Last Updated on December 27, 2018 by Legalseva.net
The Real Estate (Regulation and Development) Act, 2016 aims to regulate and promote the real estate sector by regulating the transactions between buyers and promoters of residential as well as commercial projects. It also has provisions for establishing a regulatory authority at state level called “Real Estate Regulatory Authority” (RERA) for monitoring the real estate sector and adjudicating disputes relating to Real Estate Projects. The main objectives for which the act was established is , Firstly to safeguard the buyer against the biased and stringent contracts formed by the sellers and Secondly to provide a speedy dispute resolution authority which can adjudicate the dispute between the buyer and seller.
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It is the function of the Real Estate Regulatory authority to register the real estate projects which are upcoming and even those which are ongoing, the registration of the on going projects that were started before the implementation of RERA has resulted in a conflict of opinion, that whether the contract concluded between the parties prior to the act which is not as per the rules set by the act would be void or not and also that the terms of the compensation for violation of terms of contract i.e. for delayed payment and delayed delivery of possession will hold good or not.
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In a recent case of Prakash Chand Arohi vs. M/s Pivotal Infrastructure Pvt. Ltd. we see that there is a sharp difference in the opinion of majority and minority regarding the validity of the old contract and the compensation that is to be granted .The act is still not mature and there are not many presidents to followup that is why the majority and minority opinion of this case is very crucial to understand .
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The Majority here was of the view that as held in the case of Madhu Sareen vs. B.P.T.P Limited the compensation is to be calculated according to the Rule 15 of RERA, that sets the compensation to be SBI MCLR + 2% for the entire period of the delay i.e. even before the RERA came into picture, according to them the act is both retrospective and retroactive in it’s nature and hence they disapprove the compensation clause of the original contract between the parties that had set up compensation to be Rs. 5 per square. Feet of total super area for every month of delay.
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But the minority opinion was that this implies that the act is being applied ex post facto and this is against the principle of natural justice, also Bombay High Court in Neelkamal Relators suburban Pvt. Ltd. And another Vs Union Of India and another the court has ruled out RERA to be retroactive or retrospective and hence it cannot undone the arrangements between the buyer and promoter that were concluded prior to enactment of the act, this would lead to chaos .
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Also the majority was of the opinion that all the agreements between promoter and the buyer should be set up according to the rules of the act and should be based on the model agreements given in the act anything that is deviating from the act would be considered void ab-initio on the contrary it is observed that the act no where states that it is a mandate to follow the agreement models of the act and if the parties are at consensus they can deviate from the model agreements, it is at the time of adjudication the authority has to decide to dilute the terms if they find them discriminatory in nature.
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All the contract entered into if are valid according to the Indian Contract Act should be enforceable in the eyes of law only the clauses that lead to Unfair Trade Practices should be eliminated by the authority and the authority should not be interfering in the contract just because they do not follow the RERA module , both NCDRC and the supreme Court have upheld this view in Ashish Oberoi vs. Emaar MGF.
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If we try and evaluate both views it appears that the minority view is more comprehensive and more reasoned it is also more viable as if we apply the act to all the contracts prior to the enforcement of RERA it will only draw is to a chaotic situation and adjudication of the disputes will get difficult and hence if the agreement are of fair nature and are valid under the Indian Contract Act they should be enforceable and the authority should not interfere in their applicability, authority is a judicial body and has judicial functions and it should not act as an executive body it should see that the agreements formed after RERA should be following the act and not try to bring changes in the contract that are not discriminatory in nature, it should only interfere only if the clauses lead to Unfair Trade Practices not otherwise.
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