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TMI Blog2021 (12) TMI 1520X X X X Extracts X X X X X X X X Extracts X X X X ..... n single member of the authority in terms of Section 81 of the Act, recourse to Regulation 9 of the Regulations of 2017 would become academic. The resolution challenged by the petitioners passed by RERA delegating powers to decide complaints 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. Section 35 of the SARFAESI Act provids that the provisions under the said Act shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Similarly worded provision giving overriding effect to RERA Act is contained in Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial institution 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. Conclusion - (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority, Arun Dhandhania, Ratnesh Industries Private Limited, Anant Dhandhania and Others HON'BLE UMA SHANKER VYAS, J AND AKIL KURESHI, CJ For the Appellant : Mr. Rajendra Prasad, Sr. Adv. assisted by Mr. Devendra Sharma Mr. Harshal Tholia, Mr. Rubal Tholia Mr. Ankit Rahtore, Mr. Abhi Goyal Mr. Nikhil Yadav, Ms. Priyanshi Katta Ms. Namrata Malik Mr. Priyanshu Malik Mr. Siddharth Ranka Ms. Kritika on behalf of Mr. Anant Kasliwal Mr. Samkit Jain, Mr. Mitesh Rathore Ms. Shruti Rai, Mr. Ankit Sareen Mr. Prakul Khurana Mr. Jitendra Mishra with Mr. Jai Sharma, Mr. Ashutosh Bhatia Mr. Ankit Jain, Mr. Pradeep Kumar Choudhary Mr. Waseem Ahmed Qureshi Ms. Saloni Dagur, Mr. Hardik Mishra Mr. Dinesh Bishnoi For the Respondent : Mr. M.S. Singhvi, Advocate General through VC assisted by Mr. Siddhant Jain Mr. M.M. Ranjan, Sr. Adv. assisted by Mr. Naresh Kumar Sejvani, Mr. Himanshu, Mr. Rohan Agarwal, Mr. R.K. Agarwal, Sr. Adv. assisted by Mr. Adhiraj Modi, Ms. Sunita Pareek, Mr. Anil Mehta, AAG with Ms. Archana, Mr. Yashodhar Pandey, Mr. Mehul Harkawat, Mr. Reashm Bhargava Mr. Siddhant Paliwal, Mr. Mohit Khandelwal, Mr. Shubham Khandelwal Mr. Dikshant Jain, Ms. Pallavi Mehta, Mr. Rudrak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entertain any proceedings against the bank. 3. Perusal of the impugned order passed by RERA would show that the proceedings were instituted on complaints filed by the allottees of residential units in a complex which was being developed by the promoters. The scheme comprised of 38 flats. The project was launched in the year 2014. Agreements were executed with the allottees in the same year. Substantial amounts were also paid by the allottees towards the purchase price. The developer failed to complete the project and hand over the possession. It appears that allottees had taken loan from ICICI Bank against the allotment of flats on the strength of tripartite agreement. Resultantly the security interest in favour of ICICI Bank was created. The same was also registered with the Central Registry of Securitization Asset Reconstruction and Security Interest of India (for short 'CERSAI'). Despite this, according to the allottees developers had taken the loan of Rs.15 crores from Andhra Bank which is now merged into Union Bank of India, the present petitioner, by creating a mortgage in favour of the bank. This was done on or around 04.06.2016. According to the allottees this was done wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advocates appearing for other petitioners who have similarly challenged Regulation 9 contending that the same is ultra vires the parent Act. 6. On the other hand the opposition has been made principally by the advocates for the allottees and for the authority. Their combined contentions can be recorded as under:- (i) Regulation 9 is validly framed. This aspect has been examined in slightly different context by the Supreme Court in case of M/s Newtech Promoters and Developers Pvt. Ltd. Vs. State of UP and Ors. (Civil Appeal No(s).6745-6749/2021) decided on 11.11.2021. (ii) The banks are amenable to jurisdiction of RERA as being assignee of the promoter. (iii) The orders passed by RERA are appealable before the Appellate Authority. Writ petition therefore should not be entertained directly. (iv) Regarding interplay of RERA Act and SARFAESI Act they relied on the decision of Supreme Court in case of Bikram Chatterji (supra). 7. We may first deal with the validity of Regulation 9 of the Regulation of 2019. To establish Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, as the case may be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38 provides that authority shall have powers to impose penalty or interest in regard to any contraventions of obligations cast upon the promoters, allottees and the real estate agents under the Act or rules and regulations made thereunder. 10. Chapter VII pertains to Real Estate Appellate Tribunal. Section 53 contained in the said Chapter pertains to powers of the Tribunal against an order that the Appellate Tribunal may pass. An aggrieved person in terms of Section 58 can appeal to the High Court on any one or more of the grounds specified in Section 100 of the CPC. 11. Chapter X contains miscellaneous provisions. Section 79 contained in the said chapter pertains to bar of jurisdiction and provides that no civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which the authority or the adjudicating officer or the Appellate Tribunal is empowered by or under the Act to determine. Section 81 provides that the authority may, by general or special order in writing, delegate to any member, officer of the authority or any other person, subject to conditions such of the powers and functions under the act as it may deem necessary except for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n matters required to be decided by RERA will be heard and decided usually by Single Benches. However all Single Benches wherever deemed necessary or desirable, may refer any particular matter or class of matters to Full Bench which shall comprise of chairman and at least one member as available. In terms of this resolution, thus ordinarily all matters will be heard by a single member Bench of RERA. The discretion would be vested in such member to fix a particular matter or class of matters before the Full Bench comprising of the chairman and at least one member. 