- The Hon’ble Supreme Court (SC or Court) has upheld the decision of the Rajasthan High Court(HC) in the case of Union Bank of India v Rajasthan Real Estate Regulatory Authority. The HC held that the Real Estate Regulatory Authority (RERA) can entertain complaints by home buyers against banks which took possession of real estate projects in its capacity as a secured creditor.
- RERA’s authority to issue directions against a bank/ financial institution which claimed security interest over properties which were subject matter of an agreement between the allottee and the developer was questioned by the Plaintiff, the bank.
- The contention of the Plaintiff was that RERA could issue directions only against a promoter, allottee or a real estate agent. However, since the Plaintiff did not fit under any of the aforementioned categories, RERA could not exercise its jurisdiction and entertain proceedings against the Plaintiff.
- RERA’s contention was since the Plaintiff was an assignee of the promoter, it would also fall within the definition of the promoter.
- However, the HC did not agree with the RERA’s contention and observed that statutory assignment of right of the borrower in the secured creditor kicks-in as soon as the bank takes recourse under provisions of Section 13(4) of the Act.
- The HC, relying on the decision of the Apex Court in the case of Bikram Chatterjee v Union Of India, further held that in case of a conflict between the provisions of RERA and SARFAESI, RERA would prevail.
- The HC also observed that provisions of RERA would not be applicable in transactions between a borrower and banks/ financial institutions where security interest has been created by mortgaging the property prior to the introduction of RERA unless creation of such mortgage or transaction is fraudulent or collusive.
- Lastly, the HC also clarified that an authority under RERA would have jurisdiction to entertain the complaint filed by an aggrieved person the moment banks/ financial institutions take recourse to any of the measures available under Section 13(4) of the SARFAESI Act.
- In its concluding remarks, the SC, affirming the view taken by the HC, held that Regulation 9 of the 2017 regulations is neither ultravires the Act nor invalid and relying on judgment of the Court in the case of Bikram Chatterji (Supra), it held that in the event of conflict between RERA and SARFAESI Act, the provisions of RERA would prevail.
- Dismissing the appeal, the SC held that the parties can individually pursue the case before appropriate authorities.
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