SarnobatAppeal No.l09-19

MAHARASHTRA REAL ESTATE APPELLATE TRIBUNAL

APPEAL NO. 0006000000010939

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Xander Finance Private Limited,Having its registered office address at101 , 5 North Avenue, Maker Maxity,Bandra Kurla Complex, Bandra East,Mumbai-400 051.

Vs.1) Trivesh Pooniwala,

Having his office address atH5/12, Godrej Hillside Cotony,Vikhroli (W), Mumbai 400 079.

2) Nanda Pooniwala,3) Umesh Prabhakar Terwadkar,4) Sejal Devang Chudasma,5) Vitthal covind Sawant,6) Karbelkar Furkan,7) Karbelkar Akhaque,8) Samrin Afzal Khan,9) Afzal Khan,10) Chetan Sadashiv Shetty,11)Ramchandra Palo,12) Ashok Palo,13) Parul Chand Rajen,14) Kusum D. Mishra,15) Rohit D. Mishra,16) Dinesh S. Mishra,17) Kusurr D, Mishra.18) Banwarilal R. Agarwal,19) Kamal B. Agarwal,20) Sanjiv Srivastava.21) Kaisar Abdul Majeed Bawla,22) Radhika Gaurav cupta,23) Ka rtik Ashok Mehta,24) Jalpa Chirag Shah,25) Jag ruti Ashokkumar Shah,26) Minaxa Balwantrai Shah,27) Saloni Dharam Kothara,

Appellant/s(Financiallnstitute) (F.1. )

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28) Dharam Shahi Kothari,All above respondent Nos. 2 to 2g,Through Representative TriveshPooniwala, having office address atH5/12, Godre.l Hi side Cotony,Vikhroli (W), Mumbai{00 079.

29) JVPD properties private Limited,Having its office address at 50.1 , SrhFloor. Prime plaza, Next to AshaParekh Hospital. S.V Road,Santacruz(West), [/umbai 400 054

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Aplcal \o.109.19

RespondentsiAllottees

Respondent/Promoter

Advocate Ms. Jyoti Sinha a/w Mr. Devanshu Nath i/by Khaitan &Co. for the AppellanUs.

Advocate lt/r Tanu.1 Lodha, for the Respondents

CO RAM

DATE

IU n der to 44 ol RER T b-

JU DG MENT:

Chall enqe to lmpuqned o er

1. The impugned order dated O4.OS.2O1} passed by Ld.Member and Member of MahaRERA Authority in Complaint No.23169 is challenged in this Appeal to the extent of creation ofcharge on the property ofthe project and consequenfly, to set asidethe recovery warrant issued on 09.10.201g for execution ofimpugned order and to restrain from creating any further charge ofwhatsoever nalure on the property of the project.

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,t/5SUMANT M. KOLHE.(Member J.)

MARCH. 19 2019.

Sta us of Part ies

,\ppeal No.l09-19

t2. Appellant is Xander Finance private Ltd. Having it,sregistered ofiice at Bandra East, Mumbai. lt is secured creditor(Referred as Financial lnstitute i.e. F.l. in further discussion)Respondent No. 29 is the promoter. Respondent No. 1 to 28 arethe allottees. I will refer the parties as per their status as F.1., andAllottee and promoter. ln this appeal prefered by F.1., promoterremained absent and Allottees have contested the appeal.

proiect

3. Promoter launched the project namely BhagtaniSecurity/Bhagtani Shalem to be developed on plot of land plot No.Cadmeasuring 2 acres having old S.No.34(part) of 37(part) and newS.No. 40(Part) and 41(part) corresponding S. No. 63A (part) and64(D) part situated at Mllage Tirandar, Taluka_Kurla.

Loan bv Prom r4. Promoter obtained loan from F.l. and mortgagedproperty of the project by executing registered mortgage deed on28.07 .2015 in f avour of secured creditor So, promoter is mortgagerand secured creditor is mortgagee and property of project is themortgaged property.

Th ree sets pa rs5. We have Appeal papers including Appeal memo, copyof impugned order and documents filed by secured creditor.Allottees have filed two set of papers in Volume land Volume llcontaining relevant documents on which they have relied.6. Facts necessary and materialfor adjudication ofdisputein appeal.

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Appcal No.l09J9

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Co laint Ail su rS ion 7 nd RE Ac

2016.

