This is Part 3 of 3 part blog series of RERA Act, 2016 in which we will cover various penalties and offences and finance, accounts and audit reports under this Act.

In Part 1 we have discussed what is RERA, registration and revocation of Real estate projects, Functions, powers and duties of promoters & allottees.

In Part 2 we have discussed the composition, powers & functions of Real Estate Regulatory Authority & Real Estate Appellate Tribunal.

Penalties are imposed so that the laws which are enforced for the betterment of society and for general public can be fully utilized. Penalties acts as a deterrence as the person is punished not only for the illegal act which he has committed but also to ensure that no such illegal acts to commit again. In the same manner there are various penalties under RERA for the non-compliance of the various provisions of the Act.

Penalties on Promoter or builder:

1. Non-registration of Real Estate Project:

According to Section 59 of the Act, it is the duty of the promoter to register the project with the RERA before advertising, booking or inviting to sell any plot, apartment or building as stated in Section 3 of the Act, if promoter fails to comply with the Section 3 he must be liable to a penalty which may extend up to 10% of the estimated cost of the real estate project.

If the person does not comply with the above decision of the Authority and continue to violate the provisions of section 3, he must be punishable with imprisonment for a term which may extend up to three years or with fine which may extend up to a further ten per cent. of the estimated cost of the real estate project, or with both.

2. False information for RERA registration:

As per Section 60 of the Act, if any promoter contravenes the provisions of Section 4 of the Act i.e., providing false information for application for registration of the project under RERA must be liable to a penalty which may extend up to 5% of the estimated cost of the real estate project.

3. Contravention of any other provision of the Act:

As per Section 61 of the Act, if any promoter contravenes or violates any other provision of the Act other than Section 3 or 4 or Rules and Regulations made thereunder must be liable to a penalty which may extend up to 5% of the estimated cost of the real estate project.

4. Non compliance with the order of Authority:

As per Section 63 of the Act, if any promoter fails to comply with the orders or directions of Authority, he must be liable to a penalty for every day during which such default continues, which may cumulatively extend up to 5% of the estimated cost of the real estate project.

5. Non compliance with the order of Appellate Tribunal:

As per Section 64 of the Act, if any promoter fails to comply with the orders or directions of Appellate Tribunal, he must be punishable with imprisonment for a term which may extend up to three years or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the estimated cost of the real estate project, or with both.

Penalties on Real Estate Agent:

1. Non-registration by Real Estate Agent:

As per Section 62 of the Act, if any real estate agent fails to comply with the provisions of Section 9 or 10 i.e., it is obligatory for the real estate agent to register himself with authority, and if he fails to comply the same, he must be liable to the penalty of up to Rs 10,000 for every day till when such default continues, which can be cumulatively extended up to 5% of the cost of the plot or apartment, for which the sale has been facilitated by as determined by the authority.

2. Non-compliance with the orders of Authority:

As per Section 65 of the Act, if any real estate agent fails to comply with the orders or directions of the Authority, he must be liable to a penalty for every day during which such default continues, which may cumulatively extend up to 5% of the estimated cost of plot, apartment or building, as the case may be, of the real estate project, for which the sale or purchase has been facilitated.

3. -compliance with the orders of Appellate Tribunal:

As per Section 66 of the Act, if any real estate agent fails to comply with the orders or directions of the Appellate Tribunal, he must be punishable with imprisonment for a term which may extend up to one year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the estimated cost of plot, apartment or building, of the real estate project, for which the sale or purchase has been facilitated, or with both.

Penalties on Allottee:

1. Non-compliance with the orders of Authority by Allottee:

As per Section 67 of the Act, if any allottee fails to comply with the orders, decisions or directions of the Authority, he must be liable to a penalty for the period during which such default continues, which may cumulatively extend up to 5% of the plot, apartment or building cost.

2. Non-compliance with the orders of Appellate Tribunal by Allottee:

As per Section 68 of the Act, if any allottee fails to comply with the orders, decisions or directions of the Appellate Tribunal, he must be punishable with imprisonment for a term which may extend up to one year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the plot, apartment or building cost, as the case may be, or with both.

Grants & Loans by Central/State Government:

Central/State Government provides grants and loans to the Authority after the due appropriation made by Parliament as per Section 73 & 74 of the Act.

