RERA - Regulatory Authority Has Exclusive Jurisdiction To Direct Refund To Allottee; Adjudicating Officer Has Power To Determine Compensation : Supreme Court

The Supreme Court in its judgment delivered on Thursday (11th November) had, inter alia, held that the regulatory authority has exclusive jurisdiction to direct refund of the amount, and interest on the refund amount, or directing payment of interest for delayed delivery of possession, or penalty and interest thereon, to the allottee; whereas the adjudication for determining compensation and interest thereon is with the adjudicating authority.

A Bench comprising Justices Uday Umesh Lalit, Ajay Rastogi and Aniruddha Bose delivered the judgement in an appeal filed by promoters or real estate developers challenging issues and provisions of the Real Estate (Regulation and Development) Act 2016, the UP Real Estate (Regulation and Development) Rules, 2016 and the workings of the Uttar Pradesh Real Estate Regulatory Authority.

The matter emanates from the order passed by the single member of the regulatory authority on the complaints of the home buyers, directing the promoters to refund the principal amount along with the interest. Bypassing the statutory appeal to the Tribunal, the promoters filed a Writ Petitions before the Allahabad High Court, inter alia, questioning the jurisdiction of the authority in passing the order. On dismissal of the writ petitions by the High Court, the promoters approached the Supreme Court seeking relief.

One time power to adjudicating authority to examine complaints under Section 12, 14, 18 and 19 pending before the Consumer Forum

The promoters argued that the 'authority' and the 'adjudicating officer' operate in completely distinct spheres. Both are creatures of the statute whose powers have been carved out in the Act. It is the adjudicating officer who has been bestowed with the responsibility under Section 71 exclusively to adjudicate complaints under Sections 12, 14, 18 and 19 of the Act 2016.

The Court, however, took a different view with respect to this submission. It noted that the proviso to Section 71(1) gives a one time power to the adjudicating authority to examine the complaints made under Section 12, 14, 18 and 19 pending before the Consumer Disputes Redressal Forum, in respect of composite claims, for the simple reason that Consumer Protection Act does not distinguish between refund or compensation.

Complaint for refund to be looked into by the regulatory authority, determination of compensation by adjudicating authority

The Respondents (home buyers) had submitted that the 'right to refund on demand' being a statutory right is completely distinct from the 'right to receive compensation'. Considering that the determination of compensation is a full-fledged adjudicatory process, the claim for compensation ought to be determined by the adjudicating officer, whereas the claim for refund would be determined by the authority, which is acquainted with the standard home buyer's agreements.

The Court was also of the opinion that after the commencement of the RERA Act, 2016 if a person makes a complaint for refund against the promoter or real estate agent it be looked into by the regulatory authority, while adjudication of compensation would rest with the adjudicating officer. The Court observed that this demarcation was to expedite the process and was in consonance with the scheme of the Act.

In view of Section 18, limited scope of discretion to be exercised by the regulatory authority in adjudication of refund of the amount

The promoters had also argued that the return of the amount being a serious detriment for them, adjudicating authority, which is better equipped should deal with it. Citing Imperial Structures Ltd. v. Anil Patni and Another (2020) 10 SCC 783, the Court held that Section 18 entitles the allottee to get refund of the amount on the promoter's failure to handover possession as per the terms of the home buyer's agreement and since there is next to no scope for exercising discretion in this regard, issues of refund can be dealt with by the regulator even within their limited scope of scrutiny. The Court noted that :

"...The submission has no foundation for the reason that the legislative intention and mandate is clear that Section 18(1) is an indefeasible right of the allottee to get a return of the amount on demand if the promoter is unable to handover possession in terms of the agreement for sale or failed to complete the project by the date specified and the justification which the promotor wants to tender as his defence as to why the withdrawal of the amount under the scheme of the Act may not be justified appears to be insignificant and the regulatory authority with summary nature of scrutiny of undisputed facts may determine the refund of the amount which the allottee has deposited, while seeking withdrawal from the project, with interest, that too has been prescribed under the Act, as in the instant case, the State of Uttar Pradesh has prescribed MCLR + 1% leaving no discretion to the authority and can also claim compensation as per the procedure prescribed under Section 71(3) read with Section 72 of the Act."

In cases of default in terms of agreement, both homebuyers and promoters are equally safeguarded

Another issue raised by the promoter was that, if a defaulting allottee claims refund then the adjudicating authority would be in a better position to determine the issue. The Court's finding in this regard was that in cases of default, both the home buyers and promoters are equally protected by the statute - the promoters can cancel allotment in terms of Section 11(5) of the Act, which in turn can be questioned by the allottee under proviso to Section 11(5).

Separate formats for filing compensation and refund

The Court pointed out that under the Rules there are separate formats for filing compensation and refund, further indicating that the inquiry process for both are indeed different. However, in cases where composite applications are filed, the Court believed that the same could be segregated at the appropriate stage.

Conjoint reading of Sections 18 and 19 reflects demarcation of power to adjudicate on the issues of refund and compensation

Perusing Sections 71(1), 71(2), 71(3) and 72, the Court observed that the opening words of Section 71(1) ("For the purpose of adjudging compensation under sections 12, 14, 18 and section 19, the Authority shall appoint…"); Section 71(2) ("The application for adjudging compensation under sub-section (1)..."); the reiteration in Section 71(3) ("...he may direct to pay such compensation or interest…") read with the opening words of Section 72 ("While adjudging the quantum of compensation or interest…") made it clear that the adjudicating authority was to only determine compensation. The Court held:

"From the scheme of the Act of which a detailed reference has been made and taking note of power of adjudication delineated with the regulatory authority and adjudicating officer, what finally culls out is that although the Act indicates the distinct expressions like 'refund', 'interest', 'penalty' and 'compensation', a conjoint reading of Sections 18 and 19 clearly manifests that when it comes to refund of the amount, and interest on the refund amount, or directing payment of interest for delayed delivery of possession, or penalty and interest thereon, it is the regulatory authority which has the power to examine and determine the outcome of a complaint. At the same time, when it comes to a question of seeking the relief of adjudging compensation and interest thereon under Sections 12, 14, 18 and 19, the adjudicating officer exclusively has the power to determine, keeping in view the collective reading of Section 71 read with Section 72 of the Act. If the adjudication under Sections 12, 14, 18 and 19 other than compensation as envisaged, if extended to the adjudicating officer as prayed that, in our view, may intend to expand the ambit and scope of the powers and functions of the adjudicating officer under Section 71 and that would be against the mandate of the Act 2016."

[Case Title: Newtech Promoters and Developers Pvt. Ltd. v. State of UP And Ors., LL 2021 SC 641]

Also from the judgment

 Supreme Court Upholds Application Of RERA To Real Estate Projects Ongoing At Act's Commencement

Condition Of Pre-Deposit For Filing Appeal U/Sec 43(5) RERA Not Discriminatory Against Promoters: Supreme Court

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