REAT Odisha (2025.11.24) in Punjab National Bank Vs. Mrs. Manasi Patro @ Panda & Others [OREAT Appeal No.32/2024] held that;
However the moment the bank or the financial institution takes recourse to any of the measures available in sub-section (4) of Section 13 of the SARFAESI Act, RERA authority would have jurisdiction to entertain the complaint filed by an aggrieved person.”
Order dated 14.02.2022 of the Hon’ble Supreme Court of India in the Petition for Special Leave to Appeal (Civil) Nos.1861-1871 of 2022 filed by the Union Bank of India. The appellant-bank after taking recourse to Section 13(4) of the SARFAESI Act, more particularly having taken possession of the mortgaged project land, has certainly stepped into the shoes of the respondent no.2-promoter, who is the borrower, in relation to the secured asset.
The settled law in the decision of Hon’ble Supreme Court of India in the case of Bikram Chatterji and Others versus Union of India and Others reported in (2019) 19 SCC-161 that, in the event of conflict between the RERA Act and the SARFAESI Act, the provisions contained in the RERA Act would prevail.
However, in dealing with the Hon’ble Supreme Court’s decision in the Bikram Chaterji case (Supra), the Hon’ble High Court of Rajasthan has put a rider by observing that, RERA would not apply in relation to the transaction between the borrower and the banks and financial institutions in cases where security interest has been created by mortgaging the property prior to the introduction of the Act unless and until it is found that the creation of such mortgage or such transaction is fraudulent or collusive.
Excerpts of the Order;
24.11.2025 The appeal is taken up through hybrid mode.
2) We have already heard Mr. P.K.Dasmohapatra, learned counsel appearing for the appellant, Ms.R.Jain, advocate appearing in behalf of Mr. P.Sahoo, learned counsel for the respondent no.1, Mr. D.M.Mishra, learned counsel appearing for the respondents no.2 and 3 and Mr. B.Nayak, learned counsel appearing for the respondent no.7-Regulatory Authority. The respondents no.4 to 6 are set ex parte vide order dtd. 6.11.2024 due to their non-appearance inspite of due service of notice on them.
3) Aggrieved over the order dtd. 10.01.2024 of the learned Odisha Real Estate Regulatory Authority passed in Complaint Case No.266/2022, the appellant who was the respondent no.6 therein has filed this appeal praying to set aside the impugned order dt. 10.1.2024 so far as the directions in para-15 (i), (iv) & (v) of it are concerned. The respondent no.1 of this appeal was the complainant and the respondent nos.2 to 6 were the respondents no. 1 to 5 in the said complaint case. The respondent no.7 is the learned Regulatory Authority who has passed the impugned order.
4) The facts and circumstances leading to the filing of the present appeal are as follows :
On 24.8.2022 the respondent no.1 of this appeal as complainant filed the aforesaid complaint case before the learned Regulatory Authority stating that, intending to purchase a land in Bhubaneswar she approached the respondent no.2 who made a proposal to the complainant to purchase a piece of land in mouza-Raghunathpur Jali facing Nandankanan road measuring 2000 sq. feet for a sum of Rs.10,00,000/- from the respondent no.3. The respondent no.2 had also proposed the complainant to pay a sum of Rs.23,00,000/- in cash towards development, conversion, construction of approach road etc. of the said land. The respondent no.2 further assured that he shall give one flat having super built up area of 2000 sq. feet and plinth area around 1600 sq. feet after construction of the residential project which will be constructed over the patch of lands including the plot of the complainant. Accordingly, the complainant paid a sum of Rs.2,50,0000/- on 4.3.2015 and Rs.7,50,000/- on 1.7.2015 through cheques to the respondent no.3 who as a token of receipt issued money receipts of the said amount. The complainant also paid Rs. 23,00,000/- to the respondent no.2 by cash and received money receipt to that effect. A memorandum of understanding was also executed between the complainant and the respondent no.3 on 2.7.2015 in which the respondent no.3 admitted to have received Rs.10,00,000/- for 2000 