RERA | Penalty For Non-Registration To Be Imposed Only If Promoter Does Not Comply Direction To Register Project Within 30 Days: Kerala HC

The Kerala High Court has observed that under the Real Estate (Regulation and Development) Act, 2016, the penalty to promoter for non-registration is to be imposed only after a period of one-month is granted by an order directing the promoter to register the project. 

In that context, the Bench of Justice A Badharudeen observed that,"Considering the mandate of Section 59(1) read with Section 38 of the Act, 2016, it is held that, while invoking power under Section 59(1) of the Act, 2016 by following the principles of natural justice, mainly, by hearing the otherside (includes submission of oral and written materials before the Authority), if the Real Estate Regulatory Authority is of opinion that the project in dispute is an on going project which would require registration under Section 3 of the Act, 2016, the Authority shall make an order directing the promoter to register the project, within a period of one month from the date of the order and in the event of failure to comply the order within thirty days, there from, by the same order itself, the Authority has to impose penalty by quantifying the same with direction to pay the same for non compliance of registration as directed." 

Senior Advocate Rajendran Nair, among others, appeared for the appellant, while Senior Advocate Suresh Kumar, among others, appeared for the respondents.

In this case, the appeals were filed under Section 58 of the Real Estate (Regulation and Development) Act, 2016. Graceland Foundation challenged an order by the Real Estate Appellate Tribunal, Ernakulam, arising from a directive by the Real Estate Regulatory Authority. A similar appeal was filed by Graceland Foundation Residents Welfare Association on the same order.

The Real Estate Regulatory Authority initiated suo motu proceedings, directing the promoter to register the "Graceland" project. The Appellate Tribunal partially allowed the appeal, confirming registration but setting aside the penalty. Substantial legal questions were raised, including the effective dates of Act provisions and the justification for ordering the registration of a project completed before the authority's establishment. The promoter contended that the project doesn't require registration, having obtained a completion certificate and deemed occupancy certificate. Allottees argued the documents were flawed and challenged their validity.

The Court observed that, "there is lack of clarity as regards to the mode in which the mandate of Sections 59(1) of the Act to be complied by the Kerala Real Estate Authority."

Section 59(1) provides that if the Promoter does not register his property the Penalty would be up to 10% of the project cost.

It was noted that Section 38 of the Act, 2016 deals with powers of the Authority and the Authority shall have powers to impose penalty or interest, in regard to any contravention of the obligation cast upon the promoters, the allottees and the real estate agents, under this Act or the Rule and the regulations made thereunder. It was further noted that Section 38(2) of the Act, 2016 provides that the Real Estate Regulatory Authority shall be guided by the principles of natural justice and, subject to the other provisions of the Act, 2016 and the Rules made thereunder, the Authority shall have powers to regulate its own procedure.

With that background, the Court observed that, "the orders passed by the Kerala Real Estate Regulatory Authority as well as the Real Estate Appellate Tribunal under challenge do not depict the intent and spirit of the provision."

Subsequently, the appeal was dismissed.

Cause Title: Graceland Foundation vs Kerala Real Estate Regulatory Authority & Ors.

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