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RERA prevails over SARFAESI

Cause Title : Union Bank Of India vs Rajasthan Real Estate Regulatory Authority, Special Leave to Appeal (C) Nos.1861-1871/2022, Supreme Court Of India

Date of Judgment/Order : 14-02-2022

Corum : M.R. Shah; B.V. Nagarathna, Jj.

Citied: Bikram Chatterji and Ors. Vs. Union of India and Ors. reported in 2019 19 SCC 161

Background

Appeal was filed against judgment of the Rajasthan High Court declaring the RERA Act to prevail over SARFAESI act.

Judgment

The Supreme Court observed that on the question of applicability of RERA while SARFAESI Act is also activated, Section 35 of the SARFAESI Act provides that the provisions under the said Act shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Similarly worded provision giving overriding effect to RERA Act is contained in Section 89. This Section as noted, provides that provisions of the said Act (i.e. RERA Act), shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The question would therefore arise which of the two provisions giving overriding effect to the statute would prevail. 

The judicial trend would thus suggest that in the event of direct conflict between the two central statutes giving overriding effect to the Act, ordinarily the subsequent legislation would prevail.

The Supreme Court agreed with the conclusion drawn by the Rajasthan HC, where the HC held that :-

  • As held by the Supreme Court in the case of Bikram Chatterji (supra) in the event of conflict between RERA and SARFAESI Act the provisions contained in RERA would prevail.
  • RERA would not apply in relation to the transaction between the borrower and the banks and financial institutions in cases where security interest has been created by mortgaging the property prior to the introduction of the Act unless and until it is found that the creation of such mortgage or such transaction is fradulent or collusive.
  • RERA authority has the jurisdiction to entertain a complaint by an aggrieved person against the bank as a secured creditor if the bank takes recourse to any of the provisions contained in Section 13(4) of the SARFAESI Act.


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