MAHA AT - The Total Amount For Making deposit by Appellant promoter towards compliance of the proviso to Section 43 (5) of the Act will Include amounts received by the promoter directly from complainant as well as the amounts received from the financier out of the loan sanctioned under the subvention scheme.

The Total Amount For Making deposit by Appellant promoter towards compliance of the proviso to Section 43 (5) of the Act will Include amounts received by the promoter directly from complainant as well as the amounts received from the financier out of the loan sanctioned under the subvention scheme.

MB6 Residency Private Limited V/S Ketan Kataria & L & T Finance Holdings Ltd. Appeal No. AT006000000174630 of 2023 Before the Maharashtra Real Estate Appellate Tribunal Mumbai Decided in 18th July 2024

Fact of the main Complaint CC006000000054749 :-

• On 9th June 2018, The Original Allottees filed the captioned complaint before MahaRERA  seeking inter alia for refund of the entire money paid to promoter together with interest on the grounds as set out in the complaint.
• On 24tn February 2022, Upon hearing the parties, learned Member, MahaRERA has passed the impugned order whereby it directed appellant promoter inter alia to refund the entire amounts of Rs. 1,90,28,2751/- paid by complainant together with interest over it.
• On date 20th July 2023, Subsequently, the application filed by Appellant/promoter to review the order  was also disposed of by MahaRERA by dismissing the review application.
• Executing Authority issued recovery warrant of Rs.3,48,40,409/- towards the refund of Rs.1,90,28,275/- being the paid Principal amount by complainant to promoter and Rs.1,58,12,134/- being the interest till 30th January 2024.

Fact of the Appeal:-

• Aggrieved appellant/promoter has preferred the instant appeal before this Tribunal seeking inter alia to quash and set aside these two orders, dated 24th February 2022 and 20th July 2023 passed by MahaRERA.
• In view of both the said impugned orders, promoter  pre deposited Only Rs.85,22,583/- in the Tribunal on 24.05.2024 towards the  compliance of the proviso to Section 43(5) of the Act. 
• This Amount included the Amount of Rs.53,23,433/- deposited by the Allottee Plus interest over it and did not include the amount of Rs.1,36,30,530/- which it received from the Banking Partner L & T Finance Holdings Ltd as the Subvention payment.

The Appellate Authority Framed the following Question(s) for consideration:-

Whether the total amounts received by the promoter, i.e directly from complainant as well as the amounts received from the financier out of the loan sanctioned under the subvention scheme be accounted for making deposit by Appellant promoter towards compliance of the proviso to Section 43 (5) of the Act based on the impugned orders passed by the MahaRERA?

Observations made by the Hon’ble Court:-

• Payments for the costs of the subject flat have been made from two sources 
• (a) by the complainant himself directly to appellant and 
• (b) Payments made by the financier to the promoter on behalf of and in the name of the complainant under the said subvention scheme from out of the loan sanctioned to complainant borrower.
• Reliance was made on M/s Newtech Promoters and Developers Pvt. Ltd Vs, State of UP & ors. [civil Appeal Nos.6745-6749 of 2021]
• The provisions of Section 43(5) also stipulate for pre deposit of the entire amounts received from all the sources without making any distinction of the amounts paid to the promoter, whether amounts are received directly or indirectly or from different sources directly or indirectly or through different financial products/ instruments etc.
• The Complainant is the primary borrower to whom, the subvention loan has been sanctioned to the complainant (borrower) for funding the subject flat under the subvention scheme and this loan amount has been disbursed to promoter for and on behalf of as well as in the name of the complainant. Therefore, the complainant has the primary responsibility for repayment of the outstanding loans.
• Tribunal is expected to direct promoter to first deposit the total amount to be paid to the allottee and these pre-deposits are sine qua non before the said appeal be admitted and entertained for further consideration on merits.

