1. INTRODUCTION
The division bench of the Hon'ble Rajasthan High Court ("High Court") in a recent writ petition1 passed a landmark judgment protecting the rights and interests of home-buyers by holding that secured creditors such as financial institutions and banks fall within the jurisdiction of the Real Estate Regulatory Authority ("RERA") and home-buyers can approach the RERA against such secured creditors.
The High Court further held that: (i) The Real Estate Regulatory Act, 2016 ("RERA Act") operates retrospectively only in the cases where the security interest is created because of fraud or collusion between banks/financial institutions and developers; (ii) The RERA Act would prevail over the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act") in case of a conflict between the two; and (iii) The RERA has jurisdiction to entertain complaints against secured creditors like banks/financial institutions once they take recourse under Section 13(4) of the SARFAESI Act to enforce their security interest. The High Court judgment has already been discussed in our previous update which can be accessed here.
2. HIGHLIGHTS
This judgment of the High Court was challenged by a Special Leave Petition2 before the division bench of the Hon'ble Supreme Court ("SC") by the aggrieved parties. The SC affirmed the judgment of the High Court and further clarified that actions against secured creditors before the RERA shall be applicable in a case where proceedings are initiated by the homer buyers to protect their rights. The order of the SC can be accessed here.
3. INDUSLAW VIEW
The SC has reaffirmed the views of the High Court, whereby financial institution(s) who exercise their rights under the SARFAESI Act, will be "Promoters" as defined under the RERA Act. This will have a great impact on enforcement proceedings in the future.
Footnotes
1. Union Bank of India, Jaipur vs. Rajasthan Real Estate Regulatory Authority & Ors., D.B. Civil Writ Petition No. 13688/2021 & 69 other connected Writ Petitions.
2. Union Bank of India, Jaipur vs. Rajasthan Real Estate Regulatory Authority & Ors., D.B. Special Leave Petition (Civil) No. 1861-1871/2021.
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