Supreme Court of India - The power to supersede the authority is entrusted to the appropriate Government in terms of Section 82.

Supreme Court of India - The power to supersede the authority is entrusted to the appropriate Government in terms of Section 82.

Facts:-

• On 5 January 2024, one of the members of RERA superannuated.
• On 7 February 2024, the Chairperson resigned without giving notice of three months and the resignation was accepted immediately by the state Government.
• with effect from 10 March 2024, the remaining member of RERA proceeded on leave for a period of three months until 6 June 2024.
• On 9 March 2024, the State Government in the Department of Housing and Urban Development issued notice to the Authority proposing to supersede the Authority.

• On 12 March 2024, the State Government issued an order under Section 82(1) superseding the Authority.

• On 13 March 2024, the Government  appointed Shri M S Jaggi, IAS to exercise the powers and discharge the functions of the Authority under the Act in terms of the provisions of Section 82(1).

PIL in Punjab & Haryana High Court :-

• A Public Interest Litigation KEERTI SANDHU & ORS. V/s  STATE OF PUNJAB & ANR.CWP-(PIL) No. 48/2024  was moved before the High Court of Punjab & Haryana in which the order dated 14 March 2024 was passed by a Division Bench, where it noted that the authority has to exercise sensitive functions including permissions to be given to builders and dealing with complaints against builders and hence it is not in the interest of justice if the supersession is allowed at that point of time. Consequently, the order of the Government dated 12 March 2024 was stayed by the High Court.

Appeal in the Supreme Court of India :- 

• An appeal was preferred by the state in the matter of STATE OF PUNJAB & ANR. V/s KEERTI SANDHU & ORS.7152/2024 where the supreme court of india set aside the impugned order dated 14 March 2024 of the High Court.
• It also held that The power to supersede the authority is entrusted to the appropriate Government in terms of Section 82. 
• It also noted that The order of the High Court staying the notification of the State Government dated 12 March 2024 would not advance the purpose and object of the statute. 
• A stay on the supersession cannot either bring back the member who has superannuated or restore the Chairperson who has tendered his resignation.

Supreme Court - Home buyers who had availed remedies under RERA, can not be treated as unsecured creditors in IBC.

 IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3806 OF 2023

VISHAL CHELANI & ORS. .....Appellant(s)

Vs.

DEBASHIS NANDA .....Respondent(s)

Date of Decision :-October 06, 2023

FACTS OF THE CASE:-

1.  The appellants are home buyers, who had opted for allotment in a real estate project of  Buland Buildtech Pvt. Ltd.
2. Aggrieved by the delay in the completion of the project, the appellants approached the UPRERA which by its orders upheld this entitlement to refund amounts deposited by the, together with interest.
3. In the meantime, by the Order dated 28.02.2023 by NCLAT, in C.A.(AT) No. 991/2022 proceedings under the Insolvency and Bankruptcy Code, 2016 were initiated.
4. A resolution plan was presented to the adjudicating authority. In that plan, a distinction was made between home buyers, who had opted or elected for other remedies such as i.e. applying before the RERA and having secured orders in their favor, and those who did not do so.
5. Home buyers who did not approach authorities under RERA Act were given the benefit of 50% better terms than that given to those who approached RERA or who were decree holders.
6. The appellants felt aggrieved as their applications were rejected by the NCLT and their appeals in NCLAT too was unsuccessful. Consequently, they approached the Supreme Court.  

Contentions of appellants

1. with regard to the definition of financial debt [Section 5(8)(f)] which was amended in 2018 after which home buyer allottees in real estate projects also fell within the broad description of financial creditors, so A distinction cannot be made between one set of such home buyer allottees and another.

Contentions of defendants

1. the appellants cannot be permitted to secure two benefits. Having approached the UPRERA, they fell into a different sub-class of home buyers, who were entitled to specified amounts and, therefore, were unsecured creditors, as compared with allottees who had not invoked RERA remedies. It is submitted that such home buyers relinquished their rights under Section 18 of the RERA Act.

QUESTION OF LAW

1. The main issue before the Court was whether such a classification, differentiating between home buyers who sought relief under RERA and those who did not, could be upheld. In essence, the question was whether RERA-allotted financial claims should be treated differently from those not claiming relief under RERA in insolvency proceedings.

