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TMI Blog2021 (12) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 81 of RERA Act. Once again in case of M/s Newtech Promoters and Developers Pvt. Ltd. the Division Bench of Allahabad High Court considered the validity of the powers exercised by single member of RERA. The Court referred to the provisions contained in the Act and regulations framed by the authority and upheld the power of the single member to entertain the complaints. The decision of Allahabad High Court in the case of M/S. NEWTECH PROMOTERS AND DEVELOPERS PVT. LTD. VERSUS STATE OF U.P. AND 5 OTHERS [ 2021 (1) TMI 1346 - ALLAHABAD HIGH COURT] was challenged before the Supreme Court. Several questions were raised and answered. One of the questions was whether Section 81 of the Act authorizes the authority to delegate its power to single member to hear complaints instituted under Section 31. After referring to the statutory provisions and relying upon several decisions of the Supreme Court, the Supreme Court in the said decision upheld the delegation of power to decide the complaints by single members in terms of Section 81 of the Act. The controversy at hand is substantially governed by the decision of Supreme Court in case of M/s Newtech Promoters and Developers Pvt. Ltd. [ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 772 - SUPREME COURT ], a three Judge Bench of the Supreme Court considered the similar conflict between the Electricity (Supply) Act, 1948 and Electricity Regulatory Commissions Act, 1998, both of which contained similar overriding provisions - it was held that in view of the Section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts. The judicial trend would thus suggest that in the event of direct conflict between the two central statutes giving overriding effect to the Act, ordinarily the subsequent legislation would prevail. Whether RERA would have jurisdiction in cases where the transactions between borrowers and the banks are completed before enactment of the Act? - HELD THAT:- As is well settled, a statutory provision creating rights or obligations is presumed to be prospective unless specifically or by necessary implications it has been given retrospective effect. Section 11 of RERA Act pertains to function and duties of the promoter. Sub-section (4) of Section 11 requires the promoter to perform several acts and obligations - This provision thus creates a new obligation and corresponding right in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n takes recourse to any of the measures available in sub-section (4) of Section 13 of the SARFAESI Act, RERA authority would have jurisdiction to entertain the complaint filed by an aggrieved person. Conclusions - (i) Regulation 9 of the Regulations of 2017 is not ultra vires the Act or is otherwise not invalid. (ii) The delegation of powers in the single member of RERA to decide complaints filed under the Act even otherwise flows from Section 81 of the Act and such delegation can be made in absence of Regulation 9 also. (iii) As held by the Supreme Court in the case of Bikram Chatterji in the event of conflict between RERA and SARFAESI Act the provisions contained in RERA would prevail. (iv) RERA would not apply in relation to the transaction between the borrower and the banks and financial institutions in cases where security interest has been created by mortgaging the property prior to the introduction of the Act unless and until it is found that the creation of such mortgage or such transaction is fraudulent or collusive. (iv) RERA authority has the jurisdiction to entertain a complaint by an aggrieved person against the bank as a secured creditor if the bank takes recourse to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the Banks who are the secured creditors of the promoters and who wish to take coercive measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter to be referred as 'SARFAESI Act') to recover their unpaid dues. 2. For convenience we may refer to facts stated in Civil Writ Petition No.13688/2021. This petition is filed by the Union Bank of India. The petitioner has challenged the validity of Regulation 9 stating that the same is ultra vires the provisions of the Rajasthan Real Estate (Regulation and Development) Act, 2016 (hereinafter to be referred as 'RERA Act'). By way of consequential relief the petitioner has challenged a resolution dated 25.09.2020 adopted by RERA resolving that all matters shall be heard by single benches. The petitioner has also challenged an order dated 20.09.2021 passed by a single member of RERA giving certain directions with respect to semi constructed residential complex over which the petitioner bank claims security interest. The case of the bank is that it is not amenable to jurisdiction of RERA since RERA can issue directions only against a promoter, allottee or a real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect of the SARFAESI Act to the present proceedings, the authority relied on the decision of Supreme Court in case of Bikram Chatterji and Ors. Vs. Union of India and Ors. reported in 2019 19 SCC 161. 4. In such background Counsel for the bank raised following contentions:- (i) Regulation 9 of the Regulation of 2017 is ultra vires the parent Act. (ii) Even the regulation by itself does not envisage general delegation as has been done by the impugned resolution dated 25.09.2020. (iii) Under purported exercise of powers under Regulation 9 by resolution dated 25.09.2020 arbitrary powers have been vested in single members of RERA to decide all complaints which is not even envisaged under the Act. (iv) With respect to the order dated 20.09.2021 passed by RERA it was argued that no complaint against the bank is maintainable. By instituting the provisions under RERA Act, the allottees have effectively challenged the orders passed by DRT and DRAT. (v) It was contended that the mortgage in favour of the bank in the present case was created before RERA Act was enacted. This Act therefore can have no effect on past mortgages since the Act has not been given retrospective effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that