Supreme Court Seeks Accountability from States/UTs which haven’t established RERA Authorities and Appellate Tribunals

Supreme Court Seeks Accountability from States/UTs which haven’t established RERA Authorities and Appellate Tribunals

The Supreme Court has directed the Chief Secretaries of the state governments of Meghalaya and Sikkim, as well as the Union Territory administration of Ladakh, to provide their responses concerning their failures to establish regulatory authorities and appellate tribunals under the Real Estate (Regulation and Development) Act, 2016.

Responses have also been demanded from the states of Arunachal Pradesh, Mizoram, and West Bengal, as well as the Union Territory of Jammu and Kashmir, due to their failures in establishing real estate appellate tribunals.

The Court has further issued notice to Nagaland, which stands as the only state that has not yet notified the rules under the Act.

A Bench comprising Justices Sanjiv Khanna and S.V. Bhatti issued these directives through a miscellaneous application within a previously concluded writ petition. The case pertained to the applicability of RERA as an alternative solution for homebuyers. While endorsing the 2018 modifications introduced to the Insolvency and Bankruptcy Code, treating homebuyers as financial creditors, the Supreme Court had previously instructed all states and union territories in 2019 to designate permanent adjudicating officers and set up permanent regulatory bodies and appellate tribunals under the RERA.

On August 11, the order to solicit responses from states and union territories that are not in compliance was issued following the acknowledgment of a comprehensive implementation progress report from Balbir Singh, Additional Solicitor General for India.

“We deem it appropriate to issue notice to the respective Chief Secretaries for the States of Nagaland, Meghalaya and Sikkim, and the Union Territory of Ladakh, who have yet to notify the RERA Rules or have notified the RERA Rules but are yet to establish the Real Estate Regulatory Authority, and respective Chief Secretaries for the States of Arunachal Pradesh, Meghalaya, Mizoram, Sikkim, and West Bengal, and the Union Territories of Jammu & Kashmir and Ladakh, who have passed only interim orders notifying the Real Estate Regulatory Authority or are under process to establish,” the Bench stated.

The Court instructed the relevant Chief Secretaries to submit affidavits within 60 days of this order's service, detailing the advancement of the State or Union Territory in terms of enforcing and executing the provisions of the Real Estate (Regulation and Development) Act, 2016.

This case is scheduled for further hearing in January 2024.

The background of the current case stems from events in August 2019, when the Supreme Court rejected a series of petitions lodged by around 200 builders, developers, and real estate companies. These petitions contested the validity of the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018. This amendment introduced two clarifications to Clause (f) of Sub-section (8) of Section 5 within the Insolvency and Bankruptcy Code, 2016.

The primary clarification essentially placed homebuyers on equal footing with other financial creditors. This was achieved by confirming that any funds procured from an 'allottee' of a 'real estate project' would carry the same commercial impact as borrowing. The amendment's validity was upheld, with Justice Rohinton Fali Nariman presiding over a Bench that pronounced that homebuyers would now have recourse under the Consumer Protection Act, 1986, the Real Estate (Regulation and Development) Act, 2016, as well as the Insolvency and Bankruptcy Code.

“The RERA is to be read harmoniously with the Code, as amended by the Amendment Act. It is only in the event of conflict that the Code will prevail over the RERA. Remedies that are given to allottees of flats or apartments are therefore concurrent remedies, such allottees of flats or apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code,” the Bench had then ruled.

Following this judgment, the Court added a postscript. It directed states and union territories that had not appointed any adjudicating officer, regulatory authority, or appellate tribunal under RERA or had only implemented interim measures, to ensure the appointment of permanent adjudicating officers and the establishment of regulatory and appellate tribunals within three months.

The Court acknowledged that while certain sections of RERA were put into effect in May 2016, others were enforced a year later, thereby granting states and union territories a one-year timeframe to designate an officer and establish the required regulatory body and appellate tribunal.

“We have been informed that most of the states and union territories have established or appointed adjudicating officers, the real estate regulatory authority, as well as the appellate tribunal as under the RERA. Yet, despite the fact that May 1, 2017, has long gone, some recalcitrant states and union territories have yet to do the needful. We direct such states/union territories to appoint permanent adjudicating officers, a real estate regulatory authority, and appellate tribunal within a period of three months from the date of this judgment,” the Supreme Court said.

Copies of the judgment were instructed to be dispatched to the chief secretaries of all states and union territories, along with a request for them to furnish their compliance affidavits within a timeframe of three months.