Supreme Court Sets Aside High Court Order Quashing ₹2.27 Crore RERA Penalty

The Supreme Court has recently set aside a Madhya Pradesh High Court order that had quashed a Rs. 2.27 crore penalty imposed by the Madhya Pradesh Real Estate Regulatory Authority (MPRERA) on an industrial project developer for non-registration of its project.

A bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe held that “the approach adopted by the High Court is impermissible in law.”

The court noted that the High Court was exercising judicial review in the context of entertaining a challenge to an order of the Madhya Pradesh Real Estate Appellate Tribunal (MPRAT), which had dismissed the developer's appeal for failure to comply with the mandatory pre-deposit requirement under the statute.

“There was no occasion for the High Court to set aside the penalty which was imposed in this context,” the Bench observed.

Malwa Vanaspati and Chemicals Co. Limited owns industrial land situated in Village Bhagirathpura, Tehsil and District Indore. The land is earmarked for industrial use under the Indore Industrial Development Plan, 2021.

The company proposed to develop a flatted industrial factory project after securing approval from the Joint Director, Town and Country Planning on December 7, 2018, and building permission from the Indore Municipal Corporation on May 13, 2019.

MPRERA initiated proceedings under Sections 3 and 59 of the Real Estate (Regulation and Development) Act, 2016, alleging non-registration of the project. By order dated February 2, 2022, it imposed a penalty of Rs. 2,27,98,800 and restricted booking and sale of units in the industrial project.

The company preferred an appeal before MPRAT. The Tribunal directed a pre-deposit of 30% of the penalty amount under proviso 43(5) of the Act. Its application seeking a waiver was rejected on August 4, 2022, and a review petition was dismissed on November 7, 2022. In the absence of a pre-deposit, MPRAT returned the appeal as not entertainable.

The developer then filed a writ petition under Article 226 of the Constitution contending that the RERA Act was not applicable to the sale of industrial plots. During the hearing, it was stated that two plots sold earlier were cancelled.

It also told the High Court that it would not sell any open plots for residential or commercial use and would develop the land strictly as an industrial project in line with the permissions already granted. Taking note of this statement, the High Court set aside the orders passed against the company.

Allowing MPRERA's appeal, the Supreme Court then set aside the High Court's April 25, 2024 judgment and revived the writ petition. It made clear that the company is free to raise and contest its jurisdictional objections before the High Court.

The Court also permitted MPRERA to assist the High Court regarding the jurisdiction it is empowered to exercise under the provisions of the Act.

Noting that the matter has been pending for a long time, the bench requested the High Court to take up and dispose of the writ petition as expeditiously as possible.

For Appellant (MPRERA): Senior Advocate Abhijeet Sinha; Advocates Anuj Tiwari (AOR), Aditya Shukla, Vaibhav Vats, Shalini Basu, Shivendra N. Mishra, Sameer Mishra.

For Respondent (Malwa Vanaspati and Chemicals Co. Ltd.): Senior Advocate Puneet Jain; Advocates Christi Jain (AOR), Om Sudhir Vidyarthi, Akriti Sharma, Aditya Jain, Siddharth Jain, Yogit Kamat, Ritvik Bharadwaj.