1. INTRODUCTION

The Hon'ble Haryana Real Estate Regulatory Authority ("HRERA"), in the case of Puneet Gupta ("Complainant/Allottee") Vs. International Infratech Pvt. Ltd. & Ors. 1 ("Respondents") has restrained Bank of Baroda ("Respondent No.4") from proceeding with an e-auction dated January 24, 2023 of land admeasuring 2.025 acres situated in Sector 109 without considering and settling the claims of individual allottees.

2. FACTS

Complainant had booked a shop bearing no.109-OFC-03/04 admeasuring 820 sq. ft. ("Unit") in the project "CHD E-WAY TOWERS" ("Project") and executed a Commercial Space Buyer Agreement dated October 12, 2016 ("Agreement") with CHD Developers Limited ("Respondent No.3") for a consideration and other terms and conditions mentioned therein. Respondent No. 3 was supposed to complete the project in a stipulated time period which the Respondent No. 3 failed to do so.

International Infratech Pvt. Ltd. ("Respondent No.1") (who is a 100% (One Hundred per cent) subsidiary of Respondent No.3) alongwith Respondent No.3 introduced Key Stone Community ("Respondent No.2") to the allottees of the Project, who was the new developer in view of the collaboration agreement executed between Respondent No.1 and Respondent No.2. Accordingly, 75% (Seventy-Five per cent) of the allottees gave their consent to Respondent No. 3 to go ahead with the new restructuring policy of the Project.

Subsequently, vide Loan agreement dated November 07, 2016, loan of Rs. 12.5 crores was availed by Respondent No.3 from Respondent No.4 to develop the Project, wherein the land admeasuring 2.025 acres in Sector 19 ("Project Land") was given as security and a charge was created in favour of Respondent No.4 and Respondent No.1 was the corporate guarantor and mortgagor.

The allottees of the Project were apprised by Respondent Nos.1 & 2, as well as through newspaper advertisement, that the land on which the Project is situated was being sold by Respondent No.4 by way of an e-auction dated January 24, 2023, wherein all the allottees share their reserved rights by virtue of a builder buyer agreement entered with the promoter.

Aggrieved by the proposed auction, Complainant filed the present Complaint against the Respondent Nos.1,2,3 and 4 for gross violation of Section 15 of the Real Estate (Regulation and Development) Act, 2016 ("RERA Act") 2016, as well as in violation of the notification no.01-RERA-CGM Circular 2020 dated June 29, 2020. The Complainant relying on the judgement passed in the case of Bikram Chatterji Vs. Union of India2 submitted that the first right over the real estate project is of the homebuyer/allottees and not the Respondent No.4. The Complainant submitted that their party rights which have already been created on the property have not been taken into account and the interest of allottees will be seriously affected if the auction is allowed to go through.

Respondent No.1 submitted that it had a collaboration agreement with Respondent No.3 who failed to develop the Project and therefore another Agreement dated July 28, 2022 was entered into with Respondent No.2 with the consent of the allottees.

Respondent No.2 submitted that it has all the intentions to develop the Project and has communicated to Respondent No.4 that they wish to develop the Project and clear all the liabilities with interest and have requested the Respondent No.4 to provide NOC so that Respondent No.2 can be included in the Project as a developer.

Interim Resolution Professional ("IRP") for Respondent No.3 submitted that Respondent No.3 is under Corporate Insolvency Resolution Process ("CIRP") vide order dated September 05, 2022 passed by National Company Law Tribunal, Delhi Principal Bench ("NCLT"). An appeal has been preferred before the National Company Law Appellate Tribunal ("NCLAT") and vide order dated September 27, 2022 the IRP has been directed not to take any further steps in the matter. It was also submitted that Respondent No.4 has already filed its claim of Rs. 25.94 crores on September 28, 2022 with IRP of Respondent No.3 and has simultaneously proceeded to auction the Project Land.

Respondent No.4 submitted that the action taken by them is with respect to the loan outstanding against Respondent No.3 but the guarantor and mortgagor is Respondent No.1 and Respondent No.1 is not under CIRP. Respondent No.4 submitted that the bank is bound to recover public money an action taken by bank is lawful and in public interest. Respondent No.4 submitted that they never consented to the change of developers.

3. KEY ISSUE ADDRESSED BY THE COURT

Whether the Respondent No.4 correct in putting the Project Land for sale by way of an e-auction?

Answering the question in the negative, the Hon'ble HRERA restrained the Respondent No.4 from going ahead with E-auction of the Project Land and noted the following points:

3.1. Allottees have paid their hard-earned money and booked their units in the Project and also signed builder buyer agreements. However, the promoters failed to execute the Project and construction is at a standstill and the developer i.e. Respondent No.3 has exited from the Project.

3.2. By investing in the Project and signing builder buyer agreements, a vested right has been created for the Complainant and the same cannot be taken away by Respondent No.4 who was fully aware of the status of the allottees.

3.3. Hon'ble HRERA also noted that RERA Act is an enactment subsequent to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act") which has been specially enacted to protect the interest of allottees in the real estate projects. An obligation has been cast by the statute to ensure that the rights of the allottees are not prejudiced or jeopardized. Hon'ble HRERA also noted that the Project was not registered and was in violation of Section 3 of the RERA Act.

3.4. Hon'ble HRERA also noted that Respondent No.4 has already filed its claim before the IRP for recovery of the loan amount from Respondent No.3 and more so the property being auctioned is owned by Respondent No.1.

3.5. Hon'ble HRERA also noted that despite the fact that Respondent No. 1 and 2 have already approached the Respondent No.4 with assurance to settle the loan amount by way of executing the project after obtaining all necessary clearances and certifications from the competent authorities but the Respondent No.4 is bent upon auctioning the Project Land thereby seriously jeopardizing the project itself and rights of the allottees.

3.6. Hon'ble HRERA, apart from restraining the Respondent No.4 from auctioning the Project Land without considering and settling the claims of individual allottees, also ordered that forensic audit of the accounts of Respondent No. 3 be carried out to bring out clear picture of the utilization/diversion of funds in relation to the Project.

4. QUICK VIEW

This order affirms the position of law laid down by the Hon'ble Supreme Court in the case of Union Bank of India Vs. Rajasthan Real Estate Regulatory Authority & Ors. 3 ("UBI case") and Bikram Chatterji and Ors. Vs. Union of India and Ors.4 that in the event of conflict between the RERA Act and SARFAESI Act, provisions of RERA Act would prevail. RERA Act recognizes and protects interests of the lenders and does not in any manner take away rights under any of the existing statutes such as SARFAESI Act, etc. RERA, which is a special Act, that certain rights have been created in favour of the buyers. Hon'ble Supreme Court in UBI case has also held that RERA authority has the jurisdiction to entertain a complaint by an aggrieved person against the bank as a secured creditor if the bank takes recourse to any of the provisions contained in Section 13(4) of the SARFAESI Act.

Footnotes

1. Judgement dated 23.01.2023 passed in CR/255/2023 filed before HRERA.

2. 2019 SCC Online 901

3. SLP(C) Nos. 1861-1871/2022

4. 2019 19 SCC 161

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.