High Court of Rajasthan (14.12.2021) in Union Bank of India Vs. Rajasthan Real Estate Regulatory Authority [D.B. Civil Writ Petition No. 13688/2021 held that;
(i) Regulation 9 of the (RERA Rajasthan) Regulations of 2017 is not ultra vires the Act or is otherwise not invalid.
(ii) The delegation of powers in the single member of RERA to decide complaints filed under the Act even otherwise flows from Section 81 of the Act and such delegation can be made in absence of Regulation 9 also.
(iii) As held by the Supreme Court in the case of Bikram Chatterji (supra) in the event of conflict between RERA and SARFAESI Act the provisions contained in RERA would prevail.
(iv) RERA would not apply in relation to the transaction between the borrower and the banks and financial institutions in cases where security interest has been created by mortgaging the property prior to the introduction of the Act unless and until it is found that the creation of such mortgage or such transaction is fraudulent or collusive.
(iv) RERA authority has the jurisdiction to entertain a complaint by an aggrieved person against the bank as a secured creditor if the bank takes recourse to any of the provisions contained in Section 13(4) of the SARFAESI Act.
Excerpts of the Order;
# 1. Central question involved in these petitions is of the validity of Regulation 9 of Rajasthan Real Estate Regulatory Authority Regulations, 2017 (hereinafter to be referred as ‘the Regulations of 2017’). Peripheral issues raised and consequential directions sought by the petitioners in different petitions vary. However since the validity of Regulation 9 of the Regulation of 2017 is the focal point, we have combined all these petitions for common consideration. Some of the petitions are filed by the promoters of housing projects against whom the allottees of residential units have approached RERA and in whose favour RERA has passed certain directions. Some of the petitions have been filed by the Banks who are the secured creditors of the promoters and who wish to take coercive measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter to be referred as ‘SARFAESI Act’) to recover their unpaid dues.
# 2. For convenience we may refer to facts stated in Civil Writ Petition No.13688/2021. This petition is filed by the Union Bank of India. The petitioner has challenged the validity of Regulation 9 stating that the same is ultra vires the provisions of the Rajasthan Real Estate (Regulation and Development) Act, 2016 (hereinafter to be referred as ‘RERA Act’). By way of consequential relief the petitioner has challenged a resolution dated 25.09.2020 adopted by RERA resolving that all matters shall be heard by single benches. The petitioner has also challenged an order dated 20.09.2021 passed by a single member of RERA giving certain directions with respect to semi constructed residential complex over which the petitioner bank claims security interest. The case of the bank is that it is not amenable to jurisdiction of RERA since RERA can issue directions only against a promoter, allottee or a real estate agent. The bank being none of these entities, RERA cannot entertain any proceedings against the bank.
# 3. Perusal of the impugned order passed by RERA would show that the proceedings were instituted on complaints filed by the allottees of residential units in a complex which was being developed by the promoters. The scheme comprised of 38 flats. The project was launched in the year 2014. Agreements were executed with the allottees in the same year. Substantial amounts were also paid by the allottees towards the purchase price. The developer failed to complete the project and hand over the possession.
t appears that allottees had taken loan from ICICI Bank against the allotment of flats on the strength of tripartite agreement. Resultantly the security interest in favour of ICICI Bank was created. The same was also registered with the Central Registry of Securitization Asset Reconstruction and Security Interest of India (for short ‘CERSAI’). Despite this, according to the allottees developers had taken the loan of Rs.15 crores from Andhra Bank which is now merged into Union Bank of India, the present petitioner, by creating a mortgage in favour of the bank. This was done on or around 04.06.2016. According to the allottees this was done without verification of existing charge on the properties in question. The allottees therefore alleged before RERA that such loan was sanctioned wholly fraudulently and with malafide intentions.
In the meantime since the developer failed to repay the dues to the bank, the bank treated the account as NPA and tried to recover its unpaid dues by resorting to provisions of SARFAESI Act. Some of the allottees approached the DRT and thereafter DRAT to prevent the bank from auctioning the properties and thereafter approached RERA for taking suitable action against all concerned including the bank.
Before RERA the bank raised several contentions including that RERA has no jurisdiction to entertain any complaint against the bank and that in view of the proceedings which are pending before the DRT and DRAT, the complaints should not in any case be entertained.
