Regulatory Authority Case Analysis

Payal, a 5th-year Law Student specializing in Corporate Law at the School of Law, Lovely Professional University has written this Case analysis “Siddhartha Vikram Asthana (Appellant) v. Tushar Bahadur (Respondent)”

Court: High Court of Allahabad

Appeal: 380/2019

Date of Judgement: 27th August 2021

Parties:  Siddhartha Vikram Asthana (Appellant) v. Tushar Bahadur (Respondent)

Background of the Case

The case was initially registered as Misc. Case No. 390/2019 and subsequently converted into Appeal No. 380/2019. The present appeal has been preferred by U.P. Avas Evam Vikas Parishad under Section 44 of the Real Estate (Regulation and Development) Act 2016 aggrieved against the order dated 25.06.2019 passed by Real Estate Regulatory Authority (hereinafter referred to as the “Regulatory Authority”) in complaint no. 10201820708 (Savita Kashyap v. U.P. Avas Evam Vikas Parishad), whereby the Regulatory Authority directed the promoter to handover possession of the flat in question within 45 days as well as to give interest to the allottee for the delayed possession at the rate of MCLR+1% after deducting 2 years from the delay period with effect from the promised date of possession as indicated in the Registration Booklet to the date of actual possession.

Facts of the Case

• That is a lottery draw held on 07.06.2011, the respondent was selected for allotment of a type-2 (3BHK) residential flat in the appellant’s Project, Shikhar Enclave, Ghaziabad, and a demand letter dated 28.06.2011 was issued. 
• In terms of Clause 9.1 of the Registration Booklet of the project, it was proposed to give possession of the flat in question within 24 months, but the promoter failed to give possession by the nominated date i.e. 24 months from 28.06.2011.
• The possession of the said flat was not delivered by the promoter to the respondent by the time of filing of the complaint before the Regulatory Authority on 04.10.2018. 
• The Regulatory Authority in its order dated 25.06.2019 gave the benefit of force majeure of two years for the delay in the completion of the project as there was some land dispute going on before the Hon’ble High Court.

Issues involved

1. Whether the provisions of Act, 2016 apply to the Project of the appellant and the Regulatory Authority is vested with the powers and jurisdiction to consider and decide the complaint of the respondent under the scheme of the Act, 2016?
2. Whether under the scheme of the Act, 2016 and Rules, 2016 any mechanism has been provided for the determination of the interest or compensation for the delay in handing over possession of the apartment/plot to the allottee if the allottee does not intend to withdraw from the Project?
3. Whether the Regulatory Authority ought to have examined the complaint of the respondent only based on agreed terms and conditions mentioned in the Registration Booklet read with the demand letter?
4. Whether there was a delay in handing over the possession of the Unit by the appellant to the respondent and if yes whether the benefit of force majeure can be given to the appellant/promoter?
5. Whether the respondent is entitled to interest and/or compensation on account of delayed possession under the scheme of the Act, 2016, and whether the rate of interest granted by the Regulatory Authority is by the provisions of the Act, 2016, Rules 2016?
6. Whether the allottee/respondent can claim interest and/or compensation for delayed possession of the Unit by the appellant even after getting interested by the appellant/promoter at the rate of 6% p.a.?

Contention for Appellant                                  

• The scheme floated by the appellant was a self-financing scheme and the price and time given in the Registration Booklet are tentative if the allotted flat is not delivered in time, but delivered after some delay at the original rate upon final costing (without charging a revised higher rate which is prevailing at a later date) the allottee will not be entitled to claim interest and compensation. The interest awarded to the complainant from 25.09.2016 to 25.08.2018 at the rate of MCLR+1% is bad in law in the circumstances of the present case.
• The Regulatory Authority has agreed with the cause of delay due to interim protection granted by the Hon’ble High Court in Writ Petition No. 54818/2013 (Sai Construction v. U.P. Avas Evam Vikas Parishad). Since the Hon’ble High Court had granted a stay on 08.10.2013, which could be vacated only on 21.01.2016 i.e. after a lapse of two years three months, and 13 days. Thereafter five months period was spoiled in the grant of permission by the Forest Department; moreover, farmers menace was also caused by the promulgation of the Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlement Act 2013, but only two years have been excluded from the alleged delay and therefore the impugned order is erroneous.
• The Regulatory Authority failed to appreciate that the project is under the self-financing scheme and the allottee, if not paid all the installments in time, cannot expect completion of construction therefore, the complainant is not entitled to any compensation like interest.
• The Regulatory Authority failed to appreciate that the complainant did not opt to get a refund of the deposited amount with interest upon failure of the appellant to provide the flat even after six months from the deposit of the last installment as provided under Clause 4.6 of the Registration Booklet. As such, the complainant has given implied consent in this regard, and due to this complainant is not entitled to claim any interest/compensation upon getting a flat.
• The Regulatory Authority failed to appreciate that since the appellant/promoter has already been awarded an interest amounting to Rs. 9,48,125/= (at the rate of 6% per annum upon the deposited amount) as such no more interest is liable to be awarded to the complainant.
• The Regulatory Authority while passing the impugned order has failed to appreciate the fact that the shortcomings if any and whatsoever pointed out by the allottee are finally completed at the time of delivery of actual physical possession after execution of the sale deed.
• The Regulatory Authority failed to appreciate the fact that the project in question is registered under the RERA Act and the date of completion of work was mentioned as 13.12.2017 and the promoter has applied for an extension of the registration of the project before the Regulatory Authority.

