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Are interim RERA authorities set up by states illegal?

Under RERA, it may be inappropriate for interim authorities to continue after the one-year deadline that expired on April 30, 2017 but courts cannot strike down decisions taken by interim authorities appointed before May 1, 2017

Real estate developers across the country had to register under construction projects with the regulatory authority set up by states to frame regulations and rules as per the Real Estate (Regulation and Development) Act, 2016 (RERA) by the July 31 deadline.

While only six states have so far established a permanent Real Estate Regulatory Authority, 17 have set up an interim authority. This, say some legal experts, may be illegal as, under RERA, a permanent authority needs to be appointed within one year from the Act coming into force, the deadline for which was April 30, 2017.

What this means is that after May 1, 2017, the position of an interim regulator may cease to exist and in such a situation the interim regulator continuing in his/her position may be illegal and all orders and judgments taken by them could be challenged, say some experts.

This may lead to a scenario wherein any order taken by the interim authority in favour of buyers may be easy to challenge, they say.

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Section 20 of RERA clearly states that “the appropriate Government shall, within a period of one year from the date of coming into force of this Act, by notification, establish an Authority to be known as the Real Estate Regulatory Authority to exercise the powers conferred on it and to perform the functions assigned to it under this Act.”

“This will lead to an adverse situation for home buyers since any order in their favour by an interim regulator may be challenged whereas there will hardly be any instance when an order favouring developer will be challenged by home buyers. Also, being aware of its legally vulnerable position, an interim regulator may not take suo moto action which will not be healthy for the legal implementation of RERA,” says Abhay Upadhyay, national convenor, Fight for RERA.

But some legal experts are of the view that as long as an interim authority has been established by an order of a state, it is legal. “Section 20 of RERA provides that two or more states may establish a single authority or one state may have more than one authority, as it may deem fit. It also provides that until the establishment of a permanent authority, the state shall, by order, designate any authority or any officer preferably the secretary of the department dealing with Housing, as the authority, provided on having a permanent authority, all cases shall stand transferred to such authority. Therefore, any so-called interim authority need to be established by an order of the state,” says Akshat Pande, Partner, Alpha Partners.

“Ideally a permanent regulator should have been set up within one year, by May 1, 2016, when section 20 was notified and prior to expiry of an May 1, 2017, interim regulator could have been appointed.  If for some reason an interim regulator was appointed but was not substituted by regulator appointed under section 20 (1) and the interim regulator continued functioning, I do not think that decisions by such continuing interim regulator will be struck down by courts.” says Sudip Mullick from Khaitan & Co.

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Let us take the example of section 3 of the Act which came into force from May 1, 2017. Registration of ongoing projects could only be done after section 3 came into force. So interim regulator would have no role to play if they were appointed before May 1, 2017, therefore the provisions have to be read as that interim regulators can be appointed under the third proviso of section 20 (1) till the appointment of a regular regulator under section 20 (1), he says.

The states that have so far established a permanent Real Estate Regulatory Authority are Gujarat, Maharashtra, Madhya Pradesh and Punjab. The union territory of Dadra and Nagar Haveli and Daman and Diu have tagged with Maharashtra for establishment of permanent Real Estate Regulatory Authority.

Seventeen states/UTs have established an interim real estate regulatory authority. The states are Andhra Pradesh, Assam, Bihar, Goa, Haryana, Jharkhand, Kerala, Mizoram, Rajasthan, Tamil Nadu. Telangana, Uttarakhand, Uttar Pradesh and the union territories are Andaman and Nicobar, Chandigarh, Delhi and Puducherry.

UT of Chandigarh has tagged with UT of Delhi for establishment of permanent Real Estate Regulatory Authority. UT of Andaman and Nicobar Islands has tagged with Tamil Nadu for establishment of permanent Real Estate Regulatory Authority.

“Until a proper regulatory authority is in place, power can be vested on existing development authority as an interim measure. Having said that, if an interim authority is not set up in a proper manner, in accordance with the law, it can always be subject to judicial review,” says Narendra Kumar, advocate on record, Supreme Court.

The central Real Estate (Regulation and Development) Act (RERA) came into effect on May 1, 2017, exactly a year after it was passed by Parliament. As per the Act, developers, projects and agents had till July 31 to mandatorily register their projects with the Real Estate Regulatory Authority. Any unregistered project would be deemed to be unauthorised by the regulator.

Under RERA each state and UT will have its own Regulatory Authority (RA) which will frame regulations and rules according to the Act. But not all states have a real estate authority in place yet and some with one have diluted the original provisions as per the Central Act. RERA covers both new project launches and on-going projects where the completion/occupation certificate has not been received.
Vandana Ramnani
first published: Aug 4, 2017 12:54 pm

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