1. The present appeal has been filed by U.P. Awas Evam Vikas Parishad, Lucknow, the appellant, before this Appellate Tribunal against an Order dated 22.02.2019 of the Real Estate Regulatory Authority (hereinafter referred to as the “Regulatory Authority”) passed on complaint No. 7201813543 of respondent Sri Devesh Kumar Tiwari, whereby Regulatory Authority directed the present appellant to pay the interest at the rate of MCLR +1% per annum at the total amount of Rs. 50,50,000/- till the date of possession within 45 days of the uploading of the order.
2. The respondent had booked a flat No. 3/T-5-403 in Alaknanda Enclave Scheme, Lucknow of the appellant on 01.03.2014 at a total cost of Rs. 50,50,000/- and the respondent deposited total amount of Rs.50,50,000/- with the appellant by 01.04.2016. As per the Registration Booklet issued by the appellant, the possession of the flat was to be given in 30 months i.e. by 01.09.2016 however, the appellant failed to give possession by 01.09.2016, the date of registration of sale deed of the said flat is 27.11.2018 and actual possession of the said flat was given to the respondent on 14.12.2018. In the complaint made before the Regulatory Authority by the respondent, it was prayed that he should be paid interest at the rate of 13.50% p.a. till the date of actual possession. The respondent/Complainant had further complained before the Regulatory Authority that the appellant/respondent had charged G.S.T. at the rate of 18%, and requested that G.S.T. should be charged at the rate of 8%, and the balance money be returned to him.
3. The appellant while praying for setting aside of the impugned order of the Regulatory Authority raised the ground of jurisdiction of the Regulatory Authority on the complaint of the respondent to the effect that the respondent has filed the complaint before the Regulatory Authority against the terms and conditions which were agreed between the parties prior to coming into force of the Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as the Act), and therefore Regulatory Authority should not have entertained the complaint filed by the complainant since the Act does not have retrospective effect.
4. The respondent vehemently opposed the jurisdiction issue raised by the appellant and pointed out that under Section 3(1) of the Act, for ongoing projects for which the completion certificate has not been issued the promoter shall make an application to the Regulatory Authority for registration of the said project and that in the present case the appellant has taken registration under Regulatory Authority, so his complaint was well covered under the provisions of the Act. The appellant has not denied that registration of the project has not been done in the submissions made before us.
5. Since the first ground of appeal raised by the appellant regarding jurisdiction of the Regulatory Authority on the complaint relating to the project in question, we proceed to deal with the issue of jurisdiction first. We have examined Section 3(1) of the Act, which reads as under:—
“Section 3 “Prior registration of real estate project with Real Estate Regulatory Authority”— The Real Estate (Regulation and Development) Act, 2016
(1) No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act:
Provided that projects that are ongoing on the date of commencement of this Act and for which the completion certificate has not been issued, the promoter shall make an application to the Authority for registration of the said project within a period of three months from the date of commencement of this Act:
Provided further that if the Authority thinks necessary, in the interest of allottees, for projects which are developed beyond the planning area but with the requisite permission of the local authority, it may, by order, direct the promoter of such project to register with the Authority, and the provisions of this Act or the rules and regulations made thereunder, shall apply to such projects from that stage of registration.”
(2) Notwithstanding anything contained in sub-section (1), no registration of the real estate project shall be required-
(a) where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight inclusive of all phases:
Provided that, if the appropriate Government considers it necessary, it may, reduce the threshold below five hundred square meters or eight apartments, as the case may be, inclusive of all phases, for exemption from registration under this Act;
(b) where the promoter has received completion certificate for a real estate project, prior to commencement of this Act;
(c)for the purpose of renovation or repair or re-development which does not involve marketing, advertising, selling or new allotment of any apartment. plot or building, as the case may be, under the real estate project.
Explanation.— For the purpose of this Section, where the real estate project is to be developed in phases, every such phase shall be considered a stand alone real estate project, and the promoter shall obtain registration under this Act, for each phase separately.
6. On examination we found that Section 3(1) of the Act mainly deals with the conditions for the prior registration with the Regulatory Authority of
(i) various projects lying in any planning area
(ii) the ongoing projects for which completion certificate has not been issued to apply within three months from the date of commencement of the Act, and
(iii) if necessary, to bring other projects falling beyond the planning area under its ambit.
Whereas Section 3(2) provides for conditions when registration is not required like —
(a) Where the area of land does not exceed five hundred square metres or the number of apartments does not exceed eight, inclusive of all phases. However, powers have been given to State Governments to reduce the threshold below five hundred square metres or eight apartments
(b) If the completion certificate is received prior to commencement of the Act
(c) projects under renovation or repair or redevelopment which does not include marketing, advertising, selling or new allotment.
7. We are not deliberating upon the jurisdiction of the Regulatory Authority on those projects which have either been completed with full development or for which completion certificate has been obtained prior to the relevant paras of the Act came into force; at this stage we are restricting our scope of examination to the Regulatory Authority's jurisdiction over those projects for which completion certificate has not been received before the commencement of the Act, even where either the Builder Buyer Agreement (BBA) or offer of sale or booking letter or Registration Booklet or called by whatever name was executed or signed, or issued, or made prior to the relevant provisions of the Act came into force.
8. We have further examined the definition of “ongoing projects” as given in Rule 2(h) of the U.P. Real Estate (Regulation and Development) Rules, 2016 (hereinafter referred to as the Rules) which reads as under:—
Rule 2(h)
“ongoing project” means a project where development is going on and for which completion certificate has not been issued but excludes such projects which fulfil any of the following criteria on the date of notification of these rules:
(i) where services have been handed over to the Local Authority for maintenance.
(ii) where common areas and facilities have been handed over to the Association for the Residents' Welfare Association for maintenance.
(iii) where all development work have been completed and sale/lease deeds of sixty percent of the apartment/houses/plots have been executed.
(iv) where all development works have been completed and application has been filed with the competent authority for issue of completion certificate.
9. We found that Rule 2(h) defines the “ongoing projects” as those projects for which the completion certificate has not been issued, but excludes those projects which have either been handed over for maintenance to the Local Authority or to the Residents' Welfare Association; or where all development works have been completed and sale deeds/ lease deeds of the 60% of units have been executed; or all development works have been completed and Completion Certificate applied for.
10. On further examination, we found that the appellant had not denied in its submissions made before the Regulatory Authority that it did not have jurisdiction to pass orders on the grounds that the standard terms and conditions were agreed to between the parties prior to the relevant sections of the Act came into force. In the memo of appeal, the appellant has submitted that as per settled law, the question of jurisdiction can be raised at any time even in the execution proceedings. The respondent vehemently opposed these arguments and submitted that Section 3(1) of the Act is applicable in this project and that the appellant has already taken registration for the project in question. On examination of the records we found that the appellant, in its memo of appeal (at page No. 69) has filed “Registration Certificate of Project” in which the registration has been granted by the Regulatory Authority under Section 5 of the Act to a project under project registration No. UPRERAPRJ8977. However, during the final hearing, the learned counsel for the appellant apologised for wrongly filing the Registration Certificate (at page No. 69), which actually pertained to the project “Himalaya Enclave Phase II”, and then filed the correct Registration Certificate bearing number UPRERAPRJ8433 for the “Alaknanda Enclave”, the project in question.
