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17 December 2024

HSA | Dispute Resolution & Arbitration Monthly Update | December 2024

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Maharashtra Chamber of Housing Industry had filed a complaint before Maharashtra Real Estate Appellate Tribunal alleging that CIDCO has failed to register themselves as Promoter under Section 3 of RERA.
India Litigation, Mediation & Arbitration

DISPUTE RESOLUTION AND ARBITRATION UPDATE

Maharashtra Real Estate Appellate Tribunal Maharashtra Chamber of Housing Industry, Raigad versus City and Industrial Development Corporation of Maharashtra Ltd. (CIDCO) along with City and Industrial Development Corporation of Maharashtra Ltd. (CIDCO) versus CREDAI Maharashtra Chambers of Housing Industry, Raigad.

Appeal No. U-18 Of 2019 in Complaint No. SC10000474 A/W Appeal No. U-27 Of 2019 in Complaint No. 10000474

Background facts

  • Maharashtra Chamber of Housing Industry had filed a complaint before Maharashtra Real Estate Appellate Tribunal alleging that CIDCO has failed to register themselves as Promoter under Section 3 of RERA, 2016 after launching several schemes.
  • Further, CIDCO had launched several schemes with regards to the allotment, disposal and sale of land plots to Maharashtra Chamber of Housing Industry members through advertisements, marketing and tenders
  • The Authority dismissed the complaint through an Order dated June 3, 2019. It ruled that CIDCO's sale transactions involved immovable property lacking necessary development permissions from the Competent Planning Authority. Consequently, these transactions do not qualify as sales for plotted development under the definition of a Real Estate Project.
  • Further, in Paragraph 8 of the Order, the Authority clarified that if the Complainant's building projects on the CIDCO-purchased plots require essential infrastructure (such as roads or utilities) to be provided by CIDCO, then the Complainant or their members may designate CIDCO as a promoter (landowner) during MahaRERA project registration.
  • Aggrieved by the Authority's Order dated 03.06.2016, both parties filed Appeals before the Tribunal seeking to quash, set aside or modify the impugned Order.

Issue(s) at hand

  • Whether CIDCO falls under the definition of a Promoter for town development activities.
  • Whether those town development activities are required to be registered under RERA.
  • Whether the provisions of RERA apply to CIDCO which is a statutory government organization given its functions under the MRTP Act, 1966.

