Criminology in Real Estate Regulation & Maharashtra Housing Regulation Act

The Theory of Punishments in the Maharashtra Housing Development & Regulation Act 2012[MHRDA], & Real Estate Regulation Bill [RERA]

1.  There are certain provisions in RERA dealing with punishments which are quoted as under

2.  The MHRDA also contains provisions of punishment as under.

44. Whoever fails to comply with or contravenes the provisions of section 4, shall, upon the order by the Housing Regulatory Authority in that regard, be liable to pay the penalty which may extend to rupees one thousand per day of default.

45. Whoever, without reasonable cause, fails to comply with, or contravenes, the provisions of sections 6, 16 or 17 shall, upon the order by the Housing Regulatory Authority in that regard, be liable to pay the penalty of rupees ten thousand for each day during which such noncompliance continues, or rupees fifty lakhs, whichever is lower.

46. Any allottee, flat or unit purchaser or organization, who fails to comply with, or contravenes, the provisions of the agreement for sale executed by him with the promoter for purchase of flat, including nonpayment of any amounts or charges in respect thereof, shall, upon the order by the Housing Regulatory Authority in that regard, be liable to pay the penalty which may extend to rupees ten thousand or one per cent. of the sale price of the property specified in such agreement, whichever is higher.

47. Any person, who willfully fails to comply with the orders or directions of the Housing Regulatory Authority or the Housing Appellate Tribunal, as the case may be, shall, upon the order by the Housing Regulatory Authority, or the Housing Appellate Tribunal, as the case may be, in that regard, be liable to the imprisonment for a term which may extend to three years or penalty which may extend to rupees ten lakhs or with both.

48. Any person, other than the promoter, who, without reasonable cause, fails to comply with, or contravenes, any other provisions of this Act or of any rules made thereunder, or does not pay the penalty imposed on him by the Housing Regulatory Authority shall, if no other penalty is expressly provided therefor, upon the order by the Housing Regulatory Authority in that regard, be liable to pay the penalty which may extend to rupees fifty thousand.

49. (1) Any promoter who, without reasonable excuse fails to comply with, or contravenes the provisions of section 9, section 12, section 14, section 18 or section 19, shall, upon the order by the Housing Regulatory Authority in that regard, be liable to pay the penalty which may extend to rupees one crore.

(2) Any promoter who, without reasonable excuse, fails to comply with or, contravenes, any other provisions of this Act or of any rule made there under shall, if no other penalty is expressly provided for such contravention, upon the order by the Housing Regulatory Authority in that regard, be liable to pay the penalty which may extend to rupees ten lakhs.

3.  Thus seen there are very benevolent provisions made by the state/s on punishment, which leads to bring to assistance & necessity to understand how criminology deals with such situations.

4.  Before that it would not be out of place to say that, arrogance is way-high in our country, supplemented by ego, in each individual. And when it comes to dominating position and dealing with uninformed people of their rights, there is tendency to abuse causing wrongful gains, and this is rampant.

5. Fines, merely afford opportunity to recover from the depletion, and to prepare for extortion of money lost. They are, apart of the extortionist, no punishment to one who has become insensible to statutory compliance and insensitive that they are invading other persons rights.

6.  Fines as such are not penal but are in the nature to serve still further to reinforce the warning and nothing more. Thus seen a warning in the form of fine is not at all the punishment. Fine is maximum a temporary forfeiture of product not resource to it.

7. Fines should not be leveled against those motivated by thievery, cheating, forgers, extortionists, and they have to treated as societal felons.

8. The intendment of having punishment, is deterrence, warn people of not to breach a law, to enforce the fulfillment of obligation of law. A fine fall into category of pecuniary punishment. IF fine is to act as deterrence it has to be heavy expropriatory. If it cannot be deterrent it fall into category of tax only and supply of offences become frequent. Lets take for example – running traffic signals, if they are to be deterrent in proportion of the breach fines have to be optimally regulated and cannot be over or under. Next lets take example of a person who runs signal in his maruti car and a person in rolles royes. The fine may be same, but who is affected[educated of deterrence] the most? This brings the economics into play and the analysis is to be made on how much deep is he hurt by the fine. So also is there is possibility of culprit to redeem his pecuniary loss from the society. Functionally the punishment is where there is no redemption of loss say for example loss of time served, and whatever is the sentence, it enlivens his life and marks a lable on his life so that he is himself made aware of his wrong and so are others, not to breach the law.

9. If the offense is against the State or social order, the measure of social damage should be fixed and collected by the law. Fines collected by the State should constitute a special fund for the payment of Indemnities to individuals, and the expense of detecting crime. Only such penalty receives the approval of the popular sense of justice, restrains the well-to-do from violation of law by the fear of having to make strict restitution, and the penniless by the dread of compulsory labor for the benefit of others.

10. What if the business entity is capable of manipulating the system to get the slightest penalty?

11. If a retributive fine can be collected from the resources of the convict, it can still be imposed. But whether it will act as reformatory must be decided entirely on the character of offender, and can have no relation to the payment or working out of a fine. This also necessitates the separation of the penalties of fines from need of imprisonment.

12. It is funny that the outcome of non-observation of provisions of law under above enactments is direction to follow provisions, and not punishment. But on the contrary it is the order of HRA/CA/HAT which is to be observed failing which it carries monetary sanction or time served.

