Bombay High Court : Questions On Concession By Party Before Maha RERA, Correct Approach Is To First File Review Before RERA Than Appeal To Maha REAT

Background Facts

The Appellant (Builder) is the promoter of the residential housing project consisting of two buildings named Alta Monte and Signet under the Slum Rehabilitation Scheme. The Respondent (Homebuyer) purchased two flats in the D-Block of the project by paying a total consideration of Rs. 3,91,04,400/- for each flat.

The Builder issued two letters of allotment, both dated 11.09.13, to the Homebuyers, agreeing to hand over possession of both flats by 01.06.17, with a grace period of six months.

However, the Builder failed to execute agreement for sale with the homebuyers or deliver possession of the flats to them. Consequently, the Homebuyers filed complaint before MahaRERA, seeking directions for the execution of registered agreements for sale, payment of interest for delayed possession, and passing on GST credit to the Homebuyers.

In its order dated 25.11.20, MahaRERA directed the Builder to execute and register agreement for sale with the homebuyers within 30 days as per Section 13 of RERA. MahaRERA also directed the Builder to hand over possession of the flats by July 2021. Additionally, MahaRERA directed the payment of interest at the rate of MCLR plus 2% on the amounts collected after May 2017, with a directive to adjust the interest against payments due from the homebuyers.

Discontent with the order of MahaRERA, the Homebuyers filed an appeal with the Maharashtra Real Estate Appellate Tribunal (MahaREAT). In their appeal, the Homebuyers sought interest on the entire amount paid and a directive for the passing of GST credit. They also requested compensation of Rs. 50,00,000/- for mental harassment.

In its order dated 17.03.23, MahaREAT allowed the appeal of the Homebuyers by modifying the MahaRERA order. MahaREAT directed the Builder to pay interest to the homebuyers on the entire amount paid from 1 January 2018 until the date of handing over possession of the flats. Furthermore, MahaREAT ordered the Builder to pay costs of Rs. 10,000/- to the Homebuyers.

The Appellant (Builder) filed an appeal before the Bombay High Court against the MahaREAT order dated 17.03.23.

Contention of Parties

The Builder contended in the High Court that MahaREAT erred in entertaining the appeal filed by the Homebuyers as they obtained the order dated 25 November 2020 by concession. They argued that the Homebuyers agreed before the MahaRERA that interest should only be paid on the amounts collected after the implementation of RERA, considering the financial difficulties faced by the Builder in executing the project. The Builder argued that the MahaRERA acknowledged the fact that the project is facing liquidity crises and penalizing builder will further delay completion of the project.

Additionally, they argued that if the Homebuyers had issues with the concession recorded by the MahaRERA, they should have filed a review application instead of challenging the order directly before the MahaREAT. Moreover, they contended that it is improper for a party to plead before the Appellate Court that what is recorded by a subordinate court was erroneous without first drawing the attention of the Subordinate court for correction.

The Homebuyers contended in the High Court that the Builder delayed the completion of the project and withheld substantial amounts paid by the Homebuyers. They highlighted that the allotment letters issued in September 2013 stipulated a handover period until June 2017, with a grace period extending to January 2018. However, more than six years have passed, and the Builder has yet to deliver possession of the flats. To address the Homebuyers plight, the Appellate Tribunal rightfully intervened and directed the Builder to pay interest on the entire amount received from the Homebuyers, effective from January 1, 2018.

Furthermore, the Homebuyers argued that the MahaRERA order was not based on concession but on merits. They argued that their appearance before the MahaRERA did not imply any concession, and they did not relinquish their right to claim interest on the amounts paid to the Builder. According to them, the order of the MahaREAT aligns with the statutory scheme of Section 18 of the RERA. Additionally, they stated that the scope of interference under section 100 of the Code of Civil Procedure, 1908, in challenging the Appellate Tribunal's order is limited, and unless a palpable error is evident, the Court should refrain from interfering. Therefore, they urged for the dismissal of the Appeal.

High Court Verdict

The High Court set aside the MahaREAT order dated 17.03.23 and upheld the MahaRERA order dated 17.03.23.

The High Court noted that initially, the Homebuyers insisted on payment of interest on the entire amount. However, after considering the explanation provided by MahaRERA regarding the project's liquidity crisis, they modified their demand to seek interest only on amount collected by the builder after the implementation of RERA.

The High Court held that the Homebuyers had clearly conceded before the MahaRERA as they willingly accepted interest only on amounts paid after the implementation of RERA.

Furthermore, the High Court observed that the Homebuyers neither filed an application before the MahaRERA regarding the erroneous recording of the concession nor raised any specific ground in the Appeal about it.

Consequently, the High Court concluded that the judgment and order issued by MahaREAT contained significant errors. Firstly, it noted a jurisdictional error in MahaREAT decision to entertain the Appeal without requiring the Homebuyers to seek clarification from MahaRERA regarding the concession recorded in the order. Secondly, it observed another error made by MahaREAT in entertaining an oral plea from the Homebuyers claiming they hadn't made a concession before MahaRERA.

The High Court relied on the Supreme Court decision in the case of State of Maharashtra vs. Ramdas Shrinivas Nayak and others (AIR 1982 SC 1249), wherein it was held that the Appellate Court must believe that a concession recorded by a Judge was indeed made, as only the Judge present during the recording can vouch for it. Therefore, the correct course of action for a party is to invite the Judge's contention if they feel the recording of concession was erroneous.

In conclusion, the Bombay High Court has set aside the MahaREAT order dated 17.03.23, asserting that the Appellate Tribunal lacks jurisdiction to entertain appeals where a party contends that the Authority erroneously recorded the concession.

Case: Era Realtors Private Limited V/S Prakash Shah and Niket Shah

Citation: SECOND APPEAL (STAMP) NO.27241 OF 2023

Counsel for Appellant: Mr. Shakeeb Shaikh with Mr. Noorain Patel i/b M/s. Diamondwala & Co.

Counsel for Respondents : Mr. Aseem Naphade with Mr. Rajendra Mishra, Mr. Mukesh Gupta & Ms. Asmita Yadav i/b. M/s. Solicis Lex

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