These objections of the bank were turned down by RERA. Referring to the definition of promoter contained in Section 2 (zk) of RERA Act, the authority was of the opinion that bank being an assignee of the promoter, would fall within the definition of promoter. Regarding the effect of the SARFAESI Act to the present proceedings, the authority relied on the decision of Supreme Court in case of Bikram Chatterji and Ors. Vs. Union of India and Ors. reported in 2019 19 SCC 161.
# 4. In such background Counsel for the bank raised following contentions:-
(i) Regulation 9 of the Regulation of 2017 is ultra vires the parent Act.
(ii) Even the regulation by itself does not envisage general delegation as has been done by the impugned resolution dated 25.09.2020.
(iii) Under purported exercise of powers under Regulation 9 by resolution dated 25.09.2020 arbitrary powers have been vested in single members of RERA to decide all complaints which is not even envisaged under the Act.
(iv) With respect to the order dated 20.09.2021 passed by RERA it was argued that no complaint against the bank is maintainable. By instituting the provisions under RERA Act, the allottees have effectively challenged the orders passed by DRT and DRAT.
(v) It was contended that the mortgage in favour of the bank in the present case was created before RERA Act was enacted. This Act therefore can have no effect on past mortgages since the Act has not been given retrospective effect.
# 5. We have also heard the learned advocates appearing for other petitioners who have similarly challenged Regulation 9 contending that the same is ultra vires the parent Act.
# 6. On the other hand the opposition has been made principally by the advocates for the allottees and for the authority. Their combined contentions can be recorded as under:-
(i) Regulation 9 is validly framed. This aspect has been examined in slightly different context by the Supreme Court in case of M/s Newtech Promoters and Developers Pvt. Ltd. Vs. State of UP and Ors. (Civil Appeal No(s).6745-6749/2021) decided on 11.11.2021.
(ii) The banks are amenable to jurisdiction of RERA as being assignee of the promoter.
(iii) The orders passed by RERA are appealable before the Appellate Authority. Writ petition therefore should not be entertained directly.
(iv) Regarding interplay of RERA Act and SARFAESI Act they relied on the decision of Supreme Court in case of Bikram Chatterji (supra).
# 7. We may first deal with the validity of Regulation 9 of the Regulation of 2019. To establish Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, as the case may be or the sale of real estate project in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear from the decisions of RERA and matters connected therewith, RERA Act was enacted. Section 3 of RERA requires prior registration of real estate project with RERA. Application for registration would be made under Section 4 and would be granted under Section 5 subject to fulfillment of conditions. Under Section 7 the authority has the power to revoke the registration under certain circumstances. Section 9 envisages registration of real estate agents.
# 12. Section 84 pertains to power of appropriate Government to make rules. Sub-section (1) of Section 84 empowers the appropriate Government by issuing notification to frame rules for carrying out the provisions of the Act. Section 85 pertains to power to make regulations. Sub-section (1) of Section 85 provides that the authority shall within a period of three months from its establishment by notification make regulations consistent with the Act or the rules made thereunder to carry out the purposes of the Act.
# 13. Section 89 gives overriding effect to the Act by providing that provisions of the Act shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
# 14. In exercise of powers conferred under Section 85 the authority has framed the said regulations. Regulation 9 reads as under:-
“Adjudication proceedings– For adjudication proceedings with respect to complaints filed with the Authority, the Authority may, by order, direct that specific matters or issues be heard and decided by a single bench of either the Chairperson or any member of the Authority.”
# 16. As per this decision all complaints and adjudication matters required to be decided by RERA will be heard and decided usually by Single Benches. However all Single Benches wherever deemed necessary or desirable, may refer any particular matter or class of matters to Full Bench which shall comprise of chairman and at least one member as available. In terms of this resolution, thus ordinarily all matters will be heard by a single member Bench of RERA. The discretion would be vested in such member to fix a particular matter or class of matters before the Full Bench comprising of the chairman and at least one member.
