Power of Real Estate Appellate Tribunal to Require Pre-Deposit of more than 30% should be exercised in rare cases: Allahabad HC

The Allahabad High Court has held that Real Estate Appellate Tribunal can prescribe pre-deposit higher than 30% only in exceptional cases and after recording reasons for the same.

An appellant against the order of the RERA, dated 10.04.2019 was filed whereby penalty @ MCLR + 1% w.e.f. 01.07.2012 was imposed on the appellant.At the time of filing the aforesaid appeal, the appellant furnished a demand draft for an amount of Rs.6,33,000/- towards 30% of the penalty amount awarded by the RERA. 

However by an order dated 28.01.2020, the Tribunal required the appellant to deposit the balance amount i.e. the entire amount of penalty awarded by the RERA as a pre-condition to maintain the appeal.

The Tribunal relied on the observations made by the Lucknow Bench of Allahabad High Court in Second Appeal No.364 of 2018 (Radicon Infrastructure And Housing Private Limited Vs. Karan Dhyani) and Second Appeal No. 367 of 2018 (Radicon Infrastructure And Housing Private Limited Vs. Dhaneshwari Devi Dhyani), decided on 26.07.2019, to require the appellant to deposit the entire amount of disputed penalty as a condition to maintain the appeal.

Counsel for the Appellant submitted that Section 43(5) of the Act does not mandate pre-deposit of the entire disputed demand of penalty as a pre-condition to maintain an appeal under Section 44(2) of the Act. Also, the decision of the Court in Second Appeal Nos.364 of 2018 and 367 of  2018 does not lay down as a proposition of law that the entire disputed demand of penalty must be deposited before an appeal is entertained or maintained under Section 44 of the Act.

Counsel for the RERA submitted that the right of appeal granted under Section 34 of the Act is circumscribed and conditioned by Section 43(5) of the Act. According to him, there is no right vested in the appellant to maintain its appeal by depositing 30% of the disputed penalty. The Tribunal could determine a higher amount and, as has been done in the present case.

Hon’ble Justice Saumitra Dayal Singh referred to the Judgment of Supreme Court in the case of Garikapatti Veeraya v. N. Subbiah Choudhury AIR 1957 SC 540 and Nahar Industrial Enterprises Ltd. v. Hong Kong and Shanghai Banking Corp., (2009) 8 SCC 646, where in the Supreme Court held that right of appeal is governed by the statute and cannot be curtailed by any other means.

The Court observed:

There is absolutely no discretion vested in the Tribunal to reduce that amount below the statutorily defined minimum of 30% of the penalty imposed by the RERA. That condition is absolute.

A discretion is vested in the Tribunal to determine an amount more than 30% of the penalty – to be deposited as a condition to maintain such appeal by a ‘promoter’. The legislature has referred to the same as such higher percentage “as may be determined by the Appellate Tribunal.”

Thus, in the first place, in the event of an appeal being filed by a ‘promoter’ against an order of the RERA, imposing penalty, such appellant must necessarily deposit 30% of the penalty imposed as a pre-condition to maintain that appeal. There can be no exception to the same. Neither that percentage or amount can be reduced by the Tribunal nor an appeal filed without deposit of that amount be entertained by the Tribunal.

In the context of Section 43(5) of the Act, the Tribunal must form its opinion on the facts and material before it – why a higher percentage of the disputed penalty be deposited by a ‘promoter’-appellant as a condition to entertain its appeal. Undoubtedly, this would involve exercise of judicial discretion.

Only by way of illustration, that discretion may be exercised where it appears to the Tribunal, even on a prima facie basis, that the penalty imposed by RERA is too less/insignificant to the infraction found or that the appellant before it is a repeat or habitual or wilful offender or the facts appear to involve large scale infractions of the law, by way of an organised activity. In such and other cases, for which judicially sound reasons may be recorded as may compel or commend to the Tribunal to require a particular appellant to deposit an amount higher than the statutory pre-defined limit of 30% of the penalty.

Consequently, the power of the Tribunal to direct pre-deposit in excess of 30% of the penalty, under section 43(5) of the Act is found to be purely discretionary, to be exercised with extreme caution, in rare cases, by way of an exception and not routinely.

On the facts of the case the Court found that the Appellant is a non profit organization registered as a society of retired personnel of the Indian Air Force and the Indian Navy. It exists and operates only for the purpose of providing affordable housing to the members of the Indian Air Force and the Indian Navy and the widows of such personnel.

Further, the Appellate Tribunal has not recorded any reason to require pre-deposit over and above 30%.

Consequently the Second appeal has been allowed and the Order of REAT has been set aside.

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