Rajasthan High Court Issues Notice on the Plea Challenging the Extension of RERA to Real Estate Projects

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The Jaipur Bench of the Rajasthan High Court on last Wednesday issued a notice on a PIL. The PIL is for challenging an order passed Rajasthan Real Estate Regulation Authority. The order grants an extension for the completion of registered real estate projects.

Facts of the Case 

The real estate sector in the country has suffered huge setbacks. Due to lockdown and after relaxation non-availability of labor has made the real estate sector come to a standstill.

There are lakhs of homebuyers who are waiting for possession of their dream homes. On request of the CREDAI, the Central Government has declared the COVID-19 as a force majeure situation. Thus, real estate projects which were due for completion got an automatic extension. The extension of a timeline of 6 months to cover the COVID-19 lockdown situation. But in an extreme case, Rajasthan RERA Authority has extended it for 1 year.

This step even included projects which were due for compliance before the announcement of lockdown. The extension is permitted due to the COVID-19 impact on the business. Thus, the automatic extension for completion ought to have been only for the projects of which completion date were on or after 19th Mach 2020.

Arguments

Chief Justice Indrajit Mahanty and Justice Satish Kumar Sharma issued the notice. The impugned order dated May 13, 2020, grants across the board extension to all such projects.

The petition is filed by Advocate Ashish Sharma through Advocates Nipun Singhvi and Pranjul Chopra. The petition states that clause 6 of the impugned order is liable to be quashed. The said order, passed for easing the industry suffering from the COVID-19 pandemic. Though it fails to differentiate those projects which have lapsed before 19.03.2020 without any force majeure event. The violation of said Act, 2016, and the buyer-seller agreement in such cases is not a result of force majeure events.

Court’s Observation

Section 12 mandates that if the person intends to withdraw from a project due to the following:

  • an incorrect statement made by the promoter in the notice advertisement
  • An incorrect prospectus
  • the model apartment plot or building

The Court opined that the promoter ought to return the entire investment along with interest and compensation. This is because no interest or compensation is payable for false statements made as per Section 12 of the RERA, 2016 The said order, passed with misapplication of law and fact, seeks to exempt a delinquent promoter for a wrongful act committed. However, irrespective of the fact of with or without the ongoing COVID-19 pandemic, it still remains a wrongful act. The order suffers from infirmities and thus deserves to be set-aside, the plea states.

Decision

Union Finance Minister had announced to treat the COVID-19 period as a force majeure situation. Ministry of Housing and Urban Development will issue advisories for the same. It also stated registration and completion date for all registered projects expiring on or after March 25, 2020, can be suo motu extended only by six months even without any individual applications.


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