Contention for Respondant

• The appellant is required to pay a delayed penalty to the respondent from the date on which the allotted unit was supposed to be handed over at the prescribed rate under the proviso to Section 18(1) of the Act.
• The unit allotted to the respondent was incomplete, and the respondent was not able to take physical possession of it even after approaching the appellant/promoter’s office in 2016 and 2017.
• The Executive Engineer of the promoter admitted that some work in the project is incomplete, and the promoter sought six more months to complete the pending work in the project in a letter to the Regulatory Authority.
• The respondent filed a complaint before the Regulatory Authority on 04.10.2018 as the promoter failed to hand over possession even after a delay of more than five years.
• The respondent made several telephonic conversations with the office of the appellant/promoter and purchased an e-stamp dated 18.11.2019 for Rs. 3.88 lacs for the allotted unit, but the unit was not handed over to her on one pretext or another, and the e-stamp kept lying in the office of the appellant/promoter.
• The sale deed was executed on 23.12.2019, but the appellant/promoter did not issue any possession letter, so the respondent sent a letter on 07.01.2020, asking the appellant/promoter to hand over possession to her.
• The appellant/promoter claimed to have adjusted the interest of Rs. 9,48,125/=, which the respondent argues is not adequate as the project was delayed by around 6 years.
• The interest for the delay has been awarded in terms of Section 18 of the Act and the Regulation dated 17.10.2018.
• The Hon’ble Allahabad High Court did not put a stay on the project in Writ C-54818 of 2013 but directed that no fresh contract be awarded in favor of any person if no fresh contract was finalized in pursuance of the fresh tender invited on 11.09.2013.
• The appellant/promoter had a duty to seek necessary permissions from the concerned authorities before inviting allottees to deposit their booking amount, knowing their duties as a public institution.
• The appellant/promoter’s reasons for the delay in the entire project are not acceptable, as they have not produced any records to support their averments.
• The interest at the rate of the Savings Bank Account is not adequate, and the rate of interest as MCLR+1% is correct, as recorded in the Regulatory Authority’s order dated 25.06.2019.

Laws Involved

Section 3 (Prior registration of real estate project with Real Estate Regulatory Authority)[1]

(1) No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment, or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act ……

Section 3(1) provides for certain restrictions on the promoter without registering a real estate project with the real estate regulatory authority concerned.

The proviso to Section 3(1) further provides for registration of ongoing Projects:—

Provided that projects are ongoing on the date of commencement of this Act and for which the completion certificate has not been issued, the promoter shall make an application to the Authority for registration of the said project within three months from the date of commencement of this Act.

In sub-section 3(2)(b) it has been mentioned that those projects where the promoter has received the completion certificate for real estate project before the commencement of the Act, 2016 have been taken out of the ambit of registration and not the real estate projects which may have received the completion certificate after the commencement of this Act. Section 3(2) exempts certain categories of real estate projects only from prior registration-related provisions but not from the ambit of other provisions of the Act, 2016.

Section 4: (Application for registration of real estate projects.)[2]

An apartment may be transferred by the promoter to any person only after obtaining the completion certificate from the prescribed sanctioning authority concerned as per building by-laws. The completion certificate shall be obtained by the promoter from the prescribed authority [within the period specified for completion of the project in the development permit or the building permit as the case may be] Provided that if the construction work is not completed within the stipulated period, with the permission of the prescribed authority;

Provided further that if the completion certificate is not issued by the prescribed sanctioning authority within three months of submission of the application by the promotion complete with all certificates and other documents required, the same shall be deemed to have been issued after the expiry of three months.

Section 18: (Return of amount and compensation.)[3]

Section 18 of the Act talks of the consequence of the failure by the promoter to complete or to be unable to give possession of an apartment, plot, or building either in terms of the agreement for sale or failure to complete the project by the date specified therein or on account of discontinuance of his business either on account of suspension or revocation of the registration under the Act or for any other reason. In the event of either of the above contingencies under Section 18(1)(a) of the Act, the promoter is made liable on the demand of the allottee.