Allottees had filed Complaint No. 23169 aga;nst thePromoter and F.l. before MahaRERA Authority on 31.01.2018.Copy of complaint filed by the Allottees is on record at page No..l 38in Appeal papers. Reliefs were sought against the promoter underSection 7 of RER Act 2016 for revoking the registration of theproject and to de-bar the promoter from accessing its Website andto name the Promoter in defaulter list by displaying the photographof the Promoter on its Website relating to project and also to freezeBank Accounts of the project. Allottees had also sought the reliefsof appropriate order under Section g of RERA Act, 2016 andrequested RERA Authority to take the step for carrying outremaining development work of the project \ivith help of associationof Allottees or competent Authority or in any other manner. Allotteeshad also prayed for penal action under Section 60 against thePromoter for violation of duties and obligations under RERA Act,2016. Allottees have also prayed for giving directions to F. L to fo owthe procedure laid down under MahaRERA circular No. 1112017dated 08.11.2017 regarding procedure of transferring or assigningrights and liabilities of promoters to third party. para 3 of circular isrelevant to this case

ln mre lief7. Allottees had applied for interim relief. After hearingAllottees and promoter and F.1., the Ld. Member rejected theapplication for interim relief. lnterim relief was mainly soughtagainst the F.l. for restraining F.l. from transfening the property ofthe pro1ect without consent of 2/3 Allottees and approval of RERA

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Appeal No.10939Authority as per Section 1S of RER Act, 2016 during the pendency

of the complaint. The Ld. Member discussed relevant provisionssuch as Section 15 under RER Act and circular No.11l2017d1d.O8.11.2O17 of MahaRERA Authority and relevant Section13,14,17 and 34 of Securitisation and Reconstruction of FinancialAssets and Enforcement of Security lnterest of 2OO2 (in shortSARFAESI) and rejected the interim relief by making observationthat such reliefcannot be granted against third party i.e. F.l. and F.l.

has not yet become owner of property of poect. But F.l. is havinginterest in property ofthe project. lt is a proper party and they maycontinue in this matter if they so desire.

Wi drawal F.t.

8. Thereafter, Fl. made application to MahaRERAAuthority and sought withdrawal from the complaint in view of theobservation made by Ld. Member while rejecting the interim reliefagainst El. in this matter and by observing the status of F.l. asproper party only. The Ld. Member accordingly deleted F.l. from thiscomplaint by observing that, F.l. is not promoter or Allottee ofregistered project or the registered Agent and there is no questionof violation of the provisions of RERA Act, 2016 and Rules andRegulations there under by F.l.

Fi I Dec ion of Como int9. Complaint was finally heard and decided on the bastsof submissions made by the advocate for the Allottees andadvocate for the Promoter. The Ld. Member passed final order on04.05.2018 and disposed of the complaint by giving directions tothe Promoter to refund the amount and taxes along with interestand also the costs to the Allottees. The Ld. Member also passed

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rhe order of creating charge of the aforesaid amount olptl"ji:r,H;of the project till the claims of Allottees are satisfied.

U of IS aR10. Allottees moved MahaRERA Authority for execution ofthe final order passed in Complaint No. 2316g for recovery of theamount. The Ld. Member issued recovery warrant and informed theCollector as per Section 40 of RER Act 2016 to take the appropriatesteps as laid down under Maharashtra Land Revenue Code forrecovery of the said amount as if the recovery of the revenue of theland. Now Collector is in process of taking the steps as per therecovery warrant issued by Ld. Member for recovery of the amountin view of impugned order

lnform F.l .of ove ry Wa rrant11 . Allottees had informed to F.l. about the final rmpugnedorder and issuance of recovery warrant for execution of the saidorder and informed El. that they should not create third partyinterest in the property of the project.

I bv F_t.

12. After getting the knowledge as stated above from theAllottees, F.l. has preferred this Appeal and challenged thecorrectness, legality and validity of the impugned order to the extentof creation of charge over the properties of project for recovery ofthe claims of the Allottees and issuance of recovery warrant inrespect of the amount recoverable by the Allottees as per theimpugned order

A ument bv Ld. Co unsel of F.l.13. The Ld. advocate for F.l. has submitted that the Fl. issecured creditor She further submitted that the landed properties

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Appesl No.10939of project were mortgaged by the promoter with F.l. and obtainedloan. According to her the registered mortgage deed was executedon 28.07.2015. She submitted that promoter is the mortgagor andF.l. is the mortgagee and the loan advanced by the F. l. is securedloan on account of execution of registered mortgage deed.