Constitution of Fund:

Appropriate government constitute a fund called as 'Real Estate Regulatory Fund' and to be credited thereto:

  1. All government grants received by the Authority.
  2. Fees received under this Act.
  3. Interest accrued on the amounts.
  • Fund is used to give salaries and allowances to Chairperson and other Members, adjudicating officer and the employees of the Authority and Appellate Tribunal and other expenses of the Authority for discharging its functions.
  • All sums received by way of penalties, imposed by Appellate Tribunal or the Authority in Union Territory is credited to the Consolidated Fund of India.
  • All sums received by way of penalties, imposed by Appellate Tribunal or the Authority in State is credited to the accounts specified by the State Government.

Budget, Accounts and Audit:

  1. The Authority in consultation with Comptroller and Auditor General of India has to prepare a budget, maintain proper accounts, other relevant records and prepare an annual statement of accounts as prescribed by appropriate government.
  2. Comptroller and Auditor General of India has to audit the accounts of the Authority and expense of such audit is to be paid by the Authority to Comptroller and Auditor General of India.
  3. Accounts of Authority as certified by the Comptroller and Auditor General of India must be provided annually to the appropriate Government by the Authority and the appropriate Government lay the audit report, as soon as it is received, before each House of Parliament or before the State Legislature or the Union territory Legislature, where it consists of two Houses, or where such legislature consists of one House, before that House.

Annual Report:

The Authority has to prepare an annual report once in every year in such form and time as precribed by the appropriate government:

  1. Description of all the activities of the Authority for the previous year
  2. Annual accounts for the previous year
  3. Programmes of work for the coming year.

Copy of such report is to be laid before each House of Parliament or, as the case may be, before the State Legislature or the Union Territory Legislature, where it consists of two Houses, or where such legislature consists of one House, before that House.

Jurisdiction:

  • Civil Court has no jurisdiction to entertain any suit or proceeding or grant injunction, in matter which the Authority or adjudicating officer or the Appellate Tribunal is empowered under this Act.
  • No court shall take cognizance of any offence punishable under this Act.
  • No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under this Act.

Powers of Appropriate Government:

1. To supersede Authority:

If appropriate government at any time is of the opinion that:

  1. On account of circumstances beyond the control of the Authority, unable to discharge its functions & duties.
  2. Authority has persistently defaulted in complying with any direction issued by the appropriate government.
  3. In the Public interest to do so.

Appropriate government may by notification supersede the Authority for period not exceeding 6 months but before superseding reasonable opportunity to make representations must be given to the Authority.

After notification of superseding the Authority:

  1. Chairperson and other Members vacate their offices from the date of supersession.
  2. All properties owned or controlled by the Authority will vest with the appropriate government.
  3. All powers, functions and duties of the Authority must be discharged by the person appointed by the appropriate government.

After the expiry of supersession period, appropriate government must reconstitute the Authority by a fresh appointment of its Chairperson and other members.

2. To issue directions to Authority:

  1. Appropriate government give in writing the directions to the Authority and Authority is bound by such directions.
  2. If any dispute arises between appropriate government and the authority, the decision of appropriate government shall be final.
  3. Appropriate government may from time to time may ask authority to furnish such returns or other information.

3. To make rules:

Within a period of 6 months of the commencement of this Act in matters relating to:

  • Form, time and manner of making application and fees.
  • Information and documents for application to the Authority for registration.
  • Form of application and the fees for extension of registration.
  • Period, manner and conditions under which the registration is to be granted.
  • Discharge of other functions by the real estate agent.
  • Rate of interest payable.
  • Manner of selection of Chairperson and Members of Authority.
  • Additional functions which may be performed by the Authority.
  • Manner of recovery of interest, penalty and compensation.
  • Manner of selection of Members of the Tribunal.
  • Manner of inquiry.
  • Form in which and time at which the Authority shall prepare an annual report.
  • Powers of the Chairperson of the Appellate Tribunal.

Benefits of RERA:

  1. Total transparency in the information provided by the builder to the buyer. Every minor, major aspect of the building.
  2. Builder cannot charge for the area outside the external walls such as garden, parking, stairs, etc.
  3. Project delays are prohibited.
  4. Free from structural defect.
  5. Builder cannot use the money of the buyers for any other purposes.

Conclusion

The RERA has defined carpet area, built up area and super built-up area to limit the likelihood of frauds committed by the agents against the buyers, whereby the agents used to demand additional payment from the buyers before the implementation of Act. The implementation of RERA has also reduced black money in the real estate sector. It also seeks to bring clarity and better understanding among the layman to reduce the chances of fraud. Due to lack of proper law, the real estate industry and buyers have been in conflict for a long time, which has been resolved with the implementation of this law. It has resulted in a better relation between the buyer and the seller and at the same time has helped the buyers get what they want as they are the ones to ultimately suffer. It has also provided for penalties against various promoters in cases of non-fulfilment of their obligations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.