Case Analysis: Suresh V Swamy v. Larsen & Turbo Ltd.

In Maharashtra Real Estate Regulatory Authority, Mumbai

Complaint No: CC006000000057656

Suresh V SwamyAppellants
Larsen & Turbo LimitedRespondent
Citation2018(4)ADJ406
Decided On22/04/2019
Hon’ble Judges/CoramShri B.D. Kapadnis

Introduction

“Real estate is an imperishable asset, ever increasing in value. It is the most solid security that human ingenuity has devised. It is the basis of all security and about the only indestructible security.”

Rusesell Sage

The Real Estate (Regulation and Development) Act, 2016, though still at maturing stage, is still found to have a huge effect on the functioning and various aspects of the real estate sector in the short period of its existence. Given the demand and need of infrastructural support to provide for development and housing needs of the population and the actuality of crooks in the field ,it is a piece of legislation which has been long overdue to reign in the real estate sector to ensure transparency and boost confidence among end users.

As mentioned above, with the act still being in its infancy stage, a need for more clarity with respect to the act is sought and needed. A recent judgement by the Maharashtra Real Estate Regulatory Authority (MahaRERA) in the case of Suresh V Swamy v/s Larsen and Turbo Limited in its judgement with respect to the matter clarified certain questions of law which were in debate since long. The following article summarises and seeks to simply elucidate the key questions answered by Maharashtra Real Estate Regulatory Authority through its judgment.

Facts: Brief Summary

In the present case, the complainant, Mr Swamy had filed the case asking for interest on his investment on respondents’ (Larsen & Toubro Ltd.) failure to hand over the possession of his booked flat No. 301, Tower T8 of respondents’ registered project Emerald Isle situated at village Tungwa, Taluka Kurla on agreed date, September 2017.

Issues Involved

The issues involved and questions of law answered are as follows:

  1. Whether the Jurisdiction of the Real Estate Regulatory Authority is co-extensive with the registration of the Project?
  2. Whether Section 18 of RERA is retroactive in operation?
  3. Whether RERA applies to the agreement for Affirmative. sale executed under Maharashtra Ownership flats Act?
  4. Whether the Authority has jurisdiction to entertain the complaint despite arbitration Clause in agreement?
  5. Whether the respondents have failed to hand over the possession of the flat on agreed date?
  6. Whether the complainant is entitled to get interest on his investment for delayed possession u/s 18 of RERA?

Judgement

The Maharashtra Real Estate Regulatory Authority ruled in favour of the complainant and directed the  respondents to  pay to  the complainant simple interest @ 10.75% per annum on Rs.1, 29, 42,112/ -from the date of default that is from 1st October 2017 till it  hands over the possession of the flat to the complainant . The court further ordered the respondent to pay a sum of Rs. 35,000/- to the complainant towards the cost of the complaint and opined that the complainant is at liberty to take possession of the flat provided he makes the payment as agreed by the parties’.

Observation & Analysis

The observations made by the authority and the subsequent analysis of the judgement and opinions have been dealt issue wise below:

  1. Whether the Jurisdiction of the Real Estate Regulatory Authority is co-extensive with the registration of the Project?

The authority found the answer to this issue to be negative. It opined that the jurisdiction of the Authority cannot be evaded only based on the receipt of the occupancy certificate or on the completion of the project or when the possession is offered.

With relation to the lapse of the registration of project on the reception of the occupancy certificate as the counsel for the respondents, Adv. Manish Gala had contended to be one of the reasons for the authority losing jurisdiction over the matter, the court turned its attention to Section 5(3)[1] of RERA which provides that the registration granted under the Section is valid for a period declared by the promoter under sub-clause (c) of clause (1) of sub-section (2) of Section 4 for completion of the project or phase thereof, as the case may be. This provision therefore does not show that on the receipt of the occupancy certificate the registration of the project shall lapse.

Further stating the reason for Jurisdiction of the Real Estate Regulatory Authority in the matter , the court seeked support of Section 33 of the Act which  stated that it is the function of the Authority to ensure the compliance cast upon the promoter, allottee or real estate agent under the Act , Rules and Regulations, Section 31 of the Act which provides that any aggrieved person can file a complaint with the Authority or the Adjudicating Officer against any Promoter/ allottee or real estate agent if they violate or contravene any provision of RERA or Rules or Regulations framed thereunder, Section 8 which obligates  the Authority to carry out remaining development work on lapse or revocation of registration of project. The Real Estate Regulatory Authority while performing its role as regulator has the duty to see that the promoter discharges the duties imposed by the Act and if he fails then’ the Authority has the jurisdiction to rectify the error.

  1. Whether Section 18 of RERA is retroactive in operation?

The authority found the answer to this issue to be affirmative and that the Section 18[2] of RERA is retroactive and mandatory. Placing weight to paragraphs 121 and 122 of the judgement of Neelkamal Realtors[3] wherein the Hon’ble High Court has dealt with Section 3, 6, 8 & 18 of RERA and recorded that these provisions are to some extent retroactive or quasi retroactive and the parliament has power to legislate even such provisions, the authority opined that the Section is retroactive in operation .