14. She further submitted that F. l. is notified underSARFAESI Act 2002. The Ld. advocate for the F.l. argued that thePromoter committed default by not paying the loan as per the termsand conditions and F.l. proceeded to recover the said loan as perSection 13 and Section .14 of SARFAESI Act. She also submittedthat F.l. submitted application under Section 14 to ChiefMetropolitan Magistrate Esplanade Court, Mumbai and the Ld.Chief Metropolitan Magistrate, Esplanade Court, Mumbai allowedthe said application. The reliefs as sought by F.l. under Section 14as per application bearing case No.797lSA,/2011 were granted infavour of F.l. She pointed out that the possession of the propertiesof the project is already taken by F.l. as per the order of Ld. CMM,Esplanade Court, Mumbai with the help of Court commissioner,appointed as per direction in the said order Order of AdditionalCMM, Esplanade Court, Mumbai is at page 3g of the Appeatpapers.

15. She referred the interim order passed by Ld. Member incomplaint No. 23169 whereby the Ld. Member rejected the interimrelief sought by theAllottees against Fl. for restraining the F.l. fromtransferring the properties of the project during the pendency of thesaid complaint. The Ld. Member also observed in the said order

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that the F.t. having interest in the properties of t^" od'"ffi l;.';:;party and they may continue in the matter if they so desired. ln viewof the observations made by Ld. Member while passing the orderof rejecting interim relief, regarding status of F.l. and their rights inrespect of property of the project arising out of registered mortgagedeed, F.l. submitted application for withdrawal from the saidcomplaint before Member and the application for withdrawal wasallowed and the name of F.l. was deleted from the complaint. TheLd. Member observed that F.l. is neither promoter or Allottee norAgent as per RER Act, 2016 and complaint can be filed only againstPromoter or Allottees of registered project or Agent of registeredproject for violation of provisions of RER Act, 2016 or the Rules andRegulations made there under

16. The Ld. advocate for the F.l. further, pointed out the flnalimpugned order passed by Ld. Member in the complaint afterhearing Allottees and promoter and submitted that the Ld. Memberis not empowered under RER Act to create charge of the amounton the property of the project. The final order passed by Ld.Member consists of refund of amounf with interest and costs by thePromoter to the Allottees and creation of the charge of that amountover properties of the project. She strongly submitted that suchcreation of charge on the part of Ld. Member is not legal andl ustifia ble

17. Admittedly, Allottees moved Ld. Member for executionof the impugned order for recovery of the refund arong with interestand costs. The Ld. advocate for F.l. argued that recovery warrant is

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Appert No.10939

issued and direction was given to the Collector to make recovery ofthe amount along with interest as per impugned order as if it is the

recovery of revenue of the land as contemplated under

Maharashtra Land Revenue Code and the Rules there under. So,

warrant of attachment is issued by Ld. Member to the collector bygiving direction to make the recovery of the amount with interest

which Allottees are entilled to recover.

18. The Ld. advocate for Appellant has relied on followinggrounds in the Appeal :-

1) Neither RER Act nor Rules there under empowered

Member or Authority to create a charge over theproperty of the project for recovery of amount.

2) Reliefs granted as per impugned order by authority

are not the reliefs sought by the Allottees in the

complaint.

3) Principle of natural justice is not followed and

opportunity of hearing was not given to F.l. before

creating the charge on property of project which are

already mortgaged with F.l. as per registered mort-gaged deed.

4) Order of creation of charge was passed without mak_

ing enquiry about other orders passed by other

higher forums in respect of property of the project.

19. She argued that the order of creation of charge is

illegalfor above mentioned grounds and it should be set aside. She

alternatively argued that if order of creation of charge is not set

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aside rhen, it shoutd be modified to the extent ,r"lii"i,l,|J,l'?lsubject to rights of F.l. as a mortgagee in respect of property ofproject as created under registered mortgage deed. She alsorequested to stay the execution for impugned order which isinitiated by the Collector as per recovery warrant.

ume bv . Cou sel of A20. Ld. advocate for Allottees vehemenfly submitted thatthe properties of rhe project are agricurturar rands and provisions ofSARFAESI Act are not applicable to the properties of the project.According to him the entire procedure initiated in respect ofagricultural property of project by F_1. under Section 13 and 14 ofSARFAESI Act is null and void and without jurisdiction. Ld.Advocate for Allottees further submitted that F.l. suo moto withdrewfrom the complaint even though they had alleged right in respect ofproperties of the project as per registered mortgage deed and so,they cannot now raise any objections regarding impugned orderfinally passed in the said complaint. According to him there is noquestion of hearing F.l. by Authority while passing the finalimpugned order in the complaint when F.l. had chosen to withdrawfrom the said proceedings.

