Punjab National Bank v. Asish Kumar Pradhan & Anr.
Forum: OREAT
Facts:
Homebuyers had booked units and paid substantial amounts. The promoter defaulted on a bank loan secured by mortgage of the project land. The bank initiated auction proceedings under SARFAESI, while ORERA had restrained the auction in order to protect the homebuyers.
Issue:
Whether the bank's security rights could override the prior contractual rights of homebuyers and whether RERA could protect allottees against SARFAESI enforcement.
Held:
OREAT upheld protection of the homebuyers. It held that after invoking Section 13(4) SARFAESI measures, the bank became subject to the RERA framework in the circumstances of the case. The prior AFSs created enforceable rights in favour of the homebuyers.
Ratio:
Where purchasers have acquired enforceable rights in specific units before enforcement of security, the secured creditor's rights cannot necessarily be exercised in a manner that defeats those existing allottee rights.
Practical Impact:
Banks financing real-estate projects should undertake due diligence concerning existing allotments and agreements. Homebuyers should establish the chronology of allotment, payment and mortgage.
Relevant RERA Sections:
Section 11 — promoter obligations; Section 18 — allottee remedies; Section 17 — title-related rights; Section 79 — jurisdiction.
The decision also concerns the interaction between RERA and Section 13(4) of SARFAESI.
