The Karnataka High Court has delivered a significant judgment impacting real estate regulation in the state. On petitions challenging a 2020 circular issued by the Karnataka Real Estate Regulatory Authority (K-RERA), the Court quashed the retrospective imposition of a “delay fee” for promoters who failed to submit quarterly updates and annual audit statements on time.
Justice M Nagaprasanna, while allowing the petitions, observed that the circular dated September 3, 2020, lacked legislative sanction and had no basis under the Real Estate (Regulation and Development) Act, 2016 (RERA).
Background of the Case
Under Section 11 of the RERA Act, every promoter is obligated to submit quarterly updates on project status along with annual audit reports on the regulator’s website. K-RERA issued the 2020 circular citing Section 11 and Rule 15 of the Karnataka RERA Rules, claiming that promoters were not furnishing updates on time. To ensure compliance, the authority introduced a delay fee mechanism for late submissions.
Developers challenged the circular, arguing that while the Act places obligations on promoters, it does not empower the regulator to levy delay fees of this kind. The petitioners contended that the imposition was arbitrary and beyond statutory authority.
Court’s Findings
The High Court examined the relevant provisions of the RERA Act and Rules in detail. Justice Nagaprasanna held that none of the cited provisions—Sections 11, 34, and 37—empower RERA to impose such a fee.
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Section 11 only sets out the duties of promoters but does not authorize the levy of fees.
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Section 34 specifies the powers of the authority but does not extend to pecuniary impositions.
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Section 37 allows RERA to issue directions, but this cannot be interpreted as a power to impose financial penalties.
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Sections 61 and 63 prescribe penalties for contraventions, but within strict limits and not in the manner adopted by the impugned circular.
The Court described the delay fee as “an impost without lineage under the statute, an exaction without authority, a levy without law.” It ruled that imposition of any tax, fee, or impost requires clear statutory backing and cannot be introduced by way of a circular.
Implications of the Judgment
With this ruling, the circular of September 2020 stands quashed, relieving developers of retrospective delay fees. However, the Court clarified that the legislature remains free to introduce a law enabling such a levy in the future, provided it follows proper legal procedure.
The decision underscores judicial emphasis on the limits of regulatory powers. While RERA plays a crucial role in ensuring accountability and transparency in the real estate sector, its actions must remain within the framework of statutory authority.
Conclusion
The Karnataka High Court’s judgment sets an important precedent in safeguarding promoters from arbitrary financial impositions while reinforcing the need for legislative clarity. Going forward, regulators will need to rely on explicit statutory provisions before introducing compliance-related penalties.
