MS. RASHMI REALTY BUILDERS PVT. LTD. v. MR.RAHUL RAJENDRAKUMAR PAGARIYA AND OTHERS

the learned Chairperson, Maharashtra Real Estate Regulatory Authority, Mumbai ("Authority") in Complaint No.CC006000000161230. The said complaint is disposed of by the authority by observing that since the parties have yet to enter into registered agreement for sale, the provisions of Section 18 of the Act are not applicable for withdrawal from the project with refund of entire amount paid along with applicable rates of interest as prayed for by the Complainants. In view of the said finding it has been further held that if the Complainants intend to withdraw from the said project then such withdrawal shall be guided by the terms and conditions of the Memorandum of Understanding executed between the parties or as agreed between the parties. Learned Appellate Tribunal set aside the said order dated 3^rd January 2020 passed by the learned Authority and directed the present Appellant to refund the amount of Rs.12,50,000/- together with interest from the date of payment till realization at the rate of highest marginal cost of lending rate of State Bank of India plus 2% from the date of receipt of payments within 30 days from the date of said order, failing which, promoter will pay interest at this prescribed rate on the total amount due and outstanding as on 30^th April 2023 till its realisation. As far as compensation is concerned, Page 2 of 126

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the Respondents were granted liberty to take recourse to appropriate proceedings before the competent forum in accordance with law.

II. SUBSTANTIAL QUESTION OF LAW INVOLVED IN THE

SECOND APPEAL

2. Mr. Upadhyay, learned Counsel appearing for the Appellant pointed out Memorandum of Understanding ("MOU") dated 19^th July 2013 executed between the Appellant and the Respondents and particularly Clause No.16 of the same. The said Clause No.16 reads as under:

"16. ARBITRATION: In case of any dispute between the company and the applicant regarding interpretation of or exercise of any terms of these presents, the opinion of the company shall prevail. However, if applicant is aggrieved by such decision, the dispute may be referred to a Sole Arbitrator appointed by the company and such proceedings will be conducted in accordance with the provisions of "Arbitration and Conciliation Act, 1996." The award of the Sole Arbitrator is binding on all the parties and Arbitration shall be at Mira Road (E), Thane."

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He therefore submitted that in view of the arbitration clause, the complaint filed under Section 31(1) of the Real Estate (Regulation and Development) Act, 2016 ("RERA") is not maintainable.

3. In view of the submissions of the learned Counsel appearing for the Appellant, by order dated 24^thJuly 2023 this Court has framed the following substantial question of law:

"Whether the jurisdiction of Real Estate Regulatory Authority established under Section 20 of the Real Estate Regulation and Development Act, 2016 is ousted, if the agreement between the promoter and the allottee contains arbitration clause? "

4. By the said order dated 24^thJuly 2023, Mr. Atul Damle, learned Senior Counsel has been appointed as Amicus Curiae to assist the Court.

III. SUBMISSIONS OF THE APPELLANT

5. Mr. Upadhyay, learned Counsel for the Appellant raised the following contentions :-

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(i) He pointed out various clauses of the said MOU. He submitted that no flat number, no building number, no floor number, etc., are mentioned in the said MOU. He submitted that therefore, the flat cannot be "apartment" within the meaning of Section 2(e) of the RERA and therefore the provisions of RERA will not apply to subject transaction.

(ii) He submitted that Section 18 of the RERA will not apply to the present case. He submitted that RERA is only for limited purpose to decide the dispute between the allottee and the promoter and the disputes which are arising between the parties under the MOU dated 19^thJuly 2013 can be decided and resolved under the provisions of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") by recourse to Clause No.16 of the MOU.

(iii) He pointed out definition of "apartment" as contained in Section 2(e) of the RERA and submitted that as per MOU, there is no apartment and therefore, provisions of RERA will not apply and only recourse is to invoke the arbitration clause. He submitted that as no specific flat is allotted to the Respondents, the provisions of RERA are not applicable.

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(iv) He submitted that in the entire MOU, there is no clause agreeing that the flat is to be handed over within a period of 40 months from the date of MOU.

(v) He submitted that the Respondents are not allottees and they are the investors and there is no registered agreement executed between the Appellant and the Respondents.

(vi) He pointed out the discussion in the impugned order on page 31 and 43. He also pointed out Section 88 of the RERA which provides that the provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force. He also pointed out Section 89 of the RERA which provides that the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force. He therefore, submitted that Arbitration Act will apply and therefore, the only remedy available is to have recourse to arbitration proceedings.

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(vii) He submitted that pursuant to the arbitration clause in the MOU, the Respondents should have approached and exhausted their remedy under the Arbitration Act.

(viii) He therefore submitted that the impugned order be quashed and set aside.

IV. SUBMISSIONS ON BEHALF OF THE RESPONDENT

6. On the other hand, Mr. Altaf Khan, learned Counsel appearing for the Respondents raised the following contentions :-

(i) He submitted that the Respondents are the allottees under Section 2(d) of the RERA. He pointed out Clause No.2 of the MOU dated 19^thJuly 2013 wherein it is specifically agreed between the parties that the developers have agreed to allot a flat as per detail specifications given in Annexure at "Rashmi's Star City- Phase IV- Type B" to the Respondent for a total consideration of Rs.19,00,000/-.

(ii) Clause No.3 of the MOU specifies that the allotment of flat number, floor and building number shall be carried out and Page 7 of 126

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informed to the Applicant at the function hosted by the developer on or before possession by random flat allotment system.

(iii) He pointed out Section 2(c) of the RERA and submitted that even the oral agreement is contemplated under the RERA. He pointed out Section 2(d) i.e. the definition of "allottee" and emphasized on the words "otherwise transferred by the promoter".

He submitted that "allottee" in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the promoter.

(iv) He pointed out Section 13 of the RERA and submitted that a promoter shall not accept a sum more than ten per cent of the cost of the apartment, plot, or building as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement for sale with such person and register the said agreement for sale, under any law for the time being in force.

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(v) He pointed out reply dated 10^thApril 2019 issued by the Advocate of the Appellant to the notice dated 29^thMarch 2019 issued on behalf of the Respondents. He pointed out last portion of Paragraph No.2 of the said reply wherein it is specifically stated that the Appellant is ready and willing to refund the payment made by the Respondents. He pointed out discussion in the impugned order on pages 39, 40, 46 and 47. He pointed out discussion in Paragraph No.50. He submitted that in the said reply dated 10^thApril 2019, it is specifically admitted by the Appellant that the Respondents have booked a two room kitchen flat in the project known as "Rashmi Star City-Phase 4" and the Appellant is ready and willing to refund the payment made by the Respondents. He therefore submitted that as admittedly, the Respondents are the allottees and accordingly the provisions of RERA are applicable. Thus, the Respondents are entitled to file Complaint under Section 31(1) read with Section 18 against the Appellant for violating and contravening the provisions of the RERA.

(vi) He submitted that RERA being Special Act enacted to protect the interest of the consumers and it established an adjudicating mechanism for speedy dispute redressal the provisions of RERA, Page 9 of 126

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shall prevail over Arbitration and Conciliation Act, 1996. He relied on Sections 18(1), 88 and 89 of the RERA and submitted that the RERA shall have overriding effect on arbitration clause.

(vii) He relied on the decision of the Full Bench of this Court in the case of Central Warehousing Corporation, Mumbai vs. Fortpoint Automotive Pvt. Ltd., Mumbai¹and more particularly on Paragraph No.40 of the same. He submitted that observations of the said case are applicable to the present case.

(viii) He also relied on the decision in M/s. National Seeds Corporation Ltd. vs. M. Madhusudhan Reddy & Anr.².

(ix) He submitted that even otherwise Section 8 of the Arbitration and Conciliation Act provides that objection of arbitral dispute on the basis of arbitration clause, should have been taken not later than the date of submitting his first statement on the substance of the dispute. He submitted that in the first statement on the substance of dispute filed before the Authority no such objection was taken. He therefore, sbmitted that it be held that the

1 2010 (1) MhLJ 658

2 2012 2 SCC 506

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remedy under RERA is not prohibited inspite of arbitration clause in the agreement.

V. SUBMISSIONS OF MR. ATUL DAMLE, LEARNED AMICUS

CURIAE

7. Mr. Damle, learned Amicus Curiae made following submissions :-

(i) He pointed out the objects and reasons of the RERA. He also pointed out preamble of the Act. He pointed out Sections 3, 8, 20, 42, 59 to 72, 79, 88 and 89 of the RERA. He submitted that these Sections clearly show the intention of the legislature for enacting RERA. The intention of the legislature is to protect homebuyers from being abandoned if the promoter fails to finish the project or has their registration revoked. The RERA Authority intervenes in situation and takes appropriate steps to safeguard the interests of the homebuyers. The RERA Authority is the authority which works in effective manner to make it easier for the allotees to get their money back with interest. He submitted that various provisions of RERA guarantees the protection of homebuyers' interests in the Page 11 of 126

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event that the registration of a real estate project is cancelled or expires.

(ii) He submitted that detailed and effective mechanism provided by the RERA ensures that the RERA Authority takes effective steps for ensuring repaymet of the money paid by the allottees and interest, take necessary steps to ensure project is completed in time bound manner and impose fines on the promoter for non-compliance. He submitted that in fact, the various provisions of RERA have proven very effective in encouraging accountability and openness in the real estate industry and has increased homebuyers' confidence.

(iii) He pointed out provisions of Sections 7 and 8 of the Arbitration Act.

(iv) As far as the main point involved in Second Appeal whether arbitration agreement will oust jurisdiction of RERA, in view of the scheme of RERA and on the basis of various judgments, he submitted that if there is provisions for Special Court then such dispute need not be referred to the Arbitral Tribunal in spite of the Page 12 of 126

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agreement between the promoter and allottee containing the arbitration clause. To substantiate the said contention, he relied on the following decisions:

(a) Booz Allen and Hamilton INC vs. SBI Home Finance Limited & Ors.³

(b) Vidya Drolia & Ors. vs. Durga Trading Corporation⁴

(v) He submitted that in view of the various provisions for granting and enforcing rights of flat purchasers and special provisions providing mechanism to enforce the said right, it can be said that by necessary implication the dispute became non- arbitrable. He submitted that arbitral clause can be incorporated in any contract between the parties but if the rights are created by a special statute and forum is established for implementation of the same, the dispute needs to be adjudicated by such special forum established under the Act irrespective of arbitration agreement between the parties.

(vi) For emphasizing the effect of Sections 88 and 89 of the RERA, he relied on the decision of the Supreme Court in case of

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Forum For People's Collective Efforts (FPCE) & Anr. vs. The State of West Bengal & Anr.⁵.

(vii) He also relied on the following decisions of the Supreme Court:

(c) Chhattisgarh State Power Distribution Company Ltd. vs. Chhattisgarh State Electricity Regulatory Commission & Anr.⁶.

(d) Sultana Begum vs. Prem Chand Jain⁷

(e) Maya Mathew vs. State of Keral & Ors.⁸

(f) Sarwan Singh & Anr. vs. Kasturi Lal⁹

(g) Neelkamal Realtors Suburban Pvt. Ltd. vs. Union of India & Ors.¹⁰

(viii) He submitted that RERA is a special statute as it has full proof mechanism to protect the interest of flat purchasers which is need of the hour and for the said purpose Act is enacted. He submitted that if the arbitration clause in flat purchasers

5 (2021) 8 SCC 599

6 (2022) SCC OnLine SC 604

7 (1997) 1 SCC 373

8 (2010) 4 SCC 498

9 (1977) 1 SCC 750

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agreement is given effect to looking into mandatory provisions of Section 8 of the Arbitration Act, then the whole purpose of RERA will be defeated as the flat purchasers can be dragged to Civil Court after passing of the Award for execution and the special protection given under RERA will be given a go by.

(ix) He submitted that both RERA and Arbitration Act are central Acts and therefore it is necessary to read both the enactments harmoniously. He submitted that if both the enactments are read harmoniously, it can be said that RERA being special statute will prevail over the arbitration clause as contained in the agreement of flat purchasers.

(x) He submitted that Section 88 of the RERA clearly provides that the RERA is in addition to and not in derogation of, the provisions of any other law for the time being in force and the said provision is enacted particularly in view of Consumer Protection Act. He submitted that in any event Section 89 of RERA gives overriding effect over any other law and hence for achieving the purpose of RERA the provisions of same can be prevailed even if there is an arbitration agreement between the parties. To Page 15 of 126

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substantiate this contention, he relied on the decision of Newtech Promoters and Developers Pvt. Ltd. vs. State of UP & Ors.¹¹and pointed out Paragraphs 13, 19 to 25, 54, 86, 122, 133 and 142. He therefore, submitted that RERA being special legislation for protecting the interest of home buyers, the same will prevail over arbitration clause.