21. He further submltted that Respondent Authority hasenough power to pass any appropriate order as per Section 40 ofRER Act, 2016 and RERAAuthority is empowered to pass the orderof creation of charge over properties of the project. According tohim F.l. have no locus-standi to seek any relief under RER Act,20'16 which is enacted mainly for the protection of the customersi.e. allottees. He also argued that RERA Authority had issued

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circular No.11l17 dtd. 08.11.2011of which -r, n ;[.r::Ot:t;record and F.l. shall follow that circular as secured creditor formaking recovery of its loan against property of project. He stronglysubmitted that Allottees are poor home buyers. They spend hugeamount for purchasing the home and promoter had deceived andcheated them and allottees cannot be harassed by the F.l.

Dete rm ination of Points22. ln view of the above submissions of both the sides, thefollowing points arise for my determination;POt NTS

Whether the part of impugned order creating charge is just,proper and legal?

il) Whether part of impugned order creating charge requiresto be modified?

t) what order?

My findings to the above points for the reasons statedbelow are as under

FINDING S

l) Partly affirmative

ll) Partly affirmative

lll) As per final order

REASONS

Docum ts ft led o rd

ApDeal DaDers

i) On line filing of Appeal Memoii) Memo of Appeal in form ,C,

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Page 1 to 28

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Appcal \o.109-19ii ) Copy of order passed by Addl.C.J.lril

It4umbai on 15.01.20i8 under Section

14 of SARFAEST Act. page 38 to 49

iv) Copy of lnterim order dt.16.03.201g. page SO to 54

v) Copy of application of withdrawal ofName of F.l. along with order passed

Thereon dt. 09.04.2018. page 55 to 56vi) Copy of tetter sent by Allottees to F.l.

Dt. 19.10.2018. page 57 to 95vii) Copy of finat impugned order dt.04.05.2018

ln comptaint No. 23169. page 96 to 128viii) Copy of Complaint No. 23169 page 138 to 156ix) Order dt. 10.05.2018 passed by Hon,bte

Bombay High Court in Suit for maintaining

Status-quo of properties of project

Set papers tn Volume l& Volu me llCopy of order passed by Hon,ble page 3g3_3g9Bombay High Court Aurangabad BenchOn 17.O1 .2019 in Sunder Siddi Case.Property registered card. page 390_392

Circular No. 11t2017 dt. 08.11.2011

By MahaRERA Authority about procedure

Of transferring rights and liabilities toThird party. page 315_318lndenture of Mortgage deed page 398_525

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iv)

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Appeal \o.109-j9POINT NO. 1 To3:

Nature of Comp laint with re liefs23. At the outset I would like to point out that Allottees hadfiled complaint No. 23169 agatnst the promoter and F.l. for somereliefs. Copy of the complaint is on record. lt is revealed from thecopy of complaint that Allottees had sought the relief under Section7 and Section 8 of RER Act, 2016. Allottees had asked iorrevocation of the registration of the project as the promoter hadindulged into unfair and fraudulent practjce and de_frauded theAllottees and also violated his obllgations under RER Act, 2016.Allottees had also prayed to de-bar the promoter from havrngaccess to it's Website in respect of the project and to freeze theBank Accounts of the promoter of this project and to display thephotograph of the Promoter on Website in the list of defaulters.Allottees have also prayed under Section g of RER Act 20.16 thatthe Respondent Authority should take such step as it may deem fitfor carrying out the remaining development work by engaging thecompetent authority or by Association of Allottees or by any othermanner. Allottees had also prayed to initiate penal action againstPromoter for violation of the obligations laid down under Section 60of RER Act, 2016.

24. The final impugned order passed by RERA Authority inthe abovementioned complaint is in respect of directing thePromoter to pay the amount wjth interest and costs and to createcharge on the property of the project of such amount till the claimof the Allottees is satisfied.

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Apped No.10939

Reliefs not souqht but qranted

25. I would like to point out that the complaint was filedunder Section 7 and under Section g mainly for revocation ofregistration and for taking penal action against the promoter ascontemplated under Section 60 of RER Act, 2016 and also to takesuitable step for carrying out the remaining work of the project withthe help of competent authority or Association of Allottees or as perthe manner contemplated under Section 8 of RER Act, 2016. Thus,Allottees had nelther prayed for recovery of amount along withinterest which they had paid to the promoter nor had requested tocreate charge over the properties of the project for recovery of suchamount.

