• Devesh Saxena

Case Analysis: M/s. Newtech Promoters and Developers Pvt. Ltd. vs. State of U.P. and others.

Forum: Supreme Court of India.

Case No./Citation: Civil Appeal No(s). 6745-6749 of 2021.

Bench: Justices Uday Umesh Lalit, Ajay Rastogi, and Aniruddha Bose.

Date of Decision: 11.11.2021

The Supreme Court recently took up a very pertinent case concerning the functioning of the Real Estate Regulatory Authority (RERA) and has delivered a very remarkable judgment that comes as a huge aide for homebuyers of several stuck projects throughout the country.

Backdrop of the Case:

The judgment was passed on several common questions of law arising out of the various appeals that were filed by defaulting promoters/developers challenging the order of various High Courts.

The common link between these appeals were the homebuyers who had made their substantial investment from their hard-earned money under the belief that real estate developers will hand over possession of their allotted unit in terms of the agreement entered between them. But their bonafide belief got shaken when they didn’t get the possession even several years after the promised deadline. Feeling aggrieved such inaction, they instituted complaints under various provisions of the RERA which provide for refund along with interest as well as compensation to the allottee. It so happened that such complaints were heard by a single Member of the RERA whereby it was directed to the promoters/developers to refund the principal amount along with interest (rate of which was fixed by RERA).

Eventually, some promoters/developers chose to approach the High Court against the order of RERA by filing Writ Petitions under Article 226 of the Constitution thereby assailing the jurisdiction of the RERA to pass such direction for issuing refund along with interest. They further challenged the condition of pre­-deposit as envisaged under proviso to Section 43(5) of the RERA Act, 2016 (Act of 2016) for filing a statutory appeal before Real Estate Appellate Tribunal and also raised certain ancillary questions for consideration in writ jurisdiction before the High Court. Ultimately, the High Court dismissed these petitions preferred at the instance of promoters/real estate developers and upheld the jurisdiction of RERA.

However, the orders passed by the High Court were later challenged before Hon'ble Supreme Court, and after hearing both the parties the following issues emerged in front of the court to decide:

Pertinent Issues Raised:

  1. Whether the Act of 2016 is retrospective or retroactive in its operation and what will be its legal consequences if checked on the anvil of the Constitution of India?

  2. Whether the Authority has jurisdiction to direct return/refund of the amount to the Allottee along with interest under Section 12, 14, 18, and 19 of the Act, or does the jurisdiction exclusively lie with the Adjudicating Officer under Section 71 of the Act?

  3. Whether Section 81 of the Act authorize the Authority to delegate its powers to a single member of Authority to hear matters under Section 31 of the Act?

  4. Whether the condition of pre-deposit under proviso to Section 43(5) of the Act for entertaining an appeal before Real Estate Appellate Tribunal is sustainable in law?

  5. Whether the Authority has the power to issue a Recovery Certificate of the amount in question under Section 40(1) of the Act in order to recover the due amount from the promoters/developers as an arrear of land revenue?

Verdict & Observations:

On the above-raised issues, Hon'ble Supreme Court made the following observations:

1. It was observed that the clear and unambiguous language of the statute is retroactive in operation. The legislature consciously enacted a retroactive statute to ensure the interest of consumers in the real estate sector is protected and Sections 13, 18(1) and 19(4) are all beneficial provisions for safeguarding the pecuniary interest of the consumers/allottees. The Parliament is always competent to enact any law affecting the antecedent events under its fold within the parameters of law.

47. The legislative power to make the law with prospective/retrospective effect is well recognized and it would not be permissible for the appellants/promoters to say that they have any vested right in dealing with the completion of the project by leaving the allottees in lurch, in a helpless and miserable condition that at least may not be acceptable within the four corners of law.

Thus, it negates the contention of the promoters regarding the contractual terms having an overriding effect over the retrospective applicability of the Act.