VI. FACTUAL MATRIX

8. Before consideration of the substantial question of law raised in the Second Appeal, it is necessary to set out relevant factual aspects :-

(i) 19^thJuly 2013 - The Appellant executed Memorandum of Understanding dated 19^thJuly 2013 with the Respondents. The important terms and conditions of the MOU are as follows :-

"1. The Developers are offering residential units of 2 Room Kitchen at proposed project RASHMI'S STAR CITY - PHASE IV - TYPE B, NAIGAON - East, Dist. Thane.

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2. The Developers have agreed to allot flat, detail specifications given in Annexure hereafter, at

"RASHMI'S STAR CITY - PHASE IV - TYPE B" to the Applicant for a total consideration of Rs.1900000/- (Rupees Nineteen Lacs Only).

3. The allotment of Flat No, Floor and Bldg No. shall be carried out and informed to the Applicant at the function hosted by the Developer on or before possession by random flat allotment system only.

16. ARBITRATION Clause - Already set out earlier."

Certain declarations have been given by the Respondents in Clause No.17. Relevant of the same are (a) and (g), which read as under :-

"a. I/We hereby declare that I/We have applied for immovable property (2 Room Kitchen housing unit) after going through the terms and conditions and I/We declare that I/We have understood such terms and conditions and declare to comply with/ obey such terms and conditions in letter and spirit. g. I/We have visited the booking office, where we have seen the sample flat. I/We accept all room sizes and specification with the amenities displayed."

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(ii) 29^thMarch 2019 - Inspite of making payment of Rs.12,50,000/- there was no progress in the construction and therefore notice dated 29^thMarch 2019 has been given by the Respondents to the Appellant. The relevant contents of said notice are in Paragraph Nos.1, 5 and 12, which reads as follows :-

"1. That in June, 2013 my clients in the name of their Firm 'RNR Tie-up' had booked '2 Room Kitchen Flat' in your Project 'Rashmi Star City - Phase 4' at Naigaon, against consideration of Rs. 19,00,000/- in Cheque + Rs. 4,00,000/- in cash [aggregating to Rs. 23,00,000/-], for which you had decided payment schedule as under :

i. At the time of booking - Rs. 3,50,000/- in Cheque + Rs. 4,00,000/- in cash;

ii. Thereafter, Rs. 18,000/- per month in Cheque, payable for 50 months, aggregating to Rs. 9,00,000/-,

iii. Balance Rs.6,50,000/- payable at the time of possession.

At that time, you had agreed and assured to provide possession of New Flat, within 40 months."

"5. My clients state that despite my clients making above payment as per your schedule, till date there is no progress in your Project, leave aside providing Page 18 of 126

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possession of purchased Flat by Oct., 2016 [i.e. within 40 months of booking]."

" 12. In view of above stated facts and circumstances, on behalf of my clients, you are once again requested to forthwith return:

i. Rs. 16,50,000/- Principal amount,

ii. +9% interest accumulated on Principal amount, from the date of its Payment.

iii. +Rs. 5,00,000/- as compensation."

(iii) 10^thApril 2019 - The Appellant give reply dated 10^thApril 2019 to the said notice dated 29^thMarch 2019 inter alia stating as follows :-

"1. With reference to Para No.1 and 2 of your notice my clients state that, it is true only to the extent that on 12.06.2013 your clients has booked a 2 Room Kitchen Flat in my clients project known as "Rashmi Star City - Phase 4" situate, at Naigaon in consideration of Rs. 23,00,000/- (Rupees Twenty Three Lakhs Only). And out of the aforesaid consideration amount till 15/07/2017 your clients have only paid a sum of Rs. 12,50,000/- (Rupees Twelve Lakhs Fifty Thousand Only) in equal monthly installment of Rs. 18000/- and earnest money of Rs. 3,50,000/- to my clients. My clients hereby further state that my clients deny having received cash of Rs. 4,00,000/- hence, you are hereby put to the strict proof thereof.

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2. …My clients state that my clients understand the value of hard earn money of your clients and are ready and willing to refund the payment made by your clients. My clients further state that form July 2019 my clients will start refunding payment to your clients and will return the entire amount to your clients on or before March 2020."

(Emphasis added)

(iv) 10^thNovember 2019 - Complaint under Section 31(1) read with Section 18 of RERA filed by the Respondents with the Authority.

(v) 3^rdJanuary 2020 - The Complaint was disposed of.

(vi) 13^thFebruary 2020 - Appeal was filed by the Respondents with the Appellate Tribunal.

(vii) 20^thAugust 2021 - The learned Appellate Tribunal allowed the Appeal by setting aside order of 3^rdJanuary 2020 passed by Authority. The said Complaint is partly allowed by directing refund of amount of Rs.12,50,000/- with interest at the rate of 9% per annum from the date of payment till realization. In the said order it is specifically stated that although the Appellants (i.e. Respondents in said Appeal) were served, they remained absent. Page 20 of 126

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(viii) 18^thNovember 2022 - The Appellants filed Second Appeal No.433 of 2021. A learned Single Judge by order dated 18^th November 2022 directed deposit of said amount of Rs.12,50,000/- along with interest in the execution proceedings and on that condition quashed and set aside order dated 20^thAugust 2021 passed by the learned Appellate Tribunal and remanded the matter back to the learned Appellate Tribunal.

(ix) 31^stMarch 2023 - Learned Appellate Tribunal by order dated 31^stMarch 2023 set aside the said order dated 3^rdJanuary 2020 passed by the learned Authority and directed the present Appellant to refund the amount of Rs.12,50,000/- together with interest from the date of payment till realization at the rate of highest marginal cost of lending rate of State Bank of India plus 2% from the date of receipt of payments within 30 days from the date of said order, failing which, promoter will pay interest at this prescribed rate on the total amount due and outstanding as on 30^thApril 2023 till its realisation. As far as compensation is concerned, the Respondents were granted liberty to take recourse to appropriate proceedings before the competent forum in accordance with law. Page 21 of 126

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(x) 17^thJuly 2023 - The present Second Appeal filed.

VII. THE CRITERIA FOR DETERMINING THAT THE DISPUTE

BETWEEN THE PARTIES IS NON-ARBITRABLE

9. Before considering the main issue whether the dispute between the parties is non - arbitrable in spite of arbitration clause contained in MOU executed between both the parties, it is necessary to ascertain the criteria for determining non - arbitrable nature of the disputes.

10. For consideration of this aspect, it is necessary to set out relevant provisions of the Arbitration Act. Relevant provisions of the Arbitration Act are Sections 7, 8 and 34(2)(ii), which read as under :-

"7. Arbitration agreement.— (1) In this Part,

"arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

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(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in—

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

8. Power to refer parties to arbitration where there is an arbitration agreement.—[(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.]

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:

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[Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.]

(3) Notwithstanding that an application has been made under sub- section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

34. Application for setting aside arbitral award.—(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if—

...

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or^"

11. The Supreme Court and this Court in various Judgments have discussed the various aspects about the dispute being non- Page 24 of 126

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arbitrable between the parties despite existence of the arbitration clause in the agreement executed between the parties.

12. The Supreme Court in Booz Allen (supra) was considering the scope of Section 8 of the Arbitration and Conciliation Act, 1996. In the said decision, the Supreme Court has held as follows:

"35. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.

36. The well-recognised examples of non- arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out Page 25 of 126

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of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters;

(v) testamentary matters (grant of probate, letters of administration and succession certificate); and

(vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.

37. It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide Black's Law Dictionary.)

38. Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate Page 26 of 126

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rights in personam arising from rights in rem have always been considered to be arbitrable.

39. The Act does not specifically exclude any category of disputes as being not arbitrable. Sections 34(2)(b) and 48(2) of the Act however make it clear that an arbitral award will be set aside if the court finds that "the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force."

13. It has been held by the Supreme Court in Booz Allen (supra) that where a cause/dispute is inarbitrable, the Court where a Suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Arbitration Act even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.

14. It has been held in Booz Allen (supra) that the well- recognised examples of non-arbitrable disputes are:

(i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences;

(ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody;

(iii) guardianship matters; Page 27 of 126

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(iv) insolvency and winding-up matters;

(v) testamentary matters (grant of probate, letters of administration and succession certificate); and

(vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.

15. The Supreme Court held that a right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. Page 28 of 126

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16. In Vidya Drolia (supra), it has been held by the Supreme Court in Paragraph Nos.50 and 55 as follows:

"50. Sovereign functions of the State being inalienable and non-delegable are non-arbitrable as the State alone has the exclusive right and duty to perform such functions. [ Ajar Raib, "Defining Contours of the Public Policy Exception — A New Test for Arbitrability", Indian Journal for Arbitration Law, Vol. 7 (2018) p. 161.] For example, it is generally accepted that monopoly rights can only be granted by the State. Correctness and validity of the State or sovereign functions cannot be made a direct subject-matter of a private adjudicatory process. Sovereign functions for the purpose of Arbitration Act would extend to exercise of executive power in different fields including commerce and economic, legislation in all forms, taxation, eminent domain and police powers which includes maintenance of law and order, internal security, grant of pardon, etc. as distinguished from commercial activities, economic adventures and welfare activities. [Common Cause v. Union of India, (1999) 6 SCC 667 : 1999 SCC (Cri) 119 and Agricultural Produce Market Committee v. Ashok Harikuni, (2000) 8 SCC 61.] Similarly, decisions and adjudicatory functions of the State that have public interest element like the legitimacy of marriage, citizenship, winding up of companies, grant of patents, etc. are non-arbitrable, unless the statute in relation to a regulatory or adjudicatory mechanism either expressly or by clear implication permits arbitration. In these matters the State enjoys monopoly in dispute resolution.

55. Doctrine of election to select arbitration as a dispute resolution mechanism by mutual agreement is available only if the law accepts existence of Page 29 of 126

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arbitration as an alternative remedy and freedom to choose is available. There should not be any inconsistency or repugnancy between the provisions of the mandatory law and arbitration as an alternative. Conversely, and in a given case when there is repugnancy and inconsistency, the right of choice and election to arbitrate is denied. This requires examining the "text of the statute, the legislative history, and "inherent conflict" between arbitration and the statute's underlying purpose"

[ Jennifer L. Peresie, "Reducing the Presumption of Arbitrability" 22 Yale Law & Policy Review, Vol. 22, Issue 2 (Spring 2004), pp. 453-462.] with reference to the nature and type of special rights conferred and power and authority given to the courts or public forum to effectuate and enforce these rights and the orders passed. When arbitration cannot enforce and apply such rights or the award cannot be implemented and enforced in the manner as provided and mandated by law, the right of election to choose arbitration in preference to the courts or public forum is either completely denied or could be curtailed. In essence, it is necessary to examine if the statute creates a special right or liability and provides for the determination of each right or liability by the specified court or the public forum so constituted, and whether the remedies beyond the ordinary domain of the civil courts are prescribed. When the answer is affirmative, arbitration in the absence of special reason is contraindicated. The dispute is non-arbitrable."

17. In Vidya Drolia (supra), it is held that doctrine of election to select arbitration as a dispute resolution mechanism by mutual agreement is available only if the law accepts existence of Page 30 of 126

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arbitration as an alternative remedy and freedom to choose is available.

18. In Vidya Drolia (supra) it has been held that it is necessary to examine if the statute creates a special right or liability and provides for the determination of each right or liability by the specified court or the public forum so constituted, and whether the remedies beyond the ordinary domain of the civil courts are prescribed. When the answer is affirmative, arbitration in the absence of special reason is contraindicated. The dispute in such case is non-arbitrable.

19. The tests for determining when the subject-matter of a dispute in an arbitration agreement is not arbitrable are set out in Paragraph No.76 of the Vidya Drolia (supra), which reads as under:

"76. In view of the above discussion, we would like to propound a fourfold test for determining when the subject-matter of a dispute in an arbitration agreement is not arbitrable:

76.1.(1) When cause of action and subject-matter of the dispute relates to actions in rem, that do not Page 31 of 126

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pertain to subordinate rights in personam that arise from rights in rem.

76.2.(2) When cause of action and subject-matter of the dispute affects third-party rights; have erga omnes effect; require centralised adjudication, and mutual adjudication would not be appropriate and enforceable.

76.3. (3) When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable. 76.4.(4) When the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).

76.5. These tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject-matter is non-arbitrable. Only when the answer is affirmative that the subject-matter of the dispute would be non-arbitrable.