17. We may record that the Allahabad High Court had occasion to consider somewhat similar issue of delegation of the authority of RERA into one Member to entertain complaints in case of M/s K.D.P. Build Well Pvt. Ltd. Vs. State of U.P. decided by Allahabad High Court on 04.02.2020. It was held that the order passed by one member of RERA is legal and valid. This was seen in light of Section 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 provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which regulation permitting delegation of power to the authority similar to regulation 9 of RERA Regulations of 2017 was under challenge. The Division Bench held that such powers cannot be delegated and regulation in question was not valid. Interestingly the decision of the Allahabad High Court in case of M/s K.D.P. Build Well Pvt. Ltd. (supra) was cited. The Punjab and Haryana High Court was however not able to concur with the view expressed by the Allahabad High Court in the said decision. We have referred to these elements arising out of the judgment of Punjab and Haryana High Court in case of Janta Land Promoters Private Ltd. (supra) since as noted earlier the Allahabad High Court in case of M/s Newtech Promoters and Developers Pvt. Ltd. (Sspra) had taken note of the decision of the Punjab and Haryana High Court in case of Janta Land Promoters Private Ltd. (supra) as well as its own decision in case of M/s K.D.P. Build Well Pvt. Ltd. (supra). The Division Bench followed the decision of another Bench of its own High Court. These aspects were significant because the decision of the Allahabad High Court in case of M/s Newtech Promoters and Developers Pvt. Ltd. (supra) which foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RFAESI Act provids that the provisions under the said Act shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Similarly worded provision giving overriding effect to RERA Act is contained in Section 89. This Section as noted, provides that provisions of the said Act (i.e. RERA Act), shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The question would therefore arise which of the two provisions giving overriding effect to the statute would prevail. 22. In case of West Bengal Electricity Regulatory Commission Vs. CESC Ltd., reported in (2002) 8 SCC 715, 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. In this context it was held and observed as under:- "56. First of all the non obstante clause in Schedule VI to the 1948 Act refers only to the provisions of the Indian Electricity Act, 1910. Schedule VI which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 Act being a subsequent enactment, the non obstante clause therein would ordinarily prevail over the non obstante clause in Section 46-B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 Act is a special one." Therefore, 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." 23. 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. It was not necessary to dilate on this issue any further since the Supreme Court in the case of Bikram Chatterji (supra) in the context of RERA and SARFAESI has stated as under:- "139. A submission has also been raised that the RERA recognises and protects interests of the lenders and does not in any manner take away rights under any of the existing statutes such as T.P. Act, Debt Recovery Tribunal Act, SARFAESI Act. It is apparent from a perusal of RERA, which is a special Act, that certain rights have been created in favour of the buyers. The provisions of RERA have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y apartment, plot or building he shall not mortgage or create a charge on such apartment, plot or building 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 apartment, plot or building, as the case may be. Perusal of this provision would immediately make it clear that the same would be totally unworkable in a case where transaction between the borrower and the bank is completed before the introduction of RERA Act. As per this provision the promoter is precluded from mortgaging or creating any charge on apartment, plot or building with respect to which he has executed an agreement for sale. If he breaches this obligation, such mortgage or charge created shall have no effect on the right and interest of the allottee. This provision thus creates a new obligation and corresponding right in favour of the allottee. Such provisions cannot have retrospective effect. In any case as noted, enforcing any such obligation would be wholly unworkable. It would reopen closed transactions between the borrower and the len ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Act was framed. The observations and the conclusions of the Supreme Court in this regard therefore cannot be adopted straightaway when we are considering a situation which is entirely different namely of the rights and interests of the secured creditors which were created before the Act was enacted. 28. The last question surviving for our consideration is, does RERA have the authority to issue any directions against a bank or financial institution which claims security interest over the properties which are subject matter of agreement between the allottee and the developers. The term "allottee" has been defined under Section 2(d) of RERA Act as to mean in relation to real estate project the person to whom a plot, apartment or building has been allotted sold or otherwise transferred by the promoter and would include a person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent. The term "promoter" is defined in Section 2(zk) as under:- "(zk) "promoter" means,-- (i) a person who constructs or causes to be constructed an independent build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or contravention of the provisions of the Act or the rules and regulations against any promoter allottee or real estate agent, as the case may be. The complaint by an aggrieved person thus would be restricted to being filed against any promoter allottee or real estate agent. It is in this context the definition of term "promoter" and its interpretation assumes significance. We have reproduced the entire definition of the term "promoter". Perusal of this provision would show that the same is worded "as to mean" and therefore pimafaci is to be seen as restrictive in nature. However various clauses of Section 2(zk) would indicate the desire of the legislature to define this term in an expansive manner. As per Clause (i) of Section 2(zk) "promoter" means a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees. By couching this clause in "means and includes" language the definition of a term "promoter" is extended by including within its fold not only a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be enforced in the event of non- payment of secured debts by the borrower. Sub-section (3) of Section 13 envisages disposal of the objections by the borrower if raised in response to the notice under sub-section (2). Sub- section (4) of Section 13 which is of importance to us reads as under:- "(4) in case of the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole, of the business or part of the business is severable, the security creditor shall take over the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er who has acquired any of the secured assets. For all purposes thus the secured creditor steps in the shoes of the borrower in relation to the secured asset. This is thus a case of assignment of rights of the borrower in the secured creditor by operation of law. In other words the moment the bank takes recourse to any of the measures under sub-section (4) of Section 13, it triggers statutory assignment of right of the borrower in the secured creditor. Till this stage arises the bank or financial institutions in whose favour secured interest may have been created may not be in isolation in absence of the borrower be amenable to the jurisdiction of RERA. However the moment the bank or the financial institution 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. 36. Our conclusions can thus be summarised as under:- (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 fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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