# 17. We may record that the Allahabad High Court had occasion to consider somewhat similar issue of delegation of the authority of RERA into one Member to entertain complaints in case of M/s K.D.P. Build Well Pvt. Ltd. Vs. State of U.P. decided by Allahabad High Court on 04.02.2020. It was held that the order passed by one member of RERA is legal and valid. This was seen in light of Section 81 of RERA Act. Once again in case of M/s Newtech Promoters and Developers Pvt. Ltd. the Division Bench of Allahabad High Court considered the validity of the powers exercised by single member of RERA. The Court referred to the provisions contained in the Act and regulations framed by the authority and upheld the power of the single member to entertain the complaints. Reliance was placed on the decision in case of M/S K.D.P. Buildwell (supra). We must however record that challenge to Regulation 24 of UP Real Estate Regulatory Authority (General) Regulations, 2019 which pertained to power to delegate the matters to single members was kept open since in that case no such powers were exercised. In this decision the Court had referred to a Division Bench judgment of Punjab and Haryana High Court dated 16.10.2020 in case of Janta Land Promoters Private Ltd. Vs. Union of India and Ors., reported in 4 RCR (Civil) 845 to which we would make a detailed reference shortly. The Allahabad High Court however did not accept the view adopted by the Punjab and Haryana High Court in the said case.
# 18. The decision of Allahabad High Court in the case of M/s Newtech Promoters and Developers Pvt. Ltd. (supra) was challenged before the Supreme Court. Several questions were raised and answered. One of the questions was whether Section 81 of the Act authorizes the authority to delegate its power to single member to hear complaints instituted under Section 31. After referring to the statutory provisions and relying upon several decisions of the Supreme Court, the Supreme Court in the said decision upheld the delegation of power to decide the complaints by single members in terms of Section 81 of the Act. The conclusion of the Supreme Court in this respect can be noted as under:-
“120. In view of the remedial mechanism provided under the scheme of the Act 2016, in our considered view, the power of delegation under Section 81 of the Act by the authority to one of its member for deciding applications/complaints under Section 31 of the Act is not only well defined but expressly permissible and that cannot be said to be dehors the mandate of law.”
# 20. In our view the controversy at hand is substantially governed by the decision of Supreme Court in case of M/s Newtech Promoters and Developers Pvt. Ltd. (supra). We are conscious that it was a case in which the question was delegation of the authority in terms of Section 81 of the Act which we may recall provides that the authority may by general special order in writing be delegated to any member such powers and functions under the Act as it may deem necessary. When the Supreme Court has upheld the delegation of powers to adjudicate in single member of the authority in terms of Section 81 of the Act, recourse to Regulation 9 of the Regulations of 2017 would become academic. The resolution challenged by the petitioners passed by RERA delegating powers to decide complaints into single members, could as well have been passed in exercise of powers under Section 81. In fact the resolution itself does not refer to the source of power under Regulation 9 alone. Whether so stated or not, this resolution can always stress the source of the power under Section 81 of the Act since it is well settled that non-mentioning of the provisions or wrong reference to a statutory provision for exercise of power would not invalidate the exercise if powers can be traced to any statutory source. In fact the resolution itself refers section 81 of the Act as well as regulation 9 of the regulations. Even otherwise, Regulation 9 is merely procedural provision. Section 81 of RERA Act gives powers to the authority to delegate to any member powers and functions under the Act. Sub-section (1) of Section 85 enables the authority to frame regulations consistent with the Act and the Rules. Regulation 9 framed in exercise of such powers merely regulates the process of delegation of powers in single members of RERA. This regulation is thus not ultra vires the Act or invalid for any other reason.
# 21. Coming to the question of applicability of RERA while SARFAESI Act is also activated, we may notice that Section 35 of the SARFAESI Act provides that the provisions under the said Act shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Similarly worded provision giving overriding effect to RERA Act is contained in Section 89. This Section as noted, provides that provisions of the said Act (i.e. RERA Act), shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The question would therefore arise which of the two provisions giving overriding effect to the statute would prevail.
