WHETHER THE CASES PENDING/ ONGOING WITH OTHER TRIBUNALS BE ENTERTAINED BY RERA? IN LIGHT OF THE HARYANA RERA JUDGMENT.

Sukhbir Singh Grewal vs. M/s MVL Ltd. [1] 

Senguttuvan K-Partner

Kshithija Prakashan-Associate

I. INTRODUCTION

Sukhbir Singh Grewal vs. M/s MVL Ltd, is one such significant and a one of its kind judgment rendered by the Hon’ble Haryana Real Estate Regulatory Authority on 12th September 2018, which has thrown some imperative light on the understanding of entertainment of complaints by RERA, during the pendency of cases relevant to the complaint, before various other Tribunals in India. The case pertains to Section 31 of the Real Estate (Regulation & Development) Act, 2016 read with Rule 28 of the Haryana Real Estate (Regulation & Development) Rules, 2017. Predominantly, the case revolves around the failure on part of the Developer (herein, the Respondent) in delivering the possession of an IT Space to the Complainant, on the agreed date and non-compliance of the Return Agreement dated 22nd May 2010, which was duly entered into by both the parties. In order to understand the moot question raised in this Article, it is imperative to have a glimpse on the facts and issues raised, pursuant to the complaint been filed by the Complainant before the Hon’ble Haryana RERA.

II. FACTS OF THE COMPLAINT

The Complainant had booked an IT Space property with Super Area of 500 sq. ft. from the project named “India Business Centre” owned by the Respondent, M/s MVL Ltd, situated in the District of Gurugram, Haryana on 15th May 2010. However, post the booking date till now, it has been more than seven and half years and no buyer agreement has been executed till date. Further, the complainant has got no concrete legal paper depicting the legal ownership of the property for which he has paid a huge amount of money. It is the case of the complainant that he entered into an assured return agreement on 15th May 2010 with the respondent, wherein he was under a legal obligation to pay the complainant Rs. 39/- per sq. ft. per month, from the date of execution of the said agreement till the delivery of possession, tenant is inducted, lease commences and rentals is received by the complainant, as stated in Clause 3.1 of Assured Return Agreement. Pursuant to this Assured Return Agreement, all the cheques handed over to the complainant by the respondent, were retuned by the bank for one or the other reason especially as bounced. Furthermore, despite the non-completion of project even after seven and half years, the respondent had offered to lease out the premises to the 3rd party without even completing the project. It was also the case of the complainant that the respondent has recurrently failed to deposit TDS, due from their side, which was to be deposited under the Assured Return Agreement. The complainant also submitted that the respondent has not registered the said project with the concerned authority within the stipulated time period prescribed under Section 3 of the Act. Owing to this, the complainant pled for an action to be taken under Section 59 of the Act, which provides for Punishment for Non-Registration under Section 3.

III. ISSUES RAISED

  1. Whether the Respondent/ Developer has taken necessary clearance from the competent authority?
  2. Whether the Assured Return Agreement is a Collective Investment Scheme and thereby, ARA has been infringed by the Developer?
  3. Whether the order of the SEBI and the SAT comes within the purview of the Clause of Force Majeure?
  4. Whether the Developer is under a legal obligation to hand over 10% of the estimated cost of the real estate project to the complainant under Section 59 of the RERA Act, 2016?

IV. PRELIMINARY OBJECTIONS BY THE RESPONDENT

  1. With regards to the complaint raised by the complainant that the respondent had failed to register the said project under the RERA Act, 2016, it was duly objected by the respondent that they have filed an application for registration of the said project on 31st July 2017. However, the same is still pending before the Hon’ble Haryana RERA and is not yet registered.
  2. With regards to the issue that whether the Assured Return Scheme is a Collective Investment Scheme or not, it was submitted by the Respondent that the SEBI vide its interim order dated 24th September 2013, had restrained the respondent from alienating, disposing off or selling any of the assets of the respondent and further, vide its final order dated 19th December 2014 classified the Assured Return Scheme as a Collective Investment Scheme (CIS). Therefore, the Respondent submitted that the issue “whether Assured Return Scheme is a CIS and therefore, valid under law or not”, is still pending before the Hon’ble Security Appellate Tribunal in the case of M/s MVL Ltd vs. SEBI.[1]
  3. The next issue was with respect to the applicability of invoking the Force Majeure clause. It was submitted by the respondent that pursuant to Article 6.1 of the ARA, wherein it is provided that in the event of force majeure conditions, the payment of assured return would remain suspended for such period. In the instantaneous case, Force Majeure condition are the orders of the SEBI and the SAT, restraining the respondent from alienating, selling and disposing off assets of the said project and also, the pendency of said appeal before SAT. Thus, the liability of the respondent to pay assured return is suspended as per the ARA.
  4. With regards to the last issue, it was submitted by the respondent that factually 82% of the structure was completed in 2013 only and that the respondent was in full position to handover the possession in 2014. However, the SEBI order dated 24th September 2013, resulted into stoppage of disbursement of sanctioned loan by the bank resulting into financial squeeze and causing the construction of the project delayed.

V. FINDINGS OF THE RERA AUTHORITY

The Hon’ble Haryana RERA affirmed the submissions of both the counsel for the respondent as well as complainant, that the project was factually complete to the extent of 82% in 2013. However, owing to a subsequent order passed by SEBI on 26th September 2013 and their final order dated 19th December 2014, ruling that this said project is not purely a real estate transaction, rather it fulfils the ingredients of a Collective Investment Scheme. This decision of the SEBI, was subsequently challenged by the respondent before the Securities Appellate Tribunal (SAT).[2]

In accordance with the facts and circumstances of the case, the Hon’ble Haryana RERA was addressed with the basic issue, “whether it is a real estate project or CIS?”, On this, even though, SEBI had ordered all the money along with interest be returned to the investors. The remedy with the Real Estate Regulatory Authority is also more or less on the same pattern, i.e., in case of failure to give possession by the due date, the allottee shall be refunded the money paid by him to the promoter along with interest as per prescribed rate. Thus, since the matter is already pending with SEBI / SAT, there essentially remains no legit case at present, before the RERA to continue further proceedings. Therefore, only once the SAT set aside the order of the SEBI, only then the allottee may come before the RERA for the proceedings under the Act.

VI. CONCLUSION

The Hon’ble Haryana Real Estate Regulatory Authority, through this significant decision threw some imperative light on a very contemporary issue of entertainment of complaints by the RERA, when there are already in place, pending cases before various other Tribunals, which are relevant to the complaint been filed before the RERA. The Haryana Real Estate Authority in this case, has directed the complainant to approach them for enforcement of rights and fulfillment of obligations by the promoter, only if the matter is settled by the Securities Appellate Tribunal (SAT) against the orders of the SEBI and thereby, declaring this project as a real estate project. Therefore, the position of entertainment of complaints by RERA, during the pendency of such cases before various other Tribunals in India is made amply clear in this judgment.

 

[1] Civil Appeal No. 157/ 2015

[2] Ibid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[1] Complaint No. 48 of 2018

 

 

 

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