No rovision of creati nq cha under ER Act. 16

26. After carefully perusing the provisions of RER Act, 2016and Rules as well as Regulations there under, there is no provisionor rule authorizing or empowering the MahaRERA Authority tocreate a charge on the property of project for recovery of theamount to which Allottees are entifled. lt can be easily said from thereliefs sought in the complaint that Allottees were interested incarrying out the incomplete work of the project with the help ofMahaRERA Authority as per Section g of RER Act, 2016. lt is truethat one of the objects of RER Act, 2016 is to protect the interest ofthe customers. However, at the same time as observed by theirLordships of Hon'ble Bombay High bourt in Writ petition No.273712017 decided on 06.12.2017 in Neekamat Realoters case itis also the object of RER Act 2016 to complete the incompleteprojects. This is a fit case where allottees had prayed for takingsteps under Section 8 of RER Act,2016 for carrying out the

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incomptete work of the pro1ect and for hetping *" .,1?::'"T1';;;their dream of having their own homes in the said project. lt appearsthat the Ld. Member thought it fit to ignore prayer of carrying outwork of incomplete project but to safeguard the interest of thecustomers i.e. allottees awarded them the amounts which they paidto the Promoter along with interest and also gave security for suchrecovery by creating the charge on the properties of project. I

reiterate that the claim of refund of amount with interest andcompensation is contemplated under Section 1g of RER Act, 2016.However, to create a charge on the properties of the project is notspecifically contemplated under any provision of RER Act, 2016read together with Rules and Regulations made there under.

o er for safequa rdinq I nterestofal lottees27. ln order to protect interest of customers i.e. allotteesand to achieve such object of RER Act 2016, RERA Authority ishaving wide powers and it can pass suitable order which it feelsdeem fit in a given facts ofthe case. ln present matter, though Ld.member did not consider and pass any order under Section 7 forrevocation of project and order under Section g for taking step forcarrying out work of incomplete construction as prayed by Allotteesin complaint Ld. Member directed promoter to refund the amountsreceived along with interest to the Allottees and thereby protectedinterest of Allottees by further creating charge of said amounts overthe properties of poect. Appellant has challenged only order ofcreation of charge and not the entire impugned order, since, objectof RER Act, 2016 provides to protect interest of Allottees andempowered the RERA Authority to pass order for this purposewhich it deems fit. I am of the opinion that the order of creation of

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Appcal No.10939

charge over properties of project was also for safeguarding the

rights of allottees to recover the amount from promoter.

Order passed bv Hon' ble Hiqh Court

28. A copy is produced on record shows that some of other

Allottees of project have filed suit in Hon'ble Bombay High Court

and obtained relief of status-quo in respect of properties of the

project. A proper care must be taken by RERA Authority while

issuing recovery warrant to Collector for attachment and recovery

of amount that order of status-quo is not disobeyed or violaled.

29. lf we consider the spirit of transfer of property Act, it isrevealed that charge is just collateral for payment of amount due

whereas, mortgage is transfer of interest in the assets. Whenever

a charge is created in respect immovable property, it is a mortgage

and if charge is created over moveable property, it is hypothecation

or pledge. So, charge is the right created by borrower on theproperty to secure repayment of the debt whereas, the mortgage is

the transfer of interest in particular immovable assets in order to

secure payment of first borrower Mortgage is the act of parties

whereas charge may be by act of parties or operation of law.

30. The order regarding creatton of charge on theproperties of project appears to be passed without support of anyprovisions of RER Act, 2016.

Principle of Natural Justice31 . lt is cardinal principle while dealang with the proceedings

under RER Act, 2016 that the principle of natural lustice should be

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fottowed by giving opportunity of hearing to ail the pari:ffi',::;:Tj;in the dispute before MahaRERA Authority. Admittedly, Allotteeshad impleaded F.l. as Respondent along with promoter in thepresent complaint. MahaRERA Authority rejected the relief ofinterim order sought by Allottees against F.l. and observed that F.l.is neither Promoter or Allottees nor agent. MahaRERA Authorityalso observed while rejecting interim relief that F.l. is proper partyin this matter as it is having interest in the proper es of the project.Since provisions of RER Act, 2016 cannot be made applicable toF.l. which is not Promoter or Allottees or Agent as observed byAuthority while rejecting the application for interim relief, F.l. thoughtit fit to withdraw from the said mafter and accordingly, RERAuthority also allowed the F. I. to withdraw from the matterThereafter, the matter was finally heard in absence of F. l. and onlybetween Allottees and promoter. ln ordinary course of nature it isquite possible and probable that F.l. preferred to withdraw from thecomplaint as the only relief sought against them was to restrainthem from transferring the property of the project or for directingthem to follow the procedure as laid down under the circularNo.11/2017 issued by RERA Authority while taking action underSARFAESI Act by the F.l. So, there cannot be anticipation to F.l.

that order of creation of charge may be passed in respect of theproperties of project which are already mortgaged with them underregistered mortgaged deed. Thus, it cannot be said that withdrawatof the F.l. from the complaint on their own accord may estoppedthem from taking the objection in respect of impugned order passed

finally in the complaint on the point of creation of charge. On thecontrary creation of charge is the order of substantive nature. lt is

