HC upholds Rera: Case by case approach a boost for developers, home buyers may have to approach court for delays

The Bombay High Court on 6 December, 2017 upheld the constitutional validity of the Real Estate Regulation Act (RERA), a seminal piece of legislation that would give comfort to home buyers across the country like never before. The 6th of December incidentally is remembered as the Babri Masjid demolition day. Now it would be remembered for a more constructive purpose (pun intended).

It is significant to note that it was at the Supreme Court’s behest that the Bombay High Court was hearing the numerous challenges mounted on the fledgling legislation. The SC could have easily transferred to itself all the petitions across the country as is the normal practice. That it chose to entrust this task to the Bombay High Court (HC) perhaps was in recognition of the reality that Maharashtra by far heads the tables in maximum registration under RERA---13,000 projects at the last count.

For the harried buyers of properties, the most beneficial and comfort-giving feature of the nascent law is 10 percent per annum compensation for delays beyond one year from the promised date of handing over of possession mentioned in the sale agreement. The Bombay HC has given its thumbs up to this salutary provision, brushing aside the innocent protestations of the builders that this was penal in nature.

The Court reiterated that the interest was compensatory in nature and not penal. Indeed, it is compensatory and makes the field level for builders and buyers. If builders can invoke the interest clause for delays in payment of installments, there is nothing wrong in turning the tables on them. In any case, a stiff interest would prevent dilatory tactics and diversion of fund besides being eminently fair.

Representational image. Reuters

Representational image. Reuters

What could stir the hornet’s nest, however, is the HC’s liberal interpretation of the various sections culminating in the interpretation that the one-year condonation of delay in handing over is not cast in stone. It has vested power on the authorities constituted under the RERA to condone the delay further on case by case basis. As it is, they have the power to extend the handing over period beyond one year only when the force majeure clause can be invoked.

The builders feared a double-whammy---- payment of 10 percent interest and cancellation of their registration with its disruptive effect and ignominy. Force majeure means acts of god like earthquake, flood, accidental fire etc. It is an internationally accepted condonation or latitude norm.

Case by case regime always bristles with the possibility of corruption, the bane of the Indian society, the one that afflicts the construction industry more than any other. Yet their Lordships have chosen to give this latitude in favor of the builders who have to live down the dubious reputation of worming themselves into the hearts of the officialdom with their glib talk and money power.

In my view, their Lordships ought to have enlarged the escape clause beyond force majeure to include municipal delays, electricity authority’s delay, water authority’s delay, sewerage authority’s delay etc instead of giving the authorities a carte blanche in this regard. A set of narrowly described situations and circumstances eschews corruption in the bud.

Indeed, builders should not be penalized for acts of God as well as inaction of the government machinery that more often than not is tasked with providing basic infrastructure like water, power and sewerage. Indeed, it would be unfair to hold the builder responsible for the lethargy of the government departments. But to indulge them beyond force majeure and inaction of government departments is inviting trouble.

Indeed, it could prove counterproductive. Just imagine a builder faced with the grim prospect of having to pay 10% interest to thousands of buyers would look for an easy escape route----knock at the doors of the state RERA even when the fault is his. Case by case approach is not only responsible for corruption in the higher echelons of power but also for mushrooming court cases. Harried buyers who are denied compensation thus would challenge the condonation in appeal thus setting in motion a never-ending spiral of frenetic judicial activity and dissatisfaction.

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Updated Date: Dec 07, 2017 09:33:47 IST

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