Sec 40 RERA - Homebuyers Entitled To Recover Amount Invested Along With Interest As Land Revenue Arrears From Builder : Supreme Court

A Bench comprising Justices Uday Umesh Lalit, Ajay Rastogi and Aniruddha Bose took note of the fact that a sizeable section of the allottees invest hard-earned money, often their life savings and even opt for loans just to be able to get a roof in the form of their apartments/flats/units. Refuting the contention of the promoter that under Section 40(1), the home buyers are only entitled to recover interest or penalty as arrears of land revenue, the Court held that allottees were empowered to recover the entire life savings that they had invested along with the interest thereon. The Court observed that under Section 18 which deals with the power of the authority to direct refund of the principal amount, there would be no interest until the principal amount is determined by the competent authority. Thus, reading the statute as a whole, the Court determined that the principle and the interest is treated as a composite amount to be recovered as arrears of land revenue under Section 40(1) of the Act.

The judgment was delivered by the Supreme Court in a batch of civil appeals filed against the dismissal of Writ Petitions by the Allahabad High Court. The Writ Petitions were filed by the promoters/real estate developers (appellant) assailing 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 interest.

The promoters had contended that under Section 40(1) of the Act only the interest or penalty imposed by the authority can be recovered as arrears of land revenue and no recovery certificate for the principal amount can be issued.

Considering the submission, the Court observed that upon strict construction of Section 40(1), if it is read that only penalty and interest on principal amount are recoverable, then the same would be in derogation of the essence of the statute. Examining Section 18, Section 40(1) and the Scheme of the Act, the Court opined that though there seems to be an ambiguity in Section 40(1) of the Act, reading the relevant provision in a harmonised manner, keeping in mind the intent of the legislature, the recovery of the amount invested along with the interest as quantified by either the authority or the adjudicating officer is the best way forward. The Court held that:

"Taking into consideration the scheme of the Act what is to be returned to the allottee is his own life savings with interest on computed/quantified by the authority becomes recoverable and such arrear becomes enforceable in law. There appears some ambiguity in Section 40(1) of the Act that in our view, by harmonising the provision with the purpose of the Act, is given effect to the provisions is allowed to operate rather running either of them redundant, noticing purport of the legislature and the above­ stated principle into consideration, we make it clear that the amount which has been determined and refundable to the allottees/home buyers either by the authority or the adjudicating officer in terms of the order is recoverable within the ambit of Section 40(1) of the Act."

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

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