Karnataka High Court - RERA has no Authority Over Projects Granted ‘Partial’ Occupancy Certificate Prior to Enforcement of RERA

RERA has no Authority Over Projects Granted ‘Partial’ Occupancy Certificate Prior to Enforcement of RERA

Provident Housing Limited Vs Karnataka Real Estate Regulatory Authority Writ Petition No.18448 of 2021

Date of Judgement/Order : 02/01/2023

Brief Facts of the Case:

• The petitioner is engaged in the business of real estate development. 
• On receiving respondent’s request to allot an apartment in the project, the petitioner entered into an agreement for sale and Construction with Respondent on 10/09/14. 
• The proposed date of completion of project was 31/01/17. 
• On 18/11/15– A partial occupancy certificate was granted by the competent authority i.e. BDA to the petitioner. 
• On 27/04/17– Second partial occupancy certificate was issued in favour of petitioner. 
• On 14/05/17– Respondent seeks to cancel the agreement on the ground that there was information to him that the land had not been legally acquired by the petitioner for construction of the Apartment complex. 
• On 04/12/17– The contract between petitioner and respondent is concluded, petitioner refunds the amount after deducting the cancellation charges.
• In 2019– Respondent by invoking Section 31 of the RERA Act, files a complaint before RERA Authority seeking a refund of remaining amount. 
• The authority passes the impugned order, directing the petitioner to refund the said amount. 
• On receiving the authority’s order, Petitioner files a petition before Karnataka HC challenging the maintainability of the complaint filed by respondent before the authority.

Petitioner’s Contentions:

• The partial occupancy certificate was issued in favor of petitioner before the commencement of the Act.  
• Therefore, the project of petitioner had already passed the stage of ‘ongoing project’ and is a ‘completed project’. 
• Since the project was completed before the commencement of the RERA Act, the Act is not applicable to petitioner’s project and therefore any complaint filed before the authority by invoking the provisions of the Act is not maintainable.

Respondent’s Arguments:

• The project is still an ‘ongoing project’ as no ‘competition certificate’ was issued in favour of petitioner.

Issues:

• Whether the complaint filed by respondent before the Karnataka Real Estate Authority is maintainable? 
• Whether ‘on-going’ project includes the project for which completion certificate has not been issued.

Court’s Decision: 

• The court while taking into consideration the provisions of RERA Act (Section 2(q), 3, 18, 31, 43 and 84) and the rules made by Karnataka Government (Rule 3 and 4) under Section 84 of the Act, made following observations- 
• Section 3 of the Act mandates the registration for all ongoing projects at the time of commencement of the Act.  
• Section 3(2)(b) specifically excludes those projects to be registered under the act for which ‘completion certificate’ has been issued before the commencement of the Act. 
• In the present case, partial occupancy certificates have been issued, the project would be considered to be not completed at the time of commencement of this Act. 
• The explanation of ‘ongoing project’ under the Karnataka Government Rules (Rule 4) exempts the application of the Act to those projects for which partial occupancy certificate has been issued prior to coming into force of the Act. 
• Therefore as per Rule 4 of the Karnataka Government Rules, the project is not an ongoing project as the explanation in Rule exempts such an ongoing project for which partial certificate has been obtained to the extent of the portion for which the partial occupancy certificate is obtained.
• Therefore, the provisions of the RERA Act are not applicable to the project and the order issued by the Authority is without jurisdiction and thus is not maintainable. 

• Held: The order passed by Karnataka Real Estate Regulatory Authority is without jurisdiction. The project in question is a registered project in view of grant of partial occupancy certificates. In light of the same, the complaint filed before the authority by the respondent, itself is not maintainable.

The commercial advertisement cannot have the same decree of constitutional protection as in case of social or political speeches.”

 The Apex Court in Hamdard Dawakhana (WAKF) Lal Kuan, Delhi v Union of India 1960 AIR 554, 1960 SCR (2) 671 held that an advertisement is no doubt a form of speech but its true character is reflected by the object for the promotion of which it is employed. In this judgment, the court primarily relied on the judgment of the United States Supreme Court in Valentine v Chrestensen for the proposition that "purely commercial advertising" is not protected by Article 19(1) (a) of the Constitution.

