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.

Punjab & Haryana High Court - the requirement of pre- deposit of the amount, as set out in the proviso to Section 43 (5) of the Act, cannot be held to be unreasonable or arbitrary

 In the Matter of Experion Developers Pvt. Ltd. V/s State of Haryana and others Complaint no, CWP No. 38144 of 2018 and other connected matters decided on 16.10.2020 before Punjab & Haryana High court

• These writ petitions under Article 226 of the Constitution raise several important questions of law concerning the interpretation of the provisions of the Real Estate (Regulation and Development) Act, 2016 (hereinafter 'the Act') as well as the Haryana Real Estate (Regulation and Development) Rules, 2017 (hereinafter 'the Haryana Rules').

• In some of these petitions, a challenge has been raised to the constitutional validity of the proviso to Section 43 (5) of the Act and correspondingly the orders passed by the Real Estate Appellate Tribunal (hereinafter 'Appellate Tribunal') rejecting the prayer of the Petitioners for waiver of the pre-deposit for entertaining the appeal against an order of either the Real Estate Regulatory Authority ('Authority') or the Adjudicating Officer ('AO'), as the case may be.

• Under Section 43(5) ,where the order appealed against imposes a penalty, the promoter has to deposit at least 30% of the penalty amount or such higher amount as may be directed by the Appellate Tribunal. 

• Where the appeal is against any other order which involves the payment of an amount to the allottee, then what has to be deposited with the Appellate Tribunal is "the total amount to be paid to the allottee" by such promoter/appellant "including interest and compensation imposed on him, if any, or with both, as the case may be." Further, such an amount has to be deposited "before the appeal is heard."

• The further prayer in these petitions is that given the undue hardship faced by the Petitioners, the aforesaid orders of the Appellate Tribunal should be interfered with by this Court, in exercise of its jurisdiction under Article 226 of the Constitution of India, and the Appellate Tribunal be directed to entertain the Petitioners' appeals without insisting on the pre- deposit.

Order of the High Court

• This Court has perused the decision in M/s. Lotus Realtech Pvt. Ltd. v. State of Haryana CWP No. 15205 of 2020 (O&M) 

• The law laid down by the Supreme Court in the  M/s. Technimont Pvt. Ltd. v. State of Punjab AIR 2019 SC 4489 is that the right of appeal is the creature of a statute and therefore, is and can be made conditional upon fulfilling certain conditions by the statute itself and therefore, any requirement of fulfillment of a condition imposed by the statute itself before a person can avail the remedy of appeal is a valid piece of legislation.

• Appellate Authority does not have the inherent powers to waive the limitation or precondition prescribed by the statute for filing an appeal as the inherent incidental or implied powers vested in the Appellate Authority cannot be invoked to render a statutory provision nugatory or meaningless.

• the treatment of promoters as a class different from other appellants satisfied the test of reasonableness laid down by several judgments of the Supreme Court explaining Article 14 of the Constitution of India.

• as the promoters form a distinct and separate class and as the prescription of the condition of pre-deposit upon the promoters is in furtherance of the object of the legislation, therefore, the imposition of the condition of pre- deposit upon the promoters satisfies the test of Article 14 of the Constitution of India."

• The proviso to Section 43 (5) of the Act clearly states that the pre-deposit is required to be made "before the said appeal is heard." In other words, the Appellate Tribunal is not obliged to proceed to 'entertain' or hear an appeal that has been filed before it, if the promoter, who has filed such appeal, fails to comply with the direction for making the pre-deposit in terms of the proviso to Section 43 (5) of the Act.

• even the High Court cannot issue any direction in that regard contrary to the Act, since it does not have the powers vested in the Supreme Court under Article 142 of the Constitution of India.

• In each of the individual writ petitions before this Court, where the order of the Appellate Tribunal declining to waive the requirement of pre-deposit has been challenged, this Court finds that in the facts and circumstances of the individual cases, no grounds have been made out to persuade this Court to exercise its writ jurisdiction under Article 226 of the Constitution to grant any relief in respect thereof. In none of the cases is the Court satisfied that a case of 'genuine hardship' has been made out.

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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.

Promoters are NOT entitled to exemption from compliance of Proviso of Section 43(5) of the Real Estate (Regulation and Development) Act, 2016

 IN THE MATTER OF: 

M/s Mahanagar Reality & Ors. Vs. Dinesh Ramlal Oswal & Anr. (Decided by the Hon’ble Maharashtra Real Estate Appellate Tribunal, Mumbai) 

Issue: 

 Whether the Promoters are entitled for exemption to make compliance of Proviso of Section 43 (5) of the Real Estate (Regulation and Development), Act, 2016? 

Facts: 

 Promoters being the Applicant preferred an appeal against the impugned order dated 10.01.2019 wherein the promoter was directed to refund of the amount paid by the allottees along with the interest amounts. 

 Thereafter, the Promoters filed an application for waiver of pre-deposit mandated under Section 43(5) of Real Estate (Regulation and Development) Act, 2016 before the Hon’ble Appellate Tribunal. 

Observations and Findings of the Hon’ble Tribunal: 

 The Hon’ble Appellate Tribunal observed that, it is mandated under the Real Estate (Regulation and Development) Act, 2016 that the promoter who prefers an appeal has to deposit the amount(s) and comply with the Proviso of Section 43 (5) of the Real Estate (Regulation and Development) Act, 2016 for entertaining and hearing the appeal, and that deposit in respect of the same is a prerequisite. 

 The Hon’ble Tribunal also observed that the right to appeal can be conditional and quantified. 

 The Hon’ble Tribunal further observed that the Hon’ble Supreme Court has previously settled this principle that any statute has to be interpreted in the context in which the words by are used in that particular statute. 

 Real Estate (Regulation and Development) Act, 2016 being a special legislation enacted to protect to the interests of the allottees cannot grant any exemption/ waiver to the promoter from pre-deposit of the amounts to be made under Section 43(5) of Real Estate (Regulation and Development) Act, 2016

Section 43(5) i.e pre deposit of sum by Promoter filing Appeal against the impugned order

In a Landmark Judgement passed by Allahabad HC in the matter of Radicon Infrastructure and Housing Pivate Limited vs. Karan Dhyani (Second Appeal No. - 364 of 2018). passed on 26th July, 2019.

The Hon'ble High Court in para 26 has interpreted section 43(5) i.e pre deposit of sum by Promoter filing Appeal against the impugned order is required to deposit

•  30 % or such higher sum as may be determined by Tribunal with respect to penalty imposed upon promoter.

• 100 % of amount determined to be payable being refund of principal/ interest.

This judgment will come as a relief for lakhs of homebuyers across the country who after spending several years before RERA authority and managing to secure a favourable order were then made to suffer by the developer who then used to prefer Appeal and further delay the proceedings.
The Complete Judgement can be found at the Following link.

https://media-exp1.licdn.com/dms/document/C4D1FAQGOdR4_m4LTEw/feedshare-document-pdf-analyzed/0/1617626541425?e=1617728400&v=beta&t=z-Hd96USUusVgjXeXSQqrxs_HvABg2w1VpWdnFBIM_k
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