13. Infact if one observes closely, the intent of punishment is totally withdrawn from the provisions of law to order. Thus bring us away from Rule-of-Law to Rule-of-Order. This is very innovative method deployed by the concerned trustees-of-society, however bereft to our constitutional mandate of rule of law.

14.A 2000 study by Uri Gneezy and Aldo Rustichini, A Fine Is a Price, has shown that introducing a fine for a previously unfined behavior [provisioned for serving time] may increase, rather than decrease, the unwanted behavior. This happens as the fine replaces a previous set of moral or ethical norms, and if it is low enough, it is going to be easier to overcome than the non-monetary punishment. In other words, putting a price on something previously not on a market, changes its perception drastically, and on occasion it can change it contradictory to what a deterrence theory would predict. When one fixes price for a wrong, it becomes a perk to get away with the wrong by paying price, as everyone knows that paying a price is easier and price can be recovered. Fines are limited by the inability of the convict to pay. Thus the whole concept of making fines as punishment becomes meaningless, as without receipt of the fine the punishment is otiose.

15. In this line of thought – if price can be recovered/recoverable, can it be said that it is punishment for a particular offensive behavior?

16. Punishment require reciprocating the crime and its motives, and therefore the crime has to be optimally dealt with. The Legislature has to consider the utility of committing the crime and incentivize for abiding to the law.

17. If fine can act as deterrent as proposed in these legislations, then even murderers who construct under-quality structures, forgers, extortionists, cheaters, should be only fined, it will save the cost of jails and undertrials. And the order of the day would not be Rule-of-Law but Rule-of-Money.

18. There is no incentive to the consumer to bring the offender to justice as after all, it is the entity or state who is going to be benefited of the outcome. i.e. the entity is fined or not :: the state received fine or not. Thus seen its appears to be botched-up capitalist contract between the state and entity, with outward show of public interest.

19. While enacting a punitive legislation it is important that the state takes opinions of jurists, advocates, socialist, and settles actual decision of courts which have dealt with particular issue and the apparent unfairness to the consumers. One cannot but just speculate whether such exercise was done. Forget making of new law, the old laws which are constantly in contest, and judicially decided from time to time are also not consolidated and appropriate amendments made.

20. Crimes which are less serious in nature and punished with a fine apply to misdemeanors. In the United States, less serious offenses are punished primarily by fines. The more serious offenses are punished by a combination of conditional probation, imprisonment, fines etc.

21. Fines produce a gain to the offenders as it is equated as cost to offenders, aside from collection costs. So the social cost of fines is about zero, and equivalent to bank transfer.

22. Therefore the basic question is whether the state intends to wash out the crime or not and decide whether there is a Societal loss due to the crime. Then the state has to decide whether there is societal loss with punishment, and what punishment is proper. If there were no societal loss from punishments, as with fines, the elasticity of supply for grievance redressal would drop as the punishment becomes a commodity being factored itself by means of recovering the cost, than having any enforcement targets. This process mar the purpose of deterrence theory or any societal benefit. By fine no benefit is going to be received by society, and a net social loss would result. This may also tend towards societal approach to equally or more illegal means to enforce remedy of their grievance and which at times may escalate or go out of control. Civil Wars apart, if the state is ‘concerned’ state it should take into account the societal impact of its demeanor.

23. The next aspect which requires to be considered from economic analysis, it the players in the transaction. In this particular set, the players are flat purchaser, promoter and state. Here the promoter has absolute business interest, while flat purchaser in major part have no business/financial interest and are actual consumer of the product. This questions justification of how benefit of consumer protection act is excluded by these laws to such consumers. The third party is the state/s which is supposed to act, if not pro a party, at least as a neutral regulator.

24. Compared the relationship of consumer vis-à-vis business/financial interest, and when there is admitted fact by state, with litigation statistics, that there has been abuse by business/financial interest; the expectancy, strategy, effectiveness of mechanism for dealing against abuse has to be borne out. In this situation the consumer is most vulnerable and imposing of even Rs.100/- is heavy cost as it come from his pocket and he has not way to reinstate the cost, on the contrary imposing even crores of rupees on business interest, it would be factored in the cost of the product. Thus making the penal angel of the fine in law, economically circumvented. It is known fact that business entities charge the product, even with cost of their dog food. All sorts of taxes including the income tax of the business entity is factored in the product, and charged to the consumer. Therefore in this perspective the monetary punishment is laughable on business entities.

25.  Next how the state is helped with it. These fines go to the state. They are not applied to compensate the victim to redeem his suffering.  This is apparent from section 66 of RERA and draft general rules framed under MHRDA. Thus seen the state is gaining of crime, while the victim is left as sufferer devoid of remedy, and gets paper decree. Per contra the Civil, Consumer and Competition Foras actually give remedy and compensation. Thus to that extent the monetary punishment is anti-people and benefits the business entity and the state.

26. If one read the provisions of fines in these acts it will reveal that it is very cleverly drafted so that the trying of such matter don’t require judicial mind, [judges usually have, although expected irrespective, but are better than others] to enliven the legislative intent, in the process. As, had there been imprisonment it could have been dealt done only by judiciary and nonelse.

27. Thus seen from criminological & economic point of view and most importantly from constitutional stand point the only question is;

ARE these statutes [RERA and MHRDA] realy speaking RULE-OF-LAW or RULE-OF-MONEY.