Offences, Penalties and Adjudication under RERA

The Real Estate (Regulation & Development) Act, 2016, popularly known as RERA, was enacted to bring transparency, accountability, and efficiency to the real estate sector in India. While the Act primarily focuses on protecting homebuyers and regulating promoters and agents, it also provides a comprehensive legal framework to address violations and enforce penalties for non-compliance.

Chapter VIII of the Act, which deals with Offences, Penalties and Adjudication, is a crucial section that lays down strict provisions to punish defaults by promoters, agents, and even allottees (buyers). This chapter ensures that the provisions of RERA are not merely advisory but are enforceable through stringent monetary fines, imprisonment, and legal compensation mechanisms.

Offences under RERA and Who Can Be Liable?

RERA classifies offences into several categories depending on the role of the party involved and the nature of the violation.

Offences by Promoters

The primary responsibility of registering real estate projects and providing accurate disclosures falls on promoters. The offences include:

• Non-registration of projects as required under Section 3 of RERA.
• Providing false or misleading information in documents filed under Section 4.
• Contravening any other provisions of the Act, or the rules and regulations made thereunder.
• Failing to comply with orders and directions of the Real Estate Regulatory Authority or Appellate Tribunal.

Offences by Real Estate Agents

Agents facilitating the sale or purchase of real estate must also register themselves and follow the prescribed code of conduct. Their offences include:

• Facilitating transactions without registration as required under Section 9.
• Contravening the provisions of Sections 9 and 10.
• Failing to comply with the orders or directions issued by the Authority or Appellate Tribunal.

Offences by Allottees (Buyers)

Even buyers have obligations under RERA, such as complying with the orders of the Authority or the Appellate Tribunal. Failure to do so constitutes an offence.

Corporate Liability

If an offence under RERA is committed by a company, not only is the company liable, but also the persons who are in charge of and responsible for the conduct of its business. This ensures that companies cannot evade responsibility by hiding behind their corporate veil.

Penalties under RERA

RERA prescribes both monetary penalties and imprisonment, depending on the gravity of the offence and whether the default is repeated or continuous.

Penalties for Promoters

Penalty for Non-registration (Section 59)

• A promoter who fails to register a project as mandated is liable to pay a penalty that may extend up to 10% of the estimated cost of the real estate project.
• If the promoter continues to violate the registration requirements or disobeys orders issued under this section, they may face imprisonment for up to three years or an additional fine of up to 10% of the project cost, or both.

This stringent penalty aims to deter promoters from operating projects without proper registration and oversight.

Penalty for Providing False Information or Contravening Section 4 (Section 60)

Promoters who provide false information or fail to comply with the filing and disclosure requirements under Section 4 can be penalised up to 5% of the estimated cost of the project.

Penalty for Other Violations (Section 61)

If the promoter contravenes any other provisions of the Act, rules, or regulations (other than Sections 3 and 4), they can be penalised with a fine of up to 5% of the estimated cost of the real estate project.

Penalty for Failure to Comply with Authority or Tribunal Orders (Sections 63 and 64)

• Failure to comply with the orders of the Authority can lead to a daily penalty, accumulating to a maximum of 5% of the project cost.
• Non-compliance with orders of the Appellate Tribunal may result in imprisonment for up to three years or a fine up to 10% of the project cost, or both.

These provisions ensure that promoters comply with regulatory directives and provide a legal consequence for persistent defaulters.

Penalties for Real Estate Agents

Penalty for Non-registration and Contraventions (Section 62)

• Real estate agents who fail to register as required or contravene Sections 9 and 10 are liable to pay a penalty of ₹10,000 per day during the period of default.
• This fine can cumulatively extend up to 5% of the cost of the plot, apartment, or building for which the sale or purchase has been facilitated.

Penalty for Failure to Comply with Authority or Tribunal Orders (Sections 65 and 66)

• Failure to comply with Authority orders can attract a daily penalty up to 5% of the estimated cost of the relevant property.
• Disobedience of Appellate Tribunal orders can lead to imprisonment for up to one year or a fine of up to 10% of the estimated cost, or both.

These penalties ensure that agents perform their duties in a transparent and responsible manner.

Penalties for Allottees

Allottees who fail to comply with orders of the Authority or Appellate Tribunal can be penalised as follows:

• Authority’s orders: Penalty up to 5% of the cost of the plot, apartment, or building.
• Appellate Tribunal’s orders: Imprisonment up to one year or a fine up to 10% of the cost, or both.

Though less commonly invoked, these penalties ensure all parties abide by regulatory directives.

Penalties on Companies and Their Officers (Section 69)

Where an offence is committed by a company:

• Both the company and the persons in charge of its business (such as directors or partners) are deemed guilty.
• Such persons can defend themselves by proving lack of knowledge of the offence or that they exercised due diligence to prevent the offence.
• Officers who consented to or connived in the offence are liable independently.

This provision reinforces personal accountability for corporate misconduct.

Compounding of Offences (Section 70)

To ease the burden on the courts and provide an opportunity for offenders to rectify mistakes, RERA allows compounding of offences punishable with imprisonment. This means:

• The court may accept a sum of money in lieu of prosecution.
• Compounding can be done either before or after the prosecution has begun.
• The amount payable on compounding cannot exceed the maximum fine prescribed for the offence.
• After compounding, no further prosecution shall be initiated for the same offence.

This mechanism encourages early settlement of disputes and reduces litigation.

Adjudication of Compensation (Sections 71 and 72)

One of the innovative features of RERA is the establishment of a special adjudication process for compensation claims related to real estate projects.

Appointment and Jurisdiction of Adjudicating Officers

• The Real Estate Regulatory Authority appoints one or more adjudicating officers (preferably District Judges) to decide claims under Sections 12, 14, 18, and 19 of RERA.
• These sections mainly relate to compensation claims for delay in possession, structural defects, false information, and violation of allottee rights.
• The adjudicating officer conducts inquiries after giving parties reasonable opportunity to be heard.

Application and Procedure

• Allottees may file applications before the adjudicating officer seeking compensation.
• If a complaint is already pending before the Consumer Disputes Redressal Forum or Commission, the complainant may withdraw it and file before the adjudicating officer with the forum’s permission.
• The adjudicating officer must dispose of the application within 60 days of receipt.
• Where the inquiry cannot be completed within 60 days, reasons for the delay must be recorded.

Powers of Adjudicating Officers

• They may summon and enforce attendance of witnesses.
• They can require production of documents relevant to the inquiry.
• Upon satisfaction, they can direct payment of compensation or interest.

Factors Considered in Adjudicating Compensation (Section 72)

When deciding compensation, the adjudicating officer considers:

• The amount of disproportionate gain or unfair advantage made due to the default.
• The actual loss caused to the aggrieved party.
• Whether the default is repetitive.
• Any other factors necessary to do justice.

This ensures compensation is fair and equitable.

Conclusion

The offences, penalties, and adjudication provisions of RERA represent a major shift towards a transparent and accountable real estate ecosystem. Understanding these provisions is essential for all stakeholders in the real estate market. Compliance not only avoids legal consequences but also builds trust and confidence in India’s real estate sector.