Bombay High Court Guides People To First File Review Before RERA, Then Approach Maha REAT

Bombay High Court Guides People To First File Review Before RERA, Then Approach Maha REAT

The judge referred to the judgment of the Supreme Court in a previous case

The Bombay High Court has held that it is improper for a homebuyer to appeal before the Maharashtra Real Estate Appellate Tribunal (MahaREAT) claiming that a concession recorded by the Maharashtra Real Estate Regulatory Authority (MahaRERA) was erroneous, without first applying before it to review the order.

The appellant (builder) is a promoter of the residential housing project comprising two buildings Alta Monte and Signet under the Slum Rehabilitation Scheme.

The respondents (homebuyers) purchased two flats in D-Block of the project by paying Rs.3,91,04,400 for each flat.

The builder issued two letters of allotment dated 11.09.2013 to the homebuyers. He agreed to hand over possession of both flats by 01.06.2017, with a grace period of six months.

However, the builder failed to execute the sale agreement with the homebuyers and did not deliver possession of the flats. As a result, the homebuyers filed a complaint before the MahaRERA. They sought directions from it to execute the registered agreements for sale, payment of interest for delayed possession, and passing on the Goods and Services Tax (GST) credit.

In its 25.11.2020 order, the MahaRERA directed the builder to execute and register the sale agreement within 30 days under Section 13 of the Real Estate (Regulation and Development) Act, 2016.

The builder was also ordered to hand over the possession of the flats to the respondents by July 2021. The tribunal further directed the builder to pay interest at the rate of MCLR plus 2 percent on the amounts collected after May 2017. He was directed to adjust the interest against payments due from the homebuyers.

However, displeased with the MahaRERA order, the homebuyers appealed before MahaREAT. They sought interest on the entire amount paid, and a directive for passing of the GST credit. They also requested compensation of Rs.50,00,000 for mental harassment caused to them.

In its 17.03.2023 order, the MahaREAT allowed the appeal of the homebuyers by modifying the MahaRERA order. The tribunal directed the builder to pay interest to the homebuyers on the entire amount paid from 01.01.2018 until the date of handing over the possession of the flats. It also ordered the builder to compensate the homebuyers by paying Rs.10,000.

Aggrieved by the order, the builder pleaded before the Bombay High Court.

The builder contended that MahaREAT erred by considering the appeal of the homebuyers, as they obtained the 25.11.2020 order by concession. He argued that the homebuyers agreed before the MahaRERA that interest should only be paid on the amounts collected after the implementation of RERA, considering the financial difficulties faced by the builder in executing the project.

The builder added that the MahaRERA acknowledged the fact that the project was facing a liquidity crisis, and penalizing the builder would further delay the project’s completion.

He contended that if the homebuyers had issues with the concession accorded by the MahaRERA, they should have filed a review application instead of directly challenging the order before the MahaREAT. It was inappropriate for a party to plead before the appellate tribunal that what was recorded by a subordinate court was erroneous without first drawing the attention of that court.

On the other hand, the homebuyers apprised the court that the builder delayed the completion of the project and withheld substantial amounts paid by them. They stressed that the allotment letters issued in September 2013 stipulated a handover period until June 2017, with a grace period extending to January 2018. However, more than six years later, the builder has yet to deliver the possession of the flats.

The homebuyers added that to address their plight, the appellate tribunal had rightfully intervened and directed the builder to pay interest on the entire amount received from the homebuyers.

The defendants argued that the MahaRERA order was not based on concession but on merits. They added that their appearance before the MahaRERA did not imply any concession, and they did not relinquish their right to claim interest on the amounts paid to the builder.

According to them, the order of the MahaREAT aligned with the statutory scheme of Section 18 of the RERA. They further stated that the scope of interference under Section 100 of the Code of Civil Procedure, 1908, in challenging the tribunal's order was limited, which held that unless a palpable error was evident, the court should refrain from interfering. Thus, they urged that the appeal should be dismissed.

On hearing both parties, the bench comprising Justice Sandeep V Marne set aside the 17.03.2023 MahaREAT order and upheld the MahaRERA order.

The court observed that initially, the homebuyers insisted on payment of interest on the entire amount. However, after considering the explanation provided by MahaRERA regarding the project's liquidity crisis, they modified their demand to seek interest only on the amount collected by the builder after RERA’s implementation.

The bench held that the defendants had conceded before the MahaRERA as they willingly accepted the interest only on amounts paid after the implementation of RERA. It observed that they neither applied before the MahaRERA regarding the erroneous recording of the concession nor raised any specific ground in the appeal.

Thus, Justice Marne stated that the judgment and order issued by MahaREAT contained significant errors. He noted a jurisdictional error in the decision of the MahaREAT to entertain the appeal without requiring the homebuyers to seek clarification from the MahaRERA regarding the concession recorded in the order. He observed another error made by MahaREAT in entertaining an oral plea from the homebuyers claiming that they did not concede before the MahaRERA.

The court referred to the decision of the Supreme Court in the State of Maharashtra vs. Ramdas Shrinivas Nayak and others (AIR 1982 SC 1249) case, wherein it was held that the appellate tribunal must believe that a concession recorded by a judge was indeed made, as only the judge present during the recording could vouch for it. Thus, the correct course of action for a party was to invite the judge's contention if they felt that the recording of concession was erroneous.

The judge, therefore, set aside the 17.03.2023 MahaREAT order, emphasizing that the appellate tribunal lacked jurisdiction to entertain appeals where a party contended that the authority recorded the concession erroneously.