11. Since the Act came into force w.e.f. 01.05.2017 (except Section 2, Sections 20 to 39, Sections 41 to 58, Sections 71 to 78 and Sections 81 to 92 which came into force from 01.05.2016) while the possession of the flat in question was given much later on 14.12.2018, and moreover due to the fact that the said project has already been registered with the Regulatory Authority as UPRERAPRJ8433, we have no doubt in concluding that the project in question is covered under the definition of Rule 2(h) of “ongoing projects” read with the provisions of Section 3(1) of the Act. Considering the arguments of the learned counsel for the parties and on examination of the relevant provision of the Act and Rules as well as the material on record, we find that the arguments put forward by the appellant that the Regulatory Authority should not have entertained the complaint on the ground that it did not have jurisdiction, are totally misconceived and without any merit, and are hence rejected.
12. As discussed in the previous paragraphs, we are of the considered view that all projects that are “On-going” on the date of commencement of the Act, that is, the projects for which the Completion Certificate has not been issued before 01.05.2017, but excluding those projects which fulfil any of the criteria on the date of commencement of the Rules, as explained in Rule 2(h) are required to be registered with the Regulatory Authority under Section 3(1) of the Act, unless they fall in any of the categories mentioned in Section 3(2). Thus, all projects falling under Section 3(1) of the Act require prior registration and therefore are well within the jurisdiction of the Regulatory Authority, and /or the Adjudicating Officer, for entertaining the complaints relating to such projects, and for passing appropriate orders thereon, even if either the Builder Buyer Agreement (BBA), or offer of sale, or booking letter, or Registration Booklet or called by whatever name were executed, or signed, or issued, or made prior to 01.05.2017, when the relevant Sections of the Act came into force.
13. Another ground of appeal put forward by the appellant is that Regulatory Authority had no powers to pass order of interest at the rate of M.C.L.R. plus 1 percent p.a. due to Section 18 & Rule 15 of the Act and that the case should have been put up before an Adjudicating Officer, as Section 71 of the Act clearly provides that compensation under Sections 12, 14, 18 & 19 of the Act can only be adjudged by an Adjudicating Officer.
14. The respondent vehemently opposed the argument of the appellant and pointed out that Rule 15 of the Rules and Section 71 of the Act are not related to this case. He further submitted that Section 71 is relating to adjudging compensation and are not applicable here as respondent had not sought compensation and had filed his claim before the Regulatory Authority on Form M under Rule 33(1) with the prayer to direct for giving interest @ 13.50% for the delayed period, whereas for the compensation, complainant had to approach the Adjudicating Officer on Form N under Rule 34(1).
15. We now examine Section 71, which is extracted below:—
Section 71 “Power to adjudicate”—
(1) For the purpose of adjudging compensation under sections 12, 14, 18 and section 19, the Authority shall appoint in consultation with the appropriate Government one or more judicial officer as deemed necessary, who is or has been a District Judge to be an adjudicating officer for holding an inquiry in the prescribed manner, after giving any person concerned a reasonable opportunity of being heard:
Provided that any person whose complaint in respect of matters covered under sections 12, 14, 18 and section 19 is pending before the Consumer Disputes Redressal Forum or the Consumer Disputes Redressal Commission or the National Consumer Redressal Commission, established under section 9 of the Consumer Protection Act, 1986, on or before the commencement of this Act, he may, with the permission of such Forum or Commission, as the case may be, withdraw the complaint pending before it and file an application before the adjudicating officer under this Act.
(2) The application for adjudging compensation under sub-section (1), shall be dealt with by the adjudicating officer as expeditiously as possible and dispose of the same within a period of sixty days from the date of receipt of the application:
Provided that where any such application could not be disposed of within the said period of sixty days, the adjudicating officer shall record his reasons in writing for not disposing of the application within that period.
(3) While holding an inquiry the adjudicating officer shall have power to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document which in the opinion of the adjudicating officer, may be useful for or relevant to the subject matter of the inquiry and if, on such inquiry, he is satisfied that the person has failed to comply with the provisions of any of the sections specified in sub-section (1), he may direct to pay such compensation or interest, as the case any be, as he thinks fit in accordance with the provisions of any of those sections.
16. Thus, Section 71 of the Act deals with power to adjudicate and lays down that the Regulatory Authority, in consultation with the Government, appoint an Adjudicating Officer, who shall deal with the applications for adjudging compensation under Sections 12, 14, 18 & 19 of the Act.
17. Having examined Section 71 of the Act, we now examine Sections 12, 14, 18 & 19 of the Act. Section 12 of the Act lays down that:—
Section 12. Obligation of promoter regarding veracity of the advertisement or prospectus.- Where any person makes an advance or a deposit on the basis of the information contained in the notice advertisement or prospectus, or on the basis of any model apartment, plot or building, as the case may be, and sustains any loss or damage by reason of any incorrect, false statement included therein, he shall be compensated by the promoter in the manner, as provided under this Act;
Provided that, if the person affected by such incorrect, false statement contained in the notice, advertisement or prospectus, or the model apartment, plot or building, as the case may be, intends to withdraw from the proposed project, he shall be returned his entire investment along with interest at such rate as may be prescribed and the compensation in the manner provided under this Act.”
18. Section 12 of the Act lays down that if any person (buyer) sustains any loss or damage by reason of any incorrect, false statement included in the advertisement, prospectus or a model apartment, plot or building, he shall be “compensated” by the promoter. And if the person (buyer) intends to withdraw from the proposed project then he shall be returned his entire investment alongwith “interest at such rate as may be prescribed”, and the “compensation in the manner as provided under the Act”. On examination of Section 12 of the Act we find that “interest” and “compensation” are two different items, as per the legislative intent. Section 12, read with Section 71, makes it clear that an Adjudicating Officer is necessarily required only for adjudicating “compensation” to be awarded under Section 12 of the Act.
19. We further examined Section 14 of the Act which deals with “Adherence to sanctioned plans and project specifications by the promoter”. For the sake of brevity, we examine only Section 14(3). Extract of Section 14(3) reads as under:—
(3) In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, it shall be the duty of the promoter to rectify such defects without further charge, within thirty days, and in the event of promoter's failure to rectify such defects within such time, the aggrieved allottees shall be entitled to receive appropriate compensation in the manner as provided under this Act.
