In the case of State Bank of India vs. Dharmesh Jethanand Lohana, the Gujarat Real Estate Regulatory Authority (GujRERA) dealt with a complex legal conflict involving the Real Estate (Regulation and Development) Act (RERA) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. According to Section 11(4) of the RERA Act after the promoter executes an agreement for sale for any apartment, plot or building, as the case may be, not mortgage or create a charge on such apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building, as the case may be;
Key Details:
- Background: Dharmesh Lohana had booked four shops in a real estate project in Vadodara, which was later discovered to be mortgaged to State Bank of India (SBI) by the developer (Manishbhai Mahendrabhai Patel) due to unpaid loans. SBI had taken symbolic possession of the assets, including the shops, under SARFAESI Act provisions.
- Complaint: Lohana sought to secure his ownership and prevent the bank from auctioning the properties. He contended that his rights as a buyer under the RERA Act would be compromised if the bank sold the shops.
- Legal Issue: The case centered on whether RERA provisions protecting the rights of homebuyers would take precedence over SARFAESI provisions that allow secured creditors like banks to auction properties.
Judgment:
- RERA Prevails: The GujRERA ruled that the provisions of the RERA Act, which came into force after the SARFAESI Act, would take precedence. It held that the rights of the buyer must be safeguarded under the RERA, emphasizing that the bank’s rights as a secured creditor could not override the protections offered to allottees under the real estate law.
- Jurisdiction: The Authority also confirmed its jurisdiction to hear the complaint against the bank, citing past Supreme Court rulings that in the event of conflict between RERA and SARFAESI, RERA would prevail.
This ruling highlights how homebuyers’ interests under RERA are protected even in cases where banks have taken possession of properties due to loan defaults
The Gujarat State RERA’s ruling represents a significant stride towards a more equitable and just real estate sector. By confirming the precedence of the RERA Act over the SARFAESI Act concerning allottee rights, the judgment establishes a precedent for future cases, contributing to the evolving jurisprudence in real estate law. It emphasizes the crucial task of safeguarding consumer interests, fostering trust, and instilling confidence in the real estate market.