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Judgment
This Authority while granting extension of registration in Case No. F(11)Extension/RERA/PR/2017 for the project “Avant Garde” being developed by M/s Tirath Ram Ahuja Pvt. Ltd. (hereinafter referred to as “Noticee” or “Promoter”) had noted that Noticee did not inform about;
the deviations being made by them from the sanctioned building plans by reducing the number of dwelling units from sixteen (16) to ten (10) and;
funding from M/s Panchsheel Reality and Developers Pvt. Ltd (hereinafter referred as “PRDPL”).
It is pertinent to mention here that the said project was registered under the provisions of RE (RD) Act, 2016 vide Registration Certificate No. DLRERA2018P0002 dated 24.01.2018. Thereafter, an application seeking extension of the RERA registration for the project till December 31, 2022 was received in this office and the Authority after due consideration, extended the project registration till 31.12.2022. However, while considering the extension application, the Authority observed that the promoter has made certain deviations in the building plan of the project and concealed the fact of receiving funds from a non-financial institution. For the lapse, a show cause notice dated 27.01.2023 was issued to the Noticee seeking their explanation.
Vide show cause notice dated 27.01.2023, the Authority sought an explanation from the Noticee as to why action should not be taken against them for violating the provisions made under sections 4 and 11 of the Real Estate (Regulation and Development) Act, 2016 [hereinafter referred to as “RE (RD) Act, 2016” or the “Act”] and penalty imposed under section 61 of the Act.
The Noticee filed reply to show cause notice on 10.02.2023 and the case was reserved for orders on 11.05.2023.
The main arguments of the Noticee with respect to the deviations made from the sanctioned building plans are as under:
The building plan sanctioned by the South Delhi Municipal Corporation on 02.05.2016 permitted construction of ten (10) dwelling units in the project.
During the course of construction of the project, minor deviations were made from the sanctioned building plans. However, the number of dwelling units were not altered.
The changes made in project have been duly regularized vide the regularization plan and regularization certificate dated 05.10.2021.
The total number of dwelling units in the project is in consonance with the Order dated 14.03.2008 passed by the Hon’ble Supreme Court in the matter of M.C. Mehta v/s Union of India, wherein it was provided that the number of permissible dwelling units (residential units/apartments) will not be more than ten (10) in plots ad-measuring 3000 to 3750 sq. mts., which is the plot size in the present matter.
The Noticee had erroneously represented before this Authority that they are in the process of constructing sixteen (16) residential units/apartments in the project. It was purely on account of an inadvertent error without any mal-intent to conceal any fact or mislead this Authority. The number of residential units/apartments being constructed in the project have always been ten (10) and not sixteen (16).
The Noticee had also filed a letter dated 26.09.2022, as per which it had requested the Authority to rectify Quarterly Progress Reports recording the total number of dwelling units as ten (10) instead of sixteen (16).
The Noticee have filed the rectified Quarterly Progress Reports, reflecting the correct number of dwelling units in the project, i.e. ten (10).
In compliance with directions of this Authority dated 14.09.2022, an inspection dated 20.09.2022 was conducted by Shri. Rajpal Kaushal, Assistant Engineer and Shri. Rajat Bhatia, Legal Assistant along with Shri. Amit Kumar, Civil Defence Volunteer, on the project site and in their report, it has been submitted that the construction of the project is being carried out in accordance with the approved layout plans, which shows the total number of dwelling units as ten (10).
Therefore, there has been no deviation from the sanctioned building plans and the Noticee has only constructed ten (10) dwelling units.
The main arguments of the Noticee with respect to the funding received from M/s PRDPL are as under:
The Noticee had entered into a Memorandum of Understanding dated 06.04.2015 (hereinafter referred to as “MoU”), with PRDPL as per which PRDPL had agreed to invest Rs. 92,00,00,000/- (Rupees Ninety Two Crores Only), in the construction and development of the project. The details of the said investment made by PRDPL in the project were not disclosed by the Noticee at the time of registration, since it had not sold any dwelling unit to any third party.
Vide Order dated 23.06.2022, the Authority had directed the Noticee to submit a copy of the agreement executed with PRDPL, by virtue of which funding was received. In response, the copy of the MoU, along with its addendum was submitted to the Authority on 02.08.2022.
The Noticee has not created any other encumbrance on the project. Since, no dwelling unit comprising in the project had been allotted to any third party, the interest of prospective buyers has not been jeopardized.
In compliance with section 4 and section 11 of the Act, read with rule 3 of the National Capital Territory of Delhi Real Estate (Regulation and Development) (General) Rules, 2016, the Noticee has now made requisite disclosures before the Authority.
Analysis and Consideration:
After considering the above facts, the following points of consideration arise before the Authority:
Whether the Noticee has deviated from the sanctioned building plans by reducing the number of dwelling units from sixteen (16) to ten (10) which amounts to modification of sanction plans in violation of Section 14 of RE(RD) Act?