COURT'S FINDINGS

1. The Court is unpersuaded by the submission of the Resolution Professional’s view that once an allottee seeks remedies under RERA, and opts for return of money in terms of the order made in her favour, it is not open for her to be treated in the class of home buyer.
2. To treat a particular segment of that class differently for the purposes of another enactment, on the ground that one or some of them had elected to take back the deposits together with such interest as ordered by the competent authority, would be highly inequitable.
3. Section 238 of the IBC contains a non obstante clause which gives overriding effect to its provisions. Consequently its provisions acquire primacy, and cannot be read as subordinate to the RERA Act.
4. In view of the foregoing reasons,  appeal was allowed in the above terms and the impugned order is hereby set aside; the appellants are declared as financial creditors within the meaning of Section 5(8)(f) (Explanation) and entitled to be treated as such along with other home buyers/financial creditors for the purposes of the resolution plan.

Supreme Court in the said decision upheld the delegation of power to decide the complaints by single members in terms of Section 81 of the Act.

 The decision of Allahabad High Court in the case of M/s Newtech Promoters and Developers Pvt. Ltd. (supra) was challenged before the Supreme Court in the case of M/s Newtech Promoters and Developers Pvt. Ltd. Vs. State of UP and Ors. (Civil Appeal No(s).6745-6749/2021) decided on 11.11.2021.. Several questions were raised and answered. One of the questions was whether Section 81 of the Act authorizes the authority to delegate its power to single member to hear complaints instituted under Section 31. After referring to the statutory provisions and relying upon several decisions of the Supreme Court, the Supreme Court in the said decision upheld the delegation of power to decide the complaints by single members in terms of Section 81 of the Act.

The conclusion of the Supreme Court in this respect can be noted as under:-

“120. In view of the remedial mechanism

provided under the scheme of the Act 2016, in our considered view, the power of delegation under Section 81 of the Act by the authority to one of its member for deciding applications/complaints under Section 31 of the Act is not only well defined but expressly permissible and that cannot be said to be dehors

the mandate of law.”

RERA has the jurisdiction to entertain a complaint filed by an aggrieved person against the bank as a secured creditor

 In the matter of Union Bank of India, Jaipur vs. Rajasthan Real Estate Regulatory Authority & Ors., D.B. Civil Writ Petition No. 13688/2021 & 69 other connected Writ Petitions A divisional bench of the Rajasthan High Court  held that the RERA has the jurisdiction to entertain a complaint filed by an aggrieved person against the bank as a secured creditor. In this behalf, the Rajasthan HC observed that lenders such as banks who have entered into securitized transactions have the power in case of default under the SARFAESI Act to enforce their security interest through various measures such as taking possession of the secured assets, taking over management of the business of the borrower, etc. It was held that oncethe bank takes such actions for enforcing their security interest in terms of Section 13(4) of the SARFAESI Act, the secured creditor for all purposes enters into the shoes of the borrower/promoter as there is an assignment of statutory rights in favour of the lender.

The Rajasthan HC held that the RERA Act would have no retrospective application to transactions completed between the borrower (developer in such cases) and the lender (banks/financial institutions) wherein security interest has been created prior to the RERA Act. The RERA Act can have retrospective application only when the creation of security interest was made fraudulently or in collusion with the bank/financial institutions.

The Rajasthan HC observed that both the RERA Act and the SARFAESI Act are special laws. Whilst relying on the order of Bikram Chatterji and Ors. Vs. Union of India 2019 19 SCC 161, the Rajasthan HC concluded that in case of a conflict between two special laws, the special law that was enacted later would prevail. Since,the RERA Act was enacted subsequent to the SARFAESI Act, the provisions of RERA Act would prevail over the provisions of SARFAESI Act.

THE SUPREME COURT OF INDIA in the matter of UNION BANK OF INDIA

VERSUS RAJASTHAN REAL ESTATE REGULATORY AUTHORITY & ORS. ETC. ETC. Petition for Special Leave to Appeal (C) Nos.1861-1871/2022; Dated 14-02-2022 has ratified the above order of the Rajasthan High Court.