# 22. In case of West Bengal Electricity Regulatory Commission Vs. CESC Ltd., reported in (2002) 8 SCC 715, a three Judge Bench of the Supreme Court considered the similar conflict between the Electricity (Supply) Act, 1948 and Electricity Regulatory Commissions Act, 1998, both of which contained similar overriding provisions. In this context it was held and observed as under:-
“56. First of all the non obstante clause in Schedule VI to the 1948 Act refers only to the provisions of the Indian Electricity Act, 1910. Schedule VI which is found in the Act of 1948, the legislature could not have contemplated a subsequent enactment containing a non obstante clause coming into force, nor does it say that this non obstante clause applies to or is in preference to all other enactments including future enactments. Therefore this ground itself is sufficient to reject the argument of the learned counsel for the respondent as to the prevailing effect of the non obstante clause in Schedule VI to the 1948 Act. That apart, a reading of the 1998 Act vis-a-vis the 1948 Act with reference to Schedule VI, or with special reference to Section 57 and 57A of the 1948 Act. It is seen that Sections 22 and 29 of the 1998 Act are special laws and the 1948 Act is only a general law in regard to determination of tariff. Consequently, because of the accepted principle in law that a general law yields to a special law, the provisions of the 1998 Act must prevail. As a matter of fact, this is the view taken by another Division Bench of the Calcutta High Court in regard to this principle in law, as could be seen from the impugned judgment itself, but surprisingly after noticing the same, the impugned judgment proceeds to take a contrary view without either distinguishing the previous judgment of a Coordinate Bench or referring the matter to a larger Bench. Be that as it may, this question is no more res integra. This Court in the case of Allahabad Bank v. Canara Bank and Anr. after following an earlier judgments of this Court held:
“40. Alternatively, the Companies Act, 1956 and the RDB Act can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the later special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, Section 34. A similar situation arose in Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. where there was inconsistency between two special laws, the Finance Corporation Act, 1951 and the Sick Industries Companies (Special Provisions) Act, 1985. The latter contained Section 32 which gave overriding effect to its provisions and was held to prevail over the former. It was pointed out by Ahmadi, J. that both special statutes contained non obstante clauses but that the “1985 Act being a subsequent enactment, the non obstante clause therein would ordinarily prevail over the non obstante clause in Section 46-B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 Act is a special one.”
Therefore, in view of the Section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts.”
# 23. The judicial trend would thus suggest that in the event of direct conflict between the two central statutes giving overriding effect to the Act, ordinarily the subsequent legislation would prevail. It was not necessary to dilate on this issue any further since the Supreme Court in the case of Bikram Chatterji (supra) in the context of RERA and SARFAESI has stated as under:-
“139. A submission has also been raised that the RERA recognises and protects interests of the lenders and does not in any manner take away rights under any of the existing statutes such as T.P. Act, Debt Recovery Tribunal Act, SARFAESI Act. It is apparent from a perusal of RERA, which is a special Act, that certain rights have been created in favour of the buyers. The provisions of RERA have to prevail. When we come to the question of protection of rights of buyers even if RERA had not been enacted, under aforesaid laws in the facts of the case, a different view could not have been taken. However, there is no dispute that the bankers would have the right to recover their dues from whom and in what manner is the question which we have already answered. The provisions of RERA are beneficial to the home buyers and are intended to insulate them from fraudulent action, ensures completion of the building and it is the duty of the court to protect and ensure the home buyers’ interest and at the same time to hold them responsible for the duties enjoined upon them under the said statute. We are not absolving the home buyers from the discharge of their liability if any. At the same time, they have the right of enforcement of their right for compensation due to undue delay in completion of the project.”
# 24. We will next take up the question whether RERA would have jurisdiction in cases where the transactions between borrowers and the banks are completed before enactment of the Act. In other words if the loan is already availed by mortgaging the property and creating security interest in favour of the bank, in such a case can RERA exercise powers under the Act. Neither the statute so provides, nor it is canvassed before us by the respondents that RERA Act has been given retrospective effect. As is well settled, a statutory provision creating rights or obligations is presumed to be prospective unless specifically or by necessary implications it has been given retrospective effect. Section 11 of RERA Act pertains to function and duties of the promoter. Sub-section (4) of Section 11 requires the promoter to perform several acts and obligations. Clause (h) of sub-section (4) of Section 11 reads as under:-
“(h) after he executes an agreement for sale for any apartment, plot or building, as the case may be, not mortgage or create a charge on such apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building, as the case may be.”
# 25. As per this provision thus after a promoter executes an agreement for sale for any apartment, plot or building he shall not mortgage or create a charge on such apartment, plot or building and if any such mortgage or charge is made or created then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take apartment, plot or building, as the case may be. Perusal of this provision would immediately make it clear that the same would be totally unworkable in a case where transaction between the borrower and the bank is completed before the introduction of RERA Act. As per this provision the promoter is precluded from mortgaging or creating any charge on apartment, plot or building with respect to which he has executed an agreement for sale. If he breaches this obligation, such mortgage or charge created shall have no effect on the right and interest of the allottee. This provision thus creates a new obligation and corresponding right in favour of the allottee. Such provisions cannot have retrospective effect. In any case as noted, enforcing any such obligation would be wholly unworkable. It would reopen closed transactions between the borrower and the lender. In our opinion therefore RERA Act would have no applicability to the secured creditors where such security interests have been created before introduction of the Act.
