Rajasthan HC Issues Notice On Plea Challenging RERA Extension To Real Estate Projects

The notice has been issued by a division bench comprised by Chief Justice Indrajit Mahanty and Justice Satish Kumar Sharma.

The impugned order dated May 13, 2020 grants across the board extension of 12 months to all registered projects not already completed, lapsed, or revoked as on March 19, 2020.

As per the petition filed by Advocate Ashish Sharma through Advocates Nipun Singhvi and Pranjul Chopra , Clause 6 of the impugned order is liable to be quashed in so far as it grants exemption for completion of even those projects that have lapsed before the outbreak of the pandemic, i.e. before March 19, 2020.

Further, it is stated that payment of compensation in case of failure to deliver the property under Section 18 of the Act has also been exempted in a blanket manner, even for those cases that had lapsed before March 19.

"Clause 6 of the said order dated 13.05.2020 passed by the Learned Authority, without making any distinction, imposes a blanket ban on payment of interest and compensation under Section 18 of the said Act, 2016 till 31.03.2021. The said order dated 13.05.2020, passed for easing the industry suffering from the COVID-19 pandemic, fails to differentiate those projects which have lapsed before 19.03.2020 without any force majeure event. The violation of said Act, 2016 and the buyer-seller agreement in such cases is not a result of force majeure event like the ongoing COVID-19 pandemic," the Petitioner has contended.

It is submitted that extending the benefit to such delinquent promoters, for no fault of the allottee, and without any intervention of the ongoing pandemic, is completely arbitrary and violative of the mandate of the RERA, 2016.

The petitioner has also pointed out that the Authority has granted exemption to the real-estate companies from paying compensation to the homebuyers, even under Section 12 of the Act, which relates to obligations of promoter regarding veracity of the advertisement or prospectus.

Section 12 mandates that if the person intends to withdraw from a project due to a false, incorrect statement made by the promoter in notice, advertisement, prospectus or the model apartment, plot or building, the promoter ought to return the entire investment along with interest and compensation in the manner provided.

The Petitioner has contended that by issuing directions to the effect that no interest or compensation is payable by the promoter for false statement made as per Section 12 of the RERA, 2016, the Authority has indirectly "sanctioned" such wrongful acts for the period of the extension.

"The said order, passed with misapplication of law and fact, seeks to exempt a delinquent promoter for a wrongful act committed, which with or without the ongoing COVID-19 pandemic, still remains a wrongful act. The order dated 13.05.2020 suffers from manifest perversity and legal infirmities and therefore, deserves to be quashed and set-aside," the plea states.

Further, the Petitioner has submitted that Clause 7 of the impugned order states that no coercive steps shall be taken by the Authority for execution of refund orders.

This, the Petitioner has contended has the effect of staying the operation of any judgment and order already passed in favour of the allottee by the Authority till March 31, 2021.

"Projects which have already lapsed before 19.03.2020 and against which adverse order has been passed by the Learned Authority are not hindered due to the current COVID-19 pandemic. In such cases, failure to complete a real estate project is due to promoter's fault or negligence and therefore promoter ought to be made liable for breach of the provisions of the said Act, 2016," the plea states.

It is further submitted,

"The projects for which adverse orders have been passed by the Learned Authority whereby the promoters have been directed to pay the allottee for breach of obligations are not affected by the ongoing COVID-19 pandemic. There is no reasonable nexus to extend the benefit of pandemic to such promoters against whom adverse orders have already been passed by the Learned Authority."

The Petitioner has therefore prayed that the impugned order is arbitrary and has sought that it be declared as unconstitutional and ultra vires the provisions of the RERA, 2016. In the interim, he has prayed for a stay order.

On May 13, Union Finance Minister, Nirmala Sitharaman, had announced the decision to direct regulatory authorities to treat 'COVID-19 period' as force majeure for real estate projects.

"Ministry of Housing and Urban Development will issue advisories to the States/Union Territories to direct the regulatory authorities for treating "COVID-19" period as "Force Majuere" for real estate projects", the Minister had said.

It was further said that the registration and completion date for all registered projects expiring on or after March 25, 2020 can be suo moto extended by six months even without any individual applications. 

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