The doctrine of election

 The doctrine of election was discussed in A.P. State Financial Corporation v. M/s. GAR Re-rolling Corporation, (1994) 2 SCC 647as follows: 

“15. The Doctrine of Election clearly suggests that when two remedies are available for the same relief, the party to whom the said remedies are available has the option to elect either of them but that doctrine would not apply to cases where the ambit and scope of the two remedies is essentially different. To hold otherwise may lead to injustice and inconsistent results…”

generalia specialibus non derogant

 The latin maxim ‘generalia specialibus non derogant’ governs the

Issue of Conflict between two statues. For statutory construction, it means that “for the purposes of interpretation of two statutes in apparent conflict, the provisions of a

general statute must yield to those of a special one.” This was explained by

the Supreme Court in Gobind Sugar Mills Ltd. v. State of Bihar, (1999) 7 SCC 76 as follows:

“… while determining the question whether a statute is a general or a special one, focus must be on the principal subject-matter coupled with a particular perspective with reference to the intendment of the Act. With this basic principle in mind, the provisions must be examined to find out whether it is possible to construe harmoniously the two provisions. If it is not possible then an effort will have to be made to ascertain whether the legislature had intended to accord a special treatment vis-à-vis the general entries and a further endeavour will have to be made to find out whether the specific provision excludes the applicability of the general ones. Once we come to the conclusion that intention of the legislation is to exclude the general provision then the rule "general provision should yield to special provision" is squarely attracted.”

Section 22 of the Limitation Act 1963 provides for the computation of limitation in the case of a continuing breach of contract or tort.

Supreme court of india in the matter of Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan AIR 1959 SC 798 held that Section 22 of the Limitation Act 1963 provides for the computation of limitation in the case of a continuing breach of contract or tort. It provides that in case of a continuing breach of contract, a fresh period of limitation begins to run at every moment of time during which the breach continues. 

Supreme Court of India - allottee holds the right of refund on demand as an unconditional absolute right, if the promoter fails to give possession of the unit within the time stipulated under the terms of the agreement

The Supreme Court of India vide its land mark judgement Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. (MANU/SC/1056/2021) dated November 11, 2021 held that the allottee holds the right of refund on demand as an unconditional absolute right, if the promoter fails to give possession of the unit within the time stipulated under the terms of the agreement regardless of unforeseen events or stay orders of the Court/Tribunal, provided that the allottee wishes to withdraw from the project.

Thus, the unqualified right of the allottee to seek refund is not dependent on any contingencies or stipulations.

Hon'ble High Courts shall entertain the Writ petitions and exercise their discretionary powers as provided in terms of Article 226 of the Constitution of India, only in exceptional circumstances

Hon'ble High Courts shall entertain the Writ petitions and exercise their discretionary powers as provided in terms of Article 226 of the Constitution of India, only in exceptional circumstances, where either the Adjudicating Authority acted without jurisdiction or there was violation of the principles of Natural Justice.

 In the case of Whirlpool Corpn. v. Registrar of Trade Marks [1998] 8 SCC 1 

wherein, the Supreme Court laid down the triple test for entertaining a writ petition despite availability of the remedy of an appeal in contractual matters i.e., 

firstly if the action of the respondent is illegal and without jurisdiction, 

secondly if the principles of natural justice have been violated and 

thirdly if the petitioner's fundamental rights have been violated.

In the case of Barik Biswas vs Union of India & Ors., Hon'ble High Court of Delhi also dismissed the writ petition and held that 

"the action of coming to this Court is premature and therefore, this Court is of the view that since the petitioners have effective and efficacious remedy under PMLA, necessitating institution of the petition by invoking extraordinary jurisdiction of this Court is not appropriate at this stage. If this Court were to enter into the merits of this case at this stage, it would amount to scuttling the statutorily engrafted mechanism i.e. PMLA."

However, the Hon'ble High Court of Madras in the case of A.Kamarunnisa Ghori and Others , accepted the Writ Petition on a limited point, where the Enforcement Directorate and Adjudicating Authority interpreted the law in a way different from the view point of the Hon'ble Court. Against the argument of presence of alternate remedy, the Hon'ble Court held that "in view of the fact that the order of the Appellate Tribunal is ultimately subject to an appeal to this Court under Section 42 of the Act. By the time the petitioners go before the Appellate Authority and thereafter come up before this Court under Section 42, the petitioners would have long lost possession of their properties" and hence prejudiced.

