2021 (12) TMI 892 - SC - Indian Laws

Refund of the investment made along with interest to allottees under Section 31 of of The Real Estate(Regulation and Development) Act, 2016 and The Uttar Pradesh Real Estate(Regulation and Development) Rules, 2016 - impugned orders came to be passed by the single member of the authority on the complaint instituted at the instance of the home buyers/allottees after hearing the parties with the direction to refund the principal amount along with interest(MCLR 1%) as prescribed by the State Government under the Act. 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? - HELD THAT - 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 and Sections 13, 18(1) and 19(4) are all beneficial provisions for safeguarding the pecuniary interest of the consumers/allottees. In the given circumstances, if the Act is held prospective then the adjudicatory mechanism under Section 31 would not be available to any of the allottee for an on going project. Thus, it negates the contention of the promoters regarding the contractual terms having an overriding effect over the retrospective applicability of the Act, even on facts of this case - The legislative power to make the law with prospective/retrospective effect is well recognized and it would not be permissible for the appellants/promoters to say that they have any vested right in dealing with the completion of the project by leaving the allottees in lurch, in a helpless and miserable condition that at least may not be acceptable within the four corners of law. From the scheme of the Act 2016, its application is retroactive in character and 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 on going projects and future projects registered under Section 3 to prospectively follow the mandate of the Act 2016. 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? - HELD THAT - The opening words of Section 71(1) of the Act make 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. On the contrary, 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, in accordance with provisions of Sections 12, 14, 18 and 19 of the Act. This has to be seen together with the opening words of Section 72 of the Act, which reads while adjudging the quantum of compensation or interest, as the case may be, under Section 71, the adjudicating officer shall have due regards to the broad parameters to be kept in mind while adjudging compensation to be determined under Section 71 of the Act - If there is any breach or violation of the provisions of Sections 12, 14, 18 and 19 of the Act by the promoter, such a complaint straightaway has to be filed before the regulatory authority. What is being referable to the adjudicating officer is for adjudging compensation, as reflected under Section 71 of the Act and accordingly rules and regulations have been framed by the authority for streamlining the complaints which are made by the aggrieved person either on account of violation of the provisions of Sections 12, 14, 18 and 19 or for adjudging compensation and there appears no question of any inconsistency being made, in the given circumstances, either by the regulatory authority or the adjudicating officer. If the adjudication under Sections 12, 14, 18 and 19 other than compensation as envisaged, if extended to the adjudicating officer as prayed that, may intend to expand the ambit and scope of the powers and functions of the adjudicating officer under Section 71 and that would be against the mandate of the Act 2016. 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? - HELD THAT - The express provision of delegation of power under the SEBI Act is akin to Section 81 of the Act 2016. This Court observed that if the power has been delegated by the competent authority under the statute, such action, if being exercised by a single member cannot be said to be dehors the provisions of the Act - Section 81 of the Act 2016 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, such of the powers and functions under the Act. 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. In the instant case, by exercising its power under Section 81 of the Act, the authority, by a special order dated 5th December, 2018 has delegated its power to the single member of the authority to exercise and decide complaints under Section 31 of the Act and that being permissible in law, cannot be said to be de hors the mandate of the Act. At the same time, the power to be exercised by the adjudicating officer who has been appointed by the authority in consultation with the appropriate Government under Section 71 of the Act, such powers are non delegable to any of its members or officers in exercise of power under Section 81 of the Act - In view of the remedial mechanism provided under the scheme of the Act 2016, the power of delegation under Section 81 of the Act by the authority to one of its member 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 dehors the mandate of law. 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? - HELD THAT - It is indeed the right of appeal which is a creature of the statute, without a statutory provision, creating such a right the person aggrieved is not entitled to file the appeal. It is neither an absolute right nor an ingredient of natural justice, the principles of which must be followed in all judicial and quasi judicial litigations and it is always be circumscribed with the conditions of grant. At the given time, 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 precondition, if any, against the order passed by the Authority in question - the obligation cast upon the promoter of pre deposit under Section 43(5) of the Act, being a class in itself, and the promoters who are in receipt of money which is being claimed by the home buyers/allottees for refund and determined in the first place by the competent authority, if legislature in its wisdom intended to ensure that money once determined by the authority be saved if appeal is to be preferred at the instance of the promoter after due compliance of pre deposit as envisaged under Section 43(5) of the Act, in no circumstance can be said to be onerous as prayed for or in violation of Articles 14 or 19(1)(g) of the Constitution of India. Whether the authority has power to issue recovery certificate for recovery of the principal amount under Section 40(1) of the Act? - HELD THAT - It is settled principle of law that if the plain interpretation does not fulfil the mandate and object of the Act, this Court has to interpret the law in consonance with the spirit and purpose of the statute. There is indeed a visible inconsistency in the powers of the authority regarding refund of the amount received by the promoter and the provision of law in Section 18 and the text of the provision by which such refund can be referred under Section 40(1). While harmonising the construction of the scheme of the Act with the right of recovery as mandated in Section 40(1) of the Act keeping in mind the intention of the legislature to provide for a speedy recovery of the amount invested by the allottee along with the interest incurred thereon is self explanatory. However, if Section 40(1) is strictly construed and it is understood to mean that only penalty and interest on the principal amount are recoverable as arrears of land revenue, it would defeat the basic purpose of the Act. Taking into consideration the scheme of the Act what is to be returned to the allottee is his own life savings with interest on computed/quantified by the authority becomes recoverable and such arrear becomes enforceable in law. There appears some ambiguity in Section 40(1) of the Act that in our view, by harmonising the provision with the purpose of the Act, is given effect to the provisions is allowed to operate rather running either of them redundant, noticing purport of the legislature and the abovestated principle into consideration, it is made clear that the amount which has been determined and refundable to the allottees/home buyers either by the authority or the adjudicating officer in terms of the order is recoverable within the ambit of Section 40(1) of the Act. The upshot of the discussion is that we find no error in the judgment impugned in the instant appeals - appeal disposed off.

