News Brief

In Case Aggrieved Home Buyers Approach The Authority Against Banks, RERA Also Has Jurisdiction Over Latter: What Supreme Court's Decision Means

  • The Court was hearing an appeal by the Union Bank of India against a verdict by the Rajasthan High Court.
  • The bank's case was that RERA had no jurisdiction over any recovery proceedings the bank may initiate in case of a default by a real estate company.
  • Bhaswati Guha Majumder Tuesday, February 15, 2022 11:17 am IST
    Real estate
    Real estate

    When a real estate company defaults on repaying bank loans and handing over possession, the Supreme Court held that the Real Estate (Regulation and Development) Act will prevail over recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI).

    Millions of homebuyers are expected to be relieved as a result of the court’s decision.

    The government had earlier changed the Insolvency and Bankruptcy Code (IBC) to include homebuyers on the committee of creditors that decides the company's destiny. However, the buyers were not given priority in payment of dues in the event of liquidation.

    The Court was hearing an appeal by the Union Bank of India against a verdict by the Rajasthan High Court.

    The bank appealed that RERA lacked jurisdiction over it since lenders do not fall under the description of "promoters" for the purposes of the RERA Act. Therefore, the authority could not halt the bank's recovery procedures.

    This was in response to an earlier verdict of the Rajasthan HC which implied that an aggrieved homebuyer could in fact approach the RERA authority against the recovery procedures of the bank.

    The SC stated it was completely in “agreement" with the HC's decision and dismissed the bank's appeal. The bench, however, emphasised that the HC judgement would only apply in circumstances when homebuyers file RERA actions to safeguard their interests.

    The HC, in turn, had reached its decision after hearing a case filed by the Union Bank of India. The bank had challenged a ruling of the Rajasthan RERA which had cancelled the bank auction and ordered the bank to hand over possession of a unfinished residential project to RERA.

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