Has RERA Become Toothless? Requirement Of Amendment In Local Land Laws To Execute Recovery Certificates

INTRODUCTION

The Real Estate (Regulation & Development) Act, 2016 [1] [RERA] emerged as a beacon of hope for the then-unregulated real estate sector and purported to provide solutions to the problems of homebuyers. By mandating registration of projects, adherence to strict timelines, and transparency in transactions, mandating opening of escrow accounts among other novel provisions, RERA sought to bring a paradigm shift in the real estate sector.

The enforcing provisions of the legislation are codified under Sections 18 and 40 of the Act. Section 18 provides for refund, compensation, and interest among other remedies and Section 40 provides for the issuance of a Recovery Certificate [RC] if the promoter fails to fulfil its obligations under Article 18. Moreover, the SC, in the landmark judgement of Newtech Promoters, settled that S. 40(1) allows for the retrieval of the entire refund amount as “arrears of land revenue,” extending beyond mere compensation and interest. [2]

DISMAL RATE OF EXECUTIONS

The responsibility of the Adjudicating Authority ends after issuing an RC, which then, as per the local land codes, goes to the collector/revenue officer who assumes the duty of recovering the amount as “arrears of land revenue.”

However, the RERA report card since 2016 is clear on one aspect: the dismal execution rate of such RCs. For instance, in Haryana, out of 240 RCs issued by HARERA, [3] only 1 was executed, i.e., 0.41%. In Karnataka, out of 683 RCs issued by the KRERA, [4] only 84 have been executed. i.e., 12%. In Maharashtra, out of 1123 RCs issued by MahaRERA [5] only 204 have been executed i.e., 18%. In Uttar Pradesh, out of 2352 RCs issued by the UPRERA, [6] only 118 have been executed. i.e., 5%.

As the markets have it, [7] RERA has failed and has become one of the least attractive forums for real estate dispute resolution as compared to Consumer forums and NCLTs.

REQUIREMENT OF AMENDMENT IN LOCAL LAWS

The root cause of delayed recovery stems from the absence of accountability measures within local land codes governing the duties of collectors/revenue officers responsible for collecting “arrears of land revenue.” While these codes typically outline procedures such as issuing demands, attachments, detentions, sales, or forfeitures to recover arrears, they lack a mechanism to enforce timely action by the officers involved.

While there are provisions for ultimatums directed at defaulters, there’s a glaring absence of any such ultimatum for the officers themselves to ensure the completion of procedures within a specified timeframe. Consequently, officers often linger indefinitely on the required actions, leaving homebuyers in a quandary.

For instance, Section 141 of the Punjab Land Revenue Act, 1887 grants authority to revenue officers to recover outstanding amounts without establishing any framework for accountability or specific timeframes. [8] Consequently, when revenue officers fail to act upon the RCs, there are no mechanisms in place to hold them responsible or ensure timely resolution

Similarly, Section 176 of the Maharashtra Land Revenue Code, 1966 outlines various methods of recovery that can be employed against defaulters but fail to offer any recourse in instances where the collector neglects to act upon the RCs. [9]

Even under the U.P. Revenue Code 2006 and rules thereto, there is no statutory remedy against the collector’s failure to act upon the RC. [10]

WRIT OF MANDAMUS AS THE LAST RESORT

The only available remedy against such arbitrary actions of the collectors/revenue officers is filing a Writ of Mandamus under Article 226 of the Constitution before the High Courts. [11]

However, the author contends that instead of directly resorting to the High Courts, there should be an inherent statutory procedure for RC-holders to follow. This procedural framework should provide RC-holders with the right to approach the lower courts first to address the issues of non-action or negligence by collectors or revenue officers.

Such statutory remedy offers dual advantages. First, it will rekindle confidence and faith in the RERA regime and expedite the execution of the RCs. Such a procedure will also motivate collectors/revenue officers to act promptly, ensuring regulatory effectiveness. Second, it will decrease the unwarranted caseload on HCs. As illustrated by a case where the RC was pending for more than 2 years, the Allahabad HC noted that “due to inaction of the District Magistrate, unavoidable litigation is coming to this Court time and again.” [12] Therefore, an accountability regime over such officers must be placed in state revenue codes.

