Rajasthan REAT Upholds RERA Order Treating Baroda Rajasthan Gramin Bank As Promoter In Kota Project

On 19 May, the Rajasthan Real Estate Appellate Tribunal (REAT) upheld a Rajasthan RERA order treating Baroda Rajasthan Kshetriya Gramin Bank as a “promoter” under Section 2(zk) of the Real Estate (Regulation and Development) Act, 2016.

A Bench of Chairperson Justice Madan Gopal Vyas and Judicial Member Yudhisthir Sharma held that the bank stepped into the developer's role in the “Shreenath Oasis” project at Kota after acquiring an interest in the project through a mortgage. It held:

“it is admitted fact that the respondent-developer and the respondent-landowners have assigned their rights in the project by way of mortgage and executed mortgage-deed in favour of the respondent-bank”

The dispute arose from Flat No. A-908 in Akriti Landcon Private Limited's “Shreenath Oasis” project at Kota. Surendra Kumar Katyal purchased the flat for Rs.25 lakh under an Agreement for Sale dated 12 September 2015 and paid the entire consideration. Although the project commenced in 2013 with a promised completion timeline of 36 months, the developer failed to hand over possession.

Katyal later discovered that the developer had mortgaged the project to the bank on 28 April 2014 without disclosing it to homebuyers. He obtained a sale deed for the flat on 30 September 2021. He then approached Rajasthan RERA seeking protection from any attachment or auction and asked for a direction to the bank to issue an NOC for the sale of the flat.

By order dated 30 October 2024, Rajasthan RERA held that the bank, as an assignee of the promoter, fell within the definition of “promoter” under Section 2(zk) and directed it to issue the NOC.

The bank challenged this order under Section 44. It argued that the mortgage pre-dated the sale deed and therefore took priority over project assets. It also argued that disputes arising from SARFAESI proceedings fall within the jurisdiction of the Debt Recovery Tribunal. Katyal contended that he remained a bona fide purchaser without knowledge of the mortgage and that neither the developer nor the bank disclosed the encumbrance, despite contractual obligations and RBI guidelines.

The Tribunal noted that the bank sanctioned a Rs.15 crore loan on 28 April 2014 and required the developer to route booking advances and sale proceeds through an escrow account maintained with it. It also assigned the bank responsibility to monitor the project's progress and finances.

It held that the bank acted as a “silent spectator” and failed to disclose the mortgage despite these obligations under the loan terms and RBI guidelines. The Bench observed:

“Surprisingly, the appellant bank also watched the proceedings or sale deed as a silent spectator from 28/04/2014 to 30/09/2021. It is the duty of the promoter developer and appellant bank to disclose the fact of equitable mortgage to the complainant respondent not only on the basis of sanction letter dated 28/04/2014 (Anx.R/1) but also as per the guidelines of RBI Circular No.RBI/2011-12/245”

The Bench also noted that Katyal's sale deed described the flat as free from encumbrances, while the bank publicly disclosed the mortgage only on 15 July 2022. It held that the mortgage transferred an interest in the project to the bank and therefore brought it within the definition of “promoter” under Section 2(zk) of the RERA Act as an assignee of the developer.

It clarified that the bank remained free to recover its dues from the developer, guarantors, collateral properties, or unallocated flats, but it could not proceed against flats already allotted to bona fide homebuyers.

Accordingly, the REAT dismissed the appeal and upheld Rajasthan RERA's direction requiring the bank to issue an NOC to Katyal.

Appearances for respondent No. 1 (Rajasthan Real Estate Regulatory Authority): Advocate Aftab Khan.

Appearances for respondent No. 2 (Surendra Kumar Katyal): Advocate Mohit Khandelwal.