Supreme Court of India: Triple Tier Test for prosecution under Section 138 of the Negotiable Instruments Act, 1881

Supreme Court of India : Alka Khandu Avhad v. Amar Syamprasad Mishra (2021) 4 SCC 675

Honourable Supreme Court of India has designed the Triple Tier Test for prosecution under Section 138 of the Negotiable Instruments Act, 1881.Para 9. On a fair reading of Section 138 of the NI Act, before a person can be prosecuted, the following conditions are required to be satisfied:

9.1. That the cheque is drawn by a person and on an account maintained by him with a banker.

9.2. For the payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability.

9.3. The said cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account.

Supreme Court of India:here is no bar on limitation for filing of the corruption cases in India

  Supreme Court of India : P. Ramachandra Rao v. State of Karnataka (2002) 4 SCC 578

Honourable Supreme Court of India has held that there is no bar on limitation for filing of the corruption cases in India as Prevention of Corruption Act, 1988 does not have such scheme of limitations

Supreme Court : Even after a petition under Section 7 of the IBC is admitted and before the Committee of Creditors is formed, the parties can settle the dispute

 Supreme Court : Swiss Ribbons Pvt Ltd and Anr. v. Union of India and Ors (2019) 4 SCC 17

Even after a petition under Section 7 of the IBC is admitted and before the Committee of Creditors is formed, the parties can settle the dispute. Further, even after the CoC is formed, Section 12A of the IBC does provide for a mechanism through which the petition can be withdrawn (if the parties were to reach a settlement);

Supreme Court : NCLT can not dismiss the petition on the basis that the corporate debtor has initiated the process of settlement with the financial creditors

 Supreme Court :ES Krishnamurthy v. M/S Bharath Hi Tech Builders Pvt Ltd.,

the legal issue before the apex court was whether the NCLT can, without applying its mind to the merits of the petition under Section 7, simply dismiss the petition on the basis that the corporate debtor has initiated the process of settlement with the financial creditors.

The Court found that the NCLT and NCLAT had abdicated their jurisdiction to decide a petition under Section 7 by directing the respondent to settle the remaining claims within three months, noting that such a course of action is not contemplated under the IBC except either admit or reject an application respectively contemplating occurrence of debt and default.

The Bench stated that while settlements can be encouraged by the NCLT and NCLAT to achieve the objectives of the IBC, however, "they cannot direct them by acting as courts of equity."

Suprem court : jurisdiction of the Lok Adalat under Section 20 is to facilitate a settlement of disputes between the parties in a case.

 NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY (NOIDA) V/s YUNUS & ORS. CIVIL APPEAL NO.901 OF 2022 (Arising out of SLP (C) No. 9927 of 2020)

It is clear beyond the shadow of any doubt that the jurisdiction of the Lok Adalat under Section 20 is to facilitate a settlement of disputes between the parties in a case. It has no adjudicatory role. It cannot decide a lis. All that it can do is to bring about a genuine compromise or settlement. 

The Lok Adalat by virtue of the express provisions is only a facilitator of settlement and compromise in regard to matters which are referred to it. It has no adjudicatory role (See State of Punjab & Anr. v. Jalour Singh & Ors (supra))

In Union of India v. Ananto (Dead) & Anr.14, this Court inter alia held as follows:

“7. The specific language used in sub-section (3) of Section 20 makes it clear that the Lok Adalat can dispose of a matter by way of a compromise or settlement between the parties. Two crucial terms in sub-sections (3) and(5) of Section 20 are "compromise" and "settlement". The former expression means settlement of differences by mutual concessions. It is an agreement reached by adjustment of conflicting or opposing claims by reciprocal modification of demands.

