Search for Articles CONTRIBUTOR ee e ARTICLE India: Banks Are Now Amenable To The Jurisdiction Of RERA: Supreme Court Rules In Favour Of The Homebuyers by atin Kochnar and fishab Khare ‘Your Linkedin Connection F wth ee autores Introduction In awelcome step towards ensuring that rights of Homebuyers remain protected, the Hon'ble Supreme Court of india vide an Order dated 14.02.2022 passed in Union Bank of India v, Rajasthan Real Estate Regulatory ‘Authority Et. (‘SC Order, intr lished that RERA authority has the jriscction to entertain a complaint by ‘an aggrieved person against the bank in a case where proceedings before the RERA Authority are initiate by the home buyers to protect ther rights ‘The SC Order was pronounced ina Special Leave to Appeal challenging the judgment dated 14.12.2021 of the Hon'ble Rajasthan High Court in Union Bank of India and Ors. Vs. Rajasthan Real Estate Regulatory Authority ‘and Ors2 (‘HC judgment’). The Supreme Court aimed te la lai down in the HC Judgment, Pertinenty, the HC Judgment had ended the seemingly undying tussle between the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI”) and Real Estate Regulation and Developement) Act, 2076 (RERA Act), The HC Judgment resolved thi tussle through a two-fold conclusion. Firstly, t held thatthe banks/secured creditors are amenable to the jurisdiction of RERA Authority hen the rightsinterests of the Homebuyers are under consideration Secondly, i brought end to an important controversy. that in an event of conflict between SARFAESI & RERA Act the RERA Acting a subsequent legislation shal prevall over SAREAESL Background ‘Aggrieved by the failure of developers to hand over the possession on time, mary allotees instituted Complaints before RERA. The Complaints pertained toa Project comprising of 38 ats, which was launched in the year 2014, ‘The allotees procured loans from the ICICI bank an the bass of a tripartite agreement which led to the creation of charge in favor ofthe ICICI Bank. According tothe allottees, the developers further procured loans ‘rom Andhra Bank which has now merged withthe Petitioner Bank and thus created mortgage In favor ofthe Petitioner Bank, The alotees alleged before the RERA Authority that these loans were illegally sanctioned. On the other hand, the Petitioner 2ank contested the allegation ofthe allotees by raising a jurisdictional issue around the applicability of RERA when SARFESI Act is also in the picture. In quintessence, ¢ ‘the contention that tis not covered under the ambit of the RERA Act and directions under the RERA Act can be issuec only against a promoter, allottes or areal estate agent, However, the argument ofthe Petitioner Bank eid not meet approval of RERA Authority as it held that the bank being an assignee of the promoter is 2 promoter itself and would squarely fall under the jurisdiction of RERA Authority. In dong 50, it referred o the definition of promoter provided under Section 2 (ok of the RERA Act 1 Petitioner Bank resorted to Observations of the Hon’ble Rajasthan High Court ‘The Hon'ble Rajasthan High Court observed that Section 35 ofthe SARFAESI as well as Section 89 of the RERA, {Act are similar in nature, which provide forthe overriding effect ofthe respective legislations to any other law forthe time being in force. The Hon ble High Coure while dismissing tne Petition fled by the Petitioner Bank | Qsvardhmaana@gmall.com Qheld that the RERA Act has an overriding effect on SARFAESIas inthe event of drect conflict between the two central legislations ordinarily the subsequent legislation would preva ‘The Hon'ble High Court ater relying upon Section 11¢(h) ofthe RERA Act further held that it creates @ new set of rights and inerest in favor ofthe Allottees which cannot be retrospective in nature and has Prospective effect, Thus, the RERA Act will have no applicabilty on the secured creditors whose interest has been created prior tothe introduction of the RERA Act, ‘The Hon'ble High Cour further interpreted the judgment of the Hon'ble Supreme Court of Inia in Bikram Chatter) supra) to hold that in absence of fraud or collusion, the provsions of the RERA Act cannot be applied retrospectively tothe banks and financial instkutions in whose favor the security Interests have been created prior to the enactment of the RERA Act. ‘Another key issue which came up for consideration of the Hon'ble Rajasthan High Court was if RERA has jurisdiction to isu directions against banks/financial institutions claiming security interest over properties hich are subject matter ofthe agreement between the Mllottee and the promote. ‘The Hon'ble Rajasthan High Court deliberated upon the issue and observed that Clause (of Section 2 (2k) of. the RERA Accuses the term "means and includes that has extremely wide ambit that takes into its’ sweep, the assignees of the promater as wel. Furthermore, the Cour relied upon Section 13 ofthe SARFAESI to adopt harmonious construction of statutes to harmonize the two legislations le. SARFAESI and the RERA Actin order to facltate the furtherance of rights and interests of the Allotees/2uyers, Thus, the court held that ence the banks take recourse of any of the provisions enshrined under Section 13 (4) of SAREAESI itassumes the role ‘of a borrower Interns of the RERA Act as well, Thus, once the bank initiates steps under Section 13 (4 of [SARFAESI, It shall also become amenable to the jurisdiction ofthe RERA Authority under the RERA Ac. Decision by the Hon’ble Supreme Court of India ‘The SC Order affirmed the judgment dated 14.12.2021 of the Hon'ble Rajasthan High Cour. However, the Hon'ble Supreme Court clarified chat the RERA Authority shall have jurisdiction against banks or the secured ‘creditor when ietakes a recourse under Section 13() of the SARFAESI only when the praceedings before the RERA Authority are inated by the homebuyers ta safeguard thelr rights Conclusion ‘The udgment of che Hor‘ble Supreme Court of Inala is a welcome step in the modern day RealEstate Jurisprudence by ensuring that rights of homebuyers are not watered down. The law as laid down by the Hon'ble Supreme Court of inla effectively neutralizes the apparent conflict, between the SARFAESI and the RERA Actas far as the rights and interest of the homebuyers in concerned. The judgment als reais that ‘the modus operandi of financing ofthe praject does nat stand in the way of rights af harnebuyers in procuring ther legitimate reliefS under the law. In other words, the Kor‘ble Supreme Court of Inca, by harmoniously interpreting the SARFAESI & the RERA Act, has affirmed tnat the dispute between the banksrinvestars and the promoters shall nat have any bearing upon the rights and ttle of the homebuyers. ‘The judgment of the Her‘ble Supreme Court i expected to bring relief te Home Buyers across the country as itnow entals that an aggrieved homebuyer shall now have a remedy te approach the RERA Authority when recovery proceedings have been intiated by the bankifinancial creditor against the promoter, where the properties belonging to the Homebuyers may be subject to attachment. Footnotes {Spell Leave to Appel) Nos 1861-167/2022 2.08 No. 3686/2021 The comtent ofthis article i intended to provide a general guide to the subject matter. Specialist advice should be sought about your speci circumstances. 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