Act, 1966. Arguments of the Parties

  • Arguments by the Appellant- MCHIv
    The Counsel for the Appellants stated that considering the provisions under Section 2(b)- for advertisement, Section 2(d)-of Allottees, Section 2(s)- Development, Section 2(t)-for Development works, Section 2(zg)-Person, Section 2(zn)- for Real Estate project and Section 2(zk) of the Act, development activities under the said scheme are real estate project, CIDCO fulfils all the criterion of the promoter of Real Estate project under the said schemes for sale/disposal of the planned land plots in accordance with the procedure prescribed in Navi Mumbai Land Disposal (Amendment) Regulation, 2008 for development of City of Navi Mumbai over the land acquired/ placed at its disposal by the Government. Thus, CIDCO being a "promoter", is compulsorily required to register itself as a promoter before the MahaRERA under the Act prior to commencement of the auctions of the subdivided plots.
    Further, argued that Members of the MCHI are in the business of the real estate constructions and developments, who get allotment of these plots after becoming successful bidders in the said tenders floated by CIDCO under the said scheme. Thus, members of MCHI are allottees under Section 2(d) of the Act. Accordingly, the said schemes of CIDCO are real estate project development activities under the provisions of the Act and therefore, the members of the MCHI have rights of the allottees under the Act inter alia under Section 19 and CIDCO is a promoter.
    Subsequently the counsel submitted that, whereas Section 3 of the Act specifically mandates prior registration before the promoter advertise, market, sell and invite person for the purchase of plots. However, CIDCO despite being promoter, has been routinely marketing/ tendering the subdivided plots of lands without registration, has failed to fulfil its obligations including for the removal of the encroachment/ encumbrances without carrying out final demarcations of the tendered plots in the scheme booklet(s). These deficiencies are causing inordinate delay, harassment to allottees and consequent delay in completion of the project construction undertaken by the allottees.
    Further CIDCO, despite being promoter has not been complying with the preamble/objectives of the Act to carry out the sale of plots in an efficient and transparent manner, transparencies of the contractual conditions are not being maintained besides not establishing symmetry of information between the promoter and the purchasers, Therefore, the interest of the allottees/real-estate consumers and of its members of MCHI are not being protected. This is despite the fact that the provisions of the Act do not exclude the public Authorities.
  • Arguments by the Respondents-CIDCO
    MahaRERA has correctly held in para 7 of the impugned order that buyers of the said plots are real estate developers, who have to seek approvals from the Competent Planning Authority before development of the said plots and thereafter, such proposed building construction/ project development works have to be registered with MahaRERA under the Act. Accordingly, buyers of the CIDCO plots will be promoters of those plots. Participants of the tender(s) of the plots are required to comply with the terms and conditions of the tenders. Therefore, the conclusions recorded in para 7 of the impugned order do not require any interference in the captioned appeals.
    Further, argued that "Real Estate project" defined under Section 2(zn), and the "Development" under Section 2 (s) respectively under the Act do not cover the disposal of plots and these plots are not being developed by CIDCO but are merely disposed of by selling these plots to 3'd parties by public tendering process. Therefore, only the 3'd party purchasers are required to register the said plots if these are intended to be developed by constructing apartments/buildings thereon, Section 2(zn) and 2(s) of the Act do not cover the disposal of plots as real-estate project and development respectively, which are not personally developed by CIDCO itself and are merely sold to 3'd parties by public tender.
    Subsequently the counsel submitted that, the aims and objectives of the Act are to ensure the sale of such plots in an efficient and transparent manner to protect the interests of the real estate consumers. But, neither CIDCO nor MCHI members are the real-estate consumers qua disposal of such plots. Therefore, CIDCO is not promoter under Section 2(zk) of the Act.
    In addition to the aforesaid, the counsel submitted that the Lands are disposed of under the NMDLR by tendering process on the conditions inter alia "as is where is basis" on lease terms and the prospective bidders are required to visit/ inspect the status of the proposed plots including existing infrastructures thereon before putting their bids. Tender conditions stipulate for compliance of the provisions of the Act by the successful bidders (members of the MCHI) including for registration as promoter of the proposed real estate project. Therefore, CIDCO is not bound to be registered for such real estate project as promoter nor as promoter (land development).

Findings of the Court

The Tribunal examined three key issues related to CIDCO's role and obligations under the Real Estate (Regulation and Development) Act, 2016 (RERA).

Issue 1: CIDCO's Role as a Promoter

  • The Tribunal referred to Sections 2(t) and 2(zn) of RERA, which define "development work" and "real estate project." Based on these provisions, the Tribunal concluded that CIDCO's activities, including transforming raw land into planned layout plots, fall under the definition of "real estate projects." Therefore, CIDCO is considered a promoter (town development) for its development activities.

Issue 2: Registration Requirements under RERA

  • The Tribunal observed that Section 3 of RERA mandates that no promoter, including CIDCO, can advertise, market, sell, or invite people to purchase any plot in a real estate project without first registering the project with MahaRERA. Consequently, CIDCO must register its projects with MahaRERA before selling, advertising, or marketing any land exceeding 500 square meters.

Issue 3: Conflict between RERA and MRTP

  • The Tribunal clarified that the objectives and reasons behind RERA and the Maharashtra Regional and Town Planning (MRTP) Act, 1966, do not conflict with each other. In case of any conflict, RERA, being a central legislation, would prevail over MRTP, which is a state legislation. Section 89 of RERA reinforces this position, stating that RERA's provisions will take precedence over any conflicting laws, including MRTP. This means that RERA applies to CIDCO, a statutory government organization, and its provisions have overriding authority in case of any conflict with other laws.

Kali Charan and Others Versus State of U.P and Others with a batch of Appeals Arising out of Land Acquisition Proceedings Initiated by the State of Uttar Pradesh through Yamuna Expressway Industrial Development Authority (YEIDA).