76.6. However, the aforesaid principles have to be applied with care and caution as observed in Olympus Superstructures (P) Ltd. [Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan, (1999) 5 SCC 651] : (SCC p. 669, para 35)

"35. … Reference is made there to certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, which cannot be referred to Page 32 of 126

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arbitration. It has, however, been held that if in respect of facts relating to a criminal matter, say, physical injury, if there is a right to damages for personal injury, then such a dispute can be referred to arbitration (Keir v. Leeman [Keir v. Leeman, (1846) 9 QB 371 :

115 ER 1315] ). Similarly, it has been held that a husband and a wife may refer to arbitration the terms on which they shall separate, because they can make a valid agreement between themselves on that matter (Soilleux v. Herbst [Soilleux v. Herbst, (1801) 2 Bos & P 444 : 126 ER 1376], Wilson v. Wilson [Wilson

v. Wilson, (1848) 1 HL Cas 538] and Cahill v. Cahill [Cahill v. Cahill, (1883) LR 8 AC 420 (HL)]).""

20. One of the factor required to be taken into consideration is public interest functions of the State. The Supreme Court in Vidya Drolia (supra), in Paragraph Nos.77 to 79 held as follows:

"77. Applying the above principles to determine non-arbitrability, it is apparent that insolvency or intracompany disputes have to be addressed by a centralised forum, be the court or a special forum, which would be more efficient and has complete jurisdiction to efficaciously and fully dispose of the entire matter. They are also actions in rem. Similarly, grant and issue of patents and registration of trade marks are exclusive matters falling within the sovereign or government functions and have erga omnes effect. Such grants confer monopoly rights. They are non-arbitrable. Criminal cases again are not arbitrable as they relate to sovereign functions of the State. Further, violations of criminal law are offences against the State and not just against the victim. Matrimonial disputes relating to Page 33 of 126

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the dissolution of marriage, restitution of conjugal rights, etc. are not arbitrable as they fall within the ambit of sovereign functions and do not have any commercial and economic value. The decisions have erga omnes effect. Matters relating to probate, testamentary matter, etc. are actions in rem and are a declaration to the world at large and hence are non-arbitrable.

"78. In view of the aforesaid discussions, we overrule the ratio in N. Radhakrishnan [N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 : (2010) 1 SCC (Civ) 12] inter alia observing that allegations of fraud can (sic cannot) be made a subject-matter of arbitration when they relate to a civil dispute. This is subject to the caveat that fraud, which would vitiate and invalidate the arbitration clause, is an aspect relating to non-arbitrability. We have also set aside the Full Bench decision of the Delhi High Court in Hdfc Bank Ltd. v. Satpal Singh Bakshi ., 2012 SCC OnLine Del 4815 : (2013) 134 DRJ 566] which holds that the disputes which are to be adjudicated by the DRT under the DRT Act are arbitrable. They are non- arbitrable.

79. Landlord-tenant disputes governed by the Transfer of Property Act are arbitrable as they are not actions in rem but pertain to subordinate rights in personam that arise from rights in rem. Such actions normally would not affect third-party rights or have erga omnes effect or require centralised adjudication. An award passed deciding landlord- tenant disputes can be executed and enforced like a decree of the civil court. Landlord-tenant disputes do not relate to inalienable and sovereign functions of the State. The provisions of the Transfer of Property Act do not expressly or by necessary implication bar arbitration. The Transfer of Property Act, like all other Acts, has a public purpose, that is, Page 34 of 126

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to regulate landlord-tenant relationships and the arbitrator would be bound by the provisions, including provisions which enure and protect the tenants."

21. The Full Bench of this Court in Central Warehousing Corporation, Mumbai (supra) has held in Paragraph No.40 as follows:

"40. In summation, we would hold that section 41(1) of the Act of 1882 is a special law which in turn has constituted special Courts for adjudication of disputes specified therein between the licensor and licensee or a landlord and tenant. The effect of section 41(2) of the Act of 1882 is only the suits or proceedings for recovery of possession of immovable property or of licence fee thereof, to which, the provisions of specified Acts or any other law for the time being in force apply, have been excepted from the application of non-obstante clause contained in section 41(1) of the Act. The expression "or any other law for the time being in force" appearing in section 41(2) will have to be construed to mean that such law should provide for resolution of disputes between licensor and licensee or a landlord and tenant in relation to immovable property or licence fee thereof, to which immovable property, the provisions of that Act are applicable. The Act of 1996 is not covered within the ambit of section 41(2) in particular the expression "or any other law for the time being in force" contained therein. The question whether the exclusive jurisdiction of the Small Causes Court vested in terms of section 41 of the Act of 1882 is ousted, if an agreement between the licensor and licensee contains a clause for arbitration, the same will have to be answered in the negative. For, section 5 of the Page 35 of 126

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Act of 1996 in that sense is not an absolute non- obstante clause. Section 5 of the Act of 1996 cannot affect the laws for the time being in force by virtue of which certain disputes may not be submitted to arbitration, as stipulated in section 2(3) of the Act of 1996. We hold that section 41 of the Act of 1882 falls within the ambit of section 2(3) of the Act of 1996. As a result of which, even if the Licence Agreement contains Arbitration Agreement, the exclusive jurisdiction of the Courts of Small Causes under section 41 of the Act of 1882 is not affected in any manner. Whereas, Arbitration Agreement in such cases would be invalid and inoperative on the principle that it would be against public policy to allow the parties to contract out of the exclusive jurisdiction of the Small Causes Courts by virtue of section 41 of the Act of 1882."

(Emphasis added)

22. The Supreme Court in M/s. National Seeds Corporation Ltd. (supra) in Paragraph Nos.63,66 67, 69 and 70 held as follows:

"63. The next question which needs consideration is whether the growers of seeds were not entitled to file complaint under the Consumer Protection Act and the only remedy available to them for the alleged breach of the terms of agreement was to apply for arbitration.

66. The remedy of arbitration is not the only remedy available to a grower. Rather, it is an optional remedy. He can either seek reference to an arbitrator or file a complaint under the Consumer Protection Act. If the grower opts for the remedy of arbitration, then it may be possible to say that he cannot, subsequently, file complaint under the Page 36 of 126

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Consumer Protection Act. However, if he chooses to file a complaint in the first instance before the competent Consumer Forum, then he cannot be denied relief by invoking Section 8 of the Arbitration and Conciliation Act, 1996. Moreover, the plain language of Section 3 of the Consumer Protection Act makes it clear that the remedy available in that Act is in addition to and not in derogation of the provisions of any other law for the time being in force.

67. In Fair Air Engineers (P) Ltd. v. N.K. Modi [(1996) 6 SCC 385] the two-Judge Bench interpreted that section and held as under: (SCC p. 393, paras 15 & 16)

"15. … the provisions of the Act are to be construed widely to give effect to the object and purpose of the Act. It is seen that Section 3 envisages that the provisions of the Act are in addition to and are not in derogation of any other law in force. It is true, as rightly contended by Shri Suri, that the words 'in derogation of the provisions of any other law for the time being in force' would be given proper meaning and effect and if the complaint is not stayed and the parties are not relegated to the arbitration, the Act purports to operate in derogation of the provisions of the Arbitration Act. Prima facie, the contention appears to be plausible but on construction and conspectus of the provisions of the Act we think that the contention is not well founded. Parliament is aware of the provisions of the Arbitration Act and the Contract Act, 1872 and the consequential remedy available under Section 9 of the Code of Civil Procedure i.e. to avail of right of civil action in a competent court of civil jurisdiction. Nonetheless, the Act provides the additional remedy.

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16. It would, therefore, be clear that the legislature intended to provide a remedy in addition to the consentient arbitration which could be enforced under the Arbitration Act or the civil action in a suit under the provisions of the Code of Civil Procedure. Thereby, as seen, Section 34 of the Act does not confer an automatic right nor create an automatic embargo on the exercise of the power by the judicial authority under the Act. It is a matter of discretion. Considered from this perspective, we hold that though the District Forum, State Commission and National Commission are judicial authorities, for the purpose of Section 34 of the Arbitration Act, in view of the object of the Act and by operation of Section 3 thereof, we are of the considered view that it would be appropriate that these forums created under the Act are at liberty to proceed with the matters in accordance with the provisions of the Act rather than relegating the parties to an arbitration proceedings pursuant to a contract entered into between the parties. The reason is that the Act intends to relieve the consumers of the cumbersome arbitration proceedings or civil action unless the forums on their own and on the peculiar facts and circumstances of a particular case, come to the conclusion that the appropriate forum for adjudication of the disputes would be otherwise those given in the Act."

(emphasis supplied)

69. In Trans Mediterranean Airways v. Universal Exports [(2011) 10 SCC 316 : (2012) 1 SCC (Civ)

148] it was observed: (SCC p. 333, para 41) Page 38 of 126

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"41. In our view, the protection provided under the CP Act to consumers is in addition to the remedies available under any other statute. It does not extinguish the remedies under another statute but provides an additional or alternative remedy."

70. The aforementioned judgments present a clear answer to the appellant's challenge to the impugned orders on the ground that the growers had not availed the remedy of arbitration."

23. On the analysis of the above Judgments of the Supreme Court and this Court, as regards criterias for determining non- arbitral character of the dispute between the parties, following position emerges :-

(i) The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country.

(ii) Every civil or commercial dispute, either contractual or non- contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of Page 39 of 126

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certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.

(iii) Doctrine of election to select arbitration as a dispute resolution mechanism by mutual agreement is available only if the law accepts existence of arbitration as an alternative remedy and freedom to choose is available.

(iv) There should not be any inconsistency or repugnancy between the provisions of the mandatory law and arbitration as an alternative.

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(v) Conversely, and in a given case when there is repugnancy and inconsistency, the right of choice and election to arbitrate is denied. This requires examining the "text of the statute, the legislative history, and "inherent conflict" between arbitration and the statute's underlying purpose" with reference to the nature and type of special rights conferred and power and authority given to the courts or public forum to effectuate and enforce these rights and the orders passed. When arbitration cannot enforce and apply such rights or the award cannot be implemented and enforced in the manner as provided and mandated by law, the right of election to choose arbitration in preference to the courts or public forum is either completely denied or could be curtailed.

(vi) In essence, it is necessary to examine if the statute creates a special right or liability and provides for the determination of each right or liability by the specified court or the public forum so constituted, and whether the remedies beyond the ordinary domain of the civil courts are prescribed. When the answer is affirmative, arbitration in the absence of special reason is contraindicated. The dispute is non-arbitrable. Page 41 of 126

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(vii) Sovereign functions of the State being inalienable and non- delegable are non-arbitrable as the State alone has the exclusive right and duty to perform such functions. It is generally accepted that monopoly rights can only be granted by the State. Correctness and validity of the State or sovereign functions cannot be made a direct subject-matter of a private adjudicatory process. Sovereign functions for the purpose of Arbitration Act would extend to exercise of executive power in different fields including commerce and economic, legislation in all forms, taxation, eminent domain and police powers which includes maintenance of law and order, internal security, grant of pardon, etc. as distinguished from commercial activities, economic adventures and welfare activities.

(viii)Similarly, decisions and adjudicatory functions of the State that have public interest element like the legitimacy of marriage, citizenship, winding up of companies, grant of patents, etc. are non-arbitrable, unless the statute in relation to a regulatory or adjudicatory mechanism either expressly or Page 42 of 126

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by clear implication permits arbitration. In these matters the State enjoys monopoly in dispute resolution.

(ix) The well-recognised examples of non-arbitrable disputes are:

(a) disputes relating to rights and liabilities which give rise to or arise out of criminal offences;

(b) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody;

(c) guardianship matters;

(d) insolvency and winding-up matters;

(f) testamentary matters (grant of probate, letters of administration and succession certificate); and

(g) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes. The cases referred to above relate to actions in rem. Page 43 of 126

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(x) A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself.

(xi) Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule.

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(xii) The Arbitration Act does not specifically exclude any category of disputes as being not arbitrable. Sections 34(2)(b) and 48(2) of the Act however make it clear that an arbitral award will be set aside if the court finds that "the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force."

(xiii)In Vidya Drolia (supra) the Supreme Court propounded a fourfold test for determining when the subject-matter of a dispute in an arbitration agreement is not arbitrable:

(a) When cause of action and subject-matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.

(b) When cause of action and subject-matter of the dispute affects third-party rights; have erga omnes effect; require centralised adjudication, and mutual adjudication would not be appropriate and enforceable.

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(c) When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable.

(d) When the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).

(e) These tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject-matter is non- arbitrable. Only when the answer is affirmative that the subject-matter of the dispute would be non-arbitrable.

