Regulation 9 of Rajasthan RERA Regulations valid, RERA jurisdiction over banks limited to Section 13(4) SARFAESI invocation

The Rajasthan HC upheld the validity of Regulation 9 of Rajasthan RERA Regulations, 2017, ruling it is not ultra vires the parent Act. The court determined that RERA has jurisdiction over banks/financial institutions only when they invoke Section 13(4) of SARFAESI Act, effectively stepping into the borrower's shoes through statutory assignment. RERA provisions prevail over SARFAESI in case of conflict, but RERA cannot apply retrospectively to pre-existing security interests unless fraud or collusion is established. The delegation of powers to single RERA members is valid under Section 81 of the Act.

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1. ISSUES PRESENTED and CONSIDERED

The judgment primarily deals with the following core legal questions:

(i) Whether Regulation 9 of the Rajasthan Real Estate Regulatory Authority Regulations, 2017, is ultra vires the Rajasthan Real Estate (Regulation and Development) Act, 2016 (RERA Act).

(ii) Whether the Rajasthan Real Estate Regulatory Authority (RERA) has jurisdiction over banks, particularly when they act as secured creditors under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

(iii) Whether RERA can apply retrospectively to transactions and mortgages created before the enactment of the RERA Act.

(iv) Whether RERA has the authority to issue directions against banks or financial institutions claiming security interest over properties involved in real estate agreements.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Validity of Regulation 9 of the Regulations of 2017

- Relevant Legal Framework and Precedents: The RERA Act establishes the Real Estate Regulatory Authority and empowers it to regulate real estate projects. Section 85 allows the authority to make regulations consistent with the Act. Regulation 9 permits single-member benches to decide specific matters.

- Court's Interpretation and Reasoning: The court held that Regulation 9 is not ultra vires as it is procedural and consistent with the Act. The delegation of powers to single members is permissible under Section 81 of the RERA Act.

- Key Evidence and Findings: The court referenced the Supreme Court's decision in M/s Newtech Promoters and Developers Pvt. Ltd., which upheld similar delegation powers under the Act.

- Application of Law to Facts: The court found that the delegation of powers to single-member benches is consistent with the statutory framework and does not require Regulation 9 to be invalidated.

- Treatment of Competing Arguments: The petitioners argued that Regulation 9 was ultra vires, but the court found these arguments unpersuasive in light of the statutory provisions and judicial precedents.

- Conclusions: Regulation 9 is valid and consistent with the RERA Act.

Issue (ii): Jurisdiction of RERA over Banks

- Relevant Legal Framework and Precedents: The definition of "promoter" under Section 2(zk) of the RERA Act includes assignees, potentially encompassing banks acting as secured creditors.

- Court's Interpretation and Reasoning: The court held that banks, when enforcing security interests under the SARFAESI Act, could be considered assignees of the promoter, thus falling under RERA's jurisdiction.

- Key Evidence and Findings: The court relied on the interpretation of the term "assignee" and the statutory rights banks acquire under the SARFAESI Act.

- Application of Law to Facts: The court found that when banks take measures under Section 13(4) of the SARFAESI Act, they assume the rights of the borrower, triggering RERA's jurisdiction.

- Treatment of Competing Arguments: The banks contended that RERA lacked jurisdiction, but the court found that the statutory framework allowed for such jurisdiction.

- Conclusions: RERA has jurisdiction over banks acting as secured creditors under certain circumstances.

Issue (iii): Retrospective Application of RERA

- Relevant Legal Framework and Precedents: The RERA Act does not explicitly provide for retrospective application. The court considered the principle that statutes are presumed to be prospective unless stated otherwise.

- Court's Interpretation and Reasoning: The court concluded that RERA does not apply retrospectively to transactions and mortgages created before its enactment unless fraud or collusion is involved.

- Key Evidence and Findings: The court distinguished between ongoing projects and completed transactions, emphasizing the impracticality of applying RERA retrospectively to closed transactions.

- Application of Law to Facts: The court determined that RERA's obligations cannot affect pre-existing mortgages unless fraudulent conduct is proven.

- Treatment of Competing Arguments: The respondents argued for broader applicability, but the court limited RERA's retrospective reach to cases of fraud.

- Conclusions: RERA does not apply retrospectively to pre-existing mortgages unless fraud is established.

Issue (iv): Authority of RERA to Issue Directions Against Banks

- Relevant Legal Framework and Precedents: Section 31 of the RERA Act allows complaints against promoters, allottees, or real estate agents. The definition of "promoter" includes assignees.

- Court's Interpretation and Reasoning: The court held that RERA could issue directions against banks once they exercise rights under Section 13(4) of the SARFAESI Act, effectively becoming assignees.

- Key Evidence and Findings: The court analyzed the statutory framework of both RERA and SARFAESI, concluding that banks assume the borrower's rights upon enforcement actions.

- Application of Law to Facts: The court found that RERA could address complaints involving banks when they act as assignees under the SARFAESI Act.

- Treatment of Competing Arguments: The banks argued against RERA's authority, but the court found sufficient statutory basis for RERA's jurisdiction in specific contexts.

- Conclusions: RERA can issue directions against banks acting as assignees under the SARFAESI Act.

3. SIGNIFICANT HOLDINGS

- Preserve Verbatim Quotes of Crucial Legal Reasoning: "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."

- Core Principles Established: The RERA Act allows for delegation of powers to single-member benches; RERA can exert jurisdiction over banks under certain conditions; RERA does not apply retrospectively to pre-existing mortgages unless fraud is involved.

- Final Determinations on Each Issue: Regulation 9 is valid; RERA has jurisdiction over banks in specific contexts; RERA does not apply retrospectively to pre-existing mortgages without fraud; RERA can issue directions against banks acting as assignees.

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