2024 SCC OnLine SC 3472

Background facts

  • Purpose of Acquisition
    The State of Uttar Pradesh initiated land acquisition in District Gautam Budh Nagar under the Yamuna Expressway Industrial Development Authority (YEIDA) for planned development. A policy for "Planned Development along the Taj Expressway" (dated 29-12-2007) was implemented to develop a Special Development Zone (SDZ), which included areas for roads, open spaces, commercial, institutional, residential, and recreational purposes.
  • Land in Question
    The acquired land, designated as 'Abadi Bhoomi,' was being used by landowners for dwelling and rearing cattle, holding personal and social value.
  • Process of Acquisition
    A notification under Section 4(1) of the Land Acquisition Act was issued on 26-02-2009.
    The urgency provisions (Sections 17(1) and 17(4)) were invoked, allowing the acquisition without hearing objections under Section 5-A.
    The final notification under Section 6 was issued on 19-02-2010
  • Objections by Landowners
    Landowners opposed the acquisition, citing the social and personal significance of their land. Representations were made to the Chief Executive Officer of YEIDA, which were ignored, leading to the continuation of the acquisition process.
  • Litigation History
    Multiple writ petitions were filed in the Allahabad High Court challenging:
    • Invocation of urgency provisions under Sections 17(1) and 17(4).
    • Violation of their right to be heard under Section 5-A.
  • The High Court delivered divergent rulings
    • In Kamal Sharma v. State of U.P1 ., the Court upheld the acquisition.
    • In Shyoraj Singh v. State of U.P2 ., the acquisition was quashed.
  • Dissatisfied with these rulings, landowners and YEIDA approached the Supreme Court

Issue(s) at hand?

  • Was the acquisition part of an Integrated Development Plan for the Yamuna Expressway?
  • Was the invocation of urgency provisions (Sections 17(1) and 17(4)) justified, and was it legal to dispense with the hearing under Section 5-A?
  • Which High Court ruling sets the correct legal precedent: Kamal Sharma (upholding acquisition) or Shyoraj Singh (quashing acquisition)?
  • Should the compensation granted by the High Court in Kamal Sharma be further enhanced?

Findings of the Court

  • Integrated Development Plan
    • The Court held that the acquisition was part of a comprehensive development plan for the Yamuna Expressway.
    • It relied on the precedent set in Nand Kishore Gupta v. State of U.P. (2010)3 , affirming that such acquisitions serve the public interest by promoting regional development
  • Justification of Urgency Provisions (Sections 17(1) and 17(4))
    • The urgency provisions were invoked legally and justifiably, as the acquisition was for planned development.
    • Dispensing with the enquiry under Section 5-A was found appropriate, aligning with the objectives of rapid development
  • High Court Rulings – Correct Precedent
    • The Supreme Court upheld the view taken by the Allahabad High Court in Kamal Sharma v. State of U.P., which relied on Nand Kishore Gupta v. State of Uttar Pradesh (2010) 10 SCC 282, as laying down the correct proposition of law. It held that the judgment in Shyoraj Singh v. State of U.P., which relied on Radhy Shyam v. State of U.P.4 (2011) 5 SCC 553, was legally incorrect and passed per incuriam for overlooking earlier binding precedents. The Court appreciated the High Court's thorough analysis of the factual and legal matrix in Kamal Sharma, including its equitable approach of affirming the acquisition while ensuring additional compensation for the landowners. This acknowledgment reinforced the High Court's fairness in balancing public interest with individual rights, and the Supreme Court fully endorsed its findings and reasoning
    • It was noted that Kamal Sharma was based on a thorough analysis of the records and ensured fairness by granting additional compensation.
  • Compensation
    • The High Court in Kamal Sharma awarded an additional compensation of 64.7% as a "No Litigation Bonus" under a Government Order (dated 04-11-2015).
    • The Supreme Court found this compensation adequate and did not direct further enhancement
    • However, the Court clarified that parties may still challenge issues regarding the non-issuance of the final award separately.

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