Court’s Order:-

Appellant promoter is being directed once again as last chance to pre-deposit the entire amounts received from both the sources (A and B), i.e. total amounts received from the respondent no. 2, financier under the subvention scheme and also the amounts received directly from respondent no. 1 together with interest on the entire amounts.

the jurisdiction of the Appellate Tribunal stands confined to consideration of challenges raised against orders passed by either the Real Estate Regulatory Authority or the Adjudicating Authority under the RERA

 In the matter of PRAVEEN CHHABRA V/s REAL ESTATE APPELLATE TRIBUNAL W.P.(C) 14552/2021 Decided on 26.05.2022, THE HIGH COURT OF DELHI held that the Court quashed the suo motu proceedings initiated by the Appellate Tribunal (case titled (Suo Motu Case) REAT/0002/2021 titled as “Court of Its Own Motion Vs. Commissioners of all the Municipal Zones & Anrs ) to monitor construction activity in the National Capital Territory. The court held that under the Real Estate (Regulation and Development) Act, 2016 (RERA), the jurisdiction of the Appellate Tribunal stands confined to consideration of challenges raised against orders passed by either the Real Estate Regulatory Authority or the Adjudicating Authority under the RERA. The High Court also said that the Appellate Tribunal being a creation of statute, is not part of traditional judicial institutions. The High court also held that According to Sections 43 and 44 of the RERA Act, which provide for the establishment of tribunals and the definition of what disputes can be brought before such tribunals, the Appellate Tribunal was established as a forum whose jurisdiction could be invoked by a person aggrieved by an order, decision, or direction of the Authority.

The sole member of the RERA Authority & RERA APPETITE Tribunal does not have jurisdiction to dispose of order and appeal.

 In the case of man global limited vs ram prakash joukani (Second Appeal No. 14840 Of 2019 Alongwith Civil Application No. 785 Of 2019) the Bombay high court observed that “the sole member of the said Tribunal does not have jurisdiction to dispose of appeal or any application including even an application for condonation of delay in filing appeal.”

Reliance was made on the earlier matter of Neelkamal Realtors Suburban Pvt. Ltd. and Anr. (2017 SCC OnLine Bom9302) where the Bombay high court has held that two member bench of the Tribunal shall always consist of a judicial member. It is also held that in the constitution of the Tribunal, the majority of the members shall always be judicial members.

In the matter of Altus Space Builders Pvt. Ltd vs Union Of India And Others CWP No.32437 of 2019 decided on 16 October, 2020 before Punjab & Haryana High Court the Court struck down Regulations 7 and 8 of the Punjab RERA Procedure Regulations as being ultra vires the Act.

the Court ruled that “A Single Member of the Authority cannot validly pass orders on a complaint under the Act.” 

the Court also ruled that “A Single Member of the Appellate Tribunal cannot validly pass orders in the appeals before it.”

Allahabad High Court - Section 43(5) mandates pre deposit of 30% of Penalty amount or higher at the discretion of tribunal, the tribunal must form its opinion on the facts and material before it as the appeal before the Tribunal is the first and the only appeal on facts.The Increase in pre deposit may be exercised only in extreme cases

 In the Matter of Air Force Naval Housing Board Air Force Station Versus U.P. Real Estate Regulatory Authority And Another Complaint no. RERA APPEAL DEFECTIVE No. - 6 of 2021 decided on 16.03.2021 before Allahabad High court

Fact of the Case

• The present appeal was filed against the order passed by the Real Estate Appellate Tribunal (Tribunal in short) in Appeal/Misc. Case No.360 of 2019 dated 28.02.2020 whereby the Tribunal has dismissed that appeal filed by the appellant, under Section 44(2) of the Real Estate (Regulation & Development) Act, 2016. Undisputedly, the above-described appeal came to be filed by the appellant against the order of the RERA, dated 10.04.2019 whereby penalty @ MCLR + 1% w.e.f. 01.07.2012 was imposed on the appellant.

•  at the time of filing the aforesaid appeal to the Tribunal, the appellant furnished a demand draft for an amount of Rs.6,33,000/- towards 30% of the penalty amount awarded by the RERA.