POSSIBILITY OF CRIMINAL SANCTIONS

Another reason for transitioning of homebuyers from the RERA framework to seeking redress through Consumer forums can be attributed in part to the presence of Section 72 within the Consumer Protection Act, 2019. [13] This provision not only entails financial penalties but also allows for the potential imprisonment of offenders for up to three years. The prospect of facing incarceration has emerged as a pivotal factor in ensuring compliance with the directives issued by consumer forums. Conversely, RERA primarily relies on the issuance of RCs as the sole recourse in cases of non-compliance, perpetuating a cycle of delays and frustrations for homebuyers. Introducing a provision for imprisonment within RERA could serve as a potent deterrent, particularly for prominent developers, builders, and promoters known to circumvent regulations through illicit means, including bribery of local and state-level officials.

CONCLUSION

The lack of effective execution of RCs, coupled with bureaucratic inertia, has severely undermined the intended impact of RERA, essentially rendering it ineffective and offering little to no relief to affected parties. This has created a situation where the legislation which was meant to protect homebuyers and regulate the real estate sector, stands weakened and toothless. In light of this, relevant state authorities must take proactive steps to address this issue. One key measure would be to amend state revenue codes to streamline the process and ensure the timely execution of RCs. Additionally, there is a pressing need to establish a robust accountability framework to hold accountable those officials who intentionally delay or neglect their duties. Another possible recourse at the central level can be amending the RERA to include criminal sanctions as a possible repercussion for non-compliance with orders by the RERA authorities. By doing so, it can be ensured that the objectives of RERA are effectively realized and that homebuyers are afforded the protection and recourse they rightfully deserve.

 


 

[1] Real Estate (Regulation & Development) Act, 2016, Act No. 16 of 2016.

[2] M/s Newtech Promoters & Developers Pvt. Ltd. vs. State of UP & Ors. Etc. 2022 (1) R.C.R. (Civil) 357., ¶141.

[3] “Haryana RERA Issues 240 Recovery Certificates, Only 1 Executed: Report.” Moneylife NEWS & VIEWS, www.moneylife.in/article/haryana-rera-issues-240-recovery-certificates-only-1-executed-report/71517.html

[4] “Karnataka Homebuyers Owed Rs 245 Crore in Refunds From Builders.” Moneycontrol, 20 Sept. 2022, www.moneycontrol.com/news/business/karnataka-homebuyers-owed-rs-245-crore-in-refunds-from-builders-9204611.html.

[5] Nambiar, Nisha. “Only 18% RERA Recovery Warrant Orders Executed.” The Times of India, 21 Dec. 2023, https://timesofindia.indiatimes.com/city/pune/only-18-rera-recovery-warrant-orders-executed/articleshow/106166968.cms.

[6] Online, Et. “Rera Refunds Eludes Homebuyers in Uttar Pradesh’s Noida: Report.” The Economic Times, 17 Aug. 2023, https://economictimes.indiatimes.com/industry/services/property-/-cstruction/rera-refunds-eludes-homebuyers-in-uttar-pradeshs-noida-report/articleshow/102803696.cms?from=mdr.

[7] Sharma, Aprajita. “Has Rera Really Served Its Purpose? | Mint.” Mint, 21 Mar. 2024, www.livemint.com/money/personal-finance/has-rera-really-served-its-purpose-11711026508642.html#:~:text=Builders%20are%20still%20playing%20truant,get%20away%20with%20any%20delays.

[8] The Punjab Land Revenue Act, 1887, Act No. 17 of 1887.

[9] The Maharashtra Land Revenue Code, 1966, Act No. 41 of 1996.

[10] The U.P. Revenue Code 2006, Act No.8 of 2012.

[11] The Constitution of India, 1950.

[12] Priya Kapahi and Anr. v. State Of U.P. and 5 Ors., Writ – C No. – 20464 of 2021.

[13] Consumer Protection Act, 2019, Act No. 35 of 2019.

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