# 26. Before concluding this issue we need to deal with two decisions heavily relied upon by the respondents and the conclusions noted above will have to be hedged with certain rider. In case of Bikram Chatterji (supra), the Supreme Court did apply RERA provisions to the transactions which were executed prior to introduction of the Act. This was however on the basis that there was large scale fraud committed by the promoters in connivance with the financial institutions. This would be clear upon reading of the whole judgment and more particularly paragraph 136 in which in the context of Section 11(4)(h) of RERA Act it was observed that right and interest of the allottee are safeguarded by virtue of the provisions contained in Section 11(4)(h) and even if the provision is held not applicable on the ground that RERA came into force later, since there was no valid mortgage as held by the Supreme Court it was incapable of affecting the right or interest of the allottee. In essence thus the Supreme Court having come to the conclusion that creation of security interest itself was fraudulent, the charge was invalid and therefore even if created before introduction of RERA Act, the same would not affect the right and interest of the allottees in terms of Section 11(4)(h) thereof. This would mean that in absence of fraud or collusion the Act cannot be applied retrospectively to the banks and financial institutions in whose favour security interests have been created prior to the enactment of the law.
# 27. Much reliance has also been placed in this context by the Counsel for the respondents on the decision of the Supreme Court in the case of M/s Newtech Promoters and Developers Pvt. Ltd. (supra). In this case, one of the questions raised was with respect to applicability of RERA to the construction projects which have commenced earlier. The question framed by the Supreme Court for its consideration was whether the Act of 2016 is retrospective or retroactive in its operation and what will be its legal consequence if tested on the anvil of the Constitution of India. This question was answered in the context of its applicability to the projects which had already commenced before the Act was framed. The observations and the conclusions of the Supreme Court in this regard therefore cannot be adopted straightaway when we are considering a situation which is entirely different namely of the rights and interests of the secured creditors which were created before the Act was enacted.
# 28. The last question surviving for our consideration is, does RERA have the authority to issue any directions against a bank or financial institution which claims security interest over the properties which are subject matter of agreement between the allottee and the developers. The term “allottee” has been defined under Section 2(d) of RERA Act as to mean in relation to real estate project the person to whom a plot, apartment or building has been allotted sold or otherwise transferred by the promoter and would include a person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent. The term “promoter” is defined in Section 2(zk) as under:-
“(zk) “promoter” means,—
(i) a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or
(ii) a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or
(iii) any development authority or any other public body in respect of allottees of—
(a) buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or
(b) plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or
(iv) an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or
(v) any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or
(vi) such other person who constructs any building or apartment for sale to the general public.
Explanation.—For the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the person who sells apartments or plots are different person, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made thereunder;”
# 29. The term “real estate agent” has been defined in Section 2(zm) as to mean any person who negotiates or acts on behalf of one person in a transaction of transfer of his plot, apartment or building in a real estate project by way of sale with another person and who receives remuneration or charge for the services so rendered. Under sub-section (1) of Section 31, any aggrieved person may file a complaint before RERA or before the adjudicating officer for any violation or contravention of the provisions of the Act or the rules and regulations against any promoter allottee or real estate agent, as the case may be. The complaint by an aggrieved person thus would be restricted to being filed against any promoter allottee or real estate agent. It is in this context the definition of term “promoter” and its interpretation assumes significance. We have reproduced the entire definition of the term “promoter”. Perusal of this provision would show that the same is worded “as to mean” and therefore primafaci is to be seen as restrictive in nature. However various clauses of Section 2(zk) would indicate the desire of the legislature to define this term in an expansive manner. As per Clause (i) of Section 2(zk) “promoter” means a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees. By couching this clause in “means and includes” language the definition of a term “promoter” is extended by including within its fold not only a person who constructs or causes construction of independent building but also his assignees.
