2024 (4) TMI 1286 - HC - Indian Laws

Maintainability of Writ Petition under Article 226 of the Constitution of India - jurisdiction of the RERA Court - Forbearing third respondent from continuing with the illegal construction of new towers - violation of rights of the homeowners of the appellant Association - Section 14(2)(ii) of the RERA Act. The cause of action in the present Writ Petition is that after the sale of many of the blocks the third respondent unilaterally decided to modify the original plan. HELD THAT - The RERA Act was enacted with the primary objective of reforming Real Estate culture including engaging in greater transparency citizen-centric accountability and financial discipline. It emphasises consumer protection and attempts to bring about efficiency and transparency in the sale/purchase of Real Estate projects. It establishes a Real Estate Regulatory Authority for each State and Union Territory. It mandates registration of all Real Estate Projects and the agents who intend to sell any flat apartment or building with the said authority. The developers are required to post all project details including the project plan layout Government approvals land status contractors schedule and completion of the project with the authority which will then be made available to the consumers/prospective buyers. The Act aims at the protection of the buyers interests and streamlines the duties and responsibilities of both sides. Penalties are provided for violation. The Grievance Redressal mechanism for speedy dispute redressal of the disputes is also provided under the Act. Section 3 of the RERA Act provides that no promoter shall advertise market book sell or offer for sale or invite persons to purchase in any manner any plot apartment or building without registering the Real Estate Regulatory Authority under the Act. It specifically provides that ongoing projects on the date of commencement of the Act for which the completion certificate has not been issued the promoter shall make an application. Section 14 of the RERA Act provides for adherence to the sanctioned plans and project specifications by the promoter - a careful reading of Section 14(2) of the RERA Act which is a non-obstante clause states that once the promoter discloses the sanctioned plan and layout plan no addition or alteration can be made in the building of that particular person under Section 14(2)(i) of the Act without the previous consent of that person. A reading of Section 14(2)(ii) of the RERA Act along with Explanation - II to Rule 4 of the Rules it would be clear that unless there is consent from two-thirds of the allottees there cannot be any addition revision or modification of the plan. Explanation - II only clarifies that if a project is to be developed in phases the promoter holds out the details of the development of the particular phase to the allottees and there may be excess/rest of the lands which are to be developed in the subsequent phases in which case when it develops the subsequent phases in respect of any addition or revision or modification of the subsequent phases it needs to take consent from the respective allottees of the subsequent phase alone and the consent of the earlier phase need not be taken. The same is also in sync with the purposes of the Act and Section 14(2) of the RERA Act as all the details of the development in respect of the phases which are to be developed in a later date will not be disclosed to the buyers. In essence if a promoter discloses the details as to the number of towers number of residential occupants and of the extent of the common areas amenities etc. after holding out to the buyer and making them to purchase/inviting them to purchase the apartment thereafter he loses the right to unilaterally alter or make additions unless there is consent of the two-thirds of the allottees. From the wordings of Section 14 of the Act which is a non-obstante clause and Section 89 of the Act by which the provisions of the Act are to override the other regulations it would be clear that the second respondent cannot grant a modification or revision of the building approval in violation of Section 14 of the RERA Act. Rule 11 of the Tamil Nadu Combined Development and Building Rules 2019 only states that mere granting of approval by itself will not mean the responsibility or clearance of the aspects mentioned therein. But that does not in any manner enable the second respondent to ignore the mandate of the RERA Act and grant permission for an illegal modification. Especially when the project is partly executed after the registration with the RERA authority and the buildings are allotted/sold/occupied by the parties - the impugned planning approval granting modification without the consent of two-thirds of the members of the allottees of each of the 7 buildings in Phase - II to which the block in question is held out is a common area that is being community facility for a clubhouse and commercial facility as illegal and is liable to be quashed. When the third respondent is developing the entire area of 128 acres into a gated community and township it has to stick to its plan concerning the number of buyers dwelling units commercial areas etc. It cannot keep on adding the number of towers etc. to render the original price in which it sold flats meaningless. The very purpose of the RERA Act and its registration is to safeguard such purchasers from this kind of changes that is the promoters of a single building putting up additional floors and promoters of composite township putting up additional buildings than promised - this is a fit case for interference as the Appellate Court in the findings of the learned Single Judge as the findings are completely not in tune with the express provisions or the purposes of the RERA. The order of the learned Single Judge is set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the revision and modification of the originally sanctioned plan by the promoter, specifically substituting a clubhouse with two new residential towers, was permissible without obtaining the prior written consent of two-thirds of the allottees under Section 14(2)(ii) of the Real Estate (Regulation and Development) Act, 2016 (RERA Act).

