SC confirms refund, determined under Real Estate Act, 2016, to be paid by Newtech Promoters & Developers to respective home buyers, for their failure to hand over possession

Read Judgment: M/s. Newtech Promoters & Developers Pvt. Ltd vs. State of UP & Others

Pankaj Bajpai

New Delhi, November 15, 2021: The Supreme Court has opined that the amount which has been determined and refundable to the allottees/home buyers from the promoters/real estate developers, either by the authority or the adjudicating officer, is recoverable within the ambit of Section 40(1) of the Real Estate (Regulation and Development) Act, 2016. 

Taking into consideration the scheme of the 2016 Act, a Larger Bench of Justice Uday Umesh Lalit, Justice Ajay Rastogi and Justice Aniruddha Bose therefore observed that what is to be returned to the allottee/home buyers is his own life savings with interest on computed/quantified by the authority becomes recoverable and such arrear becomes enforceable in law. 

While harmonizing 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, added the Bench. 

Going by the background of the case, the allottees/home buyers (Respondents) had made substantial investment in Newtech Promoters & Developers Pvt. Ltd. (Appellant-Real estate Developer/Promoter) under the belief that they would hand over possession of the unit in terms of home buyer’s agreement. However, the bonafide belief of Respondents stood shaken when the promoters failed to hand over possession of a unit/plot/building in terms of the agreement. Accordingly complaints were instituted by the home buyers for refund of the investment made along with interest u/s 31 of the 2016 Act. 

Accordingly, orders came to be passed by the single member of the authority with the direction to refund the principal amount along with interest (MCLR + 1%) as prescribed by the State Government under the Act. Challenging the same, the Appellant approached the High Court questioning the order passed by the authority holding it to be without jurisdiction to pass such orders of refund of the amount as contemplated u/s 18 of the Act. 

Since the High Court dismissed the petitions, hence present appeal at the instance of the promoters/real estate developers.  

After considering the statutory provisions and the arguments, the Larger Bench found that all “ongoing projects” that commence prior to the 2016 Act and in respect to which completion certificate has not been issued, are covered under the Act. 

The legislative intent is to make the Act applicable not only to the projects which were yet to commence after the Act became operational but also to bring under its fold the ongoing projects and to protect from its inception the inter se rights of the stake holders, including allottees / home buyers, promoters and real estate agents while imposing certain duties and responsibilities on each of them and to regulate, administer and supervise the unregulated real estate sector within the fold of the real estate authority, added the Bench. 

Thus, while stating that the Act 2016 is retrospective in its operation and that the first proviso to Section 3(1) is not violative of Articles 14 and 19(1)(g) of the Constitution of India, the Bench emphasizes that a promoter of a project which is not complete/sans completion certificate shall get the project registered under the Act but while getting the project registered, promoter is under an obligation to prescribe fresh timelines for getting the remaining development work completed. 

The Parliament has the power to legislate even retrospectively to take into its fold the preexisting contract and rights executed between the parties in the larger public interest, and therefore, it is not 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, added the Bench. 

The Top Court went on to add that that Section 18(1) of the 2016 Act is an indefeasible right of the allottee to get a return of the amount on demand if the promoter is unable to handover possession in terms of the agreement for sale or failed to complete the project by the date specified. 

At the same time, the Top Court observed that if the allottee has made a default either in making installments or made any breach of the agreement, the promoter has a right to cancel the allotment in terms of Section 11(5) of the Act and proviso to Section 11(5) enables the allottee to approach the regulatory authority to question the termination or cancellation of the agreement by the promoter and thus, the interest of the promoter is equally safeguarded. 

Moving ahead, the Top Court also opined that the power of delegation u/s 81 of the Act by the authority to one of its member for deciding applications/ complaints u/s 31 of the Act is not only well defined but expressly permissible and that cannot be said to be dehors the mandate of law. 

Therefore, the Apex Court refused to interfere in the decision of the Authority as well as the High Court.