REFUND & COMPENSATION -REAL ESTATE SECTOR
What does Supreme Court said on rights of allottee to get refund / compensation from RERA Developer and promoters?
Shubham Budhiraja[1]
Brief Conclusion[2]
(I)
The
RERA Act, 2016 is retroactive in operation. Just because it affects the
existing rights does not make the act per se retrospective. The difference
between retrospective legislation and retroactive legislation is well
established
(II)
The
twin mechanism under RERA where authority has power to decide complaints
seeking refund and adjudicating officer has power to decide complaints seeking
compensation is valid because both are safeguard by appeal mechanism to
appellate tribunal
(III)
The
delegation by RERA authority to single member to hear complaints seeking refund
is permissible however delegation of complaints seeking compensation to single
member is not permissible because such a power vest only with adjudicating
officer
(IV)
The
RERA authority has power to issue recovery certificate to execute not only
interest or penalty but also refund amount. The law if read literally would
defeat the purpose of act.
(V)
Condition
of pre-deposit before filling appeal to RERA tribunal is valid because appeal
is a creature of statute and there are many legislations (Consumer protection
act, SARFESI Act, MSME Act) which confer similar conditions and have been held
valid
Detailed Conclusion
Retrospective v.
Retroactive
(I)
The statute is not retrospective merely because it
affects existing rights or its retrospection because a part of the requisites
for its action is drawn from a time antecedent to its passing, at the same
time, retroactive statute means a statute which creates a new obligation on
transactions or considerations already passed or destroys or impairs vested
rights.
(II)
From the scheme of the Act 2016, its application
is retroactive in character and it can safely be observed that the projects
already completed or to which the completion certificate has been granted are
not under its fold and therefore, vested or accrued rights, if any, in no
manner are affected. At the same time, it will apply after getting the ongoing
projects and future projects registered under Section 3 to prospectively follow
the mandate of the Act 2016.
|
Cases |
Relevant Remarks |
|
Jay Mahakali Rolling Mills Vs.
Union of India and Others, 2007(12) SCC 198 |
“Retrospective” means looking backward, contemplating what is past,
having reference to a statute or things existing before the statute in
question. Retrospective law means a law which looks backward or contemplates
the past; one, which is made to affect acts or facts occurring, or rights
occurring, before it comes into force. Retroactive
statute means a statute, which creates a new obligation on transactions or
considerations or destroys or impairs vested rights.” |
|
Shanti Conductors Private
Limited and Another Vs. Assam State Electricity Board and Others 2019(19) SCC
529 |
Retroactivity in the context of the statute consists of application
of new rule of law to an act or transaction which has been completed before
the rule was promulgated. |
|
Vineeta Sharma Vs. Rakesh Sharma and
Others 2020(9) SCC 1 |
The prospective statute operates from the date of its enactment
conferring new rights. The retrospective statute operates backwards and takes
away or impairs vested rights acquired under existing laws. A retroactive statute is the one that does not operate
retrospectively. It operates in futuro. However, its operation is based upon
the character or status that arose earlier. Characteristic or
event which happened in the past or requisites which had been drawn from
antecedent events. Under the amended Section 6, since the right is given by
birth, that is, an antecedent event, and the provisions operate concerning
claiming rights on and from the date of the Amendment Act |
RERA
Authority v. adjudicating officer- Refund v. Compensation
(I)
Section 14 relates to adherence to sanctioned
plans and project specifications by the promoter. Section 14(3) empowers the allottee
to receive compensation in the event there is any structural defect or any
other defect in workmanship etc.
(II)
Section 18 starts with the marginal note “Return
of amount and compensation”. The two aspects namely ‘return of amount’ and
‘compensation’ is distinctly delineated.
(III)
Chapter IV deals with the rights and duties of
the allottees and in particular, Section 19(4) entitles the allottees to a
refund of the amount paid
(IV)
Section 31 relates to the filing of complaints
to the authority.
(V)
Section 71 relates to Power to Adjudicate vested
with the adjudicating officer while adjudging compensation
(VI)
The refund and compensation are two distinct
rights under the Act and cannot be conflated. The manner in which the two are
to be determined would require a different process and involve different
considerations. The determination of compensation involves a full-fledged
adjudicatory process which is more complex than that involved in determining
refund
(VII)
Refund of the amount” and “compensation” are two distinct
components which the allottee or
the person aggrieved is entitled to claim if the promoter has not been able to
hand over possession with a nature of enquiry and mechanism provided under the
Act. So far as the claim with respect to refund of amount on demand under
Sections 18(1) and 19(4) of the Act is concerned, it vests within the
jurisdiction of the regulatory authority. Section 71 carves out the
jurisdiction of the adjudicating officer to adjudge compensation under Sections
12, 14, 18 and 19 after holding enquiry under Section 71(3) of the Act keeping
in view the broad contours referred to under Section 72 of the Act
(VIII)
To safeguard the interests of the parties, on
being decided by the regulatory authority/adjudicating officer, it is always
subject to appeal before the Tribunal under Section 43(5) provided condition of
pre-deposit being complied with can be further challenged in appeal before the
High Court under Section 58 of the Act and, thus, the legislature has put
reasonable restriction and safeguards at all stages.