# 30. The term “assignee” has not been defined anywhere in the Act. We would therefore have to interpret the term as it is ordinarily understood in the legal parlance in the context of the provisions of RERA Act. The Advance Law Lexicon by P. Ramanatha Aiyar expands the term “assignee” as to grant, to convey, to make an assignment; to transfer or make over to another the right one has in any object as in an estate. It further provides that an assignment by act of parties may be an assignment either of rights or of liabilities under a contract or as it is sometimes expressed an assignment of benefit or the burden of the contract. The rights and liabilities of either party to a contract may in certain circumstances be assigned by operation of law, for example when a party dies or becomes bankrupt.
# 31. With this background we may refer to a relevant provision under the SARFAESI Act. As is well known this Act defines the term “security agreement” to mean an agreement, instrument or any other document or arrangement under which security interest is created in favour of secured creditor. The term “secured asset” is defined as to mean the property in which security interest is created. The term “secured creditor” has also been defined as to the institution in whose favour security interest is created by any borrower for repayment of any financial assistance.
# 32. Chapter III of the SARFAESI Act pertains to enforcement of security interest. Under said Chapter sub-section (1) of Section 13 provides that notwithstanding anything contained in Section 69 and Section 69A of the Transfer of Property Act, any security interest created in favour of the secured creditor may be enforced without the intervention of the Court or tribunal by such creditor in accordance with the provisions of the Act. Sub-section (2) of Section 13 envisages issuance of notice by the secured creditor to a borrower whose asset has been classified as non-performing asset. Such notice would require the borrower to discharge the liability in full failing which the secured creditor would be entitled to exercise or any of the rights under sub-section (4). In sub-section (3) of Section 13 the notice referred to in sub-section (2) has to contain details of amount payable by the borrower and the secured asset intended to be enforced in the event of nonpayment of secured debts by the borrower. Sub-section (3) of Section 13 envisages disposal of the objections by the borrower if raised in response to the notice under sub-section (2). Sub-section (4) of Section 13 which is of importance to us reads as under:-
“(4) in case of the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole, of the business or part of the business is severable, the security creditor shall take over the management of such business of the borrower which is relatable to the security or the debt;(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.”
# 34. Clauses (a) to (c) of sub-section (4) are all in the nature of rights that a secured creditor can exercise which originally vest in the borrower. Clause (d) on the other hand, is in the nature of a garnishee enabling the secured creditor to recover the dues from a person other than the borrower who has acquired any of the secured assets and from whom any money is due or may become due to the borrower.
# 35. Clauses (a), (b) and (c) of sub-section (4) of Section 13 vest power in the secured creditor to take all steps as the borrower himself could take in relation to the secured asset. Clause (d) goes a step further and enables the bank to recover its dues directly from a debtor or the borrower who has acquired any of the secured assets. For all purposes thus the secured creditor steps in the shoes of the borrower in relation to the secured asset. This is thus a case of assignment of rights of the borrower in the secured creditor by operation of law. In other words the moment the bank takes recourse to any of the measures under sub-section (4) of Section 13, it triggers statutory assignment of right of the borrower in the secured creditor. Till this stage arises the bank or financial institutions in whose favour secured interest may have been created may not be in isolation in absence of the borrower be amenable to the jurisdiction of RERA. However the moment the bank or the financial institution takes recourse to any of the measures available in sub-section (4) of Section 13 of the SARFAESI Act, RERA authority would have jurisdiction to entertain the complaint filed by an aggrieved person.
# 36. Our conclusions can thus be summarised as under:-
(i) Regulation 9 of the Regulations of 2017 is not ultra vires the Act or is otherwise not invalid.
(ii) The delegation of powers in the single member of RERA to decide complaints filed under the Act even otherwise flows from Section 81 of the Act and such delegation can be made in absence of Regulation 9 also.
(iii) As held by the Supreme Court in the case of Bikram Chatterji (supra) in the event of conflict between RERA and SARFAESI Act the provisions contained in RERA would prevail.
(iv) RERA would not apply in relation to the transaction between the borrower and the banks and financial institutions in cases where security interest has been created by mortgaging the property prior to the introduction of the Act unless and until it is found that the creation of such mortgage or such transaction is fraudulent or collusive.
(iv) RERA authority has the jurisdiction to entertain a complaint by an aggrieved person against the bank as a secured creditor if the bank takes recourse to any of the provisions contained in Section 13(4) of the SARFAESI Act.
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