2020 (3) TMI 1260 - HC - Indian Laws

Validity of Sub-section (5) of Section 43 of the Real Estate (Regulation and Development) Act, 2016 - right of appeal to a Promoter - pre-conditioned by the deposit of total amount to be paid to an allottee of an apartment as may have been determined by the Authority/Adjudicating Officer under the Act, before entertaining the appeal - HELD THAT - The argument of the learned counsel for the petitioner that the appeal under Section 43(5) of the 2016 Act is the forum of first Adjudication Officer does not appeal to us, inasmuch as the Adjudicatory Officer has been given limited powers, but while adjudicating the same, he is guided by Section 72. The Adjudicatory Officer is of the rank of a District Judge. The argument that the Regulatory Authority does not consist of persons having a judicial background is of no avail, inasmuch as at the first instance itself the Adjudicatory Officer being of the rank of a judicial officer has ample powers before whom the promoters while contesting the complaint have all the opportunity to establish their claim either way with full opportunity to the parties to rely on whatever evidence is permissible. Thus, the appeal provision is the second stage of adjudication, which, therefore, cannot be a stage where violation of fundamental rights can be urged - In the instant case, there is a further right of appeal before the High Court, after the decision of the Appellate Tribunal, in terms of Section 58 of the 2016 Act. This, however, is in terms of Section 100 of the Code of Civil Procedure, 1908, namely, giving rise to a substantial question of law. The words it shall not be entertained occurring in the proviso to Sub-Section (5) of Section 43 of the 2016 Act, is a preliminary injunction. This prevents even the presentation of an appeal. The Clause before the said appeal is heard ultimately is a final injunction to the process of appellate exercise of jurisdiction. Conjointly, to our mind, this clearly shuts out even the presentation or physical filing of an appeal before the Appellate Authority, as the total amount to be deposited as against compensation is a sine qua non. The justification for the same by the respondents is to prevent any form of exploitation, as the promoter or the builder is in a far more dominant position financially or otherwise and the allottee being pitted against such dominants require protection of his life time savings in such investments. It is in order to protect the interest of an allottee that such stringent conditions were necessarily required after it was experienced that promoters and builders had been enriched themselves at the cost of individuals who were made to run to Courts and fight long drawn litigations to recover their priced investments. The promoter or a builder, even if required to pay any lesser percentage, can very well raise the same argument that any amount fixed would still be either excessive or perverse. This, therefore, cannot be a ground to declare a provision ultra vires. A deposit being heavy by itself in the present case cannot be a ground to declare the provision onerous inasmuch as, as already indicated above, it is the own investment of the allottee which is sought to be secured with certain amount of compensation - There are no pleadings in the present writ petition to assume that any prejudice has been caused to the petitioner on account of any financial crisis being faced by him nor is there any material to assume that the petitioner is experiencing any indigency so as to meet this contingency of deposit. It will be open to the petitioner to plead this in appropriate proceedings, but the same is not a ground for us in the absence of any material to strike down the provision as onerous. The provision is held to be intra vires - also it is declared that the appellate forum is not illusory nor can the condition of pre-deposit be termed as onerous - petition disposed off.

Summary

Issues Involved:
1. Validity of Sub-section (5) of Section 43 of the Real Estate (Regulation and Development) Act, 2016.
2. Whether the pre-condition of depositing the total amount of compensation before entertaining an appeal is onerous.
3. Violation of Articles 14 and 19(1)(g) of the Constitution of India.
4. First opportunity to contest the matter on merits.
5. Discretionary power of the Appellate Tribunal to waive the pre-deposit requirement.

Issue-wise Detailed Analysis:

1. Validity of Sub-section (5) of Section 43 of the Real Estate (Regulation and Development) Act, 2016:
The petitioner challenged the validity of Sub-section (5) of Section 43, arguing that it imposes an onerous condition by requiring the deposit of the total amount of compensation before an appeal can be entertained. The court examined the language of the provision, which states, "it shall not be entertained" without the promoter first depositing the amount. The court found that this phrase clearly indicates that the appeal cannot be entertained or even presented without fulfilling this pre-condition. The court upheld the provision, stating that it is designed to protect the interests of allottees and prevent exploitation by promoters.

2. Whether the pre-condition of depositing the total amount of compensation before entertaining an appeal is onerous:
The petitioner argued that the pre-condition makes the right of appeal illusory and burdensome, especially if multiple complaints result in awards of compensation. The court noted that the provision aims to secure the investments of allottees and compensate them for any default by the promoter. The court found that the provision is not unreasonable, as it ensures that the allottee's investment is protected and that promoters are deterred from withholding money unfairly. The court held that the provision is a reasonable restriction and does not render the right of appeal illusory.

3. Violation of Articles 14 and 19(1)(g) of the Constitution of India:
The petitioner contended that the pre-condition violates Article 14 (right to equality) and Article 19(1)(g) (right to practice any profession) of the Constitution. The court referred to previous judgments, including Shyam Kishore vs. Municipal Corporation of Delhi, which held that the legislature can impose reasonable conditions on the right of appeal. The court found that the provision does not violate Article 14, as it applies equally to all promoters, and does not violate Article 19(1)(g), as it is a reasonable restriction to protect the interests of allottees.

4. First opportunity to contest the matter on merits:
The petitioner argued that the right of appeal under Section 71 is the first opportunity to contest the matter on merits, as the Adjudicatory Officer has limited powers and is appointed by the State Government. The court found that the Adjudicatory Officer, being of the rank of a District Judge, has ample powers to adjudicate the matter, and the appeal provision is the second stage of adjudication. Therefore, the court held that the appeal provision does not violate the petitioner's fundamental rights.

5. Discretionary power of the Appellate Tribunal to waive the pre-deposit requirement:
The petitioner argued that the absence of a discretionary power for the Appellate Tribunal to waive the pre-deposit requirement makes the provision unreasonable. The court referred to the judgment in M/s. Tecnimont Pvt. Ltd. vs. State of Punjab, which held that in cases of extreme hardship, a writ petition could be an appropriate remedy. The court noted that the petitioner had not demonstrated any financial distress or indigency to justify a waiver of the pre-deposit requirement. The court held that the absence of a discretionary power does not render the provision unreasonable, as the purpose is to protect the interests of allottees.

Conclusion:
The court held that the provision is intra vires and does not violate the petitioner's fundamental rights. The court declared that the appellate forum is not illusory, and the condition of pre-deposit is not onerous. The writ petition was disposed of, and the provision was upheld as valid.