- Whether the planning authority had jurisdiction and power to grant the impugned revised plan approval in the absence of such consent.

- The applicability of Explanation II to Rule 4 of the Tamil Nadu Real Estate (Regulation and Development) Rules, 2017 (TNRERA Rules), which exempts phased projects approved before the commencement of the RERA Act from the consent requirement.

- Whether the contractual clauses in the construction agreement, including Clause 10.3 and recital 'L', constituted valid consent by the allottees for modifications in the sanctioned plan.

- The legal status of the clubhouse and commercial facilities as common areas within the meaning of the RERA Act and whether their removal or relocation without consent violates the rights of the allottees.

- The extent of the promoter's rights to revise plans post-sale and post-RERA registration, and the protection afforded to allottees under the RERA Act against unilateral alterations.

- The jurisdictional competence of the Special Court under RERA versus the High Court under Article 226 of the Constitution to entertain challenges to planning authority approvals.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Requirement of Consent under Section 14(2)(ii) of the RERA Act for Plan Modification

The legal framework is Section 14 of the RERA Act, which mandates that a promoter shall not make any additions or alterations in the sanctioned plans or common areas after disclosure to allottees without prior written consent of at least two-thirds of the allottees. The provision is a non-obstante clause overriding other laws.

The Court examined the original sanctioned plan, which included a clubhouse and commercial facilities as common amenities for Phase II. The promoter's revision replaced the clubhouse with two residential towers, Octavius and Verona.

The Court noted that the clubhouse and commercial facilities fall within the definition of "common areas" under Section 2(n)(vii) of the RERA Act, which includes all community and commercial facilities provided in the project.

The Court held that the promoter's unilateral alteration of the clubhouse without obtaining the requisite two-thirds consent violated Section 14(2)(ii). The promoter cannot alter the amenities promised at the time of sale, as the allottee's purchase decision was based on the original plan and amenities.

The Court rejected the argument that Explanation II to Rule 4 of the TNRERA Rules exempted the promoter from obtaining consent. The Explanation applies only to phased projects where modifications relate to subsequent phases and where the scheme of phased development has been agreed upon. Here, the modification affected Phase II allottees' common amenities, thus requiring their consent.

The Court also distinguished the contractual clause (Clause 10.3) relied upon by the promoter, holding that it does not amount to consent for material alterations such as removal of a clubhouse, but only for statutory renewals or minor revisions.

The Court emphasized that consent under Section 14 must be specific, prior, and in writing from two-thirds of the allottees concerned, not merely inferred from general contractual clauses.

Issue 2: Jurisdiction of Planning Authorities and Applicability of Rule 11 of Tamil Nadu Combined Development and Building Rules, 2019

The respondents contended that the planning authority's approval under the Tamil Nadu Combined Development and Building Rules, 2019, including Rule 11, which limits the scope of permission to certain aspects and excludes responsibility for title, structural soundness, and amenities, protected the approval.

The Court held that while Rule 11 limits the planning authority's responsibility regarding certain aspects, it does not empower the authority to ignore the mandatory provisions of the RERA Act, especially Section 14(2)(ii), which prohibits unilateral alterations without consent.

The Court observed that the planning authority's approval lacked application of mind regarding the statutory consent requirement and was therefore illegal.

Issue 3: Nature of the Clubhouse and Commercial Facilities as Common Areas and Impact on Allottees' Rights

The Court analyzed the marketing brochures, sanctioned plans, and construction agreements, which showed the clubhouse and commercial facilities as amenities promised to allottees of Phase II.