Whether the promoter/noticee has concealed the fact of investment by PRDPL in the project at the time of registration of project and in subsequent QPRs and made themselves liable for penalty under section 61 of RE(RD) Act, 2016?
To adjudicate the issue no. i. regarding deviations made from the sanctioned building plans, we need to look into section 14 of the RE (RD) Act, 2016. The text of which is reproduced below:
“Section 14. Adherence to sanctioned plans and project specifications by the promoter.-
(1)The proposed project shall be developed and completed by the promoter in accordance with the sanctioned plans, layout plans and specifications as approved by the competent authorities.
(2)Notwithstanding anything contained in any law, contract or agreement, after the sanctioned plans, layout plans and specifications and the nature of the fixtures, fittings, amenities and common areas, of the apartment, plot or building, as the case may be, as approved by the competent authority, are disclosed or furnished to the person who agree to take one or more of the said apartment, plot or building, as the case may be, the promoter shall not make-
(i)any additions and alterations in the sanctioned plans, layout plans and specifications and the nature of fixtures, fittings and amenities described therein in respect of the apartment, plot or building, as the case may be, which are agreed to be taken, without the previous consent of that person:
Provided that the promoter may make such minor additions or alterations as may be required by the allottee, or such minor changes or alterations as may be necessary due to architectural and structural reasons duly recommended and verified by an authorised Architect or Engineer after proper declaration and intimation to the allottee.
Explanation. - For the purpose of this clause, "minor additions or alterations" excludes structural change including an addition to the area or change in height, or the removal of part of a building, or any change to the structure, such as the construction or removal or cutting into of any wall or a part of a wall, partition, column, beam, joist, floor including a mezzanine floor or other support, or a change to or closing of any required means of access ingress or egress or a change to the fixtures or equipment, etc.
(ii)any other alterations or additions in the sanctioned plans, layout plans and specifications of the buildings or the common areas within the project without the previous written consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in such building.
Explanation. - For the purpose of this clause, the allottees, irrespective of the number of apartments or plots, as the case may be, booked by him or booked in the name of his family, or in the case of other persons such as companies or firms or any association of individuals, etc., by whatever name called, booked in its name or booked in the name of its associated entities or related enterprises, shall be considered as one allottee only.
(3)In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, it shall be the duty of the promoter to rectify such defects without further charge, within thirty days, and in the event of promoter's failure to rectify such defects within such time, the aggrieved allottees shall be entitled to receive appropriate compensation in the manner as provided under this Act.”
In the present case, the Noticee submitted that as per original sanctioned plan they could have made only ten units and during the course of project implementation they erroneously mentioned that they will be making sixteen units which was an in-advertent error and the same was rectified subsequently. The Noticee submitted that construction of 16 residential units/apartments in the project was purely on account of an inadvertent error without any mal-intent to conceal any fact or mislead this Authority.
The MOU dated 06.04.2015 entered into between the Noticee and PRDPL shows that promoter had proposed to construct sixteen units of different dimensions. Clause B of the MOU reads as follows:
“B. AND WHEREAS, the developer proposes to construct and develop a high-end residential complex on the said land, comprising of 04 (four) habitable floors and upto 16 (sixteen) apartments, along with other amenities, on the said land (hereinafter referred to as “project”). The permissible floor area ratio (hereinafter referred as FAR) of the said land as per the building bye laws is 200%, which enables the developer to develop upto 7053.96 square meters of built-up area on the said land.”
The email dated 09.07.2021 submitted along with the details of area also shows that sixteen units were planned.
However, it is noted that the building plan was sanctioned by the South Delhi Municipal Corporation on 02.05.2016. The sanctioned building plan permitted construction of only 10 dwelling units in the project. Therefore, the total number of dwelling units comprising in the project is in consonance with the order dated 14.03.2008 passed by the Hon’ble Supreme Court in case titled as ‘M.C. Mehta v. Union of India’ (W.P. no. 4677/1985), wherein it was provided that the number of permissible dwelling units (residential units/apartments) will not be more than 10 in plots admeasuring 3000 – 3750 sq. mtrs., which is the plot size in present case.
In order to verify the fact submitted by the Noticee regarding the number of dwelling units constructed by it, this Authority had deputed Sh. Rajpal Kaushal, Assistant Engineer (A.E), RERA, NCT of Delhi to visit the site and submit a report to this effect. The A.E submitted its report on 06.03.2023 wherein it is stated that only 10 dwelling units are being developed and constructed in compliance with the sanctioned building plan dated 02.05.2016 and regularized plan and regularization certificate dated 05.10.2021.
Considering the above submissions and the report placed on record, it is clear that there is no such violation or deviation from the sanctioned building plan, which contravenes section 14 of the RE(RD) Act, 2016. The issue is accordingly decided.
