Karnataka RERA Has No Authority Over Projects Granted 'Partial' Occupancy Certificate Prior To Enforcement Of Act: High Court

The Karnataka High Court has set aside an order passed by the Karnataka Real Estate Regulatory Authority, directing M/S. Provident Housing Limited to refund an amount to an apartment purchaser, who filed a complaint with the Authority seeking refund after willingly withdrawing from the contract for sale and accepting the refund amount. The project had received partial occupancy certificate before the enactment of Real Estate (Regulation and Development Act), 2016. A single judge bench of Justice M Nagaprsanna allowed the plea filed by the company and set aside the order dated 30.09.2020 by which the authority directed the company to refund an amount of Rs.6,84,494 to Shyama Shetty within 60 days, failing which, it would carry interest at 2% per month. The bench held that “The issuance of occupancy certificate prior to the Act coming into force, albeit partially, is not in dispute. Therefore, the project loses its character, as an ongoing project in terms of Rule 4 of the (KRERA) Rules.” It added “Therefore, the determination by the Authority was without jurisdiction and if it is an act without jurisdiction, it is non est in the eye of law, and if it is non-est in the eye of law, it is rendered unsustainable and requires to be obliterated.” Case Details: Shetty had entered into a sale agreement with the petitioner for purchase of flat on 10-09-2014 and a construction agreement on the same day comes into effect. This was on the basis of a commencement certificate that was issued by the Bangalore Development Authority (‘BDA’ for short) in respect of the purchase in favour of the petitioner. The company then submits an application to the BDA on 21-10-2015 for grant of partial occupancy certificate in respect of the project which was scrutinised and the same was granted by the BDA on 18-11-2015. Another application was made on 28-03-2017 to the BDA for a second partial occupancy certificate, the same was also granted. However, on 14-05-2017, Shetty sought to cancel the agreement that was entered into between him and the petitioner, on the ground that there was information to him that the land had not been legally acquired by the petitioner for construction of the Apartment complex. The petitioner (company) acceded to his request and cancelled the agreement and the allotment made in his favour and also refunded a sum of Rs.17,85,212, on 04-12-2017 after deduction of cancellation charges and applicable taxes. Long after receipt of the said amount, Shetty approached the KRERA Authority by registering a complaint seeking refund of an amount of Rs.6,84,494, along with interest. Accordingly the authority passed the impugned order, notwithstanding the objections with regard to maintainability of the complaint raised by the petitioner. Findings: The bench noted that the Real Estate (Regulation and Development) Act, 2016 came into effect from 01-05-2016 vide Notification dated 26-04-2016 published in the official gazette. The Act was to establish a Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, as the case may be, in an efficient and transparent manner and for establishment of adjudicating mechanism for speedy dispute redressal and also to establish a Tribunal to hear appeals from the decisions of the Authority and for other matters incidental and connected thereto. Further, Section 84 empowers appropriate Government to make Rules under the Act, the Government of Karnataka accordingly notified the Rules. Then referring to the explanation of Rule 4, as to what is an ‘ongoing project. The bench said “The Rule itself recognizes the situation of issuance of partial occupancy certificate on the exemption with the applicability of the Act and the Rules or the conditions stipulated therein.” Thus it observed “Clause (v) of Rule 4 therein exempts rigour of the Act and the Rules where partial occupancy certificate is obtained to the extent of the portion for which occupancy certificate is issued.” Rejecting the complainants contention that a writ petition was not maintainable and appeal lies against the order of the Authority before the Real Estate Appellate Tribunal. The court said “If the complaint before the Authority was maintainable, the impugned order becomes appealable under subsection (5) of Section 43. If the Authority had no jurisdiction to pass the order, the writ petition in the form that is presented becomes maintainable.” Following which it held “With regard to the explanation of ‘ongoing project’ under the Rules which exempts application of the Act and the Rules since the project had commenced and partial occupancy certificate was issued prior to coming into force of the Act, the complaint itself was not maintainable before the Authority. Notwithstanding such exemption, the Adjudicating Authority appears to have been swayed ...

Karnataka RERA Has No Authority Over Projects Granted 'Partial' Occupancy Certificate Prior To Enforcement Of Act: High Court

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