In a landmark judgment, the divisional bench of Rajasthan High Court has held that complaints against banks can be filed before the Real Estate Regulatory Authority (RERA) if lending banks have taken the possession of a project as a secured creditor, pursuant to the default of the promoter in paying the loan.
The court also held that in the event of conflict between the RERA Act and the recovery proceedings of the bank under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, RERA Act would prevail.
The HC gave the verdict in the context of an under construction residential complex project titled Sunrisers in which the entire building was mortgaged to the Union Bank of India, erstwhile Andhra Bank, for obtaining a loan of Rs 15 crore. Several have booked flats in the project even before the promoters availed the term loan. However, the developers failed to repay the loan leading to the Union Bank attaching the project. Later, it auctioned the flats. On the basis of a complaint from those who booked the flats in the project, the RERA canceled the auction. The Union Bank challenged the RERA decision in high court.
The court rejected claims of the Union Bank and ruled that pursuant to taking possession of the project, the bank stepped into the shoes of the promoters and became assignee of the promoters and thus, amenable to jurisdiction of the RERA. Moreover, the RERA Act prevails over the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.