In the Matter of Secretary, Ministry of Information and Broadcasting v. Cricket Association of Bengal reported in (1995) 5 SCC 161 The Supreme Court held that “commercial advertisement no doubt is a form of speech but its true character is reflected by the object for promotion of which it is employed. Only when an advertisement is concerned with the expression or prorogation of ideas that it can be said to be related to freedom of expression and speech. The object and purpose for which advertisement is published is the determining factor. When propagation of ideas and thoughts is inconsequential, but the real purpose and object is the promotion of sales of goods and services and personal benefit without any social purpose, the commercial advertisement cannot have the same decree of constitutional protection as in case of social or political speeches.”

In the Matter of Real Estate Authority, Punjab on its own motion Vs. Singla Builders and Promoters limited, 6 0f 2018 Decided on 08.02.2018 the Authority Penalised the promoter for Rs. 10,000/- for not displaying the registration number in the advertisements.

In the suo moto Matter of Maharashtra Real Estate Regulatory Authority Vs. Sai Estate Consultant Chembur (P) Ltd.(Case No. 1 of 2017) the MahaRERA Authority directed the respondent who is  a registered Real Estate Agent, to withhold the advertisements with immediate effect and rectify all the hoardings by putting MahaRERA registration number on the same. The respondent was directed to  pay a fine Rs.10000/- per day of the violation and accordingly for a violation of 12 days he was directed to pay Rs.120000/-

As per Gujarat Real Estate Regulatory Authority Circular number GujRERA/ Circular/18/2020 of date 04.01.2020 , “The font size of RERA registration number and website address in the advertisements should be mandatorily equal to or larger than the contact details of the proposed project.”  

As per the  Karnataka Rera Circular “The length and breadth of the “RERA REGISTERED'' information must not be less than 10% of the length and breadth (whichever is higher ) of the advertisement issued in print media”

In the Matter of Chandra Shekhar singh Vs. Kul Developers (P) Ltd. Complaint no. AT00500000000004, The Maharashtra appellate tribunal held that when the developer has made a promise of providing 30 Feet road through its brochure and advertisement,though it was the obligation of Municipal corporation,it would become the responsibility of the promoter to provide that.

Karnataka Rera - No Compensation is payable for mental agony in case of breach of a contract.

 In the Matter of Suman Rupanagudi vs. Adarsh Developers Complaint no. CMP/190912/0004118 decided on 31.01.2020  before Karnataka Real Estate Regulatory Authority

Karnataka RERA tried to clear this ambiguity by placing reliance on the judgment of the Hon’ble Supreme Court of India in Ghaziabad Development Authority vs. Union of India. (2000)6 SCC113 The Hon’ble Supreme Court, while considering a case of breach of contract under Section 73 of the Indian Contract Act, 1872, held that no damages are payable for mental agony in case of breach of a contract.

In Lucknow Development Authority vs. M.K. Gupta,AIR1994 SC 787 the Hon’ble Supreme Court of India held that the liability for mental agony had been fixed not within the realms of contract but under the principles of administrative law.

In view of the same, Karnataka RERA refused to grant relief towards mental agony

Even if the Project is completed with occupancy Certificate and does not require Rera Registration, even then the Promoter is bound by the responsibilities assigned under the act.

In the Matter of Raghunath MS vs. Esteem Group Complaint no. CMP/180620/0000936  decided on 14.11.2019 before  Karnataka Real Estate Regulatory Authority

In this case, the project was completed and conveyed to the association of allottees prior to the commencement of the Act. The allottee had purchased the unit from an erstwhile allottee. The developer contended that since the project was completed before the commencement of the Act and the occupancy certificate was obtained, they cannot be bound by the provisions of the Act. Referring to the Preamble of the Act, Karnataka RERA held that even if the project was completed prior to the commencement of the Act, the developer is bound by the provisions of the Act. Accordingly, Karnataka RERA directed the developer to hand over all documents and execute a registered deed to include civic amenities in favour of the association of allottees.