• By an order dated 28.01.2020, the Tribunal required the appellant to deposit the balance amount i.e. the entire amount of penalty awarded by the RERA as a pre-condition to maintain the appeal.

• Thereafter the matter was listed before the Tribunal on 28.02.2020 .the instant case was dismissed due to non compliance of Tribunal's order dated 28.01.2020.

• The Tribunal has relied on the observations made by the Lucknow Bench of this Court in Second Appeal No.364 of 2018 (Radicon Infrastructure And Housing Private Limited Vs. Karan Dhyani) and Second Appeal No. 367 of 2018 (Radicon Infrastructure And Housing Private Limited Vs. Dhaneshwari Devi Dhyani), decided on 26.07.2019, to require the appellant to deposit the entire amount of disputed penalty as a condition to maintain the appeal.

Question of Law

1. Whether deposit of the entire disputed demand of penalty is a condition precedent to maintain the appeal against penalty, under Section 44(2) of the Real Estate (Regulation & Development) Act, 2016?"

Argument from Appellant

• The appellant is a zero-profit organization, registered as a society of retired personnel of the Indian Air Force and the Indian Navy. It exists and operates only for the purpose of providing affordable housing to the members of the Indian Air Force and the Indian Navy and the widows of such personnel.

• Learned counsel for the appellant would submit that the Tribunal has completely misread the law and/or mis-applied itself to reach a very harsh conclusion that the appeal filed by the appellant was not maintainable because the appellant did not deposit the entire disputed demand of penalty.

• it has been submitted, Section 43(5) of the Act does not mandate pre-deposit of the entire disputed demand of penalty as a pre-condition to maintain an appeal under Section 44(2) of the Act.

• Also, the decision of this Court in Second Appeal Nos.364 of 2018 and 367 of 2018 (Radicon Infrastructure And ... vs Karan Dhyani ) does not lay down as a proposition of law that the entire disputed demand of penalty must be deposited before an appeal is entertained or maintained under Section 44 of the Act.

Argument by defendant

• Right of appeal granted under Section 34 of the Act is circumscribed and conditioned by Section 43(5) of the Act.

• According to him, there is no right vested in the appellant to maintain its appeal by depositing 30% of the disputed penalty. The Tribunal could determine a higher amount and, as has been done in the present case. The right of appeal would arise only upon deposit of that higher amount. Since the appellant did not make the necessary deposit, the Tribunal has rightly dismissed its appeal.

Decision of Court

• the first conclusion that may be safely drawn is Reading Section 43 (5) of the Act strictly, no appeal may be filed by a 'promoter' against the order of the RERA imposing penalty unless a minimum of 30% of the demand of penalty is pre-deposited by such 'promoter'. There is absolutely no discretion vested in the Tribunal to reduce that amount below the statutorily defined minimum of 30% of the penalty imposed by the RERA. That condition is absolute. It has also been met, in the facts of this case. Neither that percentage or amount can be reduced by the Tribunal nor an appeal filed without deposit of that amount be entertained by the Tribunal.

• Second, a discretion is vested in the Tribunal to determine an amount more than 30% of the penalty - to be deposited as a condition to maintain such appeal by a 'promoter'. The legislature has referred to the same as such higher percentage "as may be determined by the Appellate Tribunal.

• If the Tribunal were to require a particular 'promoter'-appellant to deposit an amount that be more than 30% of the penalty amount imposed by the RERA in the order impugned before the Tribunal, as a pre-condition to maintain its appeal, it would have to first determine the same.

• In the context of Section 43(5) of the Act, the Tribunal must form its opinion on the facts and material before it - why a higher percentage of the disputed penalty be deposited by a 'promoter'-appellant as a condition to entertain its appeal.this would involve exercise of judicial discretion.

•  the appeal before the Tribunal is the first and the only appeal on facts. The further appeal to this Court is an appeal on substantial question/s of law. Thus, the Tribunal may never place a condition so onerous or burdensome, on the appellant before it, as may shut out the only remedy of appeal on fact, available under the Act.

