Promoters Cannot Claim RERA Exemption Through Separate Ownership Of Adjoining Land Parcels: Rajasthan REAT

The Rajasthan Real Estate Appellate Tribunal (REAT) has cautioned against attempts to claim exemption from project registration by relying on separate ownership of adjoining land parcels measuring less than 500 square meters.

A bench of Chairperson Justice Madan Gopal Vyas and Judicial Member Yudhisthir Sharma made the observation while dismissing eight connected appeals filed by promoter Harish Jasuja concerning the “City Trade Center” project in Sri Ganganagar.

Under the Real Estate (Regulation and Development) Act, registration is generally not required where the area of land proposed to be developed does not exceed 500 square metres or the number of apartments proposed to be developed does not exceed eight.

The tribunal observed:

“If we exempt such type of projects from registration then, two or more than two persons or a group of persons will purchase the parcel of land by separate sale-deeds of less than 500 square meters adjacent to each other and, therefore, after taking approval of competent authority in the independent capacity, they may design, construct or even offer for sale along with all type of common amenities with mutual understanding and claim for exemption to frustrate the very purpose of enactment of the RERA Act, 2016. Therefore, we may safely conclude that the project was designed, constructed and marketed as one single project and required to be registered under Section 3 of the RERA Act, 2016.”

The dispute concerns the “City Trade Center” project located at 1A Public Park, Sri Ganganagar. The Tribunal noted that the project was launched in 2013 and that a brochure for the project was issued by MNG Dreamz, a partnership firm in which Harish Jasuja and Rajendra Wadhwa were partners. The brochure marketed the project as a commercial complex comprising shops, showrooms, shop kiosks, restaurants, a gaming zone, a food court, offices, and hotel facilities.

Several allottees booked units in the project and deposited amounts towards the sale consideration. Rajasthan RERA first dealt with a complaint filed by allottee Kundan Lal and, on September 16, 2020, directed refund of ₹17 lakh. It also directed issuance of a separate notice requiring the promoters to explain why the project had not been registered and why action should not be taken for violation of the Act.

Subsequently, on February 12, 2021, Rajasthan RERA held that the project was liable to be registered. Thereafter, by an order dated May 9, 2022, it directed Harish Jasuja and Rajendra Wadhwa to register the entire “City Trade Center” project either as one project or as two independent phases within 30 days.

On March 13, 2023, Rajasthan RERA directed refund of deposited amounts with interest to allottees, including Kundan Lal, Om Prakash Gera, Sunil Johar, Nischal Kumar Makkar and Shyam Sunder Bishnoi. The Authority also directed that its May 9, 2022 order would form part of that order.

Before the Appellate Tribunal, Jasuja argued that the land owned by him measured 336.12 square metres and therefore fell outside the registration requirement. He contended that he and Wadhwa had purchased their respective parcels through separate sale deeds and had obtained approvals in their individual capacities. He also argued that MNG Dreamz had closed its business in 2016.

The Tribunal noted that although the land parcels were separately owned, both individuals were partners in MNG Dreamz when the project was launched and marketed. It further noted that the brochure presented the development as a single project.

Rejecting the contention that the project was exempt from registration, the Tribunal found that the development had been marketed as one project spread over 643.82 square metres, comprising more than eight apartments and common amenities.

On the scope of the definition of promoter, the Tribunal observed:

"It is crystal clear from the text of Explanation of Section 2(zk) of the Act that a person who merely sales apartment or plot in the project, is also included in the definition of 'promoter' and is liable as such, along with promoter who constructs and develops the project even if promoter is not an owner of project land and the RERA Act, 2016 is no very much concern whether the firm is having ownership of the project land or not."

The tribunal also endorsed Rajasthan RERA's finding that the character of a project must be assessed in the manner in which it is marketed to purchasers. Referring to the Authority's reasoning, it noted that the project had been marketed by MNG Dreamz as one having an area of more than 500 square metres and more than eight apartments.

The Tribunal quoted Rajasthan RERA's finding that,

“the area of land and the number of apartments proposed to be developed in the project are to be reckoned on the basis of the project as it is marketed, not so much on the basis of how it is physically proposed to be or is being constructed or developed on the ground. It is an undisputed fact that the project was marketed by M/s MNG Dreamz as a project having an area of more than 500 sq.mtrs. and more than eight apartments. As such, the impugned project 'City Trade Center' is required to be registered under the Act, no matter how many independent parcels of land, landowners and developers are involved therein.”

The tribunal also rejected the argument that the project qualified for exclusion under the Rajasthan RERA Rules on the ground that more than 60 per cent of the units had been sold before the Act came into force. It agreed with the Authority's finding that the material on record did not establish eligibility for that exclusion.

The bench further took note of photographs, videos, and screenshots of the project produced by allottee Shakuntala Sachdeva.

After viewing the material, the tribunal observed,“Upon seeing the contents of aforesaid videos, photos and screen shots dated 06/02/2021, it is crystal clear that the Project is still incomplete.”

Addressing the contention regarding dissolution of MNG Dreamz, the Tribunal observed that liabilities arising during the existence of a partnership do not disappear merely because the firm is later dissolved.

The Tribunal observed, “In other words, if a liability arose while the firm was existed, dissolution does not wipe it out. In the present case, the partnership firm of appellant-Harish Jasuja and respondent-Rajendra Wadhwa marketed the project.”

Holding that the “City Trade Center” project is an ongoing project that is required to be registered, the tribunal dismissed all eight appeals filed by Harish Jasuja.

For Appellant-Promoter Harish Jasuja: Advocate Gurmoj Goyal.

For Respondent (RERA): Advocate Vikram Pratap Singh.

For Respondent-Allottees: Advocates Amrit Kumar Surollia, Ashish Surollia and Aditya Surollia.