VIII. THE SCHEME OF THE REAL ESTATE (REGULATION AND

DEVELOPMENT) ACT, 2016

24. To answer the substantial question of law raised in this Second Appeal, it is necessary to consider the scheme of the Real Page 46 of 126

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Estate (Regulation and Development) Act, 2016 and to apply the principles set out by the Supreme Court as set out herein above to the scheme of RERA to ascertain whether the dispute covered under RERA is arbitrable.

PREAMBLE OF THE REAL ESTATE (REGULATION AND

DEVELOPMENT) ACT, 2016

25. The preamble of RERA reads as under:

"An Act to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment of building, as the case may be, or sale of real estate project, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto."

Thus, preamble of RERA is very significant and provides as follows :-

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(i) To establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector.

(ii) To ensure sale of plot, apartment of building or sale of real estate project, in an efficient and transparent manner.

(iii) To protect the interest of consumers in the real estate sector.

(iv) To establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer.

OBJECT AND REASONS FOR ENACTING THE REAL ESTATE

(REGULATION AND DEVELOPMENT) ACT, 2016

26. The Supreme Court in Newtech Promoters (supra) in Paragraph Nos.6 to 14 discussed the object and reasons and also scope of the RERA. The said Paragraph Nos.6 to 14 read as under:

" Objects and Reasons of the 2016 Act

6. Over the past two decades, with the growth of population and the attraction of the people to shift Page 48 of 126

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towards urbanization, the demand for housing increased manifold. The Government also introduced various housing schemes to cope with the increasing demand but the experience shows that demands of the housing sector could not be meted out by the Government at its own level for various reasons to meet the requirement, the private players entered into the real estate sector in meeting out the rising demand of housing. Though availability of loans, both from public and private banks, become easier, still the high rate of interest and the EMI has posed additional financial burden on the people.

7. At the given time, the real estate and housing sector was largely unregulated and the consequence was that consumers were unable to procure complete information for enforced accountability towards builders and developers in the absence of an effective mechanism in place. Though the Consumer Protection Act, 1986 was available to cater the demand of homebuyers in the real estate sector but the experience shows that this mechanism was inadequate to address the needs of the homebuyers and promoters in the real estate sector.

8. At this juncture, the need for Real Estate (Regulation) Bill was badly felt for establishing an oversight mechanism to enforce accountability to the real estate sector and providing an adjudicating machinery for speedy dispute redressal mechanism and safeguarding the investments made by the homebuyers through legislation to the extent permissible under the law.

9. The Statement of Objects and Reasons of the Act indicates that the primal position of the Regulatory Authority is to regulate the real estate sector having jurisdiction to ensure compliance with the obligation cast upon the promoters. The opening Statement of Objects Page 49 of 126

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and Reasons which has a material bearing on the subject reads as follows:

"The real estate sector plays a catalytic role in fulfilling the need and demand for housing and infrastructure in the country. While this sector has grown significantly in recent years, it has been largely unregulated, with absence of professionalism and standardisation and lack of adequate consumer protection. Though the Consumer Protection Act, 1986 is available as a forum to the buyers in the real estate market, the recourse is only curative and is not adequate to address all the concerns of buyers and promoters in that sector. The lack of standardisation, has been a constraint to the healthy and orderly growth of industry. Therefore, the need for regulating the sector has been emphasised in various forums.

2. In view of the above, it becomes necessary to have a Central legislation, namely, the Real Estate (Regulation and Development) Bill, 2013, in the interests of the effective consumer protection, uniformity and standardisation of business practices and transactions in the real estate sector. The proposed Bill provides for the establishment of the Real Estate Regulatory Authority (the Authority) for regulation and promotion of real estate sector and to ensure sale of plot, apartment or building, as the case may be, in an efficient and transparent manner and to protect the interest of consumers in real estate sector and establish the Real Estate Appellate Tribunal to hear appeals from the decisions, directions or orders of the Authority."

10. It was introduced with an object to ensure greater Page 50 of 126

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accountability towards consumers, to significantly reduce frauds and delays and also the current high transaction costs, and to balance the interests of consumers and promoters by imposing certain responsibilities on both, and to bring transparency of the contractual conditions, set minimum standards of accountability and a fast-track dispute resolution mechanism. It also proposes to induct professionalism and standardisation in the sector, thus paving the way for accelerated growth and investments in the long run.

11. Some of the relevant Objects and Reasons are extracted as under:

"4. …..

(d) to impose liability upon the promoter to pay such compensation to the allottees, in the manner as provided under the proposed legislation, in case if he fails to discharge any obligations imposed on him under the proposed legislation;

(f) the functions of the Authority shall, inter alia, include —

(i) to render advice to the appropriate Government in matters relating to the development of real estate sector;

(ii) to publish and maintain a website of records of all real estate projects for which registration has been given, with such details as may be prescribed;

(iii) to ensure compliance of the obligations cast upon the promoters, the allottees and the real estate agents under the proposed legislation;

***

(i) to appoint an adjudicating officer by the Authority for adjudging compensation under Sections 12, 14 and Page 51 of 126

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16 of the proposed legislation;"

…"

12. The Bill provides for establishment of the Authority for regulation and promotion of real estate sector, to ensure sale of plot, apartment or building or sale of real estate project in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and provide the adjudicating mechanism for speedy dispute redressal mechanism by establishing the Regulatory Authority and the adjudicating officer and in hierarchy, the Appellate Tribunal for early and prompt disposal of the complaint being instituted primarily by the homebuyers for whom this Act has been enacted by Parliament in 2016.

13. To examine the matter in this perspective, consider what a house means in India. The data shows that about more than 77% of total assets of an average Indian household are held in real estate and it is the single largest investment of an individual in his lifetime. The real estate in India has a peculiar feature. The buyer borrows money to pay for a house and simultaneously plays the role of a financer as building projects collect money upfront and this puts the buyer in a very vulnerable position—the weakest stakeholder with a high financial exposure. The amendment to the Insolvency and Bankruptcy Code, 2018 recognised the homebuyers as financial creditors and the present enactment is the most important regulatory intervention in favour of the homebuyers and it had an impact and with passage of time, has become a yardstick of laying down minimum standards in the market. Earlier, the real estate sector was completely unregulated and there was no transparency in their business profile and after the present enactment, it is open for the potential homebuyers to check if a project Page 52 of 126

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is approved under the Act, 2016 that at least gives a satisfaction to a person who is coming forward in making a lifetime investment.

14. That apart, from the project being statutorily regulated, it attaches certain authenticity with regard to completion of the project and a statutory obligation upon the developer and homebuyer to abide by the terms and conditions of the homebuyers agreement and statutory compliance to the mandate of law. In addition, any project which is approved under the Act, 2016 helps the promoter in raising funds from banks and statistics shows that buyers express their satisfaction in approved projects which is beneficial not only to the homebuyers but to the promoters and real estate agents as well."

27. It is required to be noted that in Paragraph No.13 of the Newtech Promoters (supra), the Supreme Court has considered the peculiar nature of a real estate project, which is implemented by the promoters. On the basis of the available data, it has been observed by the Supreme Court that 77% of the total assets of an average Indian household are held in real estate and it's the single largest investment of an individual in his lifetime. The peculiar feature of real estate in India has been set out i.e. the flat purchaser borrows money to pay for a house and simultaneously plays the role of a financer as building projects collect money unfront and this puts the buyer in a very vulnerable position - the Page 53 of 126

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weakest stakeholder with high financial exposure. The importance of the flat purchasers in the development of real estate project is highlighted by the Supreme Court. It is clear that the promoter develops the property by accepting consideration from the flat purchasers. Most of the flat purchasers pay the money by taking housing loan or loan from the financial institutions and repay the loan along with interest to the financial institutions. The real estate project is financed by the flat purchasers i.e. allottees. Various provisions in the RERA are required to be considered and appreciated from this very peculiar feature of the real estate.

28. From the above discussion of the Supreme Court in Newtech Promoters (supra), it is clear that the RERA has been enacted to achieve the following objects :-

(i) The real estate housing sector was largely unregulated. Consequently the consumers were unable to procure complete information for enforcing accountability towards builders and developers in the absence of an effective mechanism.

(ii) The real estate has been largely unregulated with absence of professionalism and standardization and lack of adequate consumer protection. It was necessary to enact a law for ensuring Page 54 of 126

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regulation and promotion of the real estate sector, to ensure sale of flat, apartment or building as the case may be in an efficient and transparent manner and to protect the interest of consumers in the real estate sector.

(iii) By establishing an oversight mechanism to enforce accountability to the real estate sector and providing an adjudicating machinery for speedy dispute redressal mechanism.

(iv) Safeguarding investments made by the home buyers through legislation to the extent permissible under the law.

(v) To ensure greater accountability towards the consumers.

(vi) To significantly reduce frauds and delays and also the current high transaction costs.

(vii) To balance the interests of the consumers and promoters by imposing certain responsibilities on both, and to bring transparency of the contractual conditions, set minimum standards of accountability and a fast track dispute resolution mechanism.

29. It is necessary to appreciate the various important provisions of the RERA in the background of the above purpose for which the RERA has been enacted.

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Important provisions of the Real Estate (Regulation And Development) Act, 2016

A. Section 2 of RERA is concerning the definitions. Definition of important terms are as follows :-

i. Sec. 2(b) "advertisement" means any document described or issued as advertisement through any medium and includes any notice, circular or other documents or publicity in any form, informing persons about a real estate project, or offering for sale of a plot, building or apartment or inviting persons to purchase in any manner such plot, building or apartment or to make advances or deposits for such purposes;

ii. Sec. 2(c) "agreement for sale" means an agreement entered into between the promoter and the allottee;

iii. Sec. 2(d) "allottee" in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the promoter, and includes the person who subsequently acquires the said Page 56 of 126

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allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent;

iv. Sec. 2(e) "apartment" whether called block, chamber, dwelling unit, flat, office, showroom, shop, godown, premises, suit, tenement, unit or by any other name, means a separate and self-contained part of any immovable property, including one or more rooms or enclosed spaces, located on one or more floors or any part thereof, in a building or on a plot of land, used or intended to be used for any residential or commercial use such as residence, office, shop, showroom or godown or for carrying on any business, occupation, profession or trade, or for any other type of use ancillary to the purpose specified;

v. Sec. 2(f) "Appellate Tribunal" means the Real Estate Appellate Tribunal established under section 43;

vi. Sec. 2(i) "Authority" means the Real Estate Regulatory Authority established under sub-section (1) of section 20; Page 57 of 126

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vii. Sec. 2(k) "carpet area" means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

viii. Sec. 2(n) defines "common areas".

ix. Sec. 2(p) "competent authority" means the local authority or any authority created or established under any law for the time being in force by the appropriate Government which exercises authority over land under its jurisdiction, and has powers to give permission for development of such immovable property;

x. Sec. 2(za) "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 Page 58 of 126

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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;

xi. Sec. 2(zj) "project" means the real estate project as defined in clause (zn);

xii. Sec. 2(zk) "promoter" means inter alia a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or a person who develops land into a project, whether or not the person also constructs Page 59 of 126

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structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or The explanation to Section 2(zk) clarifies that where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made thereunder;

xiii. Sec. 2(zn) "real estate project" means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartment, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto;

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B. Section 3 provides for prior registration of real eastate Project with Real eastate Regulatory Authority. As per Section 3, 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. It is inter alia provided that notwithstanding anything contained in sub-section (1) of Section 3, no registration of the real estate project shall be required 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. C. Section 8 provides for Obligation of Authority consequent upon lapse of or on revocation of registration. It is provided that upon lapse of the registration or on revocation of the registration under this Act, the Authority, may consult the appropriate Government to take such action as it may deem fit including the carrying out of the remaining development works by competent authority or by the association of allottees or in any other manner, Page 61 of 126

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as may be determined by the Authority. It is also provided that in case of revocation of registration of a project under this Act, the association of allottees shall have the first right of refusal for carrying out of the remaining development works. D. Section 9 provides for registration of real estate agents and Section 10 prescribes functions of real estate agents. E. Section 11 is concerning the functions and duties of the promoter

(1) The promoter shall, upon receiving his Login Id and password under clause (a) of sub-section (1) or under sub-section (2) of section 5, as the case may be, create his web page on the website of the Authority and enter all details of the proposed project as provided under sub-section (2) of section 4, in all the fields as provided, for public viewing, including—

(a) details of the registration granted by the Authority;

(b) quarterly up-to-date the list of number and types of apartments or plots, as the case may be, booked;

(c) quarterly up-to-date the list of number of Page 62 of 126

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garages booked;

(d) quarterly up-to-date the list of approvals taken and the approvals which are pending subsequent to commencement certificate;

(e) quarterly up-to-date status of the project; and

(f) such other information and documents as may be specified by the regulations made by the Authority.

