Bombay High Court Clarifies RERA Applicability to Ongoing Projects and Promoter Obligations

Court and Bench

High Court of Bombay (Mumbai Bench)

Citation

(Fictional, for illustrative purposes) 2023 (3) Mh.L.J. 456

Facts of the Case

M/s. Apex Developers (hereinafter, 'the Promoter') launched a residential project, 'Grand Towers', in 2013, promising possession by December 2016. Several allottees, including Mr. Sharma, booked units in the project. The Promoter failed to deliver possession by the stipulated date. Despite repeated representations, the project remained incomplete, and no Occupation Certificate (OC) or Completion Certificate (CC) was obtained.

Following the enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA Act), the allottees individually and collectively filed complaints before the Maharashtra Real Estate Regulatory Authority (MahaRERA), seeking possession of their units with delayed interest or, in the alternative, refund of their invested amounts with interest. MahaRERA, after due process, directed the Promoter to either hand over possession with interest for the delay or refund the amounts with interest as per RERA Act §18.

The Promoter appealed MahaRERA's order before the Maharashtra Real Estate Appellate Tribunal, contending that the RERA Act should not apply retrospectively to projects initiated before its commencement. The Promoter also argued that delays were due to external factors beyond their control, such as obtaining various governmental approvals and unforeseen material shortages. The Tribunal upheld MahaRERA's decision, reiterating the applicability of the RERA Act to ongoing projects. Aggrieved, the Promoter filed a writ petition before the Bombay High Court.

Issues before the Court

1. Whether the Real Estate (Regulation and Development) Act, 2016, applies to 'ongoing projects' for which a Completion Certificate or Occupancy Certificate had not been issued prior to the Act's commencement.
2. Whether the Promoter can be held liable for delays and subsequent payment of interest or refund under RERA Act §18, considering the reasons cited for delay.

Holding

The Bombay High Court upheld the decisions of MahaRERA and the Maharashtra Real Estate Appellate Tribunal. The Court held that the RERA Act is indeed applicable to 'ongoing projects' which were incomplete at the time of its commencement. The Court further affirmed the Promoter's liability for project delays and the consequential obligation to pay interest on delayed possession or refund the principal amount with interest, as stipulated under RERA Act §18.

Ratio Decidendi

• Applicability to Ongoing Projects: The Court relied on the express provisions of the RERA Act, particularly RERA Act §3 and the definition of 'ongoing project' as understood by various state RERA rules. It noted that the legislative intent behind the RERA Act was to protect allottees and regulate the real estate sector comprehensively. Exempting projects merely because they were launched before the Act's commencement but remained incomplete would defeat this purpose. The Court emphasised that the determining factor for RERA applicability is the absence of a Completion Certificate or Occupancy Certificate on the date of the Act's enforcement.
• Promoter's Liability for Delay: The Court reiterated that a promoter's obligation under RERA Act §18 is statutory and not contingent on the reasons for the delay, unless such reasons fall within the ambit of 'force majeure' as defined or understood by the Act. The burden to prove force majeure conditions rests squarely on the promoter. General difficulties in obtaining approvals or material shortages, if not exceptional and unforeseeable, do not absolve the promoter of their responsibility to deliver the project within the promised timeline. The Court underscored that allottees commit their hard-earned money based on promised timelines and specifications, and promoters must honour these commitments.

Practical Takeaways

• Mandatory RERA Compliance for Ongoing Projects: Developers and promoters must understand that all projects for which a Completion Certificate or Occupancy Certificate was not issued before 1st May 2017 (the date of full RERA Act enforcement) fall under the purview of RERA. This mandates registration, adherence to timelines, and compliance with all RERA obligations, irrespective of the project launch date.
• Strict Liability for Delays: Promoters cannot easily escape liability for delays by citing routine administrative hurdles or market fluctuations. The RERA Act imposes strict liability for failure to deliver possession on time, entitling allottees to interest for every month of delay or a full refund with interest.
• Allottee Protection: This judgment reinforces the RERA Act's primary objective of protecting home buyers. Allottees facing delays in projects initiated even before RERA can seek recourse under the Act, provided the project is still 'ongoing'.
• Importance of Due Diligence: Both promoters and allottees should exercise due diligence regarding project registration status and promised timelines. Promoters must meticulously plan and factor in potential delays, while allottees should be aware of their rights and the available remedies under RERA.