A three-member Supreme Court bench, led by Justice U U Lalit, last week upheld a provision in the real estate law, which makes it mandatory for builders to deposit full compensation and interest ordered by the regulator or at least 30% of the penalty as a pre-condition for challenging any such order before the appellate authority.
This ruling has come as great relief for homebuyers as it may deter builders from the usual practice of resorting to long legal recourse by challenging orders of RERA authorities. The court has also upheld the provision that the appellate authority has the freedom to increase the mandatory deposit beyond 30%.
While the penalty imposed by the RERA authorities goes to the Consolidated Fund of India or the state account, the refund is the entitlement of the customer. According to some experts, this judgment will put an end to harassment of customers as builders found it a better option to challenge the RERA orders than paying the refund amount to the buyers.
The SC held that the condition of pre-deposit imposed on promoters for filing appeals under Section 43(5) of the Real Estate (Regulation and Development) Act is neither discriminatory nor a violation of constitutional provision. The court observed: “The intention of the legislature appears to be to ensure that the rights of the decree holder (the successful party) is to be protected and only genuine bona fide appeals are to be entertained…the intention of the instant legislation appears to be that the promoters ought to show their bona fides by depositing the amount so contemplated.”
The SC also upheld the retroactive application of RERA to the real estate projects which were ongoing at the commencement of the Act. Earlier, the Bombay HC had passed a similar order when different builders had challenged the applicability of the law to projects which had already started by the time the law was notified.