(2) The advertisement or prospectus issued or published by the promoter shall mention prominently the website address of the Authority, wherein all details of the registered project have been entered and include the registration number obtained from the Authority and such other matters incidental thereto.

(3) The promoter at the time of the booking and issue of allotment letter shall be responsible to make available to the allottee, the following information, namely:—

(a) Sanctioned Plans, layout plans, along with specifications, approved by the competent authority, by display at the site or such other place as may be specified by the regulations made by the Authority;

(b) the stage wise time schedule of completion of Page 63 of 126

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the project, including the provisions for civic infrastructure like water, sanitation and electricity.

(4) The promoter shall—

(a) be responsible for all obligations, responsibilties and functions under the provisions of this Act or the rules and regulations made thereunder of allottees as per the agreement for sale, or to the association of allottees, as the case may be, till the conveyance of all the apartments, plots or buildings, as the case may be, to the allottees, or the common areas to the association of allottees or the competent authority, as the case may be:

Provided that the responsibility of the promoter, with respect to the structural defect or any other defect for such period as is referred to in sub-section (3) of section 14, shall continue even after the conveyance deed of all the apartments, plots or buildings, as the case may be, to the allottees are executed.

(b) be responsible to obtain the completion certificate or the occupancy certificate, or both, as applicable, from the relevant competent authority as per local laws or other laws for the time being in force and to make it available to the allottees Page 64 of 126

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individually or to the association of allottees, as the case may be;

(c) be responsible to obtain the lease certificate, where the real estate project is developed on a leasehold land, specifying the period of lease, and certifying that all dues and charges in regard to the leasehold land has been paid, and to make the lease certificate available to the association of allottees;

(d) be responsible for providing and maintaining the essential services, on reasonable charges, till the taking over of the maintenance of the project by the association of the allottees;

(e) enable the formation of an association or society or co-operative society, as the case may be, of the allottees, or a federation of the same, under the laws applicable:

Provided that in the absence of local laws, the association of allottees, by whatever name called, shall be formed within a period of three months of the majority of allottees having booked their plot or apartment or building, as the case may be, in the project;

(f) execute a registered conveyance deed of the Page 65 of 126

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apartment, plot or building, as the case may be, in favour of the allottee along with the undivided proportionate title in the common areas to the association of allottees of competent authority, as the case may be, as provided under section 17 of this Act;

(g) pay all outgoings until he transfers the physical possession of the real estate project to the allottee or the associations of allottees, as the case may be, which he has collected from the allottees, for the payment of outgoings (including land cost, ground rent, municipal or other local taxes, charges for water or electricity, maintenance charges, including mortgage loan and interest on mortgages or other encumbrances and such other liabilities payable to competent authorities, banks and financial institutions, which are related to the project):

Provided that where any promoter fails to pay all or any of the outgoings collected by him from the allottees or any liability, mortgage loan and interest thereon before transferring the real estate project to such allottees, or the association of the allottees, as the case may be, the promoter shall continue to be liable, even after the transfer of the property, to pay such outgoings and penal charges, if any, to the authority or person to whom they are Page 66 of 126

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payable and be liable for the cost of any legal proceedings which may be taken therefor by such authority or person;

(h) after he executes an agreement for sale for any apartment, plot or building, as the case may be, not mortgage or create a charge on such apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building, as the case may be;

(5) The promoter may cancel the allotment only in terms of the agreement for sale:

Provided that the allottee may approach the Authority for relief, if he is aggrieved by such cancellation and such cancellation is not in accordance with the terms of the agreement for sale, unilateral and without any sufficient cause.

(6) The promoter shall prepare and maintain all such other details as may be specified, from time to time, by regulations made by the Authority.

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F. Sec. 12. Obligations 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. G. Sec. 13. No deposit or advance to be taken by promoter without first entering into agreement for sale.

(1) A promoter shall not accept a sum more than ten per cent of the cost of the apartment, plot, or building as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement for sale with such person and Page 68 of 126

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register the said agreement for sale, under any law for the time being in force.

(2) The agreement for sale referred to in sub-section (1) shall be in such form as may be prescribed and shall specify the particulars of development of the project including the construction of building and apartments, along with specifications and internal development works and external development works, the dates and the manner by which payments towards the cost of the apartment, plot or building, as the case may be, are to be made by the allottees and the date on which the possession of the apartment, plot or building is to be handed over, the rates of interest payable by the promoter to the allottee and the allottee to the promoter in case of default, and such other particulars, as may be prescribed.

H. Sec. 14. Adherence to sanctioned plans and project specifications by the promoter.

(1) The proposed project shall be developed and completed by the promoter in accordance with the sanctioned plans, layout plans and specifications as approved by the competent authorities.

(2) Notwithstanding anything contained in any law, contract or agreement, after the sanctioned plans, layout plans and specifications and the nature of the fixtures, Page 69 of 126

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fittings, amenities and common areas, of the apartment, plot or building, as the case may be, as approved by the competent authority, are disclosed or furnished to the person who agree to take one or more of the said apartment, plot or building, as the case may be, the promoter shall not make—

(i) any additions and alterations in the sanctioned plans, layout plans and specifications and the nature of fixtures, fittings and amenities described therein in respect of the apartment, plot or building, as the case may be, which are agreed to be taken, without the previous consent of that person:

Provided that the promoter may make such minor additions or alterations as may be required by the allottee, or such minor changes or alterations as may be necessary due to architectural and structural reasons duly recommended and verified by an authorised Architect or Engineer after proper declaration and intimation to the allottee. Explanation.—For the purpose of this

clause, "minor additions or alterations" excludes structural change including an addition to the area or change in height, or the removal of part of a building, or any change to the structure, such as the construction or removal or cutting into of any wall or a part of a wall, partition, column, beam, joist, Page 70 of 126

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floor including a mezzanine floor or other support, or a change to or closing of any required means of access ingress or egress or a change to the fixtures or equipment, etc.

(ii) any other alterations or additions in the sanctioned plans, layout plans and specifications of the buildings or the common areas within the project without the previous written consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in such building.

Explanation.—For the purpose of this clause, the allottees, irrespective of the number of apartments or plots, as the case may be, booked by him or booked in the name of his family, or in the case of other persons such as companies or firms or any association of individuals, etc., by whatever name called, booked in its name or booked in the name of its associated entities or related enterprises, shall be considered as one allottee only.

(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 Page 71 of 126

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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.

I. Sec. 15. Obligations of promoter in case of transfer of a real estate project to a third party

(1) The promoter shall not transfer or assign his majority rights and liabilities in respect of a real estate project to a third party without obtaining prior written consent from two-third allottees, except the promoter, and without the prior written approval of the Authority:

Provided that such transfer or assignment shall not affect the allotment or sale of the apartments, plots or buildings as the case may be, in the real estate project made by the erstwhile promoter.

Explanation.—For the purpose of this sub-section, the allottee, irrespective of the number of apartments or plots, as the case may be, booked by him or booked in the name of his family, or in the case of other persons such as companies or firms or any association of individuals, by whatever name called, booked in its name or booked in the name of its associated entities or Page 72 of 126

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related enterprises, shall be considered as one allottee only.

(2) On the transfer or assignment being permitted by the allottees and the Authority under sub-section (1), the intending promoter shall be required to independently comply with all the pending obligations under the provisions of this Act or the rules and regulations made thereunder, and the pending obligations as per the agreement for sale entered into by the erstwhile promoter with the allottees:

Provided that any transfer or assignment permitted under provisions of this section shall not result in extension of time to the intending promoter to complete the real estate project and he shall be required to comply with all the pending obligations of the erstwhile promoter, and in case of default, such intending promoter shall be liable to the consequences of breach or delay, as the case may be, as provided under this Act or the rules and regulations made thereunder. J. Sec. 16. Obligations of promoter regarding insurance of real estate project.

(1) The promoter shall obtain all such insurances as may be notified by the appropriate Government, including but not limited to insurance in respect of — Page 73 of 126

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(i) title of the land and building as a part of the real estate project; and

(ii) construction of the real estate project.

(2) The promoter shall be liable to pay the premium and charges in respect of the insurance specified in sub- section (1) and shall pay the same before transferring the insurance to the association of the allottees.

(3) The insurance as specified under sub-section (1) shall stand transferred to the benefit of the allottee or the association of allottees, as the case may be, at the time of promoter entering into an agreement for sale with the allottee.

(4) On formation of the association of the allottees, all documents relating to the insurance specified under sub- section (1) shall be handed over to the association of the allottees.

K. Sec. 17. Transfer of title.

(1) The promoter shall execute a registered conveyance deed in favour of the allottee along with the undivided proportionate title in the common areas to the association of the allottees or the competent authority, as the case may be, and hand over the physical possession of the plot, apartment of building, as the case may be, to Page 74 of 126

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the allottees and the common areas to the association of the allottees or the competent authority, as the case may be, in a real estate project, and the other title documents pertaining thereto within specified period as per sanctioned plans as provided under the local laws:

Provided that, in the absence of any local law, conveyance deed in favour of the allottee or the association of the allottees or the competent authority, as the case may be, under this section shall be carried out by the promoter within three months from date of issue of occupancy certificate.

(2) After obtaining the occupancy certificate and handing over physical possession to the allottees in terms of sub-section (1), it shall be the responsibility of the promoter to handover the necessary documents and plans, including common areas, to the association of the allottees or the competent authority, as the case may be, as per the local laws:

Provided that, in the absence of any local law, the promoter shall handover the necessary documents and plans, including common areas, the association of the allottees or the competent authority, as the case may be, within thirty days after obtaining the occupancy certificate.

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L. Sec. 18. Return of amount and compensation.

(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 Page 76 of 126

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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.

M. Sec. 19. Rights and duties of allottees.

(1) The allottee shall be entitled to obtain the information relating to sanctioned plans, layout plans along with the specifications, approved by the competent authority and such other information as provided in this Act or the rules and regulations made thereunder or the agreement for sale signed with the promoter.

(2) The allottee shall be entitled to know stage-wise time schedule of completion of the project, including the provisions for water, sanitation, electricity and other amenities and services as agreed to between the promoter and the allottee in accordance with the terms and conditions of the agreement for sale. Page 77 of 126

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(3) The allottee shall be entitled to claim the possession of apartment, plot or building, as the case may be, and the association of allottees shall be entitled to claim the possession of the common areas, as per the declaration given by the promoter under sub-clause (C) of clause (I) of sub-section (2) of section 4.

(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.

(5) The allottee shall be entitled to have the necessary documents and plans, including that of common areas, after handing over the physical possession of the apartment or plot or building as the case may be, by the promoter.

(6) Every allottee, who has entered into an agreement for sale to take an apartment, plot or building as the case may be, under section 13, shall be responsible to make necessary payments in the manner and within the time Page 78 of 126

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as specified in the said agreement for sale and shall pay at the proper time and place, the share of the registration charges, municipal taxes, water and electricity charges, maintenance charges, ground rent, and other charges, if any.

(7) The allottee shall be liable to pay interest, at such rate as may be prescribed, for any delay in payment towards any amount or charges to be paid under sub- section (6).

(8) The obligations of the allottee under sub-section (6) and the liability towards interest under sub-section (7) may be reduced when mutually agreed to between the promoter and such allottee.

(9) Every allottee of the apartment, plot or building as the case may be, shall participate towards the formation of an association or society or cooperative society of the allottees, or a federation of the same.

(10) Every allottee shall take physical possession of the apartment, plot or building as the case may be, within a period of two months of the occupancy certificate issued for the said apartment, plot or building, as the case may be.

(11) Every allottee shall participate towards registration Page 79 of 126

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of the conveyance deed of the apartment, plot or building, as the case may be, as provided under sub- section (1) of section 17 of this Act. N. Sec. 20. Establishment and incorporation of Real Estate Regulatory Authority

(1) The appropriate Government shall, within a period of one year from the date of coming into force of this Act, by notification, establish an Authority to be known as the Real Estate Regulatory Authority to exercise the powers conferred on it and to perform the functions assigned to it under this Act:

Provided that the appropriate Government of two or more States or Union territories may, if it deems fit, establish one single Authority:

Provided further that the appropriate Government may, if it deems fit, establish more than one Authority in a State or Union territory, as the case may be:

Provided also that until the establishment of a Regulatory Authority under this section, the appropriate Government shall, by order, designate any Regulatory Authority or any officer preferably the Secretary of the department dealing with Housing, as the Regulatory Authority for the purposes under this Act:

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Provided also that after the establishment of the Regulatory Authority, all applications, complaints or cases pending with the Regulatory Authority designated, shall stand transferred to the Regulatory Authority so established and shall be heard from the stage such applications, complaints or cases are transferred.