Summary

Issues Involved:
1. Retrospective or retroactive operation of the Real Estate (Regulation and Development) Act, 2016.
2. Jurisdiction of the authority to direct return/refund under Sections 12, 14, 18, and 19 of the Act.
3. Delegation of powers to a single member of the authority under Section 81 of the Act.
4. Condition of pre-deposit under proviso to Section 43(5) of the Act for filing an appeal.
5. Authority's power to issue recovery certificates for the principal amount under Section 40(1) of the Act.

Detailed Analysis:

Issue 1: Retrospective or Retroactive Operation of the Act
The Supreme Court examined whether the Real Estate (Regulation and Development) Act, 2016, applies retroactively, particularly to ongoing projects. The court noted that the Act was intended to protect consumers and regulate the real estate sector, including ongoing projects without completion certificates. The court held that the Act is retroactive, meaning it applies to ongoing projects commenced before the Act but not yet completed. This retroactive application does not violate Articles 14 and 19(1)(g) of the Constitution, as it aims to protect the interests of homebuyers and ensure transparency and accountability in the real estate sector.

Issue 2: Jurisdiction of the Authority to Direct Return/Refund
The court clarified that the authority has jurisdiction to direct the return/refund of the amount to the allottee under Sections 12, 14, 18, and 19 of the Act. The adjudicating officer's jurisdiction under Section 71 is limited to adjudging compensation. The court distinguished between "refund" and "compensation," noting that refund claims can be handled by the authority, while compensation claims require a more elaborate adjudication process by the adjudicating officer. The authority's decision on refund is subject to appeal before the Appellate Tribunal and further to the High Court.

Issue 3: Delegation of Powers to a Single Member
The court upheld the delegation of powers to a single member of the authority to hear complaints under Section 31 of the Act. The court noted that Section 81 of the Act allows the authority to delegate its powers to any member, officer, or other person, except the power to make regulations under Section 85. The delegation of quasi-judicial functions to a single member is permissible and does not violate the Act. The court emphasized that the delegation is intended to ensure the expeditious disposal of complaints.

Issue 4: Condition of Pre-Deposit for Filing an Appeal
The court upheld the condition of pre-deposit under proviso to Section 43(5) of the Act, which requires promoters to deposit at least 30% of the penalty or the total amount to be paid to the allottee, including interest and compensation, before filing an appeal. The court held that this condition is not discriminatory or unconstitutional. It ensures that the rights of the decree-holder (allottee) are protected and prevents frivolous appeals. The court noted that similar pre-deposit conditions exist in other statutes and have been upheld by the judiciary.

Issue 5: Authority's Power to Issue Recovery Certificates
The court clarified that the authority has the power to issue recovery certificates for the principal amount under Section 40(1) of the Act. The court interpreted Section 40(1) to mean that the principal amount, along with interest and penalty, can be recovered as arrears of land revenue. This interpretation aligns with the purpose of the Act, which is to provide a speedy recovery mechanism for amounts due to allottees. The court emphasized that the amount determined by the authority or adjudicating officer, including the principal sum and interest, is recoverable under Section 40(1).

Conclusion:
The Supreme Court upheld the retroactive application of the Real Estate (Regulation and Development) Act, 2016, to ongoing projects, clarified the jurisdiction of the authority and adjudicating officer, validated the delegation of powers to a single member, and upheld the condition of pre-deposit for filing an appeal. The court also confirmed the authority's power to issue recovery certificates for the principal amount. The appeals were disposed of in accordance with these findings, and the court provided a 30-day window for appellants to challenge the authority's orders before the Appellate Tribunal, subject to compliance with the pre-deposit condition.