20. Section 14(3) of the Act thus provides that structural defect or any defects in workmanship, quality, etc. can be brought to the notice of the promoter within five years from the date of handing over possession and if the promoter fails to rectify them without charge, within thirty days, then allottees are entitled to get compensation. We find that Section 14(3) of the Act provides only for “appropriate compensation in the manner as provided under this Act”, and not at all for the “interest”. Thus, we conclude that any “compensation” sought by the aggrieved allottees under Section 14(3) of the Act shall be within the exclusive jurisdiction of the “Adjudicating Officer”, as laid down in Section 71 of the Act and he will determine the quantum of “compensation” in the manner provided in Section 72 of the Act.
21. Section 18 of the Act deals with “Return of amount and compensation” It reads as under:—
Section 18 “Return of amount and compensation” - The Real Estate (Regulation and Development Act, 2016)
(1) If the promoter fails to complete or is unable to give possession of an apartment, plot or building,-
(a) in accordance with the terms of the agreement for sale or, as the case may be, duly completed by the date specified therein; or
(b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act or for any other reason, he shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act:
Provided that where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.
(2) The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land, on which the project is being developed or has been developed, in the manner as provided under this Act, and the claim for compensation under this subsection shall not be barred by limitation provided under any law for the time being in force.
(3) If the promoter fails to discharge any other obligations imposed on him under this Act or the rules or regulations made thereunder or in accordance with the terms and conditions of the agreement for sale, he shall be liable to pay such compensation to the allottees, in the manner as provided under this Act.
22. On due consideration, we observe that Section 18 of the Act provides mainly for-
(i) return of amount received with “interest at such rate as may be prescribed”, and any “compensation in the manner as provided under this Act”, if the allottee wishes to withdraw from the project due to discontinuance of business by the promoter, or due to promoter failing to give possession of the property by the date specified in terms of agreement.
(ii) payment of interest by the promoter for every month of delay in handing over of possession if the allottee does not intend to withdraw from the project, “at such rate as may be prescribed”.
(iii) “compensation in the manner as provided under this Act” to the allottees for the loss due to defective title of the land on which project is developed. (Not barred by limitation).
(iv) compensation to the allottees “in the manner as provided under this Act”, if promoter fails to discharge any obligation under the Act, Rules, or Agreement for sale.
We thus find that under Section 18 of the Act, “interest at such rate as may be prescribed” and “compensation in the manner as provided under this Act” are two separate items. Interest is payable for every month of delay till handing over of the possession, at such rate as may be prescribed, provided that the allottee does not intend to withdraw from the project. We thus, conclude that the interest is payable for every month of delay, as the money is being used by the promoter and as such he is liable to pay the interest for every extra month of utilising the funds of the allottee, on account of delayed handing over of the possession. Whereas, the compensation is payable for any loss caused to the allottee due to defective title of the land, or due to promoter failing to discharge any other obligation imposed on him under the provisions of this Act, Rules or agreement of sale. It is clear that the intent of the Legislature is to differentiate between “interest at such rates as may be prescribed” and “compensation in the manner as prescribed under this Act”.
23. Section 19 of the Act deals with “Rights and Duties of the Allottees. For the sake of brevity, we extract Section 19(4) only, which reads as under:—
(4) The allottee shall be entitled to claim the refund of amount paid along with interest at such rate as may be prescribed and compensation in the manner as provided under this Act, from the promoter, if the promoter fails to comply or is unable to give possession of the apartment, plot or building, as the case may be, in accordance with the terms of agreement for sale or due to discontinuance of his business as a developer on account of suspension or revocation of his registration under the provisions of this Act or the rules or regulations made thereunder.
24. As is evident from Section 19(4) of the Act, the allottee is entitled to claim the refund of amount paid alongwith “interest at such rate as may be prescribed,” and “compensation in the manner as provided under this Act” from the promoter, if the promoter fails to comply or is unable to give possession in terms of agreement for sale. Thus again under Section 19 of the Act, there is a clear distinction between “interest, at such rate as may be prescribed” and “compensation in the manner as provided under this Act”
25. Having gone through the relevant Sections of the Act, we find that as per Sections 12, 18 and 19 of the Act, the allottee, in case of default by the promoter, is entitled to refund of his/her entire investment along with “interest at such rate as may be prescribed” and “compensation in the manner provided under the Act”. Whereas in Section 12, the part dealing with interest and the part dealing with compensation are joined with the word “and” while in Section “18” they are joined with the word “including”. Also, “at such rate as may be prescribed” is suffixed to the word “interest” in the context of refund of investment, but the expression “at such rate as may be prescribed” is neither prefixed nor suffixed to the word “compensation” in any of the Sections of the Act. The term compensation is suffixed by the expression “in the manner as provided under this Act” in Sections 12, 14, 18 & 19 of the Act. However, compensation and interest are qualified by the term “as he thinks fit in accordance with the provisions of any of those sections” in Section 71 of the Act. The Act only lays down for “holding an enquiry in the prescribed manner, after giving any person concerned a reasonable opportunity of being heard” under Section 71. The Act very clearly provides that the quantum of compensation or interest under Section 71 will be decided taking into consideration the factors listed under Section 72 of the Act.
26. We have also examined various Rules of U.P. Real Estate (Regulation and Development) Rules, 2016. Rule 15 deals with “Rate of interest payable by the promoter to the allottee”. Although there is a misprint in Rule 15 to the extent that Rule 14(4) has been copied against Rule 15, yet the intent of the Legislation is clear from the heading of Rule 15 that promoter has to pay interest to the allottee for any violation of any of the provisions of the Act and Rules by the promoter.
27. In this connection, Rule 16 is also extracted below:—
16. Timelines for refund- Any refund of money alongwith the applicable interest and compensation, if any, payable by the promoter in terms of the Act or the rules and regulations made there under, shall be payable by the promoter to the allottee within forty-five days from the date on which such refund alongwith applicable interest and compensation, if any, becomes due.
28. Thus, as per Rule 16, any refund of money alongwith the “applicable interest” and “compensation” shall be payable by the promoter to the allottee within 45 days. This rule also makes a distinction between “interest” and “compensation” while laying down a timeline for refund, when it becomes due.
29. We further examined Section 31 of the Act and Rule 33 & Rule 34 of the Rules. The relevant portions of Section 31 of the Act and Rule 33 of the Rules are extracted as under:—
Extract of Section 31 of the Act
“(1) Any aggrieved person may file a complaint with the Authority or the adjudicating officer, as the case may be, for any violation or contravention of the provisions of this Act or the rules and regulations made thereunder against any promoter, allottee or real estate agent, as the case may be.
Explanation
For the purpose of this sub-section “person” shall include the association of allottees or any voluntary consumer association registered under any law for the time being in force.
(2) The form, manner and fees for filing complaint under sub-section (1) shall be such as may be specified by regulations.”