sq. feet super built up area (approximately 1600 sq. feet built up area) of the apartment with a car parking space. It was agreed in the said MoU that the respondent no.3 will issue allotment letter and execute agreement for sale within 12 to 24 months from the date of MoU. It was further agreed upon that the apartment shall be handed over to the complainant within 60 months from the date of MoU. However, in October, 2017, the respondent no.2 informed the complainant that the respondent no.3 would not be able to honour his commitment and another promoter i.e. respondent no.4 will register a plot in the same Tahasil measuring 2000 sq. feet in favour of the complainant instead of respondent no.3, to whom the complainant had already paid an amount of Rs.10,00,000/- towards the cost of the land. In view of the new development, the respondent no.3 refunded the amount to the complainant, who in turn paid the same to the Respondent no.4 on 25.10.2017. On 31.10.2017, the respondent no.4 executed a sale deed in favour of the complainant in respect of a land measuring Ac.0.046 under Plot No.1273 in Khata no.28 of mouza Raghunathpur Jali. However, subsequently in August, 2020, the respondent no.2 informed the complainant that he could not acquire sufficient land for construction of multi-storied apartment and accordingly he could not fulfil his commitment. The respondent no.2 then approached the complainant to register Flat No.72 of 2088 sq. feet in the project ‘Ganapati Homes’, Sum Hospital Road, Sampur developed by Odyssa Homes & Commercial Pvt. Ltd. in exchange of the land purchased by the complainant with a suggestion to transfer it directly to his nominee Bhubaneswar Aquatech & Agro Products Pvt. Ltd (respondent no.4). Finding no other alternative the complainant agreed to it and accordingly an agreement for sale was executed followed by a letter of allotment issued by the respondent no.1. A Memorandum of Understanding was executed between the respondent no.2 and the complainant on 18.8.2020. The complainant on receipt of Rs.10,00,000/- from the respondent no.5 on 2.9.2020 paid the same to the respondent no. 1 so as to complete the transaction of Rs.33,00,000/- for the Flat No.72. On execution of another memorandum of understanding on 5.9.2020 between the complainant and respondent no.2 containing the detail particulars of earlier transactions including the exchange of the plot for the flat, a fresh allotment letter was issued to the complainant by the respondent no.1 signed by respondent no.2 on 6.9.2020 followed by an agreement for sale on the same day. Despite such allotment letter and agreement to sell, the respondent no.1 failed to deliver the flat and kept on delaying the same on some pretext or other. The complainant further alleged that while the matter stood thus, on 8.8.2022 he came to know from the paper publication that an e-auction notice was floated by Punjab National Bank (respondent no.6), in support of the entire property of respondent no.1 including the land under Khata No.233/144, Plot No.788/1444, mouza-Sampur, Tahasil-Bhubaneswar and was put to auction on 12.8.2022. As the respondents no.1 and 2 failed to deliver possession of the flat to the complainant, she is entitled to the refund of her money with interest. With the aforesaid claims and allegations, the complainant approached the learned Authority praying to direct the respondent no.1 to deliver the possession of the flat no.72 (Type-B) on the 7th floor of the project after complying with all the statutory requirements within stipulated time and pay interest for the delay in delivery of possession in accordance with law from the date of initial deposit till the delivery of possession. Further prayers were also made to direct the respondent no.6-Bank not to auction or create thirty party interest in Flat No.72 (Type-B) in the 7th Floor of the project and to impose penalty on the respondent no.1 under Sections 59 to 62 of the RERA Act.
Pursuant to the summons issued by the learned Regulatory Authority, the respondents no.1,2,3,5 and 6 appeared through their respective counsels and filed their separate show cause, whereas respondent no. 4 did not appear inspite of due service of notice on him and accordingly was set ex parte.