Section 18(2) of the Act mandates that in case loss is caused to the allottee due to the defective title of the land, on which the project is being developed or has been developed, the promoter shall compensate the allottee and that such claim for compensation under Section 18(2) shall not be barred by limitation provided under any law for the time being in force.

Section 18(3) of the Act states that where the promoter fails to discharge any other obligations under the Act or the Rules or Regulations made there under or by the terms and conditions of the agreement for sale, the promoter shall be liable to pay “such compensation” to the allottees, in the manner as provided under the Act.

Section 43 (Establishment of Real Estate Appellate Tribunal)[4]

Sec. 43(5) Any person aggrieved by any direction or decision or order made by the Authority or by an adjudicating officer under this Act may prefer an appeal before the Appellate Tribunal having jurisdiction over the matter:

Provided that where a promoter files an appeal with the Appellate Tribunal, it shall not be entertained, without the promoter first having deposited with the Appellate Tribunal at least thirty percent. of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be before the said appeal is heard.

Section 59 (Punishment for non-registration under section 3)[5]

(1) If any promoter contravenes the provisions of section 3, he shall be liable to a penalty that may extend up to ten percent of the estimated cost of the real estate project as determined by the Authority.

 (2) If any promoter does not comply with the orders, decisions, or directions issued under sub-section (1) or continues to violate the provisions of section 3, he shall be punishable with imprisonment for a term that may extend up to three years or with fine which may extend up to a further ten percent. of the estimated cost of the real estate project, or with both.

Own Observation

The present appeal has been preferred by U.P. Avas Evam Vikas Parishad hereinafter referred to as “the appellant/Promoter” under Section 44 of the Real Estate (Regulation and Development) Act 2016aggrieved against the order dated 25.06.2019 passed by Real Estate Regulatory Authority, whereby the Regulatory Authority directed the promoter to handover possession of the flat in question within 45 days as well as to give interest to the allottee for the delayed possession at the rate of MCLR+1% after deducting 2 years from the delay period with effect from the promised date of possession as indicated in the Registration Booklet to the date of actual possession.

Held

Further while examining the record and order of the Regulatory Authority dated 25.06.2019, we found that the Regulatory Authority awarded interest at the rate of MCLR+ 1 percent for the delayed period (after giving the benefit of force majeure of two years) but there is no mention about the interest of Rs. 9,48,125/=, which has already been paid by the appellant/promoter to the respondent for one year delay (i.e. from 31.12.2016 to 31.12.2017), and therefore, in our considered view the order of the Regulatory Authority dated 25.06.2019 needs to be modified to the extent of adjusting the amount of Rs. 9,48,125/= against the interest for the delay period as it works out in the aforesaid order of the Regulatory Authority.

Based on the aforesaid analysis and examining the material on record as well as the grounds of appeal in detail, we do not find any force in the grounds of appeal. Further, there is no illegality or perversity in the order of the Regulatory Authority. Accordingly, we uphold the order of the Regulatory Authority dated 25.06.2019 with the modification that the amount of Rs. 9,48,125/= paid by the appellant to the respondent for one year delay (i.e. from 31.12.2016 to 31.12.2017) will be adjusted in the amount of interest for the delay period as it works out in the order of the Regulatory Authority dated 25.06.2019.

We direct the Registry to transfer the entire amount deposited by the promoter under the provisions of Section 43(5) of the Act to the concerned account of the U.P. Real Estate Regulatory Authority (UP RERA), which will dispose of it by its’ judgment/order dated 25.06.2019 read with our direction in para 17 of this order. We hope and trust that UP RERA will remit the amount to the respondent/buyer after due diligence and proceed with the recovery of the balance amount from the appellant/promoter, if necessary.

Conclusion

From the above case, it could be concluded that the Real Estate Regulatory Development Authority Act, 2016 provide certain benefits to the allottees that are provided under various section of the Act, this case is related to the allotment of apartments in U.P avas evam vikas parishad where the authority given the surety that they provide the flats or apartment to the allottee in the respective are but they didn’t allot the apartment to the allottee. It was the duty of the appellant/promoter to seek necessary permissions from the concerned authorities before floating the present project and inviting the allottees to deposit their hard-earned money as the booking amount of the unit. The appellant/promoter has sufficient knowledge of their work and duties as a public institution, before agreeing with the respondent, therefore, the reasons stated by the promoter for the delay in the entire project are not acceptable.

Case Analysis Ghaziabad Development Authority Vs Union of India: Click Here

[1] Section 3 of the Real Estate Regulatory Authority Act, 2016.

[2] Section 4 of the RERA Act, 2016.

[3] Section 18 of the Real Estate Regulatory Authority Act, 2016

[4] Section 43 of the Real Estate Regulatory Authority Act, 2016.

[5] Section 59 of the RERA Act, 2016.