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2024 DIGILAW 1118 (KER)

Shwas Builders & Developers Pvt Ltd v. Premchand Surendran

2024-09-05

M.A.ABDUL HAKHIM

body2024
JUDGMENT : M.A.Abdul Hakhim, J. 1. The respondents 1 to 4 in Complaint No.37/2023 of the Kerala Real Estate Regulatory Authority (the K-RERA) are the appellants in the Miscellaneous Second Appeal filed under Section 58 of the Real Estate (Regulation and Development Act, 2006 (the RERA). The respondent is the complainant in the said complaint. 2. The parties are referred to according to their status before the K-RERA. 3. The complainant is an allottee in the Villa Project by name ‘Epcot County’ launched by the 1st respondent. The 1st respondent is a private limited company engaged in the business of development and construction of real estate projects. The respondents 2 to 4 are its Directors. The 4th respondent is the landowner of the Project also. The 5th respondent is another private limited company, which is a sister concern of the 1st respondent. 4. The complainant filed the complaint claiming amounts under various heads from the respondents alleging various defects, deficiency and delay from the part of the respondents with respect to the real estate project. 5. When the complaint was taken on file, the K-RERA found that the Real Estate Project of the 1st respondent requires registration under S.3 of the RERA and accordingly issued Show Cause Notice dt 06.03.2023 in the Complaint itself calling upon the respondents to explain why action should not be initiated for violation of S.3 of the RERA. 6. The Respondents did not file a Reply to the Show Cause Notice.The K- RERA found that the Building Permit was issued on 28.11.2015 and since no documents were produced by the respondents to prove that the villas and common areas in the real estate project were completed before 01.05.2017, the K-RERA issued Interim Order dt 25.04.2023 directing the respondents to appear in person on 30.05.2023 at 11.00 a.m at its Head Office along with all the relevant documents to explain as to why penalty as per S.59(1) of the RERA shall not be imposed. The respondents filed a Reply to the Show Cause Notice on 29.05.2023. 7. The respondents filed a Reply to the Show Cause Notice on 29.05.2023. 7. After considering the contentions of the respondents the K-RERA passed interim order dt 05.07.2023 ordering the respondents to register the real estate project within 30 days from the date of receipt of the said order, imposing a penalty of Rs.2.59 lakhs, being 0.5% of the estimated cost of the real estate project and further ordering that if the promoter fails to pay the penalty and continue to violate S.3 even after 30 days from the date of receipt of the said order, proceedings under S.59(2) shall be initiated. 8. The respondents filed Appeal before the Kerala Real Estate Appellate Tribunal (the Tribunal) as REFA No. 48/2023 challenging the said order dt 05.07.2023 of the K-RERA. The Tribunal vide its order dt 28.06.2024 allowed the appeal in part confirming the order with respect to the registration of the real estate project, setting aside the imposition of penalty and exonerating the 5th respondent. It is also ordered that K-RERA shall take appropriate steps under S.59(1) of the K-RERA at the appropriate stage if the contravention is brought to its notice. The respondents are given one month’s time from the date of the Appellate Order to register the real estate project with the K-RERA. The penalty was set aside on the ground that penalty could not be imposed simultaneously with the direction for registration. The 5th respondent was exonerated from the liability on the ground that it has no connection whatsoever with the real estate project launched by the 1st respondent. 9. I heard the learned Senior Counsel for the appellants Sri.P.B Krishnan instructed by Adv. Sri.S.S.Aravind. 10. When the appeal came up for admission on 16.08.2024, the learned Senior Counsel submitted that the impugned order dt.05.07.2023 passed by the K-RERA is unsustainable on account of jurisdictional error since the same was passed by a Single Member of the K-RERA which is impermissible under S.29 of the RERA. In view of the said submission, a Report from the K-RERA was called for and the K-RERA submitted a Report dt. 22.08.2024 stating that individual members of the K-RERA are given powers by the K-RERA in its meeting held on 27.11.2021 by delegation in the exercise of the powers under S.81 of the RERA. In view of the said submission, a Report from the K-RERA was called for and the K-RERA submitted a Report dt. 22.08.2024 stating that individual members of the K-RERA are given powers by the K-RERA in its meeting held on 27.11.2021 by delegation in the exercise of the powers under S.81 of the RERA. The scope of Section 81 is considered by the Hon’ble Supreme Court in Newtech Promoters and Developers Pvt.Ltd. V. State of U P and others [2021 SCC online SC 1044]. It is apposite to extract Paragraph 112 of the said decision. 