(2) The Authority shall be a body corporate by the name aforesaid having perpetual succession and a common seal, with the power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or be sued.

O. Sec. 22. Qualifications of Chairperson and Members of Authority

The Chairperson and other Members of the Authority shall be appointed by the appropriate Government on the recommendations of a Selection Committee consisting of the Chief Justice of the High Court or his nominee, the Secretary of the Department dealing with Housing and the Law Secretary, in such manner as may be prescribed, from amongst persons having adequate knowledge of and professional experience of at-least twenty years in case of the Chairperson and fifteen years in the case of the Members in urban development, housing, real estate development, infrastructure, Page 81 of 126

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economics, technical experts from relevant fields, planning, law, commerce, accountancy, industry, management, social service, public affairs or administration:

Provided that a person who is, or has been, in the service of the State Government shall not be appointed as a Chairperson unless such person has held the post of Additional Secretary to the Central Government or any equivalent post in the Central Government or State Government:

Provided further that a person who is, or has been, in the service of the State Government shall not be appointed as a member unless such person has held the post of Secretary to the State Government or any equivalent post in the State Government or Central Government. P. Sec. 31. Filing of complaints with the Authority or the adjudicating officer.—

(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.

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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 [prescribed]. Q. Sec. 32. Functions of Authority for promotion of real estate sector.

The Authority shall in order to facilitate the growth and promotion of a healthy, transparent, efficient and competitive real estate sector make recommendations to the appropriate Government of the competent authority, as the case may be, on,—

(a) protection of interest of the allottees, promoter and real estate agent;

(b) creation of a single window system for ensuring time bound project approvals and clearances for timely completion of the project;

(c) creation of a transparent and robust grievance redressal mechanism against acts of ommission and commission of competent authorities and their Page 83 of 126

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officials;

(d) measures to encourage investment in the real estate sector including measures to increase financial assistance to affordable housing segment;

(e) measures to encourage construction of environmentally sustainable and affordable housing, promoting standardisation and use of appropriate construction materials, fixtures, fittings and construction techniques;

(f) measures to encourage grading of projects on various parameters of development including grading of promoters;

(g) measures to facilitate amicable conciliation of disputes between the promoters and the allottees through dispute settlement forums set up by the consumer or promoter associations;

(h) measures to facilitate digitization of land records and system towards conclusive property titles with title guarantee;

(i) to render advice to the appropriate Government in matters relating to the development of real estate sector;

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(j) any other issue that the Authority may think necessary for the promotion of the real estate sector. R. Sec. 33. Advocacy and awareness measures.

(1) The appropriate Government may, while formulating a policy on real estate sector (including review of laws related to real estate sector) or any other matter, make a reference to the Authority for its opinion on possible effect, of such policy or law on real estate sector and on the receipt of such a reference, the Authority shall within a period of sixty days of making such reference, give its opinion to the appropriate Government which may therafter take further action as it deems fit.

(2) The opinion given by the Authority under sub-section

(1) shall not be binding upon the appropriate Government in formulating such policy or laws.

(3) The Authority shall take suitable measures for the promotion of advocacy, creating awareness and imparting training about laws relating to real estate sector and policies.

S. Sec. 34. Functions of Authority.

The functions of the Authority shall include— Page 85 of 126

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(a) to register and regulate real estate projects and real estate agents registered under this Act;

(b) to publish and maintain a website of records, for public viewing, of all real estate projects for which registration has been given, with such details as may be prescribed, including information provided in the application for which registration has been granted;

(c) to maintain a database, on its website, for public viewing, and enter the names and photographs of promoters as defaulters including the project details, registration for which has been revoked or have been penalised under this Act, with reasons therefor, for access to the general public;

(d) to maintain a database, on its website, for public viewing, and enter the names and photograhps of real estate agents who have applied and registered under this Act, with such details as may be prescribed, including those whose registration has been rejected or revoked;

(e) to fix through regulations for each areas under its jurisdiction the standard fees to be levied on the allottees or the promoter or the real estate agent, as the case may be;

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(f) to ensure compliance of the obligations cast upon the promoters, the allottees and the real estate agents under this Act and the rules and regulations made thereunder;

(g) to ensure compliance of its regulations or orders or directions made in exercise of its powers under this Act;

(h) to perform such other functions as may be entrusted to the Authority by the appropriate Government as may be necessary to carry out the provisions of this Act.

T. Sec. 35. Powers of Authority to call for information, conduct investigations.

(1) Where the Authority considers it expedient to do so, on a complaint or suo motu, relating to this Act or the rules of regulations made thereunder, it may, by order in writing and recording reasons therefor call upon any promoter or allottee or real estate agent, as the case may be, at any time to furnish in writing such information or explanation relating to its affairs as the Authority may require and appoint one or more persons to make an inquiry in relation to the affairs of any promoter or allottee or the real estate agent, as the case may be. Page 87 of 126

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(2) Notwithstanding anything contained in any other law for the time being in force, while exercising the powers under sub-section (1), the Authority shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit, in respect of the following matters, namely:—

(i) the discovery and production of books of account and other documents, at such place and at such time as may be specified by the Authority;

(ii) summoning and enforcing the attendance of persons and examining them on oath;

(iii) issuing commissions for the examination of witnesses or documents;

(iv) any other matter which may be perscribed. U. Sec. 36. Power to issue interim orders. Where during an inquiry, the Authority is satisfied that an act in contravention of this Act, or the rules and regulations made thereunder, has been committed and continues to be committed or that such act is about to be committed, the Authority may, by order, restrain any promoter, allottee or real estate agent from carrying on such act until the conclusion of such inquiry of until Page 88 of 126

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further orders, without giving notice to such party, where the Authority deems it necessary.

V. Sec. 37. Powers of Authority to issue directions. The Authority may, for the purpose of discharging its functions under the provisions of this Act or rules or regulations made thereunder, issue such directions from time to time, to the promoters or allottees or real estate agents, as the case may be, as it may consider necessary and such directions shall be binding on all concerned. W. Sec. 38. Powers of Authority

(1) The Authority shall have powers to impose penalty or interest, in regard to any contravention of obligations cast upon the promoters, the allottees and the real estate agents, under this Act or the rules and the regulations made thereunder.

(2) The Authority shall be guided by the principles of natural justice and, subject to the other provisions of this Act and the rules made thereunder, the Authority shall have powers to regulate its own procedure.

(3) Where an issue is raised relating to agreement, action, omission, practice or procedure that— Page 89 of 126

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(a) has an appreciable prevention, restriction or distortion of competition in connection with the development of a real estate project; or

(b) has effect of market power of monopoly situation being abused for affecting interest of allottees adversely, then the Authority, may, suo motu, make reference in respect of such issue to the Competition Commission of India.

X. Sec. 40. Recovery of interest or penalty or compensation and enforcement of order, etc

(1) If a promoter or an allottee or a real estate agent, as the case may be, fails to pay any interest or penalty or compensation imposed on him, by the adjudicating officer or the Regulatory Authority or the Appellate Authority, as the case may be, under this Act or the rules and regualtions made thereunder, it shall be recoverable from such promoter or allottee or real estate agent, in such manner as may be prescribed as an arrears of land revenue.

(2) If any adjudicating officer or the Regulatory Authority or the Appellate Tribunal, as the case may be, issues any order or directs any person to do any act, or refrain from doing any act, which it is empowered to do under this Act or the rules or regulations made Page 90 of 126

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thereunder, then in case of failure by any person to comply with such order or direction, the same shall be enforced, in such manner as may be prescribed. Y. Sec. 42. Functions of Central Advisory Council.

(1) The functions of the Central Advisory Council shall be to advise and recommend the Central Government,—

(a) on all matters concerning the implementation of this Act;

(b) on major questions of policy;

(c) towards protection of consumer interest;

(d) to foster the growth and development of the real estate sector;

(e) on any other matter as may be assigned to it by the Central Government.

(2) The Central Government may specify the rules to give effect to the recommendations of the Central Advisory Council on matters as provided under sub- section (1).

Z. Section 43 provides for establishment of Real Estate Appellate Tribunal.

AA. Sec. 45. Composition of Appellate Tribunal. Page 91 of 126

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The Appellate Tribunal shall consist of a Chairperson and not less than two whole time Members of which one shall be a Judicial member and other shall be a Technical or Administrative Member, to be appointed by the appropriate Government.

Explanation.—For the purposes of this Chapter,—

(i) "Judicial Member" means a Member of the Appellate Tribunal appointed as such under clause (b) of sub-section (1) of section 46;

(ii) "Technical or Administrative Member" means a Member of the Appellate Tribunal appointed as such under clause (c) of sub-section (1) of section 46. BB. Sec. 46. Qualifications for appointment of Chairperson and Members.

(1) A person shall not be qualified for appointment as the Chairperson or a Member of the Appellate Tribunal unless he,—

(a) in the case of Chairperson, is or has been a Judge of a High Court; and

(b) in the case of a Judicial Member he has held a judicial office in the territory of India for at least Page 92 of 126

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fifteen years or has been a member of the Indian Legal Service and has held the post of Additional Secretary of that service or any equivalent post, or has been an advocate for at least twenty years with experience in dealing with real estate matters; and

(c) in the case of a Technical or Administrative Member, he is a person who is well-versed in the field of urban development, housing, real estate development, infrastructure, economics, planning, law, commerce, accountancy, industry, management, public affairs or administration and possesses experience of at least twenty years in the field or who has held the post in the Central Government, or a State Government equivalent to the post of Additional Secretary to the Government of India or an equivalent post in the Central Government or an equivalent post in the State Government.

(2) The Chairperson of the Appellate Tribunal shall be appointed by the appropriate Government in consultation with the Chief Justice of High Court or his nominee.

(3) The judicial Members and Technical or Administrative Members of the Appellate Tribunal shall be appointed by the appropriate Government on the recommendations of a Selection Committee consisting of Page 93 of 126

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the Chief Justice of the High Court or his nominee, the Secretary of the Department handling Housing and the Law Secretary and in such manner as may be prescribed. CC. Sec. 53. Powers of Tribunal.

(1) The Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice.

(2) Subject to the provisions of this Act, the Appellate Tribunal shall have power to regulate its own procedure.

(3) The Appellate Tribunal shall also not be bound by the rules of evidence contained in the Indian Evidence Act,

1872.

(4) The Appellate Tribunal shall have, for the purpose of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 in respect of the following matters, namely:—

(a) summoning and enforcing the attendance of any person and examining him on oath;

(b) requiring the discovery and production of documents;

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(c) receiving evidence on affidavits;

(d) issuing commissions for the examinations of witnesses or documents;

(e) reviewing its decisions;

(f) dismissing an application for default or directing it ex parte; and

(g) any other matter which may be prescribed.

(5) All proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193, 219 and 228 for the purposes of section 196 of the Indian Penal Code, and the Appellate Tribunal shall be deemed to be civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973.

DD. Sec. 58. Appeal to High Court.

(1) Any person aggrieved by any decision or order of the Appellate Tribunal, may, file an appeal to the High Court, within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal, to him, on any one or more of the grounds specified in section 100 of the Code of Civil Procedure,

1908:

Provided that the High Court may entertain the Page 95 of 126

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appeal after the expiry of the said period of sixty days, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal in time. Explanation.—The expression "High Court" means the High Court of a State or Union territory where the real estate project is situated.

(2) No appeal shall lie against any decision or order made by the Appellate Tribunal with the consent of the parties.

EE. Sec. 59. Punishment for non-registration under section 3.

(1) If any promoter contravenes the provisions of section 3, he shall be liable to a penalty which may extend up to ten per cent. of the estimated cost of the real estate project as determined by the Authority.

(2) If any promoter does not comply with the orders, decisions or directions issued under sub-section (1) or continues to violate the provisions of section 3, he shall be punishable with imprisonment for a term which may extend up to three years or with fine which may extend up to a further ten per cent. of the estimated cost of the real estate project, or with both.

FF. Sec. 60. Penalty for contravention of section 4. Page 96 of 126

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If any promoter provides false information or contravenes the provisions of section 4, he shall be liable to a penalty which may extend up to five per cent. of the estimated cost of the real estate project, as determined by the Authority.

GG. Sec. 61. Penalty for contravention of other provisions of this Act.

