Unregistered FAR Not By Itself A RERA Violation Without Sale Or Marketing: Haryana REAT

The Haryana Real Estate Appellate Tribunal (HREAT) on Friday held that the mere existence of unutilised or unregistered FAR in a real estate project does not, by itself, constitute a violation of Section 3 of the Real Estate (Regulation and Development) Act, 2016, in the absence of any evidence of actual marketing, sale, or booking.

It reduced a late fee imposed on Tulip Infratech Private Limited from Rs 1,75,87,714 to Rs 75,00,000 as excessive and disproportionate.

A coram of Chairman Justice Rajan Gupta and Technical Member Dinesh Singh Chauhan directed the refund of the excess amount within 90 days.

It further held that Clause 1(iv) of the Registration Certificate, which provided for levy of late fee in case of default, cannot override the statutory requirement of establishing an actual violation under Section 3 of the Act.

“The erstwhile promoter, Vipul Ltd., had obtained registration for specific phases, namely Aarohan Phase-I and Aarohan Commercial Tower, and there is no cogent material to demonstrate that any unregistered portion of the project was actively marketed or sold in contravention of Section 3. Mere existence of unutilised or unregistered FAR, in the absence of any act of promotion or sale, does not ipso facto constitute a violation", it observed.

The dispute arose from a 19.244-acre project in Sector-53, Gurugram, originally developed by Vipul Ltd., which had obtained licences between 2004 and 2006 and secured registration for key phases, including “Aarohan Phase–I” and “Aarohan Commercial Tower,” with requisite fees paid.

However, due to financial constraints, the project stalled.

Tulip Infratech subsequently stepped in as the incoming promoter, acquiring development rights through a Beneficial Interest Permission dated March 28, 2022, and obtained fresh registration on April 25, 2022 for the entire project as “Tulip Monsella” and “Tulip Attila.”

The matter reached the Tribunal through an appeal filed by Tulip Infratech challenging an order dated December 18, 2023 passed by the Haryana Real Estate Regulatory Authority (RERA), Gurugram, which had imposed a late fee of ₹1,75,87,714 for delayed registration.

Tulip Infratech deposited the amount under protest on December 27, 2023 and, in appeal, sought refund with interest, arguing that the earlier promoter had already complied for registered phases and that no commercial activity had taken place in the remaining area.

It also contended that imposing liability for past defaults through conditions in the registration certificate was contrary to the statutory scheme and resulted in duplication of financial burden.

Haryana RERA, on the other hand, maintained that Tulip Infratech, as an assignee of development rights, qualified as a “promoter” under Section 2(zk) of the Act and was liable for compliance, including payment of late fee for unregistered portions.

Partly rejecting this approach, the Tribunal held that while the appellant could not be completely absolved of regulatory consequences, the law targets unregistered sale or marketing, and not mere existence of unregistered FAR. It further held that fastening full retrospective liability on the incoming promoter would be inequitable where the alleged breach itself has not been conclusively established.

It observed that while the project reflected some regulatory non-compliance due to incomplete registration of the entire licensed area, the absence of any unlawful sale or marketing activity, coupled with overlapping registration fees already paid for certain phases, rendered the late fee imposed excessive and disproportionate, warranting only a limited and moderated liability.

"It is also an admitted position that registration fee was paid earlier by Vipul Ltd. for certain phases, and the appellant, upon fresh registration, paid fee for the entire project area, resulting in partial overlap. This, coupled with the absence of clear evidence of unlawful marketing, renders the imposition of full late fee of Rs.1,75,87,714/- excessive and disproportionate. However, considering that there existed an element of delayed comprehensive registration of the project as a whole, some regulatory levy is justified to uphold statutory discipline", it stated.

It further added that "the circumstances warranted moderate penalty in view of the fact that the appellant voluntarily took over an abandoned project. In case, the project had not moved forward, it would have resulted in heavy loss to the allottees. Ends of justice would be served by substantially reducing late fee".

Accordingly, the tribunal partly allowed the appeal, reduced the late fee to Rs 75,00,000, and directed that the excess amount deposited by Tulip Infratech be refunded within 90 days

For Petitioner (Tulip Infratech Private Limited): Advocates Radhika Mehta.

For Respondent (Haryana Real Estate Regulatory Authority, Gurugram): Advocates Siddhant Arora.