West Bengal REAT Restrains Yes Bank From Taking Possession Of Flats And Selling Them At Auction To Recover Loan Provided To Builder

West Bengal Real Estate Appellate Tribunal (Tribunal), comprising Justice Rabindranath Samanta (Chairperson), Gour Sunder Banerjee (Judicial Member) and Dr. Subrat Mukherjee (Administrative Member) restrained Yes Bank from taking possession of the flats and selling them at auction to recover the loan provided to the builder. Background Facts Yes Bank filed eight appeals before the West Bengal Real Estate Appellate Tribunal (Tribunal) challenging the orders restraining it from taking possession of and auctioning flats in the "Ideal Exotica" project at New Alipore, Kolkata. The respondents in these appeals are individual and corporate homebuyers who purchased flats from the builder named Ideal Real Estates Private Limited through registered conveyance deeds executed between 2021 and 2023. After taking possession they became members of the Flat Owners Association and had their names recorded in Kolkata Municipal Corporation records. Subsequently, they learned that Yes Bank had obtained an order from the Debts Recovery Tribunal (DRT) under the SARFAESI Act to take possession of and auction these flats to recover a Rs.320 crore loan granted to the builder. Aggrieved, the homebuyers approached the West Bengal Real Estate Regulatory Authority (Authority) which through interim order dated 7th June, 2024 restrained the bank from proceeding with the auction. Challenging this order, Yes Bank filed these appeals before the Tribunal. Observation and Direction by Tribunal The Tribunal observed that Yes Bank had acquired the rights of the Builder through a mortgage. Since the project had already been registered under the West Bengal Housing Industry Regulation Act (WBHIRA) before the mortgage. Therefore, under Section 15 of the RERA, 2016, the Builder was prohibited from transferring or assigning its rights in the project to a third party without the prior consent of two-thirds of the homebuyers and approval from the authority. Tribunal found no evidence to suggest that the Builder had obtained the required approvals before transferring the project to Yes Bank. Therefore, it concluded that the mortgage did not legally affect the rights of the homebuyers. The Tribunal referred to Section 11(h) of the RERA, 2016 which states that once a Builder has signed an Agreement for Sale they cannot mortgage or create a charge on the apartment. Even if such a mortgage exists it does not affect the rights of the homebuyer. Tribunal noted that the Insolvency and Bankruptcy Code, 2016 (IBC) protects the interests of homebuyers by treating the amount invested by them in a real estate project as financial debt as defined under Section 5(8)(f). The Tribunal also referred to the Supreme Court decision in Union Bank of India vs. Rajasthan Real Estate Regulatory Authority and Ors., where it was ruled that in case of a conflict between RERA and the SARFAESI Act the provisions of RERA would prevail. As a result Tribunal held that the mortgage transfers to Yes Bank violated the provisions of RERA, 2016, due to the absence of necessary approvals. It affirmed that the rights of the homebuyers were protected and that the Authority had jurisdiction over the matter, even in the face of SARFAESI proceedings. The Tribunal therefore, upheld the interim orders of the Authority and dismissed all eight appeals filed by Yes Bank. Case – Yes Bank Limited Versus Ritu Gupta & Anr Along with 7 others Citation- WBREAT/APPEAL NO. – 012/2024 Along with 7 others Date – 9th January, 2025 Click Here To Read/Download The Order

West Bengal REAT Restrains Yes Bank From Taking Possession Of Flats And Selling Them At Auction To Recover Loan Provided To Builder

Aryan Raj

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