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risdiction of DRT UNder SARFAE I Act33. The Ld. Advocate for Allottee challenged the procedurefollowed by F.l. under Section 13 and Section 14 of SARFAESI Actby alleging that properties of project are Agricultural Lands as seenfrom property card extract on record and provisions of Section 13and Section '14 of SARFAESI Act do not apply to Agricultural Lands.I would like to point out Section 17 of SARFAESI Act. Any person

aggrieved by the provisions of said Act must challenge it beforeDebt Recovery Tribunal. Thus, DRT is having jurisdiction to hearand decide the grievances about provisions of said Act. Allotteesmay proceed as per Section 17 of SARFAESIAct to challenge the

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not a consequential relief. So, any order t",. .."*,;J'::'J;j:;:1right such as creation of charge must be pleaded andsubstantiated. I reiterate that, in the present matter neither the reliefof creation of charge was pleaded and substantiated nor anyprovisions under RER Act 2016 empowered RERA Authority topass such order of creation of charge on the properties of projectfor recovery of amount to which Allottees are entifled.

Action initiated bv F.l. under SARFAESI Act32. I would like to point out that before passing such order ofcreation of charge in absence of prayer to that effect by any party itwas necessary on the part of RERA Authority to consider that F.l.

had already jnitiated the action for recovery of their loan against thePromoter under the provisions of Section 13 and 14 of SARFAESIAct as the properties of the project were mo(gaged with them asper registered mortgage. So, opportunity of hearing ought to havebeen given to F.l. before passjng order regardlng creation of chargeas per impugned order.

Appeal No.l09-j9procedure under provisions of said Act

lmporta nce of RER ActandSARFAESI Act34. lt cannot be ignored that SARFAESI Act is also thespecialAct. Before enactment of SARFAESIAct the Banks and F.l.were suffering hardship to make recovery of their roans from theborrowers inspite of mortgaging the properties by borrowers as asecurity for the loan lt was tidious and long procedure to makerecovery of such loan from borrower on the part of F. l. beforeenactment of SARFAESI Acl 2002. So, special and importantprocedure is laid down under Section 1 3 and Section .14 ofSARFAESI Act 2OO2 for recovery of secured loans withoutintervention of adjudicating machinery like Court. F. l. is empoweredto take the possession after following the procedure lard downunder SARFAESI Act. In the present matter, F. l. is havtngregistered mortgage in respect of property of project in their favoursjnce year 20'15. I\,4oreover, E l. has already initiated the procedurelaid down under SARFAES I Act 2OO2 to recover the loan from thePromoter and got the order of Additional Chief tvletropolitanIvlagistrate, Esplanade Court, Mumbai to that effect and also got thepossession of

Commissioner.

the propertles

So, F. l. is

of the project through Courtfollowing legal procedure as

contemplated under SARFAESI Act for recovery of their securedloan in respect of which properties of the project were mortgagedwith F I under registered mortgage deed. On the other hand,allottees are entifled under RER Act 2016 to claim the amount withinterest and compensation from promoter on account of breach ofobligations and duties on the part of promoter jn completing theproject and in giving the possession of the homes to the allottees

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APPeal No'10939

as per agreed terms. The F. l. has challenged the impugned order

only to the extent of creation of charge over the properties of the

pro.lect. ln view of the above discussion, I am of the opinion that the

impugned order creating charge over properties of the proiect is

without having such power to RERA Authority provided under RER

Act, 2016 read together with Rules and Regulations there under'

However, such order falls under the scope of power of RERA

Authority to pass appropriate order which it feels deem and fit to

achieve the ob.iects of RER Act 2016 to safeguard interest of

Allottees. Similarly, though such order is passed without following

principle of natural justice by not giving opportunity for appellant for

final hearing of the complaint, it cannot be ignored that appellant

was already party in complaint and was heard at the time of hearing

of interim relief and appellant suo moto decided to withdraw from

complaint even though Ld, Member had observed that appellant is

proper party in the complaint and it may continue if desire lt was

just and proper for appellant to stay and continue with complaint till

it's final decision on merit and to get satisfied that final hearing and

order is not affecting their rights as mortgagee of properties of

prolect. But appellant lost this opportunity by got deleting from

complaint before it's final decision. So, now appellant cannot allege

violation of principle of natural iustice by Ld Member in deciding

the complaint.