no act or proceedings of authority shall be invalid merely by reason of any vacancy in or any defect in the constitution of the authority or any defect in the appointment of a person acting as a member or any irregularity in the procedure of the authority not affecting the merits of the case. 9. Section 31 pertains to filing of complaints with the authority or the adjudicating officer. Sub-section (1) of Section 31 provides that any aggrieved person may file a complaint to the authority or the adjudicating officer for any violation or contravention of the provisions of this Act or the rules and regulations made thereunder against any promoter, allottee or real estate agent, as the case may be. Section 34 pertains to functions of the authority and includes the functions to register and regulate real estate projects and real estate agents registered under the Act and to ensure compliance of the regulations or orders or directions made in exercise of the powers under the Act and to ensure compliance of the obligations cast upon the promoters, the allottees and the real estate agents under the Act, rules and regulations made thereunder. Section 38 pertains to powers of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member of the Authority." 15. The authority in exercise of the powers under Regulation 9, in its meeting dated 25.09.2020 dealt with agenda item-2 which pertained to decision regarding constitution of benches for hearing in the Court. The decision taken thereon reads as under:- "5.2 Consequent upon the joining of two members of the Authority, the following decisions were taken: "5.2.1 The complaints and adjudication matters required to be decided by the Authority under the Real Estate (Regulation and Development) Act, 2016 and rules and regulations made thereunder will henceforth be heard and decided in the following manner (i) Usually, all complaints and adjudication matters will be heard and decided by Single Benches, constituted as under: (a) Single Bench of Shri Nihal Chand Goel, Hon'ble Chairman. (b) Single Bench of Shri Shailendra Agarwal, Hon'ble Member (c) Single Bench of Shri Salvinder Singh Sohata, Hon'ble Member (ii) All Single Benches, wherever they deem it necessary or desirable will be free to refer any particular matter or class of matters to Full Bench, which shall comprise of Hon'ble Chairman and at least one Member, as available." 16. As pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power to single member to hear complaints instituted under Section 31. After referring to the statutory provisions and relying upon several decisions of the Supreme Court, the Supreme Court in the said decision upheld the delegation of power to decide the complaints by single members in terms of Section 81 of the Act. The conclusion of the Supreme Court in this respect can be noted as under : - "120. In view of the remedial mechanism provided under the scheme of the Act 2016, in our considered view, 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." 19. Before going further we may record that the question of applicability of RERA Act to the development projects which had commenced earlier was also considered by the Supreme Court. To this aspect we would refer at a later stage. For the present we may refer to the decision of the Division Bench of Punjab and Haryana High Court in case of Janta Land Promoters Private Ltd. (supra) on which heavy reliance has been placed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplaints into single members, could as well have been passed in exercise of powers under Section 81. In fact the resolution itself does not refer to the source of power under Regulation 9 alone. Whether so stated or not, this resolution can always stress the source of the power under Section 81 of the Act since it is well settled that non-mentioning of the provisions or wrong reference to a statutory provision for exercise of power would not invalidate the exercise if powers can be traced to any statutory source. In fact the resolution itself refers section 81 of the Act as well as regulation 9 of the regulations. Even otherwise, Regulation 9 is merely procedural provision. Section 81 of RERA Act gives powers to the authority to delegate to any member powers and functions under the Act. Sub-section (1) of Section 85 enables the authority to frame regulations consistent with the Act and the Rules. Regulation 9 framed in exercise of such powers merely regulates the process of delegation of powers in single members of RERA. This regulation is thus not ultra vires the Act or invalid for any other reason. 21. Coming to the question of applicability of RERA while SARFAESI Act is also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned judgment proceeds to take a contrary view without either distinguishing the previous judgment of a Coordinate Bench or referring the matter to a larger Bench. Be that as it may, this question is no more res integra. This Court in the case of Allahabad Bank v. Canara Bank and Anr. after following an earlier judgments of this Court held : "40. Alternatively, the Companies Act, 1956 and the RDB Act can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the later special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, Section 34. A similar situation arose in Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. where there was inconsistency between two special laws, the Finance Corporation Act, 1951 and the Sick Industries Companies (Special Provisions) Act, 1985. The latter contained Section 32 which gave overriding effect to its provisions and was held to prevail over the former. It was pointed out by Ahmadi, J. that both special statutes contained non obstante claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd creating security interest in favour of the bank, in such a case can RERA exercise powers under the Act. Neither the statute so provides, nor it is canvassed before us by the respondents that RERA Act has been given retrospective effect. As is well settled, a statutory provision creating rights or obligations is presumed to be prospective unless specifically or by necessary implications