The Court found that these facilities are integral common areas and community amenities forming part of the project's consideration and pricing. The removal or substitution of such facilities without consent adversely affects the allottees' rights and expectations.

The Court rejected the promoter's contention that the clubhouse was not part of the allottees' undivided share or that the new clubhouse area behind the new towers sufficed, holding that relocation or substitution does not negate the requirement of consent for such material changes.

Issue 4: Applicability of Contractual Clauses and Consent under the Construction Agreement

The promoter relied on recital 'L' and Clause 10.3 of the construction agreement, which empower the promoter to seek renewals and revisions of sanctioned plans and to comply with statutory requirements.

The Court held that these clauses cannot be construed as blanket consent for material alterations affecting common amenities and community facilities. Such consent must be specific and informed, as mandated by Section 14 of the RERA Act.

The Court further held that the contractual consent cannot override the statutory protections granted to allottees under RERA.

Issue 5: Interpretation of the Term 'Phase' under the RERA Act and Registration of the Project

The promoter argued that the township is developed in phases, each tower being a separate phase with independent RERA registration, and that the clubhouse lies outside the phase of the appellant's allottees, thus not requiring their consent.

The Court examined the definitions of "project" and "common areas" under Sections 2(zn) and 2(n) of the RERA Act and held that the clubhouse and commercial facilities are common areas for the entire Phase II project, which includes the seven towers to which the appellant's allottees belong.

The Court rejected the promoter's narrow interpretation of 'phase' and emphasized that the clubhouse is a shared community facility for the entire Phase II, and cannot be altered without the consent of the allottees of that phase.

Issue 6: Jurisdiction to Challenge Planning Authority's Approval

The learned Single Judge held that challenges to planning authority approvals are maintainable by Writ Petition under Article 226, as the planning authorities are not amenable to RERA Special Court jurisdiction.

The Court agreed with this finding, noting that while disputes regarding amenities and contractual obligations can be addressed before the RERA Court, illegality in grant of planning approval can be challenged by Writ Petition.

3. SIGNIFICANT HOLDINGS

- "Section 14(2)(ii) of the RERA Act is a clear and categorical embargo on the promoter from making any additions or alterations to the project once agreements have been entered into with the prospective buyers without the previous written consent of at least two-thirds of the allottees." (Para 6.12)

- "The clubhouse and commercial facilities are common areas within the meaning of the RERA Act and form part of the amenities promised to the allottees. Any unilateral alteration or removal of such common areas without the consent of two-thirds of the allottees is illegal." (Para 6.15, 6.23)

- "Explanation II to Rule 4 of the TNRERA Rules does not exempt the promoter from obtaining consent where the alteration affects the allottees of a particular phase, especially when the alteration concerns common areas and amenities." (Para 6.14, 6.25)

- "Contractual clauses empowering the promoter to seek plan revisions do not amount to consent for material alterations affecting common amenities and cannot override statutory provisions under Section 14 of the RERA Act." (Para 6.26)

- "The planning authority's approval of the revised plan without ensuring compliance with Section 14(2)(ii) of the RERA Act is illegal and liable to be quashed." (Para 6.24)

- "The term 'phase' under the RERA Act must be understood in the context of the project registration and the common areas pertaining to that phase. The promoter cannot isolate individual towers to circumvent consent requirements." (Para 6.19, 6.23)

- "Challenges to planning authority approvals are maintainable by Writ Petition under Article 226 of the Constitution, as planning authorities are not subject to RERA Special Court jurisdiction." (Para 6.25)

- "The promoter cannot unilaterally alter the number of towers or withdraw promised amenities after sale of flats, as it affects the allottee's rights and the basis of their purchase decision." (Para 6.23, 6.29)

Final determinations:

- The impugned planning approval dated 19.11.2020 granting revision of the plan substituting the clubhouse with two residential towers without obtaining prior written consent of two-thirds of the allottees of Phase II is illegal and quashed.

- The promoter may approach the allottees of the seven buildings in Phase II for their consent to such alteration. If two-thirds of the allottees consent, the promoter may reapply to the planning authority for modification, which shall be considered in accordance with law.

- No order as to costs was made on appeal, and the prior order dismissing the Writ Petition was set aside.