Circu lar No. 1 112417 Maha RA

35. ln the original complaint, Allottees have referred circular

No.11/2017 dated 08.11.2017 of trilahaRERA Authority and sought

relief that F.l. be directed to follow procedure laid down in said

circular while making recovery of their loan from promoter' ln fact'

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Appesl No'10939

original complaint was filed under Section 7 for revocation of project

and under Section 8 for requesting MahaRERA Authority to take

appropriate step for getting completed the incomplete project

through lhird party agency. Circular No 11l2O17 is issued by

MahaRERA Authority for giving guidelines and explanation

regarding procedure to be followed once step under Section 7 and

I is taken for completing the incomplete project ln this case, Ld'

Member passed final order in complaint for recovery of amount and

interest from promoter as per Section 18 of RER Act 2016 Once

the Ld. Member has not considered reliefs of Allottee prayed under

Section 7 and 8 of RER Act, circular No. 1112017 is not attracted

and F.l. cannot be compelled to follow it'

Com arision of Actions under both Acts

36. lt is true that RERAAuthority is having power to execute

the impugned order as if the decree of the Civil Court' Moreover'

there is a specific provision under RER Act' 2016 which empowers

RERA Authotity to recover the return of amount along with interest

and compensation from the Promoter by following the procedure

laid down under Maharashtra Land Revenue Code by treating such

recovery as if the recovery of revenue of land However, it is .iust

and proper to direct the Collector that such a recovery of amount

before it's final decision as if it is revenue of the land should not be

made without ignoring the right of secured creditor like F l in

respect of its legal action initiated under SARFAESI Act 2002 for

recovery of their loan against the property of proiect mortgaged with

them. So, while following the procedure for recovery of amount as

if recovery of land revenue on the part ofthe Collec{or, right of F l'

i.e. secured creditor in view of registered mortgage of properties of

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APPe.l No.10939

the project in its favour shall be protected and preferred while

making the recovery of claim of the allottees as per the impugned

order passed under RER Act' 2016. There should not be clash

between order of recovery passed under SARFAESI Act on one

hand and order of recovery passed under RER Act' 2016 On the

other hand because both orders are passed against the same

Promoter and in respect of same properties. As far as preference

is concerned. I am of the opinion that registered mortgage deed of

the property ofthe project was executed in the year 2015 in favour

of F.l. and thus F. l. is secured creditor and entitled to take the legal

steps as contemplated under SARFAESI Act 2OO2 of recovery of

the said loan against the said properties which is already

mortgaged with F. l. Claim of allottees is determined under RER

Act, 2016 only as per the impugned order passed on 04 05 2018

and the executton thereof is sought thereafter. Though such a claim

of Allottees to recover the amount is accompanied by creation of

charge over the properties ofthe project of the Promoter, such order

is passed later in time and all most by way of second charge The

first legal charge created by way of registered mortgage deed will

be having preference and will prevail while executing recovery

warrant against mortgaged property of the project by the Collector'

37. This is a typical case wherein Promoter of project is

behind bar and work of proiect is stopped. Promoter has admittedly

collected amounts from Allottees who are prospective purchasers

and also obtained huge loan for proiect by mortgaging properties of

project with Appellant. Promoter committed default in repaying the

loan and also in returning the amounts of Allottees. RER Act 2016

APPeal No.10939

is newly enacted to regularize real estate sector The most

important ob.iect of RER Act 2016 is to protect and safeguard

interest of Allottees. So, Allottees obtained order against promoter

under RER Act 2016 for recovery of amount with interest though

they had filed complaint mainly for revocation of registration of

project under Section 7 and for getting completed the work of

project with help of RERA Authority under Section 8 of RER Act

2016. RERA Authority created charge of recoverable amounts of

Allottees on properties of project. ln fact, Appellant also followed

legal procedure under SRFAESI Acl,2OO2 to recover loan from

promoter by complying the provisions of Section 13 and Section 14

of SRFAESI Act. Appellant got possession of properties of project

through Court Commissioner as per order passed by Addl Chief

Metropolitan Magistrate, Esplanade Court, Mumbai in Petition filed

under Section 14 of SRFAESI Act by Appellant Thus' on basis of

creation of charge over properties of project for recovery of

Amounts of Allottees as per order of RERA Authority under RERA

Act. Allottees sought order of issuance of recovery warrant from

RERA Authority and send it to Collector to execute it for making

recovery of amounts as if recovery of revenue as per Rules of

Maharashtra Land Revenue Code. Similarly, Appellant is in process

of making recovery of loan by proceeding against properties of

proiect which are already mortgaged with Appellant under

registered deed of mortgage. Appellant is following procedure as

per Section 13 and 14 of SRFAESI Act 2002 Both RERAAoI amd

SRFAESI Act are landmark enactment recently passed to regulate

Real Estate Sector to protect interest of Allottee and to help Bank

of Financial lnstitute i.e secured creditors to recover loan from

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APPeal No.10939

Borrowers by proceeding against secured proPerties such as

mortgaged properties of loan respectively.

