Bengaluru: The Karnataka High Court on Monday quashed a circular issued by the Real Estate Regulatory Authority (RERA), Karnataka, dated September 3, 2020, that sought to impose a retrospective “delay fee” on promoters and developers for late submission of quarterly updates and annual audit statements. The court cited a lack of legislative sanction for the move.
Background of the circular
The circular mandated that every builder, developer, promoter, or individual engaged in development projects file quarterly updates and annual audit statements under Section 7 of the Real Estate (Regulation and Development) Act, 2016. It also sought to levy fees on those who failed to comply within the stipulated timelines.
Petitioners challenged the circular, arguing that while the RERA Act imposes certain obligations on promoters, it does not empower the authority to impose delay fees. Many also pointed out that delays were due to the COVID-19 pandemic and the consequent slowdown in projects, which were beyond their control.
In contrast, the government advocate contended that the Act imposes mandatory obligations on promoters to submit quarterly updates on the K-RERA portal. According to the advocate, any failure to comply could result in fee collection.
Court’s observations
Justice M. Nagaprasanna, while delivering the judgment, emphasised that no tax or fee can be levied on citizens except by authority of law.
“Law in this context must mean not the executive fiat of the authority nor the circular of a department, but an enactment of the legislature clothed with the constitutional mandate and fortified by statutory sanction,” the court noted.
Citing Article 265 of the Constitution, Justice Nagaprasanna stated that compulsory exactions must be traceable directly to legislation, and any delegation of such power must be unambiguous and within the legislative policy framework.
“Tested against these principles, the impugned circular seeking to impose a delay fee on promoters and developers was found to lack statutory parentage,” he added.
The order was passed after allowing a batch of petitions filed by builders and developers challenging the retrospective imposition of delay fees.
Implications for developers and RERA
The ruling provides relief to developers and promoters who were facing retrospective fees for delays, particularly during the COVID-19 pandemic when project timelines were disrupted. Legal experts say the verdict reinforces the principle that regulatory authorities cannot levy monetary penalties unless explicitly empowered by statute.
For Karnataka’s real estate sector, this decision clarifies the limits of RERA’s powers and ensures that any pecuniary burdens on promoters must be backed by clear legislative authority.