While considering issue no. ii, it is noted by the Authority that as per the terms of this MoU dated 06.04.2015, PRDPL had agreed to invest an amount of Rs. 92 crore in the construction and development of the project, either by themselves or through any legal entity (i.e., company, limited liability partnership, sole proprietorship, partnership, promoter) forming part of PRDPL. Pursuant to the execution of the MoU, PRDPL has invested approximately Rs. 69.5 crores in the project.
Further it cannot be denied that in lieu of the funding received from PRDPL, the parties had mutually decided to secure certain units in the form of security for investment and PRDPL shall have a lien upon them, as is evident from a reading of clause 2 of the MOU dated 06.04.2015. Clause 2 of the MOU reads as follows:
“2. Security for Investment
2.1It has been agreed by and between the parties that in consideration of the Investor providing the financial assistance to the Developer, the investor shall be entitled to either of the following at its sole discretion and option:
a. Return on investment at IRR of 20% (twenty percent); or
b. Such number of residential units in the project which consume 50% (fifty percent) of the FAR that has been consumed in the development of residential units of the project(secured units). As per the proposed plan, the developer is planning to develop upto 16 units of different dimensions. Upon santion of the plan by the appropriate authourity, the parties shall mutually identify such Secured Units.
2.2the parties agree that in order to secure the investment, the investor shall have a lien over the secured units and the Developer undertakes not to create any third party rights, unless consented to by the Investor.”
Further an Addendum dated 10.08.2016 to MOU dated 06.04.2015 was also signed between the Noticee and PRDPL wherein it has been stated that as per the MOU dated 06.04.2015 between the Noticee and PRDPL, 8 (eight) out of 16 (sixteen) residential units were to be constituted as “secured units”. However as per the sanctioned building plan dated 02.05.2016, the total number of residential units proposed to be constructed in the project have been reduced from 16 (sixteen) to 10 (ten). Accordingly, the Noticee has agreed that the “secured units” and its size shall remain same and the number of units comprising the “secured units” (i.e.08 residential units) shall not be reduced in light of the sanctioned plan. Further the Noticee shall be entitled to 02 residential units in the project which shall be equivalent to 50% of the FAR consumed in the development of residential units in the project.
It is noted that the Noticee was bound to disclose at the time of application about the encumbrances created on the project in lieu of the funding given by PRDPL and the entitlement to 50% FAR comprising of 8 (eight) units in the form of ‘secured units’ in the project, as per section 4 (2) (l) (B) of RE (RD) Act, 2016 which reads as :
“4. Application for registration of real estate projects.-
…
(2)The promoter shall enclose the following documents along with the application referred to in sub-section (1), namely:—
(l)a declaration, supported by an affidavit, which shall be signed by the promoter or any person authorised by the promoter, stating:—
(B)that the land is free from all encumbrances, or as the case may be details of the encumbrances on such land including any rights, title, interest or name of any party in or over such land along with details; …..”
Thus, it was mandatory for the Noticee to inform about the encumbrance on the project. Concealment of such vital information is in contravention of section 4(2) (l) (B) of RE (RD) Act, 2016 and Rule 3 (1) (e) of the National Capital Territory of Delhi Real Estate (Regulation and Development) (General) Rules, 2016. The Noticee not only failed to disclose this fact to the Authority at the time of the filing of application for Registration of the project but also did not disclose it in the subsequent QPRs filed by the Noticee.
The purpose of the RE (RD) Act, 2016 is the regulation and development of real estate projects. The promoter is supposed to apprise the Authority of all the developments qua the project, but promoter i.e., Noticee in the present case had obtained loan of substantive amount from a non-financial institutions, putting encumbrance on the project which was not disclosed at the time of application for registration nor it was disclosed in QPRs filed subsequent to registration.
We note that the project has been completed as on date with completion certificate dated 21.03.2023 on record.
Considering the above, we order as follows:
The Noticee concealed about funding from PRDPL and they agreeing to invest an amount of Rs. 92 crore in the construction and development of the project, either by themselves or through any legal entity forming part of PRDPL, from the Authority at the time of registration of project and subsequently, in violation of Section 4(2) (l) (B) of RE (RD) Act, 2016 r/w Rule 3 (1) (e) of the National Capital Territory of Delhi Real Estate (Regulation and Development) (General) Rules, 2016. Therefore, we impose a penalty of Rs.15,00,000/-(Rupees Fifteen Lakh Only ) under section 61 of the RE(RD) Act, 2016 on them to be deposited in Bharat Kosh within a period of 45 days from the date of this order.
The Noticee is also directed to inform all the prospective Allottees about the funding and the agreed terms of the MOU with PRDPL and the Addendum and submit a compliance report within 45 days of this order.
The Noticee shall not sell more than 10 units in the subject property ‘Avant Garde’.
The Sub-Registrar, South East, Delhi shall not register sale of more than 10 units in project ‘Avant Garde’ developed on Plot No. 11, Friends Colony West, New Delhi-110065.
The case is disposed of accordingly.
File is consigned to the Record Room.