2. The court observed that it is vivid from the scheme of the Act that power of adjudication has been conferred with both Regulatory Authority and Adjudicating officer. What finally culls out is that although the Act indicates the distinct expressions like 'refund', 'interest', 'penalty' and 'compensation', a conjoint reading of Sections 18 and 19 clearly manifests that when it comes to refund of the amount, and interest on the refund amount, or directing payment of interest for delayed delivery of possession, or penalty and interest thereon, it is the Regulatory Authority which has the power to examine and determine the outcome of a complaint. At the same time when it comes to a question of seeking relief of adjudging compensation and interest thereon under sections 12, 14, 18 and 19, the Adjudicating officer has the power to determine, keeping in mind the collective reading of the same along with section 71 and 72 of the Act. If the adjudication under Sections 12, 14, 18 and 19 other than compensation as envisaged, if extended to the Adjudicating officer as prayed that, in our view, may intend to expand the ambit and scope of the powers and functions of the adjudicating officer under Section 71 and that would be against the mandate of the Act 2016.

82. .......there is a complete delineation of the jurisdiction vested with the regulatory authority and the adjudicating officer. If there is any breach or violation of the provisions of Sections 12, 14, 18 and 19 of the Act by the promoter, such a complaint straightaway has to be filed before the regulatory authority. What is being referable to the adjudicating officer is for adjudging compensation, as reflected under Section 71 of the Act and accordingly rules and regulations have been framed by the authority for streamlining the complaints which are made by the aggrieved person either on account of violation of the provisions of Sections 12, 14, 18 and 19 or for adjudging compensation and there appears no question of any inconsistency being made, in the given circumstances, either by the regulatory authority or the adjudicating officer.

3. Further the court observed that Section 81 of the Act, 2016 empowers the Authority by general or special power to delegate its powers to any member of the authority subject to conditions as may be prescribed under the Act. The Court opined that all other powers exercised by the authority could be delegated to any of its members for expeditious disposal of complaints by a special or general order. In the present case vide special order dated 05.12.2018 power was delegated to a single member to decide complaints under Section 31.

120. In view of the remedial mechanism provided under the scheme of the Act 2016, in our considered view, the power of delegation under Section 81 of the Act by the authority to one of its members for deciding applications/complaints under Section 31 of the Act is not only well defined but expressly permissible and that cannot be said to be dehors the mandate of law.

4. The court observed that the obligation casted upon the promoter of pre­deposit under Section 43(5) of the Act, being a class in itself, and the promoters who are in receipt of money which is being claimed by the home buyers/allottees for refund and determined in the first place by the competent authority, if legislature in its wisdom intended to ensure that money once determined by the authority be saved if appeal is to be preferred at the instance of the promoter after due compliance of pre­deposit as envisaged under Section 43(5) of the Act, in no circumstance can be said to be onerous as prayed for or in violation of Articles 14 or 19(1)(g) of the Constitution of India.

136. It is indeed the right of appeal which is a creature of the statute, without a statutory provision, creating such a right the person aggrieved is not entitled to file the appeal. It is neither an absolute right nor an ingredient of natural justice, the principles of which must be followed in all judicial and quasi­ judicial litigations and it is always be circumscribed with the conditions of grant. At the given time, it is open for the legislature in its wisdom to enact a law that no appeal shall lie or it may lie on fulfilment of precondition, if any, against the order passed by the Authority in question.

It was fiurther observed that, the intention of the instant legislation appears to be that the promoters ought to show their bona fides by depositing the amount so contemplated.

5. The Hon'ble Court remarked that there is indeed a visible inconsistency in the powers of the authority regarding refund of the amount received by the promoter and the provision of law in Section 18 and the text of the provision by which such refund can be referred under Section 40(1). While harmonising the construction of the scheme of the Act with the right of recovery as mandated in Section 40(1) of the Act keeping in mind the intention of the legislature to provide for a speedy recovery of the amount invested by the allottee along with the interest incurred thereon is self­explanatory. However, if Section 40(1) is strictly construed and it is understood to mean that only penalty and interest on the principal amount are recoverable as arrears of land revenue, it would defeat the basic purpose of the Act.

141. ....There appears some ambiguity in Section 40(1) of the Act that in our view, by harmonising the provision with the purpose of the Act, is given effect to the provisions is allowed to operate rather running either of them redundant, noticing purport of the legislature and the abovestated principle into consideration, we make it clear that the amount which has been determined and refundable to the allottees/home buyers either by the authority or the adjudicating officer in terms of the order is recoverable within the ambit of Section 40(1) of the Act.

Read the Judgment:

Ms. Newtech Promoters and Developers Pvt. Ltd. vs. State of U.P. and others.
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Author: Prachi Tripathi, Intern, S&D Legal Associates.