Karnataka High Court
Maithri Developers vs The Real Estate Regulatory Authority on 10 March, 2020
Author: R Devdas
Bench: R Devdas
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF MARCH, 2020
BEFORE
THE HON'BLE MR.JUSTICE R DEVDAS
WRIT PETITION NO.39231 OF 2019(GM-RES)
BETWEEN
MAITHRI DEVELOPERS
NO.25/7, SRIKOTE ASHIRVAD TOWERS,
DODDANEKKUNDI,
BENGALURU-560 037
REP BY ITS PROPRIETOR
MR. B.V.S. REDDY
AGED ABOUT 46 YEARS.
...PETITIONER
(BY SRI P K SREEKARA, ADVOCATE FOR
SRI RAYAPPA Y HADAGALI, ADVOCATE)
AND
1. THE REAL ESTATE REGULATORY
AUTHORITY (RERA)
1/14, 2ND FLOOR,
SILVER JUBLI BLOCK
CSI COMPOUND
3RD CROSS, MISSON ROAD,
UNITY BUIDLING SAMPANGI RAMA LTD
NAGAR, BENGALURU-560 027.
2. THE REAL ESTATE APPELLATE AUTHORITY
3RD FLOOR, MS BUILDING,
NEAR VIDHANA SOUDHA,
AMBEDKAR VEEDHI,
BENGALURU, KARNATAKA-560 001.
...RESPONDENTS
(BY SRI PRASHANTH M V, ADVOCATE FOR R1
R2 SERVED)
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THIS WRIT PETITION IS FILED UNDER ARTICLES 226
& 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET
ASIDE AND QUASH THE IMPUGNED ORDER AT ANNEXURE-A
DTD:30.4.2019 PASSED BY THE L.D. REAL ESTATE
REGULATORY AUTHORITY, KARNATAKA AND ETC.
THIS WRIT PETITION COMING ON FOR PRELIMINARY
HEARING IN 'B' GROUP THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
R. DEVDAS J., (ORAL):
The petitioner is a Proprietorship concern engaged in Real Estate Development in Bangalore City. It is stated that the petitioner is in the business of real estate development for the past 15 years. The petitioner has completed numerous projects in Bangalore and has several ongoing projects, all of which are registered under the Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as 'RERA Act' for short).
2. The petitioner filed an application under Section 4 of the RERA Act for registration of its upcoming project "Shilpitha Tech Park" on 28.11.2018. Consequent to the application being filed by the petitioner, the registering authority called 3 for certain documents from the petitioner. When the process of collecting information from the petitioner was going on, on 02.04.2019 a photograph said to have been taken from the website of the petitioner- Firm was confronted to the petitioner. It was stated by the authority that the petitioner had issued an advertisement in the website which was in contravention to Section 3(1) of the RERA Act. The petitioner was asked certain questions in this regard and the authority held that the petitioner did not explain the same satisfactorily. Consequently, the authority proceeded to issue the impugned order dated 30.04.2019 approving the project proposed by the petitioner, however, the same was subject to payment of penalty of 1% of the estimated cost of the project. The order stipulates that the petitioner shall pay Rs.1,75,00,000/- as penalty, on payment of which the registration certificate was ordered to be issued.
3. Learned Counsel for the petitioner submits that it is evident from the impugned order that no 4 opportunity of hearing was granted to the petitioner. The petitioner was confronted with a photograph said to have been taken from the official website of the petitioner. In this regard, the learned Counsel submits that Section 38 of the RERA Act specifically provides that the authority was required to adhere to the principles of natural justice before passing an order of penalty. Secondly, it was submitted that Section 59 of the RERA Act, which prescribes punishment for contravention of Section 3, provides that the promoter could be imposed with a penalty, which may extend upto ten percent of the estimated cost of the real estate project as determined by the authority.
4. The learned Counsel submits that the provision does not prescribe a minimum punishment. It is therefore submitted that the authority was within its powers to impose a penalty commensurate to violation of Section 3. Therefore, the learned Counsel submits that having regard to the facts and 5 circumstances of this case, the authority was well within its power to impose a nominal penalty.
5. The learned Counsel further submits that the petitioner has also approached the Appellate Authority as provided under Section 43(5) of the RERA Act. However, it is submitted that in terms of proviso to Sub-section (5) of Section 43, the Appellate Tribunal directed the petitioner to deposit thirty per cent of the penalty, as a pre-condition for considering the appeal filed by the petitioner. The learned Counsel further submits that the petitioner is not in a position to deposit 30% of the penalty. The learned Counsel would place reliance on two decisions of the Apex Court i.e., Government of Andhra Pradesh and Others Vs. P.Lakshmi Devi reported in (2008) 4 SCC 720 and M/s.Hindustan Steel Ltd. Vs. State of Orissa reported in 1969 (2) SCC 627.