Prioritv of riohts of successive transferrer

Let us see Law on above Point

"When there are two or more competing

equitable interests, the equitable maxim qui prior

e.t terpot" potior est jure (he who is earlier intime is stronger in law) applies. This means that

the first in time prevails over the others Section 48

of the Transfer of Property Act embodies thisprinciple in legislation.

The Section is founded upon the importantprinciple that no man can convey a title than whathe has.

BASIS OF THE PRINCIPLEIt is a principle of natural justice that if

rights are created in favour of two persons at

drfferent trmes, the one who has the advantage in

time should also have the advantage in law This

rule, however, applies only to cases where the

conflicttng equities are otherwise equal.Section 48 of the Transfer of Property Act

1882 is founded upon the important principle thatno man can convey a title than what he has, lf aperson has already effected a transfer, he cannotderogate from his grant and deal with the property

free from the rights created under the earliertransactaon. Section 48 is an absolute in its termsand does not contain any protection or

reservation in favour of a subsequent transfereewho has no knowledge of the prior transfer.

Thus, according to Section 48' the

transferor cannot prejudice the rights of the

transferee by any subsequent dealing with theproperty This self-evident proposition isexpressed in the equitable maxim qui prior est

tempore prior est jure. The section is just an

expression of this well-known common lawprinciple

lf there are successive transfers of the same

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^ppcxl No.l09f9

property, the later transfer is sublect to the prior

transfer "

Sec dc ito U/S E RF

38. F.l. is secured Creditor under SRFAESI Act and so' F l'

is entitled to follow procedure under Section 13 and under Section

14 of SRFAESI Act for recovery of loan Now' as per Section 26E

of SRFAESI Act, the debts due to any Secured Creditor shall be

paid in priority over other debts as per Section 26E of SRFAESI Act'

Section 26E of SRFAESI Act reads as under :-

"26E :Priority to secured creditors :-

Notwithstanding anything contained in any other law

for the time being in force' after the registration of

security interest, the debts due to any secured creditor

shall be paid in priority over all other debts and all

revenues. taxes' cesses and other rates payable to

the Central Government or State Government or local

authority."

Thus, Section 26E of SRFAESI Act gives priority to due

debts to be paid to Secured Creditor like present F l'

Conc lus n

39. ln view of above discussion, it is necessary to strike

balance between claim of allottees and claim of loan of F l against

properties of project. Since, charge is created by RERA Authority

for recovery of amounts of Allottee and also issued recovery

warrant and directed Collector to execute recovery warrant as if

recovery of revenue of land as per rule under Maharashtra Land

Revenue Code on one hand and legal procedure laid down under

Section 13 and 14 of SRFAESI Act is followed and possession of

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Appeal No.10939

properties of project is taken by Appellant through Court

Commissioner as per order of court and Appellant is further taking

legal step as per SRFAESI Act for recovery of loan, it is.iust and

proper to modify the impugned order of creating charge to the

extent that if should be subject to right of Appellant as mortgagee

in respect of properties of proiect as per registered deed of

mortgage in favour of appellant. Moreover, Collector should

execute recovery warrant subject to the rights of Appellant as

mortgage of properties of project under registered mortgage deed

and the fact that possession is taken of properties of project by

Appellant from the Court as per procedure for recovery of loan

under Section 13 and 14 of SRFAESI Act. So, part of impugned

order creating charge is partly just, proper and legal and it needs

modification to the extent that it is subject to right of the F.l over

properties of project as mortgagee under registered mortgage

deed. I answer points accordingly. ln the result, I partly allow appeal

and pass following order;

ORDER

l) Appeal is partly allowed

ll) Part of impugned order creating charge on the

properties of the project is partly modified to the

extent that it is subject to right of Financial

lnstitute as a mortgagee over the properties of the

project in view of registered mortgage deed dated

28.O7.2015.

lll) Recovery warrant issued as per impugned order

shall be subject to above mentioned modification of

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App€rl No.10939

the part of impugned order regarding creation of

charge.

lV) Executing Authority shall also be informed about

the modification of part of impugned order

regarding creation of charge over the properties of the

project subject to right of Financial lnstitute as a

mortgagee in the said properties as per registered

mortgage deed dated 28.07.2015.

V) Parties to bear their respective costs'

Vl) Copy of this order be sent to MahaRERA Authority'

I SUM NT M.JUDICIAL MEMBER,

Maharashtra Real EstateAppellateTribunal,(MahaRERA)

Mumbai.

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