December 07, 2017

 

MUMBAI : In a victory for home buyers, the Bombay high court has upheld the constitutional validity of the Real Estate (regulation and development) Act (Rera) and its applicability to ongoing projects across states. The law intends to make home-buying a transparent and speedy transaction with powers of redressal.

The judgment, however, offered a breather to builders too. It expanded the Rera authority's powers to grant more time in exceptional cases to a builder to complete a project. The additional time is meant to be granted in compelling circumstances on a case-by-case basis.

A division bench of Justices Naresh Patil and R G Ketkar gave separate but concurrent findings. The extension would go beyond the statutory one-year extension after the deadline for completion, which the Act requires the project's promoter to mention during registration.

The HC pronouncement is the first such verdict in the country on challenges raised by builders in various high courts. The Supreme Court had in September tasked the Bombay HC to set the path while staying hearings in other courts on similar challenges.

HC agrees to more judicial members on RERA appeals tribunal

The main legal challenge from builders to RERA was against section 3 which required registration of not just new but even ongoing constructions that were yet to get a completion certificate by May 1. That was the date when the law kicked in.

Builders objected to this saying they were being made retrospectively liable for delays and default on schedules set in the past. They also sought quashing of certain provisions, one which requires builders to deposit 70% of funds paid by buyers; another bars the regulator from granting more than a year's extension even for genuine reasons and made builders liable to compensate buyers even for possession dates agreed in the past.

These were discriminatory, capricious and violative of their fundamental right to trade and meddled with existing contractual obligations, the builders argued, through lawyers including Aspi Chinoy, Virendra Tulzapurkar, SU Kamdar and Girish Godbole.

The HC held that these provisions were merely regulatory or compensatory, not penal, agreeing with the stance taken by the Centre's counsel Anil Singh, state advocate general Ashutosh Kumbhakoni, Darius Khambata as amicus curiae and Shiraz Rustomjee, who appeared for a home buyers' body.

The petitioners in court included DB Realty group companies from Mumbai and Swapnil Developers from Nagpur. The HC rejected the constitutional challenge raised by builders on all but one count pertaining to appointment of members on a tribunal for appeals under RERA; it partly struck down this clause which required judicial members on tribunals to be bureaucrats from Indian Legal Services.

The HC accepted the builders' plea that 'judicial members' must mean 'judicial officers' or judges, as the tribunal has powers to order imprisonment up to three years. The bench held that a "two-member appellate tribunal should always consist of judicial member...and majority members should always be judicial members.''

The Centre sought a stay on the severance of the section. But the bench rejected its plea.

The HC also significantly, in what the construction industry sees as a silver lining, said that based on its scrutiny of sections 6,7,8 and 37 (see graphic for explanation), the RERA authority would be entitled to provide leeway "if in exceptional and compelling circumstances'', a promoter could not complete the project in spite of extensions—of maximum a year--granted under section 6. "It should be granted on case-by-case basis after hearing promoter allottee and in certain cases even the government,'' the HC held. But it cautioned that "this doesn't mean that in every case of failure...to complete the project within the extended time under section 6, the promoter shall be entitled...''

But the HC dismissed the builders' contention of projects being expropriated under RERA in case of delays. "There is no acquisition or requisition of the promoter's property,'' said the HC. It only deals with transfer of property. The judges held that when "construed harmoniously'', sections 3,4, 5,6, 7 and 8 (dealing with revocation of registration)—objected to by builders—are not discriminatory nor do they violate the rights to property and freedom of trade. "These provisions impose reasonable restrictions on the promoter in larger public interest. They regulate construction activities...''

Regarding section 18 which makes a builder liable to compensate a buyer for delay in possession even if he withdraws from a project, the HC found nothing unconstitutional. "Its purpose is to ameliorate the buyers in real estate sector and balance the rights of all the stakeholders. It seeks to protect the allottees and simplify the remedying of wrongs committed by a promoter,'' held the HC adding, "It ensures that a buyer's money is not misused or unreasonably retained by the promoter.''

Before RERA, home buyers had limited protection under state-specific laws. In Maharashtra, such law had a serious lacuna as it provided no time-line for completion of projects. The union housing ministry began the process of framing RERA in June 2013. After seeking objections and suggestions from all stakeholders including real estate developers, the law was finally enacted in March 2016.

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Source: timesofindia.indiatimes.com