6. The learned Counsel, while making reference to these judgments, would submit that when a writ petition challenging the exorbitant demand made by 6 the registering Officer is made, it was held that it was always open to the High Court, if it is satisfied that the allegation is correct, to set aside such exorbitant demand and declare that the demand was arbitrary.
7. Learned Counsel for the respondent- Authority would submit that the impugned order does not call for interference. The learned Counsel submits that though sub-clause (1) of Section 59 of RERA Act provides for imposition of penalty which may extend upto ten per cent of the estimated cost of the Real Estate Project, what has been imposed by the authority is only 1%. It is further submitted that opportunity of hearing was given to the petitioner and as noticed from the impugned order, though opportunity of hearing was given to the petitioner, the petitioner was not able to explain the violation of Section 3(1) of the RERA Act, inasmuch as the advertisement being issued in the official website of the petitioner, to the satisfaction of the authority. 7
8. Heard the learned Counsels for the petitioner and respondent No.1 and perused the petition papers.
9. What is relevant to be noticed is that on 02.04.2019, when the proceedings with respect to consideration of the application filed by the petitioner under Section 4 of the RERA Act was underway before the authority, a photograph said to have been taken from the official website of the petitioner was confronted and an immediate explanation was sought from the petitioner. There is nothing on record that would show that the petitioner was put on notice to show cause as to why action should not be initiated for violation of Section 3(1) of the RERA Act. On the other hand, it is clear from the impugned order that no sooner the petitioner was confronted with the photograph, it was held that the petitioner was not able to give a satisfactory explanation for the advertisement said to have been issued in the official website. As rightly pointed out by the learned Counsel for the petitioner, the photograph of the 8 proposed project was put up in a corner of the webpage and the same is said to have been uploaded on the website even before the Act came into force.
10. The learned Counsel has fairly admitted that the petitioner does not deny that a photograph of the proposed building was available in a corner of the webpage in the website of the petitioner and if the same could be held as an advertisement of the petitioner, the petitioner will be able to deny the same, but the learned Counsel submits that if an opportunity was given to the petitioner he would have explained as to under what circumstances the photograph was put up on the webpage, whether any third party or prospective buyer had entered into an agreement with the petitioner consequent to issuance of such a photograph and whether the petitioner has violated any other provisions of the RERA Act and whether there was any complaint made by a prospective purchaser.
11. The learned Counsel has rightly submitted that if an opportunity was given to the petitioner, he 9 would have explained all these aspects to the authority. The authority would have thereafter arrived at the penalty commensurate to the violation or contravention of any of the provisions of the Act.
12. In this regard, the decision of the Apex Court in the case of Hindustan Steel (supra) would be beneficial. In the said decision, the Apex Court has held that penalty will not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. It was also held that even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
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13. In the opinion of this Court, the breach of Section 3(1) of the RERA Act, which is said to have been committed by the petitioner i.e., showing the photograph of the upcoming breach in a corner of the webpage in the website before registration of the real estate project with the Real Estate Regulatory Authority, is not such that it should attract a penalty of Rs.1,75,00,000/-. It is submitted by the learned Counsel for the petitioner that the real estate market in the present circumstances has hit an all-time low and therefore, under such circumstances, if a penalty of Rs.1,75,00,000/- is imposed on the petitioner, the same, seems very harsh and therefore the authority could have kept the penalty nominal.
14. As rightly pointed out by the learned Counsel for the petitioner, inspite of the authority passing an order registering a real estate project, a condition has been imposed on the petitioner that unless and until he pays the penalty, the petitioner could not proceed with the project. Though the petitioner has approached the Appellate Tribunal, the 11 Tribunal has also shied away from hearing the appeal unless and until the petitioner deposits 30% of the penalty levied by the authority.
15. Having regard to the decisions of the Apex Court as noted above and having regard to Section 59(1) of the RERA Act, this Court is of the considered opinion that the penalty levied by the authority, without affording an opportunity of hearing, without issuing show cause notice or calling upon the petitioner in writing to explain the photograph confronted to the petitioner, is arbitrary and in violation of the principles of natural justice, therefore, the same is required to be interfered with.
16. Nevertheless, this Court is also of the opinion that instead of remanding the matter back to the Authority for reconsideration and in the light of the fact that the petitioner has already lost one year since he was not able to pay the penalty or 30% as pre-deposit before the Appellate Authority, this Court would proceed to pass the following:
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ORDER
1. The petition is allowed in part.
2. The penalty levied by the respondent-
authority is modified and the petitioner is directed to pay penalty of Rs.50,00,000/- (Rupees fifty lakhs only). The same shall be deposited with the Authority under the separate Head of Account meant for payment of penalty, as soon as possible.
3. As and when the penalty is paid, the registration Certificate shall be issued to the petitioner.
Sd/-
JUDGE JT/-