As can be seen from above, Section 31(2) of the Act provides for specifying by regulations, the form, manner and fee for filing complaint under Section 31(1) of the Act. As provided under Section 31(2) of the Act, the U.P. Government has framed Rule 33(1) of the Rules, as extracted below:—
Extract of Rule 33(1) of Rules—
(1) Any aggrieved person may file a complaint with the regulatory authority for any violation under the Act or the rules and regulations, made thereunder, save as those provided to be adjudicated by the adjudicating officer, in Form M which shall be accompanied by a fee of rupees one thousand in the form of a demand draft drawn on a nationalized bank, in favour of regulatory authority and payable at the main branch of that bank at the station, where the seat of the said regulatory authority is situated.
30. It is evident from Rule 33(1) of the Rules that the complaints filed with the Regulatory Authority should be in Form M, except those complaints which require to be adjudicated by the Adjudicating Officer. On top of Form M, it is clearly written that it is as per provisions of Rule 33(1) and is meant for filing complaint under Section 31 of the Act. We therefore, conclude that all complaints, except those demanding compensation, need to be filed before the Regulatory Authority, on Form M.
31. We have also examined Rule 34(1) of the Rules which relates to filing of a complaint with the Adjudicating Officer for compensation. Rule 34(1) reads as follows:—
Extract of Rule 34(1)
(1) Any aggrieved person may file a complaint with the adjudicating officer for compensation under Section 12, 14, 18 and 19 in Form N, which shall be accompanied by a fee of rupees one thousand in the form of a demand draft drawn on a nationalized bank in favour of regulatory authority and payable at the main branch of that bank at the station, where the seat of the said regulatory authority is situated.
32. It is clear from Rule 34 (1) of the Rules that a complaint for “compensation” under Sections 12, 14, 18 and 19 of the Act is to be filed before the Adjudicating Officer in Form N. It is mentioned on top of Form N itself that it is an application to Adjudicating Officer for claim of compensation under Rule 34(1) of the Rules and under Section 31 of the Act read with Section 71 of the Act.
33. Thus, it is our considered view that Form N is to be filed before an “Adjudicating Officer” for only claiming “compensation” under Rule 34(1); whereas Form M is to be filed before the Regulatory Authority under Rule 33(1) of the Rules for all types of reliefs, barring “compensation”, for any violation under the Act, Rules or Regulations.
34. In order to distinguish between the meaning of the terms “interest” and “compensation”, we now examine various definitions of these two words, which are often confused by the litigants. The word interest is already defined in Section 2 of the Act dealing with Definitions, in Sub section (za). Section 2(za) of the Act reads as under:—
“interest” means the rates of interest payable by the promoter or the allottee, as the case may be.
Explanation.- For the purpose of this clause_
(i) the rate of interest chargeable from the allottee by the promoter, in case of default, shall be equal to the rate of interest which the promoter shall be liable to pay the allottee, in case of default.
(ii) the interest payable by the promoter to the allottee shall be from the date, the promoter received the amount or any part thereof, till the date, the amount or part thereof and interest thereon is refunded, and the interest payable by the allottee to the promoter shall be from the date the allottee defaults in payment to the promoter till the date it is paid.
35. We further examined the definitions of “interest” as used in different laws and in English Dictionaries to fully understand the meaning of the word “interest”.
Interest is defined in the Concise Law Dictionary by P. Ramanatha Aiyar as follows:—
“Interest” means the time value of the funds or money involved, which, unless otherwise agreed, is calculated at the rate and on the basis customarily accepted by the banking community for the funds of money involved.[UN Commission of International Trade Law : Model Law on International Credit Transfers (Nov. 25, 1992), Art. 2(m)]
“Interest” means interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the money borrowed or debt incurred or in respect of any credit facility which has not been utilised. [Income Tax Act (43 of 1961) S.2 (28A)]
Interest is defined in Merriam and Webster Dictionary as:
“A charge for borrowed money, generally a percentage of the amount borrowed”.
In Oxford Dictionary, interest is defined as:—
“Money paid regularly at a particular rate for the use of money lent, or for delaying the re-payment of a debt.”
In Indian Arbitration and Conciliation Act, 1996, Section 31(7) provides that:
“(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made”.
36. Having examined various definitions of the word interest, we are of the view that interest is basically the time value of funds or money involved, which unless otherwise agreed, is generally calculated on the basis of home loan rates offered by nationalized banks in the context of this Act. The interest is liable to be paid from the date amount is received till the date amount, and interest thereon, is refunded in the context where the promoter is liable to make the refund if the allottee withdraws from the project. The “interest” is liable to the paid from the date of default of payment till the date it is paid, in the context where the interest is payable by the allottee to the promoter due to not paying as per payment schedule. Obviously, the interest payable to the allottee is proportional to the period of usage of the amount (or money or funds) received by the promoter; or for the money of the promoter being used due to default in timely payment by the allottee. Penal rate of interest, “interest at such rate as may be prescribed” or “interest as he thinks fit” will also fall in the wider definition of the term interest in the context of this Act.
37. We now examine the meaning of the word “compensation”. The word “compensation” is defined in Concise Law Dictionary by P. Ramanatha Aiyar as follows:—
“Compensation” means any compensation paid, whether in cash or in kind, in respect of any immovable property in West Pakistan belonging to a displaced person under any general scheme arrived at in this behalf between the Government of India and the Government of Pakistan or framed by the Government of India. [Displaced Persons (Debt Adjustment) Act (70 of 1951). S. 2(3)]
An act which a Court orders to be done, or money which a Court orders to be paid, by a person whose acts or omissions have caused loss or injury to another in order that thereby the person damnified may receive equal value for his loss, or be made whole in respect of his injury; remuneration or satisfaction for injury or damage of every description; remuneration for loss of time, necessary expenditures, and for permanent disability if such be the result; remuneration for the injury directly and proximately caused by a breach of contract or duty; remuneration or wages given to an employee or officer. (Black; Cyc. Law. Dic. Ame. Cyc.)
In Merriam and Webster Dictionary, the word “compensation” is defined as —
“To make an appropriate or counterbalancing payment to compensate the victims of the loss”.
In Oxford Dictionary, “compensation” is defined as:—
“Something, typically money, awarded to someone in recognition of loss, suffering, or injury”.
“Something that counterbalances or makes up for an undesirable or unwelcome state of affairs.”
38. Having examined the various definitions of the word “compensation” as given in various dictionaries and its meaning in terms of the various references made on compensation in the Act and Rules, we are of the view that “compensation” means anything given to counterbalance or to make things equivalent; a thing given to someone in recognition for physical, mental or financial loss, damage, suffering, injury, mental agony, necessary expenditures, etc. caused due to someone's acts or omissions; or due to a breach of contract, or commitment or promise, or duty. It may be in terms of money or in kind (i.e. non-monetary form) and/or in both.
