RERA applies retroactively to ongoing projects that do not have completion certificate: Supreme Court

The Real Estate (Regulation and Development) Act, 2016 [RERA] is retroactive in its application and covers all ongoing projects for which completion certificate has not been issued, the Supreme Court has held (Newtech Promoters and Developers Limited v. State of UP).

. A Bench of Justice UU Lalit, Ajay Rastogi and Aniruddha Bose held that by enacting the RERA, Parliament intended to bring within the fold of the statute ongoing real estate projects in its wide ambit to protect the interests of consumers/homebuyers.

“Looking at the scheme of Act 2016 and Section 3 in particular of which a detailed discussion has been made, all “ongoing projects” that commence prior to the Act and in respect to which completion certificate has not been issued are covered under the Act. It manifests that the legislative intent is to make the Act applicable not only to the projects which were yet to commence after the Act became operational but also to bring under its fold the ongoing projects….” the Court held.

. From the scheme of the RERA, its application is retroactive in character, the Court said.

“The clear and unambiguous language of the statute is retroactive in operation and by applying purposive interpretation rule of statutory construction, only one result is possible, i.e., the legislature consciously enacted a retroactive statute to ensure sale of plot, apartment or building, real estate project is done in an efficient and transparent manner so that the interest of consumers in the real estate sector is protected by all means,” the Court held.

The intention of the legislature by necessary implication and without any ambiguity is to include those projects which were ongoing and for which completion certificate has not been issued, the Bench added.

“It can safely be observed that the projects already completed or to which the completion certificate has been granted are not under its fold and therefore, vested or accrued rights, if any, in no manner are affected. At the same time, it will apply after getting the ongoing projects and future projects registered under Section 3 to prospectively follow the mandate of the Act 2016,” the Court made it clear.

. Pertinently, the Court also held that power to direct return/refund of the amount to the allottee under Sections 12, 14, 18 and 19 of the Act lies with the Real Estate Regulatory Authority.

At the same time, when it comes to a question of seeking relief of compensation and interest thereon under Sections 12, 14, 18 and 19, the adjudicating officer exclusively has the power to determine the same.

. The judgment was passed in an appeal filed by real estate company, Newtech Promoters and Developers against an order of a single member of the Uttar Pradesh Real Estate Regulatory Authority (Authority). As per this order, the appellant company was directed to refund the principal amount along with interest to homebuyers who were not delivered flats on time.

. Ordinarily, orders passed by the Authority are appealable under Section 43(5) of the Act, provided the statutory compliance of pre-deposit is made under proviso to Section 43(5) before the Appellate Tribunal.

However, the promoter/real estate developers approached the High Court by filing a writ petition under Articles 226 and 227 of the Constitution questioning the order. They argued that it was without jurisdiction as it was passed by a single member of the authority, who according to the appellants, holds no jurisdiction to pass such orders of refund of the amount as contemplated under Section 18 of the Act.

The High Court dismissed the plea, leading to the present appeal before the Supreme Court.

. The Supreme Court framed the following legal issues and answered them:

. 1) Whether the Act 2016 is retrospective or retroactive in its operation and what will be its legal consequence if tested on the anvil of the Constitution of India?

In answering this question, the top court noted that it had in its earlier judgment in Jay Mahakali Rolling Mills v. Union of India and Others explained the distinction between retrospective and retroactive application of statutes. In that judgment, it was held:

"'Retrospective' means looking backward, contemplating what is past, having reference to a statute or things existing before the statute in question. Retrospective law means a law which looks backward or contemplates the past; one, which is made to affect acts or facts occurring, or rights occurring, before it comes into force. Retroactive statute means a statute, which creates a new obligation on transactions or considerations or destroys or impairs vested rights."

Further, the Bench also noted that the apex court in Shanti Conductors Private Limited and Another v. Assam State Electricity Board and Others held:

“Retroactivity in the context of the statute consists of application of new rule of law to an act or transaction which has been completed before the rule was promulgated.”

In the instant case, the Court noted that the term ‘ongoing projects’ has not been defined in RERA. However, Section 2(zn) defines ‘real estate project’ which includes ongoing real estate projects.

Further, Rule 2(h) of the Uttar Pradesh Real Estate (Regulation and Development) Rules, 2016 defines ‘ongoing project’ as a project where all development works have been completed and application has been filed with the competent authority for issue of completion certificate.

Thus, looking into the scheme of RERA, it covers all ongoing projects in respect of which completion certificate has not been issued and is retroactive in its application. In such cases, contractual terms between the homebuyer and real estate developer will not override the retroactive applicability of the Act, the Court said.

. 2) Whether the authority has jurisdiction to direct return/refund of the amount to the allottee under Sections 12, 14, 18 and 19 of the Act or the jurisdiction exclusively lies with the adjudicating officer under Section 71 of the Act?

The Court, after examining the scheme of the Act and relevant provisions, ruled that the opening words of Section 71(1) of the Act made it clear that the scope and functions of the adjudicating officer are only for “adjudging compensation” under Sections 12, 14, 18 and 19 of the Act.

If the legislative intent was to expand the scope of the powers of the adjudicating officer, then the wording of Section 71(1) ought to have been different, it noted.

“Even the opening words of Section 71(2) of the Act make it clear that an application before the adjudicating officer is only for “adjudging compensation”. Even in Section 71(3) of the Act, it is reiterated that the adjudicating officer may direct “to pay such compensation or interest” as the case may be as he thinks fit,” the Court stated.

It, therefore, held that the right to direct refund of amount to a homebuyer is with the Authority, while the adjudicating officer has exclusive jurisdiction to decide on compensation or interest.

. 3) Whether Section 81 of the Act authorizes the authority to delegate its powers to a single member of the authority to hear complaints instituted under Section 31 of the Act?

. It was the specific stand of the Authority that the power has been delegated under Section 81 to the single member of the Authority only for hearing complaints under Section 31 of the Act. This was done in view of the volume of complaints.

The Court, after examining Section 81, held that the provision empowers the Authority, by general or special order in writing, to delegate its powers to any member of the authority, subject to conditions as may be specified in the order.

“What has been excluded is the power to make regulations under Section 85, rest of the powers exercised by the authority can always be delegated to any of its members obviously for expeditious disposal of the applications/complaints including complaints filed under Section 31 of the Act and exercise of such power by a general and special order to its members is always permissible under the provisions of the Act,” the Court ruled.

Thus, the power of delegation under Section 81 of the Act by the authority to one of its members for deciding applications/complaints under Section 31 of the Act is not only well-defined but expressly permissible and that cannot be said to be de hors the mandate of law, the Court ruled.

. 4) Whether the condition of pre-deposit under proviso to Section 43(5) of the Act for entertaining substantive right of appeal is sustainable in law?

The Court held that the legislative intent behind the same is to ensure that the promoters show their bona fides by depositing the amount. In this regard, the Court noted that the right to appeal is a creature of statute and not an absolute right or an ingredient of natural justice.

Thus, the Court said that it is open for the legislature in its wisdom to enact a law that no appeal shall lie or it may lie on fulfilment of a precondition, if any, against the order passed by the Authority.

. In view of the above, the Court upheld the judgment of the High Court.

. [Read Judgment]

RERA applies retroactively to ongoing projects that do not have completion certificate: Supreme Court

Bar & Bench

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