Relief for homebuyers: Retroactive Applicability of RERA and condition for pre-deposit before Appeal, upheld by SC

The Uttar Pradesh- Real Estate Regulatory Authority ordered, the Promoter Newtech Developers to refund (with interest) the monies advanced by the homebuyers for violating the terms of the Builder-Buyer Agreement by inter-alia delaying in handing over possession. This finding was impugned before the Supreme Court.

The first issue that the court looked into was that of whether the RERA Act can be applied to projects, which were commenced and completed before the notification of the Act. The court observed that the RERA Act although does not apply to projects commenced and completed before enforcement of the Act, however, the ongoing projects, which means the projects on which the completion certificate is yet to be granted must be registered under and comply with the provisions of the Act.

The second issue that the court dealt with was whether the Authority has the jurisdiction to direct refund in case of default by the builders under Sections 12,14, 18 and 19 of the Act or only the Adjudicating Officer(s) which are appointed under Section 71 have exclusive jurisdiction to do so. The respondents in the current case argued that the term "refund" and "compensation" are distinct rights and had distinct procedures. The buyer's right to get a refund is a right given by the Act itself. The court recognized that the right of refund and compensation are separate so as far as the claim is of refund the Regulatory Authority can be approached whereas the Adjudicating Officer has separate jurisdiction to adjudge compensation.

The third issue the court dealt with is whether the Regulatory Authority can delegate their powers to a single member to hear complaints under Section 31. Section 31 of the RERA Act basically prescribed the procedure to file a complaint. Originally the Regulatory Authority is composed of one chairperson and two full time members appointed by the government. In this particular issue the court clearly ruled that the powers can be delegated to a single member as it was clear from Section 81 of the Act that mentioned delegation powers of the authority.

The fourth issue was whether the condition of pre-deposit of the entire decretal/refund amount along with the 30 percent penalty before admitting an appeal before the Appellate Tribunal was unconstitutional. Newtech contended that the right to appeal is a substantive right which means that appealing is a basic right and it should not be subject to any conditions of pre-deposit. Newtech further contended that this is discriminatory to the developers as no such condition is imposed on the home buyers. The court in this issue focused on the intent of the RERA Act which was to safeguard the buyers, the court further clarified that the developers and the buyers are two separate categories and obligations of developers and buyers are thus different. The court held to protect the buyers the pre-deposit is a valid condition. The court further relied on other acts like the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act and the Micro, Small and Medium Enterprises Development Act. These acts contained similar provisions with conditions of pre-deposit and the court compared them to the RERA provisions to hold the condition of pre-deposit on as a valid condition.

Overall this judgement showcases the importance and recognizes that 77% of total assets of an average Indian household are in the real estate sector which makes regulating it all the more important. A person spends a substantial amount of their life savings to buy a house. The court takes note of it and highlights the object of the Act and rules in favour of the buyers and also clarifies the role of the regulating authority. This judgement is a step forward to safeguard the rights of the consumers.

By - Arush Khanna