112. S.81 of the Act 2016 empowers the authority, by general or special order in writing, to delegate its powers to any member of the authority, subject to conditions as may be specified in the order, such of the powers and functions under the Act. What has been excluded is the power to make regulations under S.85, rest of the powers exercised by the authority can always be delegated to any of its members obviously for expeditious disposal of the applications / complaints including complaints filed under S.31 of the Act and exercise of such power by a general and special order to its members is always permissible under the provisions of the Act. 11. Hence, the Single Member of K-RERA has the power and jurisdiction to consider a complaint as it is perfectly within his jurisdiction in view of the delegation of power by the K-RERA in exercise of its powers under S.81 of the RERA. 12. The learned Senior Counsel further contended that the appellants are only contractors as the land on which the villa of the complainant was constructed belonged to the complainant as per the sale deed executed by the 4th respondent landowner. The status of the respondents is that of a contractor and not a promoter and the respondents are not promoters as defined under S.2(zk) of the RERA. On transfer of title as per S.17, the real estate project comes to an end, thereafter, there could not be any registration of the real estate project. The real estate project could not be treated as an ongoing project since the project was completed on 24.05.2019, i.e., much before the establishment of K-RERA in Kerala. The direction to register the project is a direction to do an impossible act. The real estate project could not be treated as an ongoing project since the project was completed on 24.05.2019, i.e., much before the establishment of K-RERA in Kerala. The direction to register the project is a direction to do an impossible act. The impugned order passed by the K-RERA is in the nature of an interim order, the said order was passed without complying the procedure under S.36 of the RERA which deals with the power of the K-RERA to issue interim orders. The K-RERA ought to have conducted an enquiry giving sufficient opportunity for the respondents to produce documents and ought to have accepted the documents produced by the respondents by marking the same in evidence. The prayers in the complaint are not maintainable in view of the provisions under S.18. 13. It is revealed from the admitted pleadings in the case that the 1st respondent launched a villa project by name, ‘Epcot County’ consisting of 15 twin villas (30 villas) in a land having an extent of 49.60 Ares owned by the 4th respondent. Building Permit was issued for the project on 28.11.2015. An agreement for sale was executed with the complainant on 01.06.2016. The Construction Agreement was executed with the complainant and 1st respondent on 30.12.2016. The complainant agreed to purchase Plot No.11 having an extent of 2.91 cents from the 4th respondent. The entire construction of the villas was completed by the 1st respondent in January, 2019. The Villa of the complainant was handed over on 12.02.2019. The Construction Agreement clearly mentions that the 1st respondent made a scheme to construct villas in the real estate project; that the project is managed by the 1st respondent; that the common area, common amenities and facilities proposed in the village project shall be completed and handed over by the 1st respondent. The aforesaid clauses clearly indicate that the 1st respondent is a promoter with respect to the real estate project. The 1st respondent is not a mere contractor engaged by the complainant to construct his individual villa. The status of the 1st respondent is that of a promoter within the meaning of Se.2(zk) of the RERA and not of a contractor. 14. The 1st respondent is not a mere contractor engaged by the complainant to construct his individual villa. The status of the 1st respondent is that of a promoter within the meaning of Se.2(zk) of the RERA and not of a contractor. 14. The learned Senior Counsel contended that in the case of the villa of the complainant, the occupancy certificate would be obtained by the complainant on completion of the villa, and the 1st respondent has nothing to do with the matter. It is true that when the promoter is not the owner of the land, the documents like building permits, completion certificates, etc., are obtained in the name of the landowners. But it does not in any way absolve the liability of respondents 1 to 4 as a promoter of the project. 15. Proviso to S.3(1) of the RERA provides that the promoter shall make an application for registration of the real estate project if the project is ongoing on the date of commencement of the RERA and for which completion certificate has not been issued. Admittedly, the 1st respondent had not completed the project as on 01.05.2017, ie, the date of commencement of the RERA. The 1st respondent does not have a case that it has received the Completion Certificate with respect to the real estate project prior to the commencement of the RERA in order to avoid registration in view of S.3(2) (b) of the RERA. Gong by the scheme of registration as provided in Section 3 of the RERA, with respect to a real estate project existing as on the date of commencement of the RERA, the only two material factors which are to be considered is whether the project was an ongoing project as on the date of commencement of the RERA and whether the Promoter has received Completion Certificate before the commencement of the RERA. The date of establishment of the K-RERA is not relevant and material in the statutory scheme to decide whether a project is liable to be registered or not. Since the subject real estate project was admittedly an ongoing one as on the date of commencement of the Act, the respondents 1 to 4 are liable to register the same under S.3 (1) of the RERA. 16. Since the subject real estate project was admittedly an ongoing one as on the date of commencement of the Act, the respondents 1 to 4 are liable to register the same under S.3 (1) of the RERA. 16. I am unable to accept the contention of the learned Senior Counsel that the real estate project is concluded on the transfer of title as per S.17 of the RERA and that since the transfer was done before 01.05.2017, there could not be any direction to register the project. As per the statutory scheme of the RERA, it is the completion of the project, what is relevant and material and not the transfer of title. The RERA is enacted essentially to protect the interests of the allottees of a real estate project. Their interests are to be protected till the handing over of the agreed allotted apartment, villa