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RERA is valid, rules HC

Thursday, December 07, 2017
By Philip Varghese

The bench while observing that the Act was crucial to protect the interest of flat buyers across the country, gave a relief for developers by directing the Maharashtra RERA and the Appellate Tribunal to consider any delays on a case-to-case basis in consultation with the state, and not to cancel such projects or developers’ registration in cases where the delay was caused due to exceptional and compelling circumstances

The Real Estate (Regulation and Development) Act (RERA) 2016 is valid, constitutional and legal, ruled the Bombay High Court as the bench comprising of Justice Naresh Patil and Justice R.G. Ketkar dismissed the petitions filed by several real estate developers and individual plot owners who had challenged the legal validity of the act and its various provisions.

The RERA Act came into existence in May this year which has got a huge response from the home-buyers as the act featured some serious punishments for the delay of projects and other buyer-friendly clauses.  

“We hold that the challenge to constitutional validity of first proviso to Section 3(1), 3(2)(a), explanation to Section 3, section 4(2) (l) (c), Section 4(2) l) (d), Section 5(3) and the first proviso to Section 6, Section7, 8, 18, 22, 38, 40, 59, 60, 61, 63, 64 of Real Estate (Regulation & Development) Act, 2016 fails. These provisos are held to be constitutional, valid and legal,” said a bench of Justices Naresh Patil and RG Ketkar. However, the bench while observing that the Act was crucial to protect the interest of flat buyers across the country, gave a relief for developers by directing the Maharashtra RERA and the Appellate Tribunal to consider any delays on a case-to-case basis in consultation with the state, and not to cancel such projects or developers registration in cases where the delay was caused due to exceptional and compelling circumstances.

Several builders had approached with cases in High Courts of Bombay, Nagpur, Aurangabad, Bangalore, Jabalpur to challenge the recently enacted Real Estate (Regulation & Development) Act, 2016 and few of its provisions including applicability for ongoing projects. The government of India had filed a Transfer Petition in the Supreme Court seeking directive that all similar cases in various courts be clubbed and heard by the apex court. The Supreme Court then directed Bombay High Court to hear the cases filed in Maharashtra with a directive to give a judgment within two months. In the meantime, the Supreme Court had stayed all proceedings in other High Courts until this judgment is pronounced.

The Act, among other things, mandates that all developers or promoters register themselves under a state level regulatory authority. It also allows buyers to claim compensation for delay in possession, and envisages cancellation of a developer's registration and imposition of severe penalties in case where the developer fails to complete the project within the stipulated deadline.

Section 18 which the court was asked to test for, makes the builder liable to return the amounts already received with interest and pay compensation he fails to complete the project or give possession. The compensation will have to paid even if the buyer wants to withdraw from the project. If he doesn't, he is entitled to interest for every month of delay till possession from the builder.

Most of the developers had challenged a provision of 'force majeure or a natural disaster' that allowed an extension of the deadline by a maximum of one year, if the delay was caused on account of natural disasters such as earthquakes or floods.

The HC did not interfere with the composition of the state-level authority, but it ruled that the tribunal must be headed by a judicial officer and not a bureaucrat, or a member of the Indian legal services, and that majority of the members of such tribunal must be officers or members of the judiciary.

The Centre and the state had vehemently defended the Act, and justified the strict provisions by arguing that the same were meant to protect buyers, and to rein in rogue developers.

Section 18 of RERA...
Section 18 which the court was asked to test for, makes the builder liable to return the amounts already received with interest and pay compensation if he fails to complete the project or give possession. The compensation will have to be paid even if the buyer wants to withdraw from the project. If he doesn't, he is entitled to interest for every month of delay till getting possession from the builder.

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