As per Termes de la Ley, "compromise is a mutual promise of two or more parties that are at controversy". As per Bouvier it is "an agreement between two or more persons, who, to avoid a law suit,amicably settle their differences, on such terms as they can agree upon".The word "compromise" implies some element of accommodation on each side. It is not apt to describe total surrender. [See Re NFU Development Trust Ltd. [1973] 1 All ER 135(Ch.D)]. A compromise is always bilateral and means mutual adjustment. "Settlement" is termination of legal proceedings by mutual consent. The case at hand did not involve compromise or settlement and could not have been disposed of by Lok Adalat. If no compromise or settlement is or could be arrived at, no order can be passed by the Lok Adalat. Therefore, question of merger of Lok Adalats order does not arise.”

https://www.livelaw.in/pdf_upload/new-okhla-industrial-development-authority-noida-vs-yunus-2022-livelaw-sc-123-408906.pdf

Supreme Court : parties are entitled for the refund of the Court Fees in case of private amicable negotiation without intervention of the Hon’ble Courts

 High Court of Madras v. M.C. Subramaniam (2021) 3 SCC 560

Honourable Supreme Court of India has held that parties are entitled for the refund of the Court Fees in case of private amicable negotiation without intervention of the Hon’ble Courts as prescribed under aegis of Section 89 of the Code of Civil Procedure, 1908

Supreme Court : the banks had failed to comply with their duties, and had in fact colluded with the developer in committing a fraud on the home buyers, and breaching public trust.

 Bikram Chaterjee vs. Union of India, [2018]147 SCL 154 wherein the Apex Court took cognizance of the fact that the banks had failed to comply with their duties, and had in fact colluded with the developer in committing a fraud on the home buyers, and breaching public trust. It may be useful to refer to paragraphs 69 and 127 of the judgement, which reads as under-

“69. In the instant matter, the question of larger public importance is involved. It is a shocking and surprising state of affairs that such large scale cheating has taken place and middle and poor class home buyers have been duped and deprived of their hard-earned money and lifetime savings and some of them had taken a loan from the bank and they are not getting houses. Bank has made payment to the builder, owners have the liability of making payment of amount with interest, homebuyers are still waiting for their dream houses to be completed.

127. The Forensic Auditors’ report makes it apparent that Bankers have failed to ensure and oversee that the money was invested in the projects. It was diverted elsewhere as rightly found by the Forensic Auditors. Even what was paid by the home buyers, had not been used in the projects and stands diverted. There was, in fact, no necessity for raising the loans from the bank. The money borrowed from banks was used to create other assets worth thousands of crores. Thus, the banks can realise their money from those assets  and from guarantors and not from the investment of home buyers, not from the buildings in which loans granted by banks have not been invested, which have been erected partially or some are at the nascent stage, for which hard- earned money has been paid by the home buyers”

SC - Right to appeal is neither an absolute right nor an ingredient of natural justice

 Vijay Prakash D. Mehta v. Collector of Customs (1988(4) SCC 402), wherein the  Apex Court observed: 

 "9. Right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant."

in The Anant Mills Co. Ltd. v. The State of Gujarat (1975(2) SCC 175), it was held that

"...The right of appeal is the creature of a statute. Without a statutory provision creating such a right the person aggrieved is not entitled to file an appeal.

the terms of registered document can be altered, rescinded or varied only by subsequent registered document and not otherwise

 S. Saktivel(Dead) Vs. M. Venugopal Pillai & Others, (2000) 7 SCC 104 wherein the Supreme Court with reference to Section 92 proviso (4) of the Indian Evidence Act held thus:

the terms of the registered document can be altered, rescinded, or varied only by subsequent registered document and not otherwise

Supreme Court of India -Charge of the money paid by the home buyers must be treated as the highest priority.

in the matter of Bikram Chatterjee and others vs. Union of India and others in Writ Petition (C) No.940 of 2017 and other connected matters, (MANU/SC/0947/ 2019) The Apex Court held that charge of the money paid by the home buyers must be treated as the highest priority. It also held that "the public trust doctrine enshrined under Article 21of the Constitution of India is very much applicable upon the authorities and a duty is cast upon them to act fairly and reasonably in order to promote the public good and public interest."

that every allegation / averment in the plaint, if not denied specifically or stated to be not admitted in the written statement, shall be taken to be admitted

 In the Matter of Balraj Taneja v. Sunil Madan (1999) 8 SCC 396 at page 404

Honorable Supreme Court of India has held that every allegation / averment of fact in the plaint, if not denied specifically or by necessary implication or stated to be not admitted in the written statement, shall be taken to be admitted in accordance to the Order 8 Rule of the Code of Civil Procedure 1908. The denial of the statement of the fact has to be Specific and not Evasive else it will be considered as deemed admitted in the eyes of the law.