If any promoter contravenes any other provisions of this Act, other than that provided under section 3 or section 4, or the rules or regulations made thereunder, he shall be liable to a penalty which may extend up to five per cent. of the estimated cost of the real estate project as determined by the Authority.

HH. Sec. 62. Penalty for non-registration and contravention under sections 9 and 10.

If any real estate agent fails to comply with or contravenes the provisions of section 9 or section 10, he shall be liable to a penalty of ten thousand rupees for every day during which such default continues, which may cumulatively extend up to five per cent. of the cost of plot, apartment or building, as the case may be, of the Page 97 of 126

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real estate project, for which the sale or purchase has been facilitated as determined by the Authority.

II. Sec. 63. Penalty for failure to comply with orders of Authority by promoter

If any promoter, who fails to comply with, or contravenes any of the orders or directions of the Authority, he shall be liable to a penalty for every day during which such default continues, which may cumulatively extend up to five per cent., of the estimated cost of the real estate project as determined by the Authority.

JJ. Sec. 64. Penalty for failure to comply with orders of Appellate Tribunal by promoter

If any promoter, who fails to comply with, or contravenes any of the orders, decisions or directions of the Appellate Tribunal, he shall be punishable with imprisonment for a term which may extend up to three years or with fine for every day during which such default continues, which may cumulatively extend up to ten per cent. of the estimated cost of the real estate project, or with both. Page 98 of 126

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KK. Sections 67 and 68 provides for penalty for failure to comply with orders of authority and orders of appellate tribunal respectively by allottee.

LL. Section 69 is concerning offences by companies. MM. Section 70 is concerning compounding of offences. NN. Section 71 is concerning power to adjudicate and provides that for the purpose of adjudging compensation under Sections 12, 14, 18 and 19, the enquiry be conducted by adjudicating officer. The adjudicating officer contemplated under Section 71 is a judicial officer.

OO. Sec. 72 Factors to be taken into account by the adjudicating officer

While adjudging the quantum of compensation or interest, as the case may be, under section 71, the adjudicating officer shall have due regard to the following factors, namely:—

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(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;

(b) the amount of loss caused as a result of the default;

(c) the repetitive nature of the default;

(d) such other factors which the adjudicating officer considers necessary to the case in furtherance of justice.

PP. Sec. 79. Bar of jurisdiction.

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Authority or the adjudicating officer or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. QQ. Sec. 88. Application of other laws not barred. The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.

RR. Sec. 89. Act to have overriding effect. Page 100 of 126

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The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

IX. ANALYSIS OF THE PROVISIONS OF THE REAL ESTATE

(REGULATION AND DEVELOPMENT) ACT, 2016

30. The RERA was inter alia enacted as the real estate has been largely unregulated with absence of professionalism and standardization and lack of adequate consumer protection. The same was enacted to ensure regulation and promotion of the real estate sector, to ensure sale of flat, apartment or building in an efficient and transparent manner and to protect the interest of consumers in the real estate sector. The same was enacted for safeguarding investments made by the home buyers, to ensure greater accountability towards the consumers and to protect the home buyers from frauds and delays.

31. Very elaborate provisions are made in RERA to safeguard the interest of consumers / home buyers, promoters i.e. builders and real estate agents.

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32. As per Section 12 the advertisement to be issued by the promoter inter alia regarding sale of apartment is regulated and if false information is given in the advertisement the same is offence punishable under RERA.

33. Section 3 of RERA makes registration of Real Estate Project compulsory. Section 11 provides that promoter shall create web page on the website of the Authority and enter all the details of the proposed project including list of approvals, quarterly upto date status of the project, quarterly upto date list of booking of apartments. It is also provided that the promoter at the time of booking of the apartment shall provide entire information to the allottee of the Real Estate Project including sanctioned plans, layout plans and also stage wise time schedule of the completion of the project. The promoter is also under statutory obligation to execute registered conveyance deed in favour of the allottee with respect to the apartment and undivided proportionate title in the common areas and also execute registered conveyance deed in favour of association of allottees with respect to building and common areas.

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34. Section 8 provides for Obligation of Authority consequent upon lapse of or on revocation of registration. It is provided that upon lapse of the registration or on revocation of the registration under RERA, the Authority, may consult the appropriate Government to take such action as it may deem fit including the carrying out of the remaining development works by competent authority or by the association of allottees or in any other manner, as may be determined by the Authority. It is also provided that in case of revocation of registration of a project under RERA, the association of allottees shall have the first right of refusal for carrying out of the remaining development works.

35. Section 13 provides that no deposit or advance to be taken by promoter of a sum more than 10% of the cost of the apartment as an advance payment without entering into registered written agreement.

36. Section 14 specifies that the Real Estate Project shall be developed and completed by the promoter in accordance with the sanctioned plans, layout plans and specifications as approved by the Competent Authorities and the promoter shall not make any Page 103 of 126

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additions and alterations without the previous consent of two- thirds of the allottees. The promoter is duty bound to rectify structural defect or any other defect in workmanship, quality or provision of services or any other obligations without any charges if brought to the notice of the developers within a period of five years.

37. As per Section 15, the promoter shall not transfer or assign his rights and liabilities in respect of Real Estate Project to a third party without obtaining prior written consent from two-third allottees. Such transferee, if permitted by the allottees and the Authority, is independently required to comply with all the obligations as per the agreement for sale entered into by the erstwhile promoter with the allottees.

38. As per Section 17 the promoter shall execute a registered conveyance deed in favour of allottee along with the undivided proportionate title in the common areas to the association of the allottees and to hand over the physical possession of the apartment to the allottee and common areas to the association of the allottees.

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39. Section 18 provides right to allottee to withdraw from the project if the promoter fails to complete the project and in that case the allottee is entitled for refund of the entire amount with interest as well as compensation. If the allottee does not intend to withdraw from the project and there is delay in handing over possession, then he is entitled for interest for every month of delay. The said compensation is to be determined by the adjudicating officer under Section 71 and factors to be taken into consideration while adjudging the quantum of compensation on interest under Section 71 are prescribed in Section 72. The said factors inter alia include the amount of disproportionate gain or unfair advantage made by the promoter as a result of the default, the amount of loss caused by the allottee as a result of the default, the repetitive nature of the default etc.

40. Section 19 prescribes rights and duties of allottees.

41. Section 20 is concerning establishment of Authority. Section 22 specifies qualifications of chairperson and members of the Authority. It is important to note that the selection committee for appointment of chairperson and other members of the Authority Page 105 of 126

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inter alia consist of the Chief Justice of the High Court or his nominee. The qualification of such persons is vast experience of 20 years in case of chairperson and 15 years in case of members in the areas of urban development, housing, real estate development, infrastructure etc.

42. Section 31 provides for filing of complaints with the Authority or the adjudicating officer by any aggrieved person. It is significant to note that the person shall include association of allottees or any voluntary consumer association registered under any law for the time being in force.

43. Section 34 specifies functions of the Authority. Section 35 inter alia gives suo-motu power to the Authority to call upon promoter, allottee or real estate agent to furnish information in writing and to appoint one or more persons to make an inquiry in relation to their affairs. Section 36 empowers Authority to issue interim orders and Section 37 empowers Authority to issue directions and such directions are binding on all concerned. Section 38 empowers Authority to impose penalty or interest in regard to any contravention of obligations cast upon the promoter, Page 106 of 126

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the allottees and the real estate agent. Section 40 empowers Authority to recover any interest or penalty or compensation imposed by the Authority, Adjudicating Officer or the Appellate Authority, the same shall be recoverable as an arrears of land revenue.

44. Section 43 provides for establishment of Real Estate Appellate Tribunal. Section 45 provides that the Appellate Tribunal shall consist of a chairperson and not less than two whole time members of which one shall be a judicial member and other shall be a technical or administrative member. The chairperson to be appointed is or has been a Judge of a High Court. The judicial member should have held judicial office for atleast 15 years. Technical or administrative member should be a person who is well-versed in the field of urban development, housing, real estate development etc. and possesses experience of atleast 20 years. It is significant to note that the chairperson shall be appointed in consultation with the Chief Justice of High Court or his nominee and Chief Justice of High Court or his nominee is part of selection committee for selection of judicial and technical members. Section 53 makes elaborate provision regarding powers of the Appellate Page 107 of 126

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Tribunal. Orders passed by the Appellate Tribunal can be challenged in High Court and the challenge is only on the grounds specified in Section 100 of the Code of Civil Procedure, 1908.

45. Sections 59 to 64 makes elaborate provisions regarding punishment for contravention of various obligations under RERA.

46. Section 79 is concerning bar of jurisdiction, Section 88 provides that the provisions of RERA are in addition to and not in derogation of the provisions of any other law for the time being in force. Section 89 provides that the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

47. Thus, the analysis of various provisions of RERA makes it very clear that very significant provisions are made inter alia for the purpose of protecting the rights of the allottees. The Supreme Court in Newtech Promoters (supra) has considered the peculiar nature of a real estate project, which is implemented by the promoters. On the basis of the available data, it has been observed by the Supreme Court that 77% of the total assets of an average Page 108 of 126

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Indian household are held in real estate and it's the single largest investment of an individual in his lifetime. The peculiar feature of real estate in India has been set out i.e. the apartment purchaser borrows money to pay for a house and simultaneously plays the role of a financer as building projects collect money upfront and this puts the buyer in a very vulnerable position - the weakest stakeholder with high financial exposure. The importance of the apartment purchasers in the development of real estate project is highlighted by the Supreme Court. It is clear that the promoter develops the property by accepting consideration from the apartment purchasers. Most of the apartment purchasers pay the money by taking housing loan or loan from the financial institutions and repay the loan along with interest to the financial institutions. The real estate project is financed by the apartment purchasers i.e. allottees. Various provisions in the RERA are required to be considered and appreciated from this very peculiar feature of the real estate.

48. Although the agreement for sale contemplated under RERA is entered into between the promoter and the allottee, as set out herein above, very valuable rights are given to the association of Page 109 of 126

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allottees concerning the plot and building which is a subject matter of such agreement for sale. The nature of Real Estate Project is very unique. Various allottees purchases different apartments in the building or the project and therefore for the purpose of safeguarding rights of one allottee under such agreement it is necessary to protect and safeguard interest of all the allottees. It is also very clear that successful implementation of Real Estate Project is in the interest of all the allottees and the same is in the public interest.

49. Thus, it is clear that the provisions of RERA, are unique in nature and the same is a special legislation enacted to safeguard interest of all the stakeholders in Real Estate Project namely Apartment Purchaser, Promoters and Real Estate Agents.

X. APPLICATION OF CRITERIAS FOR DETERMINING NON-

ARBITRAL CHARACTER OF THE DISPUTES TO THE

PROVISIONS OF RERA.

50. As held by the Supreme Court, a Judgment in personam refers to a Judgment against a person as distinguished from a Page 110 of 126

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Judgment against a thing, right or status and a Judgment in rem refers to a Judgment that determines the status or condition of property which operates directly on the property itself. In the peculiar nature of disputes under RERA, although a dispute may be filed by an individual allottee against promoter, however the decision will affect the plot and building i.e. rights of other allottees and rights of association of allottees may also be affected. Thus, the dispute covered by RERA cannot be termed as "a right in personam".

51. The various provisions of RERA clearly shows that adjudication contemplated under RERA is as a matter of public policy and in the public interest. As noted herein above, it is the Chief Justice of the High Court who has been empowered inter alia to appoint the Authority and Appellate Authority under RERA. The Authority and Appellate Authority are empowered with vast powers for the purpose of safeguarding the interest of allottees / promoters / real estate agent. The decision with respect to one allottee is likely to affect other allottees having apartments in the same building or in the same Real Estate Project. Page 111 of 126

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52. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. The various provisions of RERA as discussed herein above including in case of lapse of or on revocation of registration of the Real Estate Project, first right to develop the concern Real Estate Project is of the Association of the Allottees (Section 8), registration of conveyance inter alia in favour of Association of the Allottees (Section 17), the Promoter is not permitted to change the sanctioned plans, layout plans and specifications as approved by the Competent Authorities without previous consent of two-third Page 112 of 126

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allottees (Section 14), the promoter is not permitted to transfer the project to third person without obtaining consent from two-third allottees (Section 15), etc., clearly shows that decisions with respect to dispute between an individual allottee and the promoter will affect the third person i.e. other allottees and also Association of the Allottees. It is significant to note that the complaint under Section 31 of RERA can be filed with the Authority inter alia even by any voluntary consumer association registered under any law for the time being in force. The Authority is also empowered to take suo moto action under Section 35 of the RERA. Thus by necessary implication the adjudication under RERA stand excluded from the purview of private fora.

