Karnataka High Court quashes RERA circular imposing retrospective ‘delay fee’ on promoters

Bengaluru: The Karnataka High Court has quashed the Real Estate Regulatory Authority (RERA) circular, imposing a 'delay fee' retrospectively for delayed submission of quarterly updates and annual audit statements.

Justice M Nagaprasanna allowed a batch of petitions challenging the September 3, 2020 circular, observing that the circular lacked legislative sanction as the statute nowhere contemplates the ‘delay fee’ in the event of non-compliance.

Section 11 of the Real Estate (Regulation and Development) Act obliges every promoter to furnish quarterly updates on the project status together with annual reports. The circular referred to section 11 of the Act and Rule 15 of the Karnataka Real Estate (Regulation and Development) Rules.

It further said the Authority has observed that promoters are not filing post registration quarterly updates and annual audits on the website within time and therefore decided to impose a delay fee.

The petitioners argued that although the Act undoubtedly imposes obligations on promoters, it neither envisages nor empowers the authority to levy delay fees of the kind that is demanded. On the other hand, the government advocate submitted that when the promoters, developers or individuals fail to submit quarterly updates on the K-RERA website, the delay fee is collected as a caution to adhere to the timeline.

After examining the provisions in the Act and the Rules, Justice Nagaprasanna noted that none of the provisions quoted in the circular empower RERA to impose a fee. The circular does not indicate any source of power for imposition of a fee, and does not have the method of calculation of fee as well, the court said.

The court further noted that imposition of tax, fee or any other impost upon any person, cannot be by way of circular. It is therefore manifest that the Act and the Rules have not clothed the Authority with power to levy or recover fees beyond those expressly authorised," Justice Nagaprasanna said.

“The reliance placed on Sections 11, 34, and 37 of the Act by the respondents (Authority) is wholly misplaced. Section 11 imposes duties but confers no power of exaction. Section 37 enables directions to be issued, but the power to issue directions cannot, by any stretch of judicial imagination, metamorphose into the authority to impose a compulsory pecuniary burden.

"Sections 61 and 63 also do not empower the impugned levy of delay fee; while they contemplate penalties, those are limited to what is observed in the said provisions."

"Therefore, from any of the provisions that the respondents seek to place reliance upon, delay fee cannot be distilled. Where from this impost has arisen? This Court finds no answer within the four corners of the statute; it is an impost without lineage under the statute, an exaction without authority, a levy without law,” the court said, stating that the setting aside of the circular will not come in the way of legislation imposition of fee in a manner known to law.