WRIT PETITION NO. 2711 OF 2017
The provisions of RERA (Real Estate Regulatory Authority) whose constitutional validity were challenged and contentions of the parties. The second part will deal with the observation, decision of the Hon’ble Bombay High Court and relevance/importance of the Neelkamal Case.
In a victory for home buyers, the Hon’ble Bombay High Court vide its judgment dated 06.12.2017 upheld the validity of the various provisions of the RERA (Regulation and Development) in the matter of Neelkamal Case. The judgment dated 06.12.2017 was pronounced on a bunch of Petitions filed by real estate developers and individual plot owners, all challenging the constitutional validity of RERA (Regulation and Development). The Hon’ble Bombay High Court upheld RERA (Regulation and Development) and its applicability to ongoing projects across states.
A number of writ Petitions were filed by the builders i.e. Neelkamal Realtor Suburban Private Limited & Another (for short “the Petitioners”) of real estate project against the Union of India & Others (for short “the Respondent”) before the Hon’ble Bombay High Court challenging the constitutional validity of various provisions i.e. first proviso to Section 3(1), Section 3(2)(a), Explanation to Section 3, Section 4(2)(l)(C) & (D), Section 5(3) and the first proviso of Section 6, Sections 7,8,18, 22,38,40,46,59,60,61,63,64 of RERA (Regulation and Development) as being violative of the Articles 14, 19(1) (g), 20 and 300A of the Constitution of India (for short “Constitution”).
Before delving/ into the analysis or introspection of the comprehensive judgement dated 06.12.2017 pronounced by the Justices Naresh Patil and R.G. Ketkar of the Hon’ble Bombay High Court, it is important to understand RERA (Regulation and Development), the provisions whose constitutional validity were challenged by the Petitioners and the contentions of the Parties.
- Whether the provisions of RERA (Regulation and Development) as stated above are violative of Article 14, 19(1)(g), 20 and 300A of the Constitution or not?
- Whether the provisions of RERA (Regulation and Development) have retrospective/ retroactive application?
CONTENTIONS OF THE PETITIONERS
The Petitioners advanced main submissions regarding ongoing real estate projects. The Petitioners challenged the validity of above provisions of RERA (Regulation and Development) on the following grounds:
(a) Retrospective/ retroactive application of certain provisions.
(b) Unreasonable restrictions placed by certain provisions of RERA (Regulation and Development), contrary to Article 19(1) (g) and violative of Article 14 of the Constitution.
(c) Absence of judicial member in the REAL (Regulation and Development) constituted under Section 46 (b) of RERA (Regulation and Development).
SUBMISSIONS OF THE PETITIONERS
(a) The Petitioners attacked the proviso of Section 3(1) by submitting that registration of ongoing projects under RERA (Regulation and Development) would be contrary to the contractual rights established between the promoters and allottees under the agreement for sale executed prior to registration under RERA (Regulation and Development), further the proviso had retrospective application.
(b) Section 4(2) (l)(C) was challenged by the Petitioners on the ground of arbitrariness and section 4(2) (l)(D) of RERA was challenged by the Petitioners on the ground that no guidance in respect of 70% of the amount realized from the allottees is provided under Section 4(2) (l) (D), and the Petitioners referred to situations where the promoters may not receive 70% of the amount from the allottees etc.
(c) Section 6 was challenged on the ground that the provision does not take into consideration practical difficulties (i.e. nonavailability of labour and raw material, stoppage of work due bto strike etc.) of the promoter to complete the project within the time line prescribed by the promoter under Section 4(2) (l) (C). That as per the proviso to Section 6, the Authority has not been given power under RERA (Regulation and Development) to grant further extension of registration of project beyond the period of one year.
(d) The Petitioners challenged the validity of Section 18 on the ground, that the Section 18(1) (a) is harsh, arbitrary, penal, and drastic and against the business of the promoter.
(e) The Petitioners submitted that provisions of penalties (Sections 59, 60, 61, 63, 64) operate retrospectively and therefore, violative of Articles 14 & 20 of the Constitution.
The Allottees approaching MahaRERA (Maharashtra’s Regulation and Development Authority) Authorities have urged for grant of interest for delayed possession in respect of their respective flats booked by them .The Agreement interalia provided that the Promoter was to hand over possession of the flat to the Allottees on 31.12.2014 with a grace period of one year i.e. by the end of 31.12.2015. The principal grievance is, the date stipulated has been deliberately ignored by the Promoter.
The Promoter principally emphasized on economic downturn faced by the them and the economical situation. He travelled through the entire report to impress as to how the economical conditions worsened the development in the project and Promoter has suffered a lot. In the appeals for the first time balance sheets are produced to show the quantum of losses successively suffered by the Promoter for last three years.
From submissions from both the sides, it emerges that the allottee does not want in each of the case to withdraw from the project. The principal grievance is payment of interest for delayed possession.
The allottee has grievances to the concession extended in the order of Ld. Member-I, MahaRERA (Maharashtra’s Regulation and Development Authority), Mumbai, subject of challenge and orders passed in respect of the said project in other cases of allottees. He has criticized the same branding it to be misuse of discretion by the Authority. He calls such order to be arbitrary in its character.
The appeal preferred by Neelkamal Realtors Versus Keshavlal Upadhyay in which on 25th April 2015 where the the promoter was declined to be entertained in respect of economic downturn or the non-availability of raw material. It was observed in the said order; the delay occasioned in completing the project cannot be attributed to be suffered by the allottee. The allottee was mandated under the terms of the agreement if he commits default to release interest @21% p.a. however when the turn of the Promoter comes, he took an umbrella to the legal provisions of MOFA (Maharashtra Ownership Flats ) to release interests @9% p.a.
when committed default in making payment suffered liability of interest at 9% p.a. Thus no concession is extended to them in remittance.
The grounds raised by the promoter and involvement of huge project of 25 buildings which is undertaken by the Promoter and additional 8 buildings to be handed over to the Govt. of Maharashtra under the Scheme may be a stalk ground reality but it will not tilt the balance so far as payment of interest is concerned to be saddled and borne by the promoter, for delayed possession.
The Promoters are directed to release interest from 7.7.2016 @ 10.05% p.a. The Promoter is at liberty to appropriate / adjust the interest if certain recoverable are due by the allottees.
Thus the allottees’ two appeals are partly allowed.
This Article is Written by Mr. Keval Tachak, Final Year Student of KES College of Law, Mumbai University.