it has been given retrospective effect. Section 11 of RERA Act pertains to function and duties of the promoter. Sub-section (4) of Section 11 requires the promoter to perform several acts and obligations. Clause (h) of sub-section (4) of Section 11 reads as under:- "(h) after he executes an agreement for sale for any apartment, plot or building, as the case may be, not mortgage or create a charge on such apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building, as the case may be." 25. As per this provision thus after a promoter executes an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court having come to the conclusion that creation of security interest itself was fraudulent, the charge was invalid and therefore even if created before introduction of RERA Act, the same would not affect the right and interest of the allottees in terms of Section 11(4)(h) thereof. This would mean that in absence of fraud or collusion the Act cannot be applied retrospectively to the banks and financial institutions in whose favour security interests have been created prior to the enactment of the law. 27. Much reliance has also been placed in this context by the Counsel for the respondents on the decision of the Supreme Court in the case of M/s Newtech Promoters and Developers Pvt. Ltd. (supra). In this case, one of the questions raised was with respect to applicability of RERA to the construction projects which have commenced earlier. The question framed by the Supreme Court for its consideration was whether the Act of 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. This question was answered in the context of its applicability to the projects which had already commenced before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or (vi) such other person who constructs any building or apartment for sale to the general public. Explanation.--For the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the person who sells apartments or plots are different person, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made thereunder;" 29. The term "real estate agent" has been defined in Section 2(zm) as to mean any person who negotiates or acts on behalf of one person in a transaction of transfer of his plot, apartment or building in a real estate project by way of sale with another person and who receives remuneration or charge for the services so rendered. Under sub-section (1) of Section 31, any aggrieved person may file a complaint before RERA or before the adjudicating officer for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm "secured asset" is defined as to mean the property in which security interest is created. The term "secured creditor" has also been defined as to the institution in whose favour security interest is created by any borrower for repayment of any financial assistance. 32. Chapter III of the SARFAESI Act pertains to enforcement of security interest. Under said Chapter sub-section (1) of Section 13 provides that notwithstanding anything contained in Section 69 and Section 69A of the Transfer of Property Act, any security interest created in favour of the secured creditor may be enforced without the intervention of the Court or tribunal by such creditor in accordance with the provisions of the Act. Sub-section (2) of Section 13 envisages issuance of notice by the secured creditor to a borrower whose asset has been classified as non-performing asset. Such notice would require the borrower to discharge the liability in full failing which the secured creditor would be entitled to exercise or any of the rights under sub-section(4). In subsection (3) of Section 13 the notice referred to in sub-section (2) has to contain details of amount payable by the borrower and the secured asset inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the management of business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; appoint any person to manage the secured assets the possession of which has been taken over by the secured creditor and require at any time any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower to pay the secured creditor so much of the money as is sufficient to pay secured debt. 34. Clauses (a) to (c) of sub-section (4) are all in the nature of rights that a secured creditor can exercise which originally vest in the borrower. Clause (d) on the other hand, is in the nature of a garnishee enabling the secured creditor to recover the dues from a person other than the borrower who has acquired any of the secured assets and from whom any money is due or may become due to the borrower. 35. Clauses (a), (b) and (c) of sub-section (4) of Section 13 vest power in the secured creditor to take all steps as the borrower himself could take in relation to the secured asset. Clause (d) goes a step further and enables the bank to recover its dues directly from a debtor or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner has challenged the final order passed by the authority. We would therefore divide our directions in two parts. Wherever challenge is made to the pending proceedings, the stay orders are lifted. If any of the petitioners have not filed reply before the authority, they would have time upto 15.01.2022 to file such replies. Wherever the petitioners have challenged the orders passed by the authority, they are relegated to the appellate forum for which they would have time upto 15.01.2022 to file their appeals. If such appeals are filed by such date, the same shall be decided on merits without raising question of limitation. 38. In Civil Writ Petition Nos.11372/2019, 15503/2019 and 9154/2020 the petitioners had approached the High Court since the appeals they have filed were not being heard by the Appellate Tribunal since chairman and members were not appointed. Learned Advocate General stated that such appointments have been made which is also supported by the Counsel for the petitioners. These petitions are disposed of to enable the petitioners to pursue such appeals before the appellate forum on merits. 39. With these observations, all petitions stand disposed of. Pending ..... 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