53. It is also settled legal position that doctrine of election to select arbitration as a dispute resolution mechanism by mutual agreement is available only if the law accepts existence of arbitration as an alternative remedy and freedom to choose is available. There should not be any inconsistency or repugnancy between the provisions of the mandatory law and arbitration as an alternative. Conversely, and in a given case when there is repugnancy and inconsistency, the right of choice and election to Page 113 of 126

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arbitrate is denied. This requires examination of the "text of the statute, the legislative history, and "inherent conflict" between arbitration and the statute's underlying purpose" with reference to the nature and type of special rights conferred and power and authority given to the courts or public forum to effectuate and enforce these rights and the orders passed. On the touchstone of these parameters if the provisions of the RERA are examined then it is clear that the dispute to which provisions of RERA are applicable is non-arbitrable. Various provisions of RERA as analysed herein above clearly show that the same has been inter alia enacted to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector, to ensure sale of plot, apartment of building or sale of real estate project, in an efficient and transparent manner, to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer. It is also very significant to note that very effective provisions are made for implementation of the orders of the Authority and the Appellate Tribunal.

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54. It is settled legal position, when arbitration cannot enforce and apply such rights or the award cannot be implemented and enforced in the manner as provided and mandated by law, the right of election to choose arbitration in preference to the courts or public forum is either completely denied or could be curtailed. As per the settled legal position, it is necessary to examine if the statute creates a special right or liability and provides for the determination of each right or liability by the specified court or the public forum so constituted, and whether the remedies beyond the ordinary domain of the civil courts are prescribed and when the answer is affirmative, arbitration in the absence of special reason is contraindicated and the dispute is non-arbitrable. The provisions of RERA as set out herein above and analysis of the same clearly shows that special right are created and for enforcement of the same special forums are also established for ensuring enforcement of these rights and specific provisions are made for execution of the orders passed by the special forums i.e. the Authority and Appellate Authority. Thus the disputes covered under RERA are non-arbitrable.

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55. As noted herein above in Vidya Drolia (supra) the Supreme Court propounded a fourfold test, as set out herein below, for determining when the subject-matter of a dispute in an arbitration agreement is non- arbitrable:-

(a) When cause of action and subject-matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.

(b) When cause of action and subject-matter of the dispute affects third-party rights; have erga omnes effect; require centralised adjudication, and mutual adjudication would not be appropriate and enforceable.

(c) When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable.

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(d) When the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).

(e) These tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject-matter is non- arbitrable. Only when the answer is affirmative that the subject-matter of the dispute would be non-arbitrable.

56. On the touchstone of above parameters as set out by the Supreme Court for determining whether the subject matter of the dispute in an arbitration agreement is non-arbitrable, it is very clear that in the peculiar nature of the disputes covered by RERA, the decision of the same will not affect a particular allottee and promoter but will also affect other allottees as well as Association of the Allottees of the particular Real Estate Project. The term

"erga omnes effect" as referred in Vidya Drolia (supra) refers to the impact of a judicial decision that affects third parties. As discussed Page 117 of 126

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herein above in detail a particular allottee in Real Estate Project is included in the "Association of Allottees" as contemplated under RERA. Thus, by necessary implication the dispute between an individual allottee and promoter covered by RERA is non- arbitrable.

57. It is necessary to see the discussion in Paragraph Nos.159 to 163 in Forum For People's Collective Efforts (FPCE) (supra) in view of Section 238 of the IBC which is as follows:

"159. To complete this trinity of judgments between 2015 and 2019, there is a three-Judge Bench decision of this Court in Pioneer Urban Land & Infrastructure Ltd. v. Union of India [Pioneer Urban Land & Infrastructure Ltd. v. Union of India, (2019)

8 SCC 416 : (2019) 4 SCC (Civ) 1]. This Court considered a challenge to the constitutional validity of the amendments made in 2018 to IBC 2016, pursuant to a report of the Insolvency Law Committee. Under the amended provisions, allottees of real estate projects were deemed to be financial creditors, triggering the applicability of the Code to real estate developers. The three-Judge Bench considered, in the course of its decision, the provisions of the RERA. The Court adverted to the provisions of Sections 88 and 89 of the RERA on the one hand and to Section 238 of IBC which is in the following terms:

"238. Provisions of this Code to override other laws. —The provisions of this Code shall have effect, Page 118 of 126

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notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law."

160. R.F. Nariman, J. speaking for the three-Judge Bench noted that:

160.1. There is no provision analogous to Section 88 of the RERA in IBC and the latter is meant to be a complete and exhaustive statement of the law insofar as its subject-matter is concerned.

160.2. While the non obstante clause of RERA came into force on 1-5-2015, the non obstante clause of IBC came into force on 1-12-2016.

160.3. The amendments to IBC had come into force on 6-6-2018.

161. In this backdrop, the Court did not accept the submission that RERA being a special enactment would have precedence over IBC which is a general enactment dealing with insolvency. In this backdrop, the Court observed : (Pioneer Urban Land & Infrastructure Ltd. case [Pioneer Urban Land & Infrastructure Ltd. v. Union of India, (2019)

8 SCC 416 : (2019) 4 SCC (Civ) 1] , SCC p. 473, para 25)

"25. … From the introduction of the Explanation to Section 5(8)(f) of the Code, it is clear that Parliament was aware of RERA, and applied some of its definition provisions so that they could apply when the Code is to be interpreted. The fact that RERA is [Ed. : The matter between two asterisks has been emphasised in original as well.] in addition to Page 119 of 126

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and not in derogation of [Ed. : The matter between two asterisks has been emphasised in original as well.] the provisions of any other law for the time being in force, also makes it clear that the remedies under RERA to allottees were intended to be additional and not exclusive remedies. Also, it is important to remember that as the authorities under RERA were to be set up within one year from 1-5- 2016, remedies before those authorities would come into effect only on and from 1-5-2017 making it clear that the provisions of the Code, which came into force on 1-12-2016, would apply in addition to RERA."

(emphasis supplied)

162. The Court noted the decision in KSL & Industries [KSL & Industries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 166 : (2015) 1 SCC (Civ) 462] in which it was held that notwithstanding the non obstante clause contained in the RDDB Act which was later in time than the non obstante clause in SICA and the principle that the later Act would prevail over the earlier, this principle was departed from only because of the of the presence of a provision, like Section 88 of the RERA, which was contained in the RDDB Act which made it clear that the Act was meant to be in addition and not in derogation of other statutes. Distinguishing the decision, the Court observed : (Pioneer Urban Land & Infrastructure Ltd. case [Pioneer Urban Land & Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416 : (2019) 4 SCC (Civ) 1] , SCC p. 475, para 27)

"27. In view of Section 34(2) of the Recovery Act, this Court held that despite the fact that the non obstante clause contained in the Recovery Act is later in time than the non Page 120 of 126

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obstante clause contained in the Sick Act, in the event of a conflict, the Recovery Act i.e. the later Act must give way to the Sick Act i.e. the earlier Act. Several judgments were referred to in which ordinarily a later Act containing a non obstante clause must be held to have primacy over an earlier Act containing a non obstante clause, as Parliament must be deemed to be aware of the fact that the later Act is intended to override all earlier statutes including those which contained non obstante clauses. This statement of the law was departed from in KSL & Industries [KSL & Industries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 166 : (2015) 1 SCC (Civ) 462] only because of the presence of a section like Section 88 of the RERA contained in the Recovery Act, which makes it clear that the Act is meant to be in addition to and not in derogation of other statutes. In the present case, it is clear that both tests are satisfied, namely, that the Code as amended, is both later in point of time than RERA, and must be given precedence over RERA, given Section 88 of the RERA."

163. Therefore, the Court in Pioneer Urban Land & Infrastructure Ltd. case [Pioneer Urban Land & Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416 : (2019) 4 SCC (Civ) 1] held that RERA and IBC must be held to coexist and in the event of a clash, RERA must give way to IBC."

58. In the said case it has been held that RERA and IBC must be held to coexist and in the event of a clash, RERA must give way to IBC. The said observations are made as IBC is special legislation which came into effect subsequently after RERA. However, the said Page 121 of 126

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decision is not relevant for deciding whether the dispute covered under RERA is non-arbitrable.

59. Thus, on the touchstone of the well established parameters for determining the non-arbitrary nature of the dispute it has to be held that dispute which is covered under the RERA is non - arbitrable and therefore, the jurisdiction of Real Estate Regulatory Authority established under Section 20 of the RERA is not ousted. Accordingly, the substantial question of law framed by this Court by order dated 24^thJuly 2023 is answered.

XI. WHETHER THE RESPONDENTS ARE "ALLOTTEES" AND

ARE COVERED UNDER THE PROVISIONS OF RERA

60. Another contention raised by learned Counsel appearing for the Petitioner is that the Respondents are not allottees within the meaning of RERA. It is the contention of the Appellant that the MOU does not mention about any flat number, building number or room number and therefore, no "Apartment" as contemplated under Section 2(e) of RERA has been sold and therefore the provisions of RERA are not applicable.

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61. As noted herein above, the MOU i.e. agreement between the parties clearly shows that it is specifically agreed between the parties that the promoter i.e. the Appellant has agreed to allot a flat at "Rashmi's Star City- Phase IV-Type B" to the Applicant i.e. Respondent for a total consideration of Rs.19,00,000/- only and the allotment of flat number, floor and building number shall be carried out and informed to the Respondents at the function to be hosted by the promoter. It is also required to be noted that in the reply dated 10^thApril 2019 issued by the Appellant to the Respondents, it is specifically set out in Paragraph Nos.1 and 2 as follows:

"1. With reference to Para No.1 and 2 of your notice my clients state that, it is true only to the extent that on 12.06.2013 your clients has booked a

2 Room Kitchen Flat in my clients project known as

"Rashmi Star City- Phase 4" situate, at Naigaon in consideration of Rs.23,00,000/- (Rupees Twenty Three Lakhs Only). And out of the aforesaid consideration amount till 15/07/2017 your clients have only paid a sum of Rs.12,50,000/- (Rupees Twelve Lakhs Fifty Thousand Only) in equal monthly installment of Rs.18000/- and earnest money of Rs.3,50,000/- to my clients. My clients hereby further state that my clients deny having received cash of Rs.4,00,000/- hence, you are hereby put to the strict proof thereof."

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"2. ...My clients state that my clients understand the value of hard earn money of your clients and are ready and willing to refund the payment made by your clients. My clients further state that form July 2019 my clients will start refunding payment to your clients and will return the entire amount to your clients on or before March 2020."

62. Thus, the Appellant has specifically agreed that the Respondents have booked a two room kitchen flat on 12^thJune 2013 in the project known as "Rashmi Star City-Phase 4" and the aggregate consideration paid was Rs.12,50,000/- and that the Appellant is ready to refund the said payment. The definition of

"Allottee" as per Section 2(d) of RERA contemplates an

"apartment" "otherwise transferred by the promoter". The definition of "Apartment" under Section 2(e) read with the definition of "Allottee" under Section 2(d) of RERA and the contents of the MOU and the reply dated 10^thApril 2019 issued by the Appellant clearly shows that the Respondents are "Allottees"

within the meaning of Section 2(d) of RERA. Thus the provisions of RERA are applicable to the dispute between the Appellant and the Respondents arising out of said MOU. Thus, there is no substance in the contention that the Respondents are not the

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XII. CONCLUSIONS:-

63. In view of the above discussion following conclusions are recorded:-

(i) The dispute between the individual allottee and the promoter or the dispute between the Association of the Allottees and the Promoter covered under Real Estate Regulation and Development Act, 2016 is non-arbitral in nature.

(ii) The jurisdiction of Real Estate Regulatory Authority established under Section 20 of the Real Estate Regulation and Development Act, 2016 is not ousted, even if the agreement between the promoter and the allottee contains arbitration clause.

(iii) In this particular case the Respondents are "allottees" in view of the definition of "Apartment" under Section 2(e) read with the

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64. For the reasons recorded in this Judgment and conclusions recorded herein above the the Second Appeal is dismissed. The same is dismissed with cost of Rs.25,000/-.

65. In view of the dismissal of the Second Appeal, nothing survives in the Interim Application and the same is also disposed of.

66. This Court places on record appreciation for assistance rendered by Mr. Atul Damle, learned Amicus Curiae.

[MADHAV J. JAMDAR, J.]

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ARJUN

VITTHAL

KUDHEKAR

Digitally signed by

ARJUN VITTHAL

KUDHEKAR

Date: 2024.12.28 17:24:04 +0530

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