In a strong enforcement action, the Karnataka Real Estate Regulatory Authority has imposed a penalty of up to 5% of the estimated project cost on a Bengaluru-based developer for failing to comply with its earlier refund orders. The authority cited a “persistent and systemic pattern of non-compliance”, sending a clear message that ignoring RERA directions will attract strict consequences.
Background of the Case: Mantri Webcity 2B Project
The matter relates to the Mantri Webcity 2B project, where homebuyers had booked a flat under a pre-EMI scheme.
- Buyers paid ₹14.35 lakh upfront
- Remaining ₹64.17 lakh funded through a home loan
- A tripartite agreement was signed between buyers, developer, and lender
- Developer agreed to service pre-EMI and loan liability in case of withdrawal
The promised possession date was March 31, 2017, but the project faced repeated delays, leading buyers to approach K-RERA.
Earlier RERA Order Ignored
In its earlier order dated April 3, 2024, K-RERA had ruled in favour of the homebuyers and directed the developer to:
- Refund the amount
- Discharge loan liability
- Comply within a stipulated timeline
However, the developer failed to implement these directions, prompting fresh proceedings.
Developer’s Defence
The developer cited multiple reasons for delay, including:
- Legal and licensing hurdles
- Flooding and heavy rainfall (2015–2018)
- Impact of demonetisation
- Labour shortages and market slowdown
- COVID-19 disruptions and extension circulars
Despite these arguments, K-RERA found no evidence of compliance with the earlier order.
K-RERA’s Strong Observations
The authority made critical observations highlighting the seriousness of the violation:
- Repeated failure to comply with multiple RERA orders
- Demonstrated disregard for the “letter and spirit of the law”
- Non-refund of buyer funds and failure to repay loan liabilities
K-RERA emphasized that such conduct reflects a systemic issue, not an isolated default.
Penalty Under Section 63 of RERA
Invoking the Real Estate (Regulation and Development) Act, 2016, the authority imposed:
- Penalty up to 5% of project cost
- Payable within 60 days
- Applicable for continuous non-compliance
Under Section 63, penalties can be imposed daily until compliance is achieved, making it a powerful enforcement tool.
Directors Summoned: Personal Accountability
In a significant move, K-RERA also issued notices to:
- Managing Director
- Company Directors responsible for operations
They have been directed to appear within 30 days and explain why action should not be taken under:
- Section 63 (penalty for non-compliance)
- Section 69 (offences by companies)
The authority clearly stated that corporate structure cannot be used as a shield to escape legal obligations.
Key Legal Principle: Corporate Veil Cannot Protect Violators
K-RERA stressed that:
- A company acts through its directors and officers
- Responsibility lies on individuals managing affairs
- Non-compliance can trigger personal liability
This reinforces accountability at both company and individual levels.
Impact on Homebuyers
This ruling is crucial for homebuyers because:
- It strengthens enforcement of RERA orders
- Ensures developers cannot delay refunds indefinitely
- Introduces personal liability for company directors
- Sends a deterrent signal to non-compliant builders
For affected buyers, it brings renewed hope that orders will translate into actual relief.
What This Means for Developers
Developers must note:
- Ignoring RERA orders can lead to heavy financial penalties
- Directors may face personal legal action
- Delays without compliance are no longer tolerated
- Regulatory scrutiny is becoming stricter
Conclusion
The K-RERA order marks a significant step towards strict enforcement of real estate regulations in India. By imposing penalties and summoning directors, the authority has reinforced that compliance is mandatory, not optional.
For homebuyers, this decision strengthens trust in the system. For developers, it is a clear warning: failure to comply with RERA orders can lead to serious financial and legal consequences.
