Introduction

Section 3 of the Real Estate (Regulation and Development) Act, 2016 generally known as RERA Act makes it compulsory for the real estate developers to register their project with the Real Estate Regulatory Authority (RERA). This prior registration of the project and builder with RERA is in favour of buyers and protects them against the corrupt practices of some builders. In some cases this registration can be revoked by the RERA based on the provisions laid under Section 7 of the RERA Act. The revocation of registration of a project can be detrimental to the buyers who have invested in the project. To protect the interest of buyers in such a case RERA Act has a remedy in form of Section 8, whereby RERA may consult with the appropriate government to take action for carrying out the remaining development in the project. A detailed analysis of Section 7 and Section 8 of RERA Act is enumerated below.

Revocation of the Project under Section 7 of the RERA Act

Section 7 of the RERA Act deals with the provisions related to revocation of registration by RERA. The subsection 1 of section 7 states that RERA may cancel the registration of any project either by receiving complaints against the promoter or project from the buyers or on the recommendation of some other authority (e.g. any development authority) or by itself on the basis of following four (4) grounds:

• Promoter does not adhere by the RERA Act, 2016 or the rules or regulations made under it.

• Promoter violates the terms and conditions based on which it was given approval by the competent authority. Here the competent authority means any local authority, or any other authority established under law which has jurisdiction over the land on which the project was getting developed and it has the powers to give permission for development of such land.

• Promoter has involved itself into any kind of unfair practices. The section also specifies the meaning of unfair practices. “Unfair practice” is a practice where the builder/promoter for promoting the any project adopts any unfair method for e.g. making false representation about the standard of services or representation about an approval or affiliation that the project does not have or false and misleading representations about the property in any advertisement, prospectus or newspaper.

• Promoter indulges in any fraudulent practice.

Sub section 2 of Section 7 of RERA Act makes it mandatory for RERA to issue 30 days show cause notice to the builder before cancelling the registration of the project. The power to cancel the registration under Section 7 is a discretionary power and it is the choice of RERA to not cancel the registration of the project in the interest of allottees. Under sub section 3 of Section 7 whereby RERA after imposing certain terms and conditions can permit the project to remain in force. These terms and conditions so imposed by RERA shall be binding on the builder.

RERA authority’s powers upon the Revocation of Registration?

Upon revocation of the project under sub section 1 of section 7 of RERA Act, the RERA authority has been conferred powers under Subsection 4 of Section 7 of RERA Act to take the following actions against the builder:

• It will add the name of promoter in the list of defaulters along with displaying the photo of promoter on its website. It can also ban the promoter from using its website in relation to the project. It will also be the duty of the concerned RERA authority to inform Real Estate Regulatory Authorities of other States and Union Territories about such revocation of the project.

• It can order bank to freeze the Escrow Account[1] as specified under sub-clause (D) of Clause (1) of sub-section (2) of Section 4 of the RERA Act. According to the section, 70% of amount collected from the buyers for the real estate project is deposited in this escrow account. RERA authority is also empowered to take further actions beyond freezing the account like allowing for consequent de-freezing of the account for completion of the remaining development works.

• It shall carry out the remaining development work.

•  Clause (d) of Sub-section (4) of Section 7 of the Act empowers RERA to issue any such direction in interest of the buyer or in the public interest at large.

Bombay High Court in Swapnil Promoters and Developers … vs The Union Of India And Ors noted that Revocation of the registration takes place only upon satisfaction of the Authority as regards grounds (a) to (c) of sub-section (1) of Section 7. The Authority, before taking action of revocation of registration has to give not less than 30 days’ notice in writing stating the ground on which it is proposed to revoke the registration. The Authority has to consider any cause shown by the promoter against the proposed revocation. Any promoter aggrieved by the decision of the Authority has a remedy of appeal before the Appellate Tribunal. The power conferred on the Authority under sub-section (4) of Section 7 cannot be said to be unbridled and unguided. It is only in the event of the Authority satisfying as regards one or the other ground under clauses (a) to (c) of sub-section (1) of Section 7, it can revoke the registration. The object behind debarring the promoter from accessing its website and also specifying his name in the list of defaulters and displaying his photograph on the website of the Authority and informing other Real Estate Regulatory Authority in other States and Union Territories about the revocation of the registration is cautioning other public from dealing with such promoter. The purpose behind this is absolutely salutary and no fault can be found with this object. Likewise after revocation of registration the promoter cannot be permitted to deal with the amounts deposited in dedicated bank account as specified in Section 4(2)(l)(D). 70% amount deposited under Section 4(2)(l)(D) covers the cost of construction and the land cost and has to be utilized for that purpose only. The object behind clause (c) of sub-section (4) of Section 7 is also salutary and the amounts deposited in the dedicated account can be utilized by the Authority for carrying out remaining development works which was left behind by the promoter[2].

The obligation of RERA authority upon the Revocation of Registration or lapse of registration?

The RERA Act puts obligation on RERA authority for carrying out the remaining development work once the registration of the project lapses or there is revocation of the registration under sub-section (1) of Section 7 of the Act. Section 8 of the Act states that it is the duty of RERA to carry out the remaining development of the project and in order to achieve this end it may consult the appropriate government to take action either by carrying out the work through a Development Authority or by the Association of Allottees or in any other manner as is determined by RERA. The section also states that it will be the Association of Allottees who will have the first right to refuse to carry out the remaining development work in case there is revocation of the project under section 7(1) of the act.

In a Complaint against the promoter, the Maharashtra RERA ordered for the revocation of the registration of the project named “MARVELLA” situated at Mulshi, Pune, on the request of the allotees where the allotees stated that the builder didn’t comply with a previous order dated April 17, 2018 passed in Complaint no: CC005000000010941 wherein the Promoter was required to handover possession of the apartments to the allottees and thus demanded for revocation of registration of the project. The bank was also directed by the authority to freeze the escrow bank account of the project. The authority also issued directions to facilitate the remaining development works as per section 8 of RERA Act and the project was, handed over to the Association of Allottees. For the purpose of carrying out the balance project work, the Association of Allottees was authorized to open a separate bank account for the project, collect the balance consideration amounts from the concerned allottees and incur expenditure for the purpose of completing the project. [3]

Conclusion:

The Real Estate (Regulation and Development) Act, 2016 was brought into effect with the objective of bringing transparency in the real estate sector and to protect the interest of the buyers. Many a times when the promoter is not able to complete the project for whatever reasons RERA authorities do not have many options to provide relief to the homebuyers. One way is to order for refund of the amount invested by the buyer which might not be the best option as promoter may not be able to refund that and if the project is in the final stages, then all the allottees might not want to take the refund and issuing the refund would make it impossible for the RERA authority to get the project completed. And here restarting a project is a win- win situation for both the buyers and the builder by allowing joint development of delayed projects, wherein the promoter continues to be responsible for completing the project and delivering on its obligations, while the homebuyers through their collective are responsible to ensure the payments made by them are being deployed only on the project.