  1. Whether RERA applies to the agreement for sale executed under Maharashtra Ownership flats Act?

The authority found the answer to this issue to be affirmative. The authority took cognizance of the Hon’ble Division Bench of the High Court in the Neelkamal Realtors case wherein it observes-“Under provisions of Section 18, the delay in handing over the possession would be counted from the date mentioned in the agreement for sale entered into by the Promoter and the allottee prior to its registration under RERA–.-the RERA does not contemplate the re-writing of the contract.”

The authority opined that the aforementioned observation was sufficient to hold that the provisions of RERA are applicable to the agreements for sale though they have been entered into prior to the registration of project under RERA just extending the ambit of the Act to apply to the agreements which have been executed even before it came into operation i.e. executed during MOFA regime.

  1. Whether the Authority has jurisdiction to entertain the complaint despite arbitration Clause in agreement?

The counsel for the respondents had contended that the agreement for sale had an arbitration clause and hence the dispute should be referred to the Arbitrator under Section 7 of Arbitration and Conciliation Act, 1996. The authority, however, found the answer to this issue to be affirmative. The reasoning being the following:

Special powers of Real Estate Regulatory Authority under Section 20 of RERA which enable it to adjudicate the dispute between the aggrieved person on one hand and the promoter, allottee, real estate agent on the other for violation or contravention of the provisions of RERA, Rules and Regulations made thereunder’

Section 71 of RERA setting up Special Forum of Adjudicating officer whose qualification is that of District Judge to decide the matters arising out of Section 72, 1,4,18 & 19 and the current matter arising out of Section 18 of the Act for which a separate special forum has been provided by RERA

Thus the jurisdiction lies with the Authority and cannot be delegated to the Arbitrator despite the provisions of the Arbitration and Conciliation Act and the Arbitration Clause of the agreement.

  1. Whether the respondents have failed to hand over the possession of the flat on an agreed date?

The authority found the answer to this issue to be affirmative. The authority opined that in Para-119 of the judgement of the Division Bench in the Neelkamal Realtors’ case’ has clarified that under provisions of Section 18, that the delay in handing over the possession would be counted from the date mentioned in the agreement for sale entered into by the promoter and the allottee prior to its registration under RERA

The authority observed that the promoter had revised the date of completion of the project while registering the project incommunicado, without the consent of the allottees and found the respondents bound by the contractual obligation to hand over the possession of the flat on agreed date and not by the declared date.

Furthermore, the respondents had agreed to deliver possession of the flats on or before 31st March 2017 with grace period of six months’ It means that they agreed to deliver the possession on or before 30th  September 2017, thus, the respondents were found to have failed to hand over the possession of the agreed date.

  • Whether the complainant is entitled to get interest on his investment for delayed possession u/s 18 of REZA?

The authority found the answer to this issue to be affirmative and opined that the complainant is entitled to get interest on his investment at prescribed rate on respondents’ failure to hand over the possession of the flats on the agreed date under Section 18 of RERA and further observed the prescribed the rate of interest under the rules framed under the Act. It was found to be 2% above state Bank of India’s highest marginal cost of lending rate with the said rate currently being 8.75%’ .Hence, the allottee is entitled to get simple interest @10.75% per annum from the date of default till handing over of the possession of the flat.

Conclusion

The real estate sector is an inalienable part of the human existence. The pre-Covid era saw ambitious projects being taken up by individuals for the development and progress of this sector but an equal apprehension in the minds of the populace remains due to the malpractices in the sector. RERA brought about a welcome boost of confidence among people but there is still a long way to go.

The above mentioned and discussed case and its judgement stand to instil more trust add credence to the legal system relating to the real estate sector with this case proving to be instrumental in providing much needed clarity and remove ambiguity from the law .The judgement as observed provided more lucidity in terms of the jurisdiction and delayed passion of investments.


[1] (3) The registration granted under this Section shall be valid for a period declared by the promoter under sub-clause (C) of clause (l) of sub-Section (2) of Section 4 for completion of the project or phase thereof, as the case may be.

[2] 18. Return of amount and compensation.—(1) If the promoter fails to complete or is unable to give possession of an apartment, plot or building,—

(a) in accordance with the terms of the agreement for sale or, as the case may be, duly completed

by the date specified therein; or

(b) due to discontinuance of his business as a developer on account of suspension or revocation of

the registration under this Act or for any other reason, he shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act: Provided that where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.

(2) The promoter shall compensate the allottees in case of any loss caused to him due to defective title

of the land, on which the project is being developed or has been developed, in the manner as provided

under this Act, and the claim for compensation under this subSection shall not be barred by limitation

Provided under any law for the time being in force.

(3) If the promoter fails to discharge any other obligations imposed on him under this Act or the rules

or regulations made there under or in accordance with the terms and conditions of the agreement for sale, he shall be liable to pay such compensation to the allottees, in the manner as provided under this Act.

[3]  Neelkamal Realtors Suburban Pvt. Ltd. v. Union of India,  2017 SCC OnLine Bom 9302, order dated 06-12-2017

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