Authority under RERA Act, 2016 is empowered to impose interest on contravention of obligations by promoter

In Paramount Prop Build Pvt. Ltd vs. State Of U.P. And Others, as the petitioner, who is the promoter, could not deliver possession of the flats to the allottees in time and there occurred delay, the allotees filed complaint before Uttar Pradesh Real Estate Regulatory Authority, who passed the impugned orders awarding interest.

The petitioner appealed before the High Court of Allahabad, claiming that the impugned orders are without jurisdiction inasmuch as the power to grant interest, does not vest with the authority.

The High Court however observed that  as per Section 18 of the Real Estate (Regulation and Development) Act, 2016, which deals with of return of amount and compensation in case the promoter fails to complete or is unable to give possession of an apartment, plot or building, Sub-section (1) of Section 18 provides for two different contingencies. In case the allottee wishes to withdraw from the project, the promoter shall be liable on demand to return the amount received by him to the allottees in respect of the apartment, plot or building as the case may be with interest at such rate as may be prescribed including compensation in the manner as provided under the Act. Alternatively, where the allottee does not intend to withdraw from the project, the promoter shall, as per the proviso to Section 18(1), be liable to pay interest for every month of delay, till the handing over of the possession, at such rate as the case may be prescribed.

Further, Section 38(1) of the Act, 2016 confers powers upon the Authority to impose penalty or interest, in regard to any contravention of obligations cast upon the promoters, the allottees and the real estate agents, under the Act or the Rules or the Regulations made thereunder.

The case at hand being one where the promoter has failed to give possession of the apartments, duly completed by the specified date, and the allottees having not intended to withdraw from the project, the proviso to Section 18(1) casts an obligation on the promoter to pay to the allottees interest for every month of delay, till the handing over of the possession, at the prescribed rate.

The promoter having contravened the aforesaid obligation with regard to giving possession of the apartment by the specified date, and complaints in this regard having been filed by the allottees, the Authority exercising powers under Section 38(1) is fully empowered to impose interest in this regard to contravention of the obligation cast upon the promoter.

It was the considered view of the High Court, that in case of contravention of any obligation cast upon the promoters, the Authority while exercising jurisdiction under Section 38(1), is fully empowered to award interest. The impugned orders passed by the Authority, therefore, cannot be said to be without jurisdiction.

The High Court also took notice of the fact that the Act, 2016 was enacted for establishment of the real estate regulatory authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, as the case may be, or sale of real estate project in an efficient and transparent manner and to protect the interest of consumers in real estate sector; accordingly, the provisions of the Act have to be read in the manner so as to sub-serve the aforesaid objects.