or plot with title over the same after completion of the project. The adjudicatory mechanisms are provided for addressing all their grievances till the handing over of the agreed allotted apartment, villa or plot with title over the same after completion of the project. The allottees of the real estate project may purchase divided or undivided shares in the project by registered conveyances much before the completion of the real estate project. Sometimes, such registered conveyances are required for the allottees to create mortgages for availing loans for payments to the promoter. It could not be said that on the execution of the conveyance deed transferring the title of the land, the real estate project would come to an end even if the construction was not completed. There is no indication in S.17 that once the transfer of title is made in favour of the allottee, the real estate project has come to an end. If such a contention is accepted it is easy for every promoter of a real estate project to defeat the provisions of the RERA by transferring the title of the land to the allottee before completion of the project. The question of whether the project land is transferred to the allottee or not is not a relevant factor for deciding whether the real estate project is complete or not. 17. The question of whether the project land is transferred to the allottee or not is not a relevant factor for deciding whether the real estate project is complete or not. 17. It is true that the impugned order dt 05.07.2023 is titled as an interim order, but it could not be said that it is an interim order passed by K-RERA invoking its power under S. 36. It is an order passed by K-RERA when it is noticed that the real estate project of the respondents is not registered under S.3 of the RERA. It is a proceeding independent of the complaint. The said proceeding ends with an order on the finding whether the project is registrable or not. It has nothing to do with the allegations and claims in the complaint which are proceeded and decided in the complaint itself. True, the K-RERA ought to have initiated the proceedings under a separate numbering either as suo motu or as I.A in order to avoid technical objection. But failure to do so will not affect the nature and character of the said order. It is essentially an order in an independent proceedings and it does not have the trappings of an interim order and hence compliance of the provisions in S. 36 of the RERA is not necessary for passing orders under Ss.3 and 59 of the RERA. 18. In the case on hand, the impugned order was passed after giving sufficient opportunities to the respondents to submit necessary pleadings and evidence from their part. The said order is based on material details, which are relevant for considering whether a real estate project is liable for registration. It could not be said that the respondents could not submit any relevant materials for the adjudication of whether the real estate project is liable for registration. All the contentions raised by the respondents were considered on the basis of the admitted pleadings from the parties. The respondents could not point out any material document which could not be produced by them before the K-RERA in the matter of registration. 19. As stated earlier, with respect to a real estate project existing as on the date of commencement of the RERA, what is relevant is whether it is an ongoing project and whether the completion certificate with respect to the project is issued. 19. As stated earlier, with respect to a real estate project existing as on the date of commencement of the RERA, what is relevant is whether it is an ongoing project and whether the completion certificate with respect to the project is issued. The K-RERA is perfectly justified in adjudicating the question of whether registration is required or not when these two relevant materials are available. No prejudice whatsoever is caused to the respondents. 20. Though the learned Senior Counsel advanced arguments with respect to the sustainability of the claims of the complaint with reference to S.18 of the RERA, I do not propose to consider the same in this appeal as the said contentions are to be considered by the K-RERA while considering the complaint. The impugned order is limited to the question of registration of the project. 21. The K-RERA as well as the Tribunal considered all the contentions of the respondents on the basis of the pleadings and evidence in the case. The order of the K-RERA and the order of the Tribunal do not require any interference. No substantial question of law arises in the matter for invoking the jurisdiction of this Court under S.58 of the RERA Act. The Miscellaneous Second Appeal is liable to be dismissed. 22. Since the time of one month granted by the Tribunal to respondents 1 to 4 to register the real estate project with the K-RERA has already expired, one month time from the date receipt of the certified copy of this judgment is granted to the respondents 1 to 4 to register the real estate project with the K-RERA. 23. Since no separate procedure is prescribed for adjudicating the question as to the registration of real estate projects under S.3, and for adjudicating the imposition of penalty under S.59, the K-RERA is free to adopt a procedure of its own in full compliance of the principles of natural justice. Of course, a uniform procedure is to be adopted by the K-RERA in all cases. Since the question of registration of a project is to be adjudicated independently of the allegations and claims in the main complaint, hereafter the K-RERA shall initiate separate suo motu proceedings when the K-RERA is prima facie of the view that a real estate project is liable for registration, in the absence of any prayer with respect to the same in the complaint. 24. 24. The Miscellaneous Second Appeal is dismissed without costs.