The Supreme Court held, among other things, that under Section 40(1) of the Real Estate (Regulation and Development) Act 2016, the amount invested by allottees, which is often their life savings, as well as the interest thereon as quantified by the regulatory authority or adjudicating officer, can be recovered as arrears of land revenue by them from the builders ("Act").
"While harmonising the construction of the scheme of the Act with the right of recovery as mandated in Section 40(1) of the Act keeping in mind the in mind the intention of the legislature to provide for a speedy recovery of the amount invested by the allottee along with the interest incurred thereon is self-explanatory. However, if Section 40(1) is strictly construed and it is understood to mean that only penalty and interest on the principal amount are recoverable as arrears of land revenue, it would defeat the basic purpose of the Act", the Court held.
A three-judge panel led by Justices Uday Umesh Lalit, Ajay Rastogi, and Aniruddha Bose noted that a significant number of allottees invest hard-earned money, frequently their life savings, and even take out loans only to acquire a roof over their heads in the shape of homes, flats, or units.
Rejecting the promoter's argument that under Section 40(1), house purchasers are only allowed to collect interest or penalty as arrears of land revenue, the Court found that allottees were entitled to recover their full life savings, including interest.
The Court pointed out that there would be no interest until the responsible authority decided the principal amount under Section 18, which deals with the authority's jurisdiction to direct refund of the primary amount.
As a result, the Court concluded that the principle and interest are recognised as a single amount that can be collected as land revenue arrears under Section 40(1) of the Act.
The Supreme Court handed down its decision in a series of civil appeals challenging the Allahabad High Court's rejection of Writ Petitions.
The promoters/real estate developers (appellant) filed Writ Petitions challenging the ruling.
The promoters/real estate developers (appellant) filed Writ Petitions challenging a single member of the regulatory authority's ruling instructing the promoters to return the original sum plus interest in response to complaints from house purchasers.
According to the promoters, only the interest or penalty imposed by the authorities may be collected as arrears of land revenue under Section 40(1) of the Act, and no recovery certificate for the principal amount can be granted.
After considering the argument, the Court concluded that if Section 40(1) is strictly construed to mean that only penalty and interest on the main amount are recoverable, this would be contrary to the statute's intent.
Examining Section 18, Section 40(1), and the Act's Scheme, the Court concluded that, while Section 40(1) of the Act appears to be ambiguous, reading the relevant provisions in a harmonised manner and keeping the legislature's intent in mind, the best way forward is to recover the amount invested plus interest as quantified by either the authority or the adjudicating officer.
According to the Court:
"Taking into consideration the scheme of the Act what is to be returned to the allottee is his own life savings with interest on computed/quantified by the authority becomes recoverable and such arrear becomes enforceable in law.
There appears some ambiguity in Section 40(1) of the Act that in our view, by harmonising the provision with the purpose of the Act, is given effect to the provisions is allowed to operate rather than running either of them redundant, noticing purport of the legislature and the aboveĀ¬ stated principle into consideration, we make it clear that the amount which has been determined and refundable to the allottees/home buyers either by the authority or the adjudicating officer in terms of the order is recoverable within the ambit of Section 40(1) of the Act."