(IX)
The opening words of Section 71(1) of the Act
make it clear that the scope and functions of the adjudicating officer are only
for “adjudging compensation” under Sections 12, 14, 18 and 19 of the Act. If
the legislative intent was to expand the scope of the powers of the
adjudicating officer, then the wording of Section 71(1) ought to have been
different. On the contrary, even the opening words of Section 71(2) of the Act
make it clear that an application before the adjudicating officer is only for
“adjudging compensation”. Even in Section 71(3) of the Act, it is reiterated
that the adjudicating officer may direct “to pay such compensation or interest”
as the case may be as he thinks fit, in accordance with provisions of Sections
12, 14, 18 and 19 of the Act. This has to be seen together with the opening
words of Section 72 of the Act, which reads “while adjudging the quantum of
compensation or interest, as the case may be, under Section 71, the
adjudicating officer shall have due regards” to the broad parameters to be kept
in mind while adjudging compensation to be determined under Section 71 of the
Act.
(X)
If there is any breach or violation of the
provisions of Sections 12, 14, 18 and 19 of the Act by the promoter, such a
complaint straightaway has to be filed before the regulatory authority. What is
being referable to the adjudicating officer is for adjudging compensation, as
reflected under Section 71 of the Act and accordingly rules and regulations
have been framed by the authority for streamlining the complaints which are
made by the aggrieved person either on account of violation of the provisions
of Sections 12, 14, 18 and 19 or for adjudging compensation and there appears
no question of any inconsistency being made, in the given circumstances, either
by the regulatory authority or the adjudicating officer
(XI)
So far as the single complaint is filed seeking
a combination of reliefs, it is suffice to say, that after the rules have been
framed, the aggrieved person has to file complaint in a separate format. If
there is a violation of the provisions of Sections 12, 14, 18 and 19, the
person aggrieved has to file a complaint as per form (M) or for compensation
under form (N) as referred to under Rules 33(1) and 34(1) of the Rules. The
procedure for inquiry is different in both the set of adjudication and as
observed, there is no room for any inconsistency and the power of adjudication
being delineated, still if composite application is filed, can be segregated at
the appropriate stage.
(XII)
When it comes to refund of the amount, and
interest on the refund amount, or directing payment of interest for delayed
delivery of possession, or penalty and interest thereon, it is the regulatory authority which has the
power to examine and determine the outcome of a complaint. At
the same time, when it comes to a question of seeking the relief of adjudging
compensation and interest thereon
under Sections 12, 14, 18 and 19, the adjudicating officer exclusively has the power to determine,
keeping in view the collective reading of Section 71 read with Section 72 of
the Act. If the adjudication under Sections 12, 14, 18 and 19 other than
compensation as envisaged, if extended to the adjudicating officer as prayed that,
in our view, may intend to expand the ambit and scope of the powers and
functions of the adjudicating officer under Section 71 and that would be
against the mandate of the Act 2016.
Section 81- Delegation
of power by RERA to single member permissible for cases of refund but not for
those cases when adjudicating officer empowered to deal with compensation cases
(I)
In the instant case, by exercising its power
under Section 81 of the Act, the authority, by a special order dated 5th
December, 2018 has delegated its power to the single member of the authority to
exercise and decide complaints under Section 31 of the Act and that being
permissible in law, cannot be said to be de hors the mandate of the Act. At the
same time, the power to be exercised by the adjudicating officer who has been
appointed by the authority in consultation with the appropriate Government
under Section 71 of the Act, such powers are non-delegable to any of its
members or officers in exercise of power under Section 81 of the Act.
(II)
That scheme of the Act, 2016 provides an inbuilt mechanism and any order passed on a complaint by the authority
under Section 31 is appealable before the tribunal under Section 43(5) and
further in appeal to the High Court under Section 58 of the Act on one or more
ground specified under Section 100 of the Code of Civil Procedure, 1908, if any
manifest error is left by the authority either in computation or in the amount
refundable to the allottee/home buyer, is open to be considered at the
appellate stage on the complaint made by the person aggrieved.
(III)
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.
Right of appeal-
condition of 30% pre-deposit- Section 43 RERA Tribunal
(I)
There are multiple statutes which provide a
condition of pre-deposit of a stipulated statutory amount to be deposited
before an appeal is entertained by an appellate forum/tribunal for reappraisal
of facts and law at the appellate stage. Example, Section 65 of Rajasthan Stamp
Act,1998, Section 18 of SARFESI Act,2002, Section 19 of Consumer Protection
Act, 1986, Section 19 of MSME Act,
Section 62(5) of the Punjab Value Added Tax Act, 2005 (PVAT)
(II)
The obligation cast upon the promoter of
pre-deposit under Section 43(5) of the Act, being a class in itself, and the
promoters who are in receipt of money which is being claimed by the home
buyers/allottees for refund and determined in the first place by the competent
authority, if legislature in its wisdom intended to ensure that money once determined
by the authority be saved if appeal is to be preferred at the instance of the
promoter after due compliance of pre-deposit as envisaged under Section 43(5)
of the Act, in no circumstance can be said to be onerous as prayed for or in
violation of Articles 14 or 19(1)(g) of the Constitution of India
Recovery
certificate for Refund by RERA- Section 40
(III)
There is indeed a visible inconsistency in the
powers of the authority regarding refund of the amount received by the promoter
and the provision of law in Section 18 and the text of the provision by which
such refund can be referred under Section 40(1). 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. However, if Section 40(1) is
strictly construed and it is understood to mean that only penalty and interest
on the principal amount are recoverable as arrears of land revenue, it would
defeat the basic purpose of the Act.
(IV)
Hence, the amount which has been determined and
refundable to the allottees/home buyers either by the authority or the
adjudicating officer in terms of the order is recoverable within the ambit of
Section 40(1) of the Act.
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