39. As discussed earlier, the “compensation” is different from “interest at such rates may be prescribed” or penal interest or “interest as he thinks fit” or penalty, in the context of this Act. There is a difference, though suttle, between “compensation” per se; and any relief which may be “compensatory in nature”, like payment of “interest at such rate as may be prescribed”, or an alternate property in lieu of the original property booked, etc.
40. However, only for the “compensation” per se or “appropriate compensation” (as used in Section 14), or “interest as he thinks fit” the power to adjudicate and to award them lies in the exclusive domain of an Adjudicating Officer as per Section 71 read with Sections 12, 14, 18 & 19 of the Act, while adjudging the quantum of “compensation/appropriate compensation”, “interest as he thinks fit”, the Adjudicating Officer shall have due regard to various factors mentioned in Section 72 of the Act, and as detailed in Rule 34 of the Rules.
41. Having examined Section 71, read with Sections 12, 14, 18 & 19 of the Act and the relevant rules of the Rules, we are of the view that “appropriate compensation/compensation as provided under the Act” or “interest as he thinks fit” or “interest, at such rate as may be prescribed” are different in meaning from one another as referred to in various Sections of the Act in different contexts. Whereas the powers to adjudicate and to award any “compensation” and to adjudicate “interest as he thinks fit” under Section 71 in respect of matters covered under Sections 12, 14 (sub section 3), 18 & 19 are solely within the jurisdiction of an Adjudicating Officer, while the rest of the powers are vested with the Regulatory Authority, which has much wider jurisdiction than the Adjudicating Officer under the Act. It is our view that awarding of interest at such rate as may be prescribed; imposing penalty; awarding penalty for delayed possession provided in Builder Buyer Agreement (BBA); directing for handing over legal possession of the property or of an alternate property; etc. fall well within the jurisdiction of the Regulatory Authority under various Sections of the Act. Though one may argue that awarding interest for the delayed period; or directing the Promoter to hand over an alternate property; or awarding penalty for delayed possession as per Builder Buyer Agreement (BBA); etc. fall within the definition of “compensation”, yet in our considered opinion, these awards/directions are only of “compensatory nature” and are not “compensation” per se, as used in various Sections of the Act. Thus, there is no bar or restriction on the Regulatory Authority, even under Sections 12, 14 (except sub section 3 which deals with compensation only), 18 & 19 of the Act, to direct the Promoter to pay interest at such rate as may be prescribed for delayed possession; or to order for refund of full amount with interest at such rate as may be prescribed; or to order for handing over of legal/habitable possession; or to order for paying penalty; or to order for giving possession of an alternate property; or directing builder to pay penalty for delayed possession as per BBA; etc. or any such similar order which is compensatory in nature while following the procedure as laid down in Rule 33 of the Rules, or as per Regulations of the Regulatory Authority.
42. Under Section 38 of the Act, the Regulatory Authority has been given powers to impose penalty or interest with regard to any contravention of obligations cast upon the promoters, the allottees and the real estate agents under the Act. Thus under Section 38 of the Act, the Regulatory Authority may/can either impose penalty or interest. This “interest” as enshrined in Section 38 is in reference to Sections, 12, 14, 18 and 19 of the Act and not the interest as prescribed in Section 2(za). We thus reject the argument of the appellant that Regulatory Authority had no power to pass order of interest and the case should have been put up before an Adjudicating Officer. Apparently, the appellant has confused between the meaning of interest and compensation.
43. The appellant has further submitted that Section 21 of the Act clearly provides that the authority shall consist of a Chairperson and not less than two full time Members, and therefore in the present case the order passed by the Chairman and one Member of the Regulatory Authority on 22.02.2019 becomes irrelevant and un-enforceable. The respondent vehemently opposed it and pointed out that Section 30 of the Act provides that no act or proceeding of the Authority shall be invalid merely by reason of any vacancy in, or any defect in the constitution of the Authority.
44. We have examined the provisions of Section 21 and Section 30 of the Act. Section 21 lays down the composition of the Regulatory Authority which shall consist of a Chairperson and not less than two whole time Members to be appointed by the appropriate Government.
45. Section 30 deals with “Vacancies, etc., not to invalidate proceeding of the Authority”. Section 30 clearly lays down that on account of any vacancy or any defect in the appointment of a person acting as a Member of the Regulatory Authority or any irregularity in the procedure of the Authority, not affecting the merits of the case, shall not make any act or proceeding of the Regulatory Authority invalid.
46. We have also noted that whereas Section 43(3) of the Act provides that every bench of the Appellate Tribunal shall consist of at least one Judicial Member and one Administrative or Technical Member, there is no such restriction provided under the Act on the working of the Regulatory Authority.
47. Moreover, the Regulatory Authority has powers to frame its “rules of procedure”, as provided under Section 29 of the Act as well as powers to take decisions in its meetings, and accordingly on 05.12.2018 it was decided in the Regulatory Authority's 5th Meeting that for the month of December 2018 and later, the complaints will be heard by single bench as per needs. Subsequently, in exercise of the powers conferred under Section 85 of the Act, the Regulatory Authority made its Regulations notified on 27.02.2019 which provide for hearing and deciding matters by a single bench in terms of Regulation 24(a), which is extracted below:—
Regulation 24(a) of RERA
“For adjudication proceedings with respect to complaints filed with the Authority, the Authority may, by order, direct that specific matters or issues be heard and decided by a single bench of either the Chairperson or any Member of the Authority.”
48. Further, in Writ C No. 2248 of 2020 K.D.P. Build Well Pvt. Ltd. v. State of U.P. the Hon'ble Allahabad High Court has observed as follows:—
“…….The proposition of Section 21 is not that the complaint could not be decided by a single member of the Authority, whereas it could be decided by a single member or by two members, whichever is better in the interest of justice as per availability of the members and we further observed that Section 81 of the Real Estate (Regulation and Development) Act, 2016 provides “Delegation”, which says that “The Authority may, by general or special order in writing, delegate to any member, officer of the Authority or any other person subject to such conditions, if any, as may be specified in the order, such of its powers and functions under this Act (expect the power to make regulations under section 85), as it may deem necessary……”
49. We thus observe that orders passed by the Regulatory Authority by a Bench consisting of even one Member (i.e. either Chairman only, or any one of the Members) are valid and are covered in the Regulatory Authority's Regulations notified under the provisions of the Act. In the present case, since the Bench consisted of the Chairperson and one whole time Member, so it was fully competent to hear the matter and pass orders. The appellant has apparently confused between the composition of the Regulatory Authority and the composition of the Bench of the Regulatory Authority. The submission of the appellant is thus rejected.
50. The appellant has further submitted that expected period of 30 months is for completion of the construction of the flat and that the Registration Booklet does not provide that the delivery of possession will be given in 30 months, as provided in its clause 2.1 and clause 9.1. The respondent opposed the arguments of the appellant and submitted that clause 2.1 and 9.1 of Registration Booklet are the offers put forward before the respondent and once the same are accepted by the respondent by depositing the registration fee, the same become terms of a contract. Thus, these clauses are obligatory and binding over the appellant.
