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MUMBAI: In a victory for home buyers, the Bombay high court has upheld the constitutional validity of the Real Estate (Regulation and Development) Act (Rera) and its applicability to ongoing projects across states. The law intends to make homebuying a transparent and speedy transaction with powers of redressal.
The judgment, however, offered a breather to builders too. It expanded powers under Rera to grant more time in exceptional cases to a builder to complete a project. The additional time is meant to be granted in compelling circumstances on a case-by-case basis.
A division bench of Justices Naresh Patil and R G Ketkar gave separate but concurrent findings. The extension would go beyond the statutory one-year extension after the deadline for completion, which the Act requires the project’s promoter to mention during registration. The pronouncement is the first such verdict in the country on challenges raised by builders in various HCs. The Supreme Court had tasked the Bombay HC in September to set the path.
The SC had tasked the Bombay HC in September to set the path while staying hearings in other courts on similar challenges. The main legal challenge from builders to Rera was against Section 3, which required registration of not just new but even ongoing constructions that were yet to get completion certificates by May 1. Builders objected to this saying they were being made retrospectively liable for delays and default on schedules set in the past. They also sought quashing of certain provisions, one which requires builders to deposit 70% of funds paid by buyers; another which bars the regulator from granting more than a year’s extension even for genuine reasons and made builders liable to compensate buyers even for possession dates agreed to in the past.
The HC held that these provisions were regulatory or compensatory, not penal, agreeing with the stance taken by the Centre’s counsel, Anil Singh, state advocate general Ashutosh Kumbhakoni, Darius Khambata as amicus curiae and Shiraz Rustomjee, who appeared for a home buyers’ body. The HC rejected the constitutional challenge raised by builders on all but one count pertaining to appointment of members on a tribunal for appeals under Rera; it partly struck down this clause which required judicial members on tribunals to be bureaucrats from the Indian Legal Service.
The HC accepted the builders’ plea that “judicial members” must mean “judicial officers” or judges, as the tribunal has powers to order imprisonment up to three years. The Centre sought a stay on the severance of the section, but the bench rejected its plea. The HC said that based on its scrutiny of Sections 6,7,8 and 37 (see graphic for explanation), the Rera authority would be entitled to provide leeway “if in exceptional and compelling circumstances”, a promoter could not complete the project in spite of extensions — of maximum a year — granted under Section 6. “It should be granted on a case-by-case basis after hearing promoter allottee and in certain cases even the government,” the HC held.
But it cautioned, “this doesn’t mean that in every case of failure… to complete the project within the extended time under Section 6, the promoter shall be entitled…”
Following Wednesday’s ruling, home buyers in several states like Telangana, UP, Haryana, Maharashtra, Karnataka, Andhra Pradesh and Madhya Pradesh will be able to challenge the rules that had been diluted by the state governments to keep most delayed and “ongoing projects” out of Rera’s ambit.