• The judicial discretion thus vested on the Tribunal must be exercised with extreme care and it must not appear to have been exercised on whims or fancies. It may be exercised only in extreme cases. Only by way of illustration, that discretion may be exercised where it appears to the Tribunal, even on a prima facie basis, that the penalty imposed by RERA is too less/insignificant to the infraction found or that the appellant before it is a repeat or habitual or wilful offender or the facts appear to involve large scale infractions of the law, by way of an organised activity. In such and other cases, for which judicially sound reasons may be recorded as may compel or commend to the Tribunal to require a particular appellant to deposit an amount higher than the statutory pre-defined limit of 30% of the penalty.

• Unless careful application of mind is first made by the Tribunal to the facts of the individual case and unless the Tribunal records specific reasons to determine the higher amount required to be deposited by the 'promoter'-appellant, to maintain its appeal against the order imposing penalty passed by the RERA, the entire exercise made by the Tribunal may be questioned as arbitrary or unreasoned. That would be wholly undesirable and an avoidable course in the context of the quasi-judicial power exercised by the Tribunal.

• Normally, the legislature provides a right of appeal without a condition of pre-deposit. However, in financial matters, the modern legislative trend has been to provide for a minimum deposit as a pre-condition to maintain the appeal. Unless the orders of the Tribunal requiring pre-deposit at higher rates (30% of penalty) are informed with reasons, such practice, if allowed, would amount to taking away the right of appeal before the Tribunal, by an order passed by the Tribunal that has been vested with the jurisdiction to decide such appeals on merits. It would be a uniquely odd process and result, factually and juris prudentially. The appellant in that situation may end up being pre-judged by the Tribunal.

• Consequently, the order dated passed by the Tribunal dated 28.02.2020 is set aside.

There is no provision in the RERA Act which envisaged either the Authority or the Appellate Tribunal to function with a single member

 The Punjab & Haryana High Court vide its order Janta Land Promoters Pvt. Ltd vs Union Of India And Others CWP No. 8548 of 2020, dated 16.10.2020, ruled that there was no provision in the Real Estate (Regulation and Development) Act, 2016, (“RERA Act”) which envisaged either the Authority or the Appellate Tribunal to function with a single member while exercising quasi-judicial or adjudicatory functions.

The key points of this judgement are as follows:  

•  The High Court ruled that the adjudicatory power of the Authority could not be transferred to a single member without express provision in the RERA Act.

• While interpreting the provisions provided under Section 21 of the RERA Act, the court held that it is clear that the Authority is a multi member body and that it cannot be considered to be an Authority if it is not comprised of its Chairperson and at least two whole time members. This has to be read along with Section 29 of the RERA Act which deals with the meetings of the Authority.

• Similarly referring to Section 43 of the RERA Act, the Court declared that an Appellate Tribunal was required to have at least two members, out of which, one was to be a judicial and other a technical or administrative member.

•  The court went to hold that any order passed by such Single Member Bench of the Appellate Tribunal would be null and void in law.

Designated Tribunal under Section 43 of RERA ACT will function till such time a regular Tribunal is established

  In a judgment dated 17.09.2018 passed in Writ-C No. 31085 of 2018; Gardenia Aims Developers Pvt. Ltd. v. State of U.P., wherein The Honorable Allahabad High Court  has held that

 Section 43 of the Act prescribes a time of one year for establishment of the Tribunal but the proviso to the said Section says that till such time regular Tribunal is established the State Government will have power to designate any other existing Tribunal to hear the appeals. 

The Court held that in the said case the State Government by an order dated 24.01.2018 had designated the U.P. State Transport Appellate Tribunal as the Tribunal to hear the appeals and the proviso does not prescribe any time limit for functioning of the designated Tribunal, which says that the said designated Tribunal will function till such time a regular Tribunal is established and as the regular Tribunal had not been established till 17.09.2018, the designated Tribunal had jurisdiction.