51. We have examined clause 2.1 and clause 9.1 of the Registration Booklet (in Hindi) of the said project. An appropriate English translation of these clauses are as under:—
Clause 2.1- The above mentioned price is approximate. The construction is proposed to be done in 30 months. Once the project is complete, the final price payable will be based on actual costing. Therefore, the amount of the instalments can increase or decrease. Property's present price is determined based on estimated cost; due to unavoidable circumstances like increase in rates of building construction materials in the market, the increase in the price is possible. In the Super Area calculation, the area of parking has not been included.
Clause 9.1- The construction of the flats is proposed to be completed within 30 months from the date of issuance of demand letter.
52. The Hon'ble Supreme Court has time and again held that where the buyer has to suffer on account of delay beyond a reasonable time then he/she has to be compensated either by way of interest or penalty and in this connection Hon'ble Supreme Court in Fortune Infrastructure v. Trevor Dlima, (2018) 5 SCC 442 observed as follows “-
“………Moreover, a person cannot be made to wait indefinitely for the possession of the flats allotted to them and they are entitled to seek the refund of the amount paid by them, along with compensation. Although we are aware of the fact that when there was no delivery period stipulated in the agreement, a reasonable time has to be taken into consideration……”
Hon'ble Supreme Court in Civil Case No. 3182 of 2019 Kolkata West International City Pvt. Ltd. v. Devashish Rudra, (2019) 6 Scale 462 has observed that:—
“…… it would be unreasonable to require a buyer to wait indefinitely for the possession ……”
53. We are of the view that the Registration Booklet, letter of allotment or agreement for sale or any written document called by whatever name is kind of an offer of sale and once it is executed or signed or issued or the first payment of booking amount is made by the buyer, it becomes a Contract. The provision in clause 2.1 of the Registration Booklet that the expected period of completion of the flat is 30 months, is to be taken as the specified/expected period of handing over of possession of the flat in question by any prudent person, as no date of possession is mentioned anywhere else. The respondent cannot be made to suffer indefinitely merely on account of the fact that there is no specified/expected date of possession of flat given in the Registration Booklet. We, thus reject the arguments of the appellant put forward with regard to specified/expected date of possession as it is unreasonable and inequitable to keep the respondent waiting for possession for an indefinite period.
54. The appellant has further submitted that clause 4.6 & clause 4.7 of the Registration Booklet provide that the amount deposited by the respondent would be refunded alongwith interest at the rate payable on the savings bank account of the Nationalized Bank, if the appellant could not allot the flat after six months of the payment of last instalment, if a refund is demanded by the respondent. The respondent vehemently opposed the arguments of the appellant and submitted that as per Section 18 of the Act, where allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.
55. Clauses 4.6 and 4.7 of the Registration Booklet are in Hindi. An appropriate English Translation is as below:—
4.6- Due to delay in construction of flats, if the Board is not able to allot the flats within six months after the allottee has paid the final instalment then the allottee's money will be returned by the Board alongwith interest at the rate of savings bank interest of the nationalised bank which will be payable from the next month after the payment of last instalment and till the previous month in which the money is returned.
4.7- If for some reasons the Board decides not to launch a particular scheme then the deposited amount of the registered applicants will be returned as per rules. But the interest at the rate of savings bank account interest of a nationalised bank will be payable only if the money has been retained by the Board for more than one year.
56. Having examined the terms and conditions of the Registration Booklet/Agreement, we would like to examine the laws on contracts. In this connection, it is useful to note what Chitty has to say about the old ideas of freedom of contract in modern times. The relevant passages are to be found in Chitty on Contracts, Twenty-fifth Edition, Volume I, in paragraph 4, and are as follows:—
“These ideas have to a large extent lost their appeal today. “Freedom of contract”, it has been said, “is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the economic interests of the community at large.” Freedom of contract is of little value when one party has no alternative between accepting a set of terms proposed by the other or doing without the goods or services offered. Many contracts entered into by public utility undertakings and others take the form of a set of terms fixed in advance by one party and not open to discussion by the other. These are called “contracts d’adhesion” by French lawyers. Traders frequently contract, not on individually negotiated terms, but on those contained in a standard form of contract settled by a trade association. And the terms of an employee's contract of employment may be determined by agreement between his trade union and his employer, or by a statutory scheme of employment. Such transactions are nevertheless contracts notwithstanding that freedom of contract is to a great extent lacking.
Where freedom of contract is absent, the disadvantages to consumers or members of the public have to some extent been offset by administrative procedure for consultation, and by legislation. Many statutes introduce terms into contracts which the parties are forbidden to exclude, or declare that certain provisions in a contract shall be void. And the courts have developed a number of devices for refusing to implement exemption clauses imposed by the economically stronger party on the weaker, although they have not recognised in themselves any general power (except by statute) to declare broadly that an exemption clause will not be enforced unless it is reasonable. Again, more recently, certain of the judges appear to have recognised the possibility of relief from contractual obligations on the ground of “inequality of bargaining power”.
57. Now turning to the question regarding ex-facie one sided, unfair and unreasonable agreement terms of a contract, the Hon'ble Supreme Court in LIC of India v. Consumer Education & Research Centre, (1995) 5 SSC 482, decided on 10th May 1995, was pleased to observe that:—
“in dotted line contracts there would be no occasion for a weaker party to bargain or to assume to have equal bargaining power. He has either to accept or leave the services or goods in terms of the dotted line …….. imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line………”.
58. Recently, the Hon'ble Supreme Court in Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan, (2009) 2 CPJ 34 (SC), rejected the plea of the builder that it should not be directed to pay interest at the rate of 10.7% as the agreement provided for 6% interest. The Hon'ble Supreme Court observed that:—
6.7. A term of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder. The contractual terms of the Agreement dated 08.05.2012 are ex-facie one-sided, unfair, and unreasonable. The incorporation of such one-sided clauses in an agreement constitutes an unfair trade practice as per Section 2 (r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the Builder.
7. In view of the above discussion, we have no hesitation in holding that the terms of the Apartment Buyer's Agreement dated 08.05.2012 were wholly one-sided and unfair to the Respondent — Flat Purchaser. The Appellant — Builder could not seek to bind the Respondent with such one-sided contractual terms.
