RERA Adjudicating Officer Cannot Award Interest While Enforcing Refund Order: Madhya Pradesh High Court

The Madhya Pradesh High Court has recently held that a RERA Adjudicating Officer cannot independently determine and award interest after the Regulatory Authority has already decided a homebuyer's entitlement to a refund and compensation.

It ruled that such a determination falls outside the jurisdiction conferred on the Adjudicating Officer under Section 71 of the Real Estate (Regulation and Development) Act, 2016.

Justice Milind Ramesh Phadke partly allowed a writ petition filed by Jetal Construction Private Limited and set aside the Adjudicating Officer's award of 10% annual interest. The court, however, sustained the directions giving effect to the Regulatory Authority's determination on refund and compensation.

The court observed, "Section 71 of the Act of 2016 also makes it evident that the Adjudicating Officer has been appointed only for the limited purpose of adjudging compensation under Sections 12, 14, 18 and 19 of the Act. Likewise, Section 40 of the Act merely provides for recovery of interest, penalty or compensation and for enforcement of orders passed by the Adjudicating Officer, the Regulatory Authority or the Appellate Tribunal within the sphere of their respective statutory powers. The said provision does not confer any additional substantive jurisdiction upon the Adjudicating Officer to determine issues beyond those expressly entrusted under Section 71 of the Act."

The dispute arose after a homebuyer booked two flats from Jetal Construction Private Limited by availing housing loans of ₹47 lakh from HDFC Bank, Gwalior.

After the buyer defaulted, the bank initiated proceedings under the SARFAESI Act and took possession of the flats in 2019. A consumer complaint filed on the same cause of action was dismissed, following which the homebuyer approached the Regulatory Authority under the RERA Act.

By an order dated September 4, 2018, the Regulatory Authority found that the builder had failed to complete construction within a reasonable period and had neither informed the buyer that the flats were ready nor indicated any definite timeline for completion.

It held that the buyer was entitled to withdraw from the project and claim a refund, interest and compensation, leaving the rate of interest and quantification of compensation to the Adjudicating Officer.

The Adjudicating Officer later directed the builder to refund ₹45 lakh with interest at 10% per annum.

Jetal Construction challenged the order, arguing that the Adjudicating Officer's powers under Section 71 are limited to deciding compensation claims and do not extend to directing a refund.

Referring to the Supreme Court's decision in Newtech Promoters and Developers Pvt. Ltd. v. State of Uttar Pradesh, the court said the Regulatory Authority and the Adjudicating Officer have distinct roles under the Act.

Since the Regulatory Authority had already decided the homebuyer's entitlement to a refund and compensation, the Adjudicating Officer could give effect to that decision. However, by independently determining the interest payable, the officer went beyond the jurisdiction conferred under Section 71.

The court, therefore, set aside the part of the order dealing with interest and sent the issue back to the Regulatory Authority for a fresh decision. It also said the Recovery Certificate and the recovery proceedings would continue only for the principal amount and compensation. Recovery of the interest component will depend on the Regulatory Authority's fresh determination.

For Petitioner (Jetal Construction Private Limited): Advocate Rajmani Bansal.

For Respondent (State of Madhya Pradesh): Government Advocate Sohit Mishra.

For Respondent (Respondent No. 3): Advocate Rohit Jagwani.