Real Estate Agents With Sole Proprietorship Challenge HARERA Rules That Club Them With Companies; P&H HC Issues Notice [Read Petition]

Is there any distinction between a proprietorship concern and its proprietor operating as real estate agents? Can a sole proprietorship concern be treated at par with other entity/partnership firm etc.?

Faced with these issues, the Punjab and Haryana High Court has issued notices to the Haryana government and the Haryana Real Estate Regulatory Authority (HARERA) on a petition moved by the Association of Property Professionals challenging the notification which clubs real estate agents working as proprietorship with partnership firms, companies etc.

Various members of the petitioner association had sought to be registered as real estate agents and applied to the HARERA for the same under Rule 9 of the HARERA Rules along with a fee of Rs 25,000.

Thereafter, they were granted registration certificates of real estate agent under Rule 10 of the HARERA Rules.

What gave rise to cause of action was letters issued by the HARERA to certain members of the petitioner association, calling upon them to pay an additional amount of Rs 2.25 lakh as registration fees within a period of 15 days failing which their registration as real estate agents under HARERA Rules would stand revoked.

“…the said letters in a nutshell state that the members/real estate agents had applied and received registration as Real Estate Agent under the category of proprietorship firms and hence, in terms of Schedule II of the HARERA Rules, the recipient would fall under the category “Other than individual” thereby making the members/real estate agents liable to pay a registration fee of Rs.2,50,000 as prescribed in Schedule II of the HARERA Rules,” said the petition filed through advocates Piyush Singh and Vaibhav Jain from PSP Legal.

The counsel also submitted that an exorbitant fee for an individual registration for a real estate agent would also amount to a violation of Fundamental Right under Article 19 (1) (g), which confers on the citizens the right to carry any profession or carry on any occupation trade or business.

“After the RERA Act, every state was supposed to frame respective Rules but most States have framed arbitrary and violative rules. This will have a larger ramification towards such Rules framed by respective states,” said Singh.

On May 8, the HARERA issued a notice for a time extension for deposit of deficient fees for individuals functioning as sole proprietor agents.

One of the members of the petitioner association wrote back to the HARERA stating that he is an individual working under the name and style of his proprietorship concern namely, ‘M/s Global Inspirations’ and as such would fall under the category of “individual” and not “other than individual” as had been wrongly concluded by the HARERA.

He also stated that the GST REgistration and the PAN card issued to him had also been issued in his individual name.

The HARERA, however, replied that in terms of the HARERA Rules, an individual had been treated as separate from a proprietorship concern and as such a proprietorship concern would fall under the category “Other than individual”. It was further stated that Form REA-I of the HARERA Rules makes a distinction between the applicants as an individual/company/proprietorship firm/societies/partnership firm/limited liability partnership etc.

The counsel for the petitioners argued that “Rule 9 of the HARERA Rules which lays down the application procedure for registration as a real estate agent makes no distinction between an individual and proprietorship concern and the action of HARERA is thus liable to be set aside”.

“HARERA has acted without any application of mind and without true appreciation of the HARERA Rules inasmuch as a conjoint reading of HARERA Rules makes it abundantly clear that distinction has been made between a proprietorship concern/individual and other legal entities such as partnership/company/ society, etc. however, no distinction has been made between an individual and proprietorship concern”.

The petition said: “It is settled principle of law that a proprietorship concern and its proprietor are considered as one entity and are intrinsically linked to each other and the classification arrived at by HARERA in placing the members of the Petitioner association who are registered real estate agents operating as sole proprietorship concerns as falling under the category of “other than individual” under Schedule-II of the HARERA Rules is illegal, arbitrary, without any application of mind and liable to be set-aside.”