59. Moreover, Section 23 of the Contract Act, 1872 provides that what consideration and objects are lawful, and what are not. It says that the consideration or object of an agreement is lawful, unless, it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
60. The expression “public policy” or “opposed to public policy” has not been defined in the Contract Act. In R.B. Singh v. State of U.P. a Division Bench of the Hon'ble Allahabad High Court explained the meaning of word “Policy” and “Public Policy” as defined in various Dictionaries-
30. In Grocier New Webster's Dictionary (page 304) “Policy” has been defined as a selected, planned line of conduct in the light of which individual decisions are made and coordination achieved. In Legal Glossary (1993, page 250) “policy” means a course of action adopted as advantageous or expedient. According to the Oxford Dictionary the word “Policy” means political sagacity, State-craft, prudent conduct, sagacity, craftiness, ‘course of action adopted by Government’. According to Webster's New International Dictionary “policy” means a settled or definite course or method adopted and followed by a Government, institution, body or individual; a civil or ecclesiastical policy; Government; the science of Government.
31. In Law Lexicon with Legal Maxims it has been mentioned that the general head of “public policy” covers a wide range of topics, such as for example, trading with the enemy in time of war, stifling prosecutions, chaperty and maintenance, and various other mater's; it has even been said in the House of Lords that public policy is always an unsafe and treacherous ground for legal decision. In Black's Law Dictionary “Public Policy” mean community common sense and common conscience, extended and applied throughout the State to matters of public morals, health, safety, welfare, and the like; it is that general and well settled public opinion relating to man's plan, palpable duty to his fellowmen, having due regard to all circumstances of each particular relation and situation. In Words and Phrases (West Publishing Co.) the word “public policy” generally means that imports something that is uncertain and fluctuating, varying with the changing economic needs, social customs and moral aspiration of the people. Lord Wright in his Legal Essays and Addresses (Vol. III, pages 76 and 78) stated that public policy like any other branch of the common law ought to be and I thing is, governed by the judicial use of precedents….. If it is said that rules of public policy have to be moulded to suit new conditions of a changing world, that is true, but the same is true with the principles of the canon law generally; Lord Lindley held in Janson v. Driefontein Consolidated Mines Ltd. that “a contract or other branch which is against public policy i.e. against the general interest of the country is illegal.”
61. In Gherulal Parakh v. Mahadeodas Malya, AIR 1959 SC 781 the Supreme Court while defining the word “Public Policy” or the “Policy of Law” has held as under:—
“Public policy or the policy of the law is an illusive concept; it has been described as “untrustworthy guide”, “variable quality”, “uncertain one”, “unruly horse”, etc. The primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contract which form the basis of society, but in certain cases, the court may relieve them of their duty on a rule founded on what is called the public policy for want of better words Lord Atkin describes that something done contrary to public policy is a harmful thing, but the doctrine is extended not only to harmful cases but also to harmful tendencies; this doctrine of public policy is only a branch of common law, and just like any other branch of common law it is governed by precedents; the principles have been crystallized under different heads and though it is permissible for courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public.”
62. In the case of Central Inlad Water Transport Corpn. v. Brojo Nath Ganguly, (1986) 3 SCC 156 the Hon'ble Supreme Court explained the above expressions and held-
“The Indian Contract Act does not define the expression “public policy” or “opposed to public policy”. From the very nature of things, the expressions “public policy”, “opposed to public policy” or “contrary to public policy” are incapable of precise definition. Public policy, however, is not the policy of a particular government. It connotes some matter which concerns the public good and the public interest. The concept of what is for the public good or in the public interest or what would be injurious or harmful to the public good or the public interest has varied from time to time.”
63. The Hon'ble Supreme Court, after discussing the different schools of thought including landmark judgments on the expression of “public policy”, further explained in the above case that-
“It is thus clear that the principles governing public policy must be and are capable, on proper occasion, of expansion or modification, Practices which were considered perfectly normal at one time have today become obnoxious and oppressive to public conscience. If there is no head of public policy which covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declare such practice to be opposed to public policy. Above all, in deciding any case which may not covered by authority our courts have before them the beacon light of the Preamble to the Constitution. Lacking precedent, the court can always be guided by that light and the principles under lying the Fundamental Rights and the Directive Principles enshrined in our Constitution”.
64. Thus, where the terms of a contract show that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder, then certainly the contractual terms of the Agreement are one sided, unfair and unreasonable. It would also be referred as an unconscionable bargain. An unconscionable bargain would be one which is irreconcilable with what is right or reasonable or the terms of which are so unfair and unreasonable that they shock conscience of the Court.
65. Now again the question is that under which head an unconscionable bargain would fall? If it falls under the head of undue influence, it would be voidable but if it falls under the head of being opposed to public policy, it would be void. The word “unconscionable” is defined in the Shorter Oxford English Dictionary, 3rd Edn., Vol. II, p. 2288, when used with reference to actions etc, as “showing no regard for conscience; irreconcilable with what is right or reasonable”.
66. In this light, we also observe that the appellant in the present case is a corporation of the State Government having wide powers for acquisition of land and for development of residential projects. The rules, terms & conditions provided in the Registration Booklet are heavily loaded in favour of the promoter (i.e. appellant) and a buyer (respondent) is in an obvious disadvantaged position and has no real choice but to sign on the one sided agreement for sale, or to agree to the rules, terms & conditions of the Registration Booklet or of the booking/allotment letter in order to buy a residential flat of his dreams, using his hard earned savings. Such terms and conditions of agreements, called by any name whatsoever, fall in the category of “dotted line” agreements or “one sided, unfair and unreasonable” agreements, as observed by the Hon'ble Apex Court in several cases. We thus reject the argument of the appellant that Regulatory Authority's order is not sustainable merely on the ground that it has ordered the appellant to pay to the respondent an interest which is higher in rate than what is provided in the Registration Booklet.
67. A perusal of the Regulatory Authority's order dated 22.02.2019 reveals that they have relied upon the decision of Hon'ble Bombay High Court in “Neelkamal Realtors Suburban Pvt. Ltd. v. Union of India, the relevant portions of which have already been quoted in the order dated 22.02.2019, part of it is extracted below for the sake of brevity:—
“Section 18(1)(b) lays down that if the promoter fails to complete or is unable to give possession of an apartment due to discontinuance of his business as a developer on account of suspension or revocation of the registration under the Act or for any other reason, he is liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice in this behalf including compensation. If the allottee does not intend to withdraw from the project he shall be paid by the promoter interest for every month's delay till handing over of the possession. The requirement to pay interest is not a penalty as the payment of interest is compensatory in nature in the light of the delay suffered by the allottee who has paid for his apartment but has not received possession of it. The obligation imposed on the promoter to pay interest till such time as the apartment is handed over to him is not unreasonable. The interest is merely compensation for use of money”.
68. U.P. Government framed “Uttar Pradesh Real Estate (Regulation and Development) (Agreement for Sale/Lease) Rules, 2018”, wherein under Rule 9.2(ii) and 9.3(i), the rate of interest payable by the promoter or by the allottee respectively are defined in case of default by either of the party. These Rules are extracted below:—
Rule 9.2(ii)
The Allottee shall have the option of terminating the Agreement in which case the Promoter shall be liable to refund the entire money paid by the Allottee under any head whatsoever towards the purchase of the apartment, along with interest at the rate equal to MCLR (Marginal Cost of Lending Rate) on home loan of State Bank of India + 1% unless provided otherwise under the Rules, within forty-five days of receiving the termination notice:
Provided that where an Allottee does not intend to withdraw from the Project or terminate the Agreement, he shall be paid, by the Promoter, interest at the rate prescribed in the Rules, for every month of delay till the handing over of the possession of the Apartment/Plot, which shall be paid by the Promoter to the Allottee within forty-five days of it becoming due.
