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Why are UP laws silent on quantum of punishment?

Builders have been delaying possession in Noida even after getting completion certificate, but RERA offers solutions to the problem

real estate Updated: Aug 13, 2016 18:31 IST
Vandana Ramnani
UP Apartment Act

The UP Apartment Act calls for penalising builders not getting completion certificates within the stipulated time but is silent on the quantum of punishment for violations. (Getty Images/iStockphoto)

Section 4(5) of the UP Apartment (Promotion of Construction, Ownership and Maintenance) Act 2010 requires a builder to get a completion certificates from the state’s housing authority within two years from the date of a sale agreement it (builder) has signed with the first buyer in the project. This provision of the Act has been violated by builders, allege 20 homebuyers in Noida whose apartments have been delayed by over four years. They had filed a case against illegal revision of original project plans and deliberate possession delay.

The UP Apartment Act calls for penalising builders not getting completion certificates within the stipulated time. A fine is to be paid, but interestingly, the Act is silent on the quantum of punishment for violations. The court, therefore, referred the case of the 20 homebuyers to the state government, asking it to frame rules on how this violation should be dealt with.

Officials in the UP government, who do not wish to be named, say they are not aware of any rules on compensation paid to buyers for delays and the quantum of punishment for violations. This is because the state is in the process of framing rules under the Real Estate (Regulation and Development) Act 2016, which is expected to include provisions for compensation and punishment.

Interestingly, none of the projects in UP have been handed over within 24 months of the builder receiving the completion certificate. Curiously, no rules specify how builders are to be penalised in such cases.

The Allahabad High Court (HC) in March this year directed a Noida builder to speed up a project delayed by over four years. It also asked the state government for issuance of guidelines for the implementation of the provisions of Section 4 (5) as it (state government) has power under Section 27 to issue directions for the efficient administration of the Act to the competent authorities.

The 20 homebuyers had in their writ petition to the HC said that “Noida Authority has acted contrary to the statue in allowing the promoter to delay the project for over four years whereas the public policy mandates completion of project within a period of 24 months, thereby frustrating the intent of the legislation.”

Section 4 (5) of the UP Apartment Act states that “an apartment may be transferred by the promoter to any person only after obtaining the completion certificate from the prescribed sanctioning authority concerned as per building byelaws. The completion certificate shall be obtained by the promoter from prescribed authority within the period of two years from the date of the sale agreement.”

According to S K Pal, Supreme Court lawyer, the UP Apartment Act already has some stringent provisions with regard to any delay in completion of the project. However, it has nothing to say on the quantum of the punishment and compensation which have been clearly provided for in RERA.

There are two orders from the Allahabad HC. In the first, the matter was referred back to the Noida Authority to decide on the compensation to be given to buyers and in the second, the builder was directed to complete the project. The state government was asked to formulate guidelines on the quantum of punishment and the compensation that may be required to be given to the homebuyers.

Under RERA the builder will pay a compensation equal to what the buyer pays to him for delay in payment of the house. A builder can also be imprisoned for delays or pay 10% of the total project cost as penalty. Section 18 of RERA states that if the promoter fails to complete or is unable to give possession of an apartment, plot or building on the due date specified in the sale agreement he shall be liable to return the amount received by him for the property or pay compensation. Section 59 of RERA also defines the punishment that is required to be levied. “If any promoter contravenes the provisions of section 3, he shall be liable to a penalty which may extend up to ten per cent of the estimated cost of the real estate project as determined by the Authority. If a promoter does not comply with the orders or continues to violate the provisions, he shall be punishable with imprisonment for a term which may extend up to three years or with fine which may extend up to a further 10%of the estimated cost of the project, or with both.”

According to Sudip Mullick from Khaitan & Co, “various states have different provisions as to when an instrument of sale of a unit is to be registered. In some cases, we have seen considerable amount of money is taken without any registered instrument. RERA requires that the promoter necessarily enter into registered instrument with an allottee if collection is more than 10% of the total cost of the apartment.”