Can promoters be made liable personally to comply the order of the authority for payment of interest/compensation/penalty?

Karnataka HC order to prosecute Ozone Group promoters to recover money hits a roadblock: RERA lacks provision

According to section 40 of   the Real Estate (Regulation and Development) Act, 2016, if a builder fails to pay compensation or refund money to homebuyers, the regulatory authority can direct the state revenue department or District Commissioner (DC) to recover the money from the builders.

Recently, in a suit filed by buyers of flats in a project by Ozone Group, the Karnataka High Court ordered that the company’s promoters be made party to the case so that their personal properties and assets could be attached. The case was filed before the Karnataka Real Estate Regulatory Authority (KRERA) for recovery of money the  buyers had paid for homes in a delayed Bengaluru project, Ozone Urbana.

However, the Real Estate (Regulation and Development) Act, 2016, lacks provisions to make promoters a party to the execution proceedings. Execution proceedings refers to the process of enforcing a court’s or tribunal’s judgments.

In this case, the state government failed to recover the money buyers had sunk into the delayed township. According to the real estate law section 40 , if a builder fails to pay compensation or refund money to buyers, the regulatory authority can direct the state revenue department or district commissioner urban (DC) to recover the dues from the builders.

Karnataka developers together owe homebuyers more than Rs 486 crore in refunds for delayed delivery of apartments, The state revenue department had completed 138 recoveries as on January 31, 2024, and 1110 recovery proceedings were yet to be concluded.

“However, the slow-moving process at the DC office has made such recovery cases go on for years, so much so that the homebuyers have turned to the high court for recovery of their investments,”

around 20 homebuyers moved the state high court, the order dated May 27 noted that orders passed by KRERA were only against the opposite company, i.e., Ozone Urbana Infra Developers Private Limited, and not against its promoters.

“Even the DC told the high court that after they raided the company’s office, they found no available assets that can be attached to recover the money,”

No orders have been passed against the promoters and, consequently, the tahsildar (revenue officer) did not have jurisdiction over their personal/individual properties, the high court order noted.

Thus the court ordered the homebuyers to make the promoters a party to the fresh execution proceedings,

RERA lacks provisions

Courts under the RERA Act can get the order   executed in a manner similar to a civil court. If the respective state real estate regulator can’t execute an order on its own, it can send it to a civil court in the area where the project is located or where the builder lives or works.

However, even in such cases, it is a considerable challenge to follow the court orders as the RERA act lacks provisions to prosecute promoters in its execution proceedings,.Top of Form