Rule 9.3
The Allottee shall be considered under a condition of Default, on the occurrence of the following events:
Rule 9.3(i)
In case the Allottee fails to make payments for 2(two) consecutive demands made by the Promoter as per the Payment Plan annexed hereto, despite having been issued notice in that regard the Allottee shall be liable to pay interest to the promoter on the unpaid amount at the rate equal to MCLR (Marginal Cost of Lending Rate) on home loan of State Bank of India + 1% unless provided otherwise under the Rules. The Promoter must not be in default to take this benefit.
69. It is noted that these Rules notified by U.P. Government are in consonance with the definition of interest as provided in Section 2(za) of the Act, in as much as that the interest chargeable from the allottee by the promoter, in case of default in payment as per demand, is equal to the rate of interest which the promoter is liable to pay to the allottee, in case of default/delayed possession on the part of promoter.
70. As far as the rate of interest to be paid by the appellant to the respondent is concerned, the Regulatory Authority had ordered an interest of MCLR +1% per annum in this case. We first examine the meaning of MCLR. The term MCLR stands for the Marginal Cost of Lending Rate, which is the minimum interest that a bank can lend at. MCLR is a tenor linked internal benchmark, which means the rate is determined internally by the bank. The RBI introduced the MCLR methodology for fixing interest rate from 01.04.2016 and MCLR replaced the base rate structure, which had been in place since July 2010. Banks review and publish MCLR's every month. Since the allottees of the Real Estate have to often take loan to supplement their savings before buying a property, the Regulatory Authority's order for interest at the rate of MCLR +1% of State Bank of India for home loans is equitable and just for the reason that the home buyers when they receive an interest at the rate of MCLR +1% for the period of delayed possession, their cost of borrowing money from the bank, gets more or less off-set by the interest they get for the delayed possession.
71. One may argue that the interest rate of MCLR +1% prescribed by the U.P. Government and being awarded by the Regulatory Authority as an “interest at the rate as may be prescribed” does not have retrospective effect and the rate of interest, or delayed penalty mentioned in the agreement for sale or letter of alloment or Builder Buyer Agreement (BBA) or Registration Booklet as mutually agreed to between buyer and seller should remain applicable till the U.P. Government's notification or till the Act came into force. On scrutiny, we found that in the BBA/Registration Booklet, etc., the rate of interest payable by the buyer/allottee in case of default in payment is in all cases much higher than the interest or delayed penalty payable by the seller to the buyer in case of default/delayed possession. We feel that this imbalance is on account of the fact that the buyer/allottee has much less bargaining power as compared to the seller in the real estate market and therefore the buyers/allottees have no choice but to sign on such “dotted line”, “one sided, unfair and unreasonable” terms and conditions/Agreements. We are therefore of the view that the rate of MCLR +1%, as prescribed by the Government and as being ordered by the Regulatory Authority, be payable from the date of deposit of money in case the allottee wishes to withdraw from the project; and from the specified/expected date of possession in case the allottee wishes to stay in the project, would balance the equities and are just and fair and will fall within the term “interest at such rate as may be prescribed” as used in Sections 12, 18 & 19. On due consideration, we find that the rate of interest to be paid by the appellant to the respondent in this case, at the rate of MCLR +1% per annum till the date of possession is quite in the order, being as prescribed and reasonable. We, therefore, found the Regulatory Authority's order with regard to MCLR +1% interest to be paid till date of possession is quite in order being fair, just and reasonable, as it balances the equities between the parties.
72. The appellant has mentioned in paragraph No. 5.15 of the memo of appeal that the delay so caused was by external circumstances and was beyond the control of the appellant and that the project has been terribly hit from the agitation of the land owners as well as kisan union and the matter being subjudiced and adjudicated by the Hon'ble High Court, Lucknow Bench, Lucknow in Land Acquisition Writ Petition No. 110/2011 alongwith connected Misc. Writ Petition Nos. 12734/2010 and 3869/2011 and the project lost valuable time between 2011 to 2018.
73. The respondent has vehemently opposed the above submissions of the appellant. It is argued by the respondent that Parigrah Patra dated 10.01.2011 and letters by Executive Engineer dated 27.07.2012, 11.10.2012 and 12.08.2013 as submitted by the appellant are relating to Himalaya Enclave Yojna, situated in Village Kalli Paschim, Lucknow. He further submitted that the copy of the F.I.R. dated 11.07.2013, N.O.C. issued by the Airport Authority of India Limited dated 29.08.2013, Office Order of Awas Vikas Parishad dated 06.02.2018, and the copy of the judgment of the Hon'ble High Court, Allahabad as submitted by the appellant are also not related to the project in question viz. Awadh Vihar Yojna. It is further pointed out by the respondent that Awadh Vihar Yojna has been developed from the land acquired from village Ghuswal Kala and not from the land acquired from the village Kalli Paschim. He also filed two documents in support of his submission. In the objection to grounds of appeal, the respondent has pointed out that the delay is of 27 months from 01.09.2016 to 14.12.2018 and the Regulatory Authority has erred in granting delay of 1 year and 9 months.
74. A perusal of the records shows that the papers filed by the appellant pertain to Telibagh, Vrindavan Yojna No. 4, Lucknow and the F.I.R. lodged on 11.07.2013 is also for Himalaya Enclave and Sapna Enclave under Vrindavan Yojna No. 4, Lucknow. It is further noted by the Tribunal that the papers submitted by the appellant did not pertain to Alakhnanda Enclave Yojna, Lucknow and they are of a period between 2011 and 2013, whereas the respondent had booked the said flat No. 3/T-5-403 under Alakhnanda Enclave Yojna, Lucknow on 01.03.2014. In case the appellant was facing any litigation or there was some delay on account of agitation by the farmers, the same could be considered in this appeal, only if they occurred after 01.03.2014, that is the date of booking of the said flat.
75. A perusal of the order dated 22.02.2019 of the Regulatory Authority shows that the delay period has been calculated as 01 year and 09 months. Though there is some discrepancy in the calculation, but we will at this stage not like to comment on it as it is not under challenge.
76. In view of the preceding observations after examining the material on record, as well as the grounds of appeal in detail, we do not find any force in the grounds of appeal and also any illegality, infirmity or perversity in the order of the Regulatory Authority. Accordingly, while upholding the order of the Regulatory Authority dated 22.02.2019, we dismiss the appeal. Cost easy.