The respondent no.6 in its show cause submitted that the Bank is the true owner of the project land as the memorandum of understanding and sale agreement between the complainant and the respondent no.1-promoter are unregistered ones and the complainant has not disputed the mortgage of the project land and the loan advanced by the respondent no.6. Moreover, the complainant has no right, title and interest over the project property as no sale deed in respect of it has so far been executed in her favour by the respondent no.1. It is claimed by the respondent no.6-bank that it has sanctioned a term loan of Rs. 460 lakhs for construction of a house building project (Ganapati Homes) on the project land in favour of the respondent no.1 subject to certain terms and conditions and as per the said terms, the respondent no.1 has created a valid equitable mortgage in favour of the respondent no.6 in respect of the project land on 8.2.2014. The respondent no.6 has claimed that it being a secured creditor has every right to put the secured asset i.e. the project land to auction for recovery of the loan dues. The respondent no.6 further contended that after the loan amount was declared NPA on 29.11.2016 it issued a demand notice u/s 13 (2) of the SARFAESI Act,2002 on 5.12.2016 to the respondent no.1 asking it to pay Rs. 4,09,59,761.95 within a period of sixty days from the date of the notice, but inspite of the receipt of the said demand notice, the respondent no.1 failed to pay the outstanding dues resulting in the respondent no.6 issuing possession notice u/sec. 13 (4) of the SARFAESI Act, 2002 and publishing the same in the daily news paper. The bank also filed a recovery suit under the RDB Act, 1993 against the respondent no.1 and others vide O.A. No.166 of 2018 in the Debts Recovery Tribunal, Cuttack on 28.2.2018 for recovery of a due of Rs.3,72,37,455.90 and other reliefs and the same is pending for hearing. Claiming that it has already taken physical possession of the project land pursuant to the order dated 24.6.2019 passed by the District Magistrate and Collector, Khordha in BMC No.41/2017 under section 14 of the SARFAESI Act and that the said order has still not been challenged by the aggrieved party, the respondent no.6 has reiterated its claim that the agreement between the complainant and the respondent no.1 being an unregistered one and no sale deed having been executed and registered in her favour in respect of the flat in question, the complainant has no right, title and interest over the mortgaged property and as such the relief claimed against the respondent no.6 is not at all tenable in the eye of law. Further claiming that it being the secured creditor and the mortgagee in respect of the project land is authorized to sell it for realization of the loan dues, that the proceedings initiated so far by it under the SARFAESI Act have not been challenged either by the complainant or by the respondent no.1-promoter, that Section 35 of the SARFAESI Act, 2002 will override the provision of the RERA Act, 2016, that the dues of the Bank being secured debt will have priority over the mortgaged property, that the DRT, Cuttack only has the exclusive jurisdiction to adjudicate the issue involved and that other courts and tribunals have no jurisdiction to decide the validity and legality of the mortgage, the respondent no.6 has prayed for dismissal of the complaint with costs.
The respondents no.1 and 2 in their show cause have denied the multiple transactions claimed by the complainant in the complaint except the agreements dtd. 11.8.2020 and 6.9.2020. It is submitted that, the transactions entered into between the respondent no.2 and the complainant were purely on the personal capacity of the former and not as a director of respondent no.1. The transactions with respondents no.3,4 and 5 as alleged by the complainant are in no way connected with the agreements for sale dtd. 11.8.2020 and 6.9.2020 as those are personal and separate transactions between them. While admitting the complainant to be an allottee of the flat no.72 of the project in question the respondent no.1 has made it clear that, though the respondent no.2 is one of the directors of respondent no.1, but it is the director Mr. Saroj Kumar Panda, who is authorize to sign all the papers on behalf of the respondent no.1 accordingly it was Mr. Saroj Kumar Panda, who had signed the agreement for sale dated 11.8.2020. The respondent no.1 has claimed to be no way connected to the transaction dt.2.7.2015. It is further claimed that, the documents relied on by the complainant in Annexure-1 which are the money receipts of 2015 are issued by M/s. Shree Sidhi Vinayak Buildcon (P) Ltd. i.e. the respondent no.3 and hence the respondent no.1 has no nexus to it. The respondent no.1 has claimed that the MoU dtd. 18.8.2020 executed between the complainant and the respondent no.2 has been executed in their personal capacity and the respondent no.1 is not responsible for the same, as he is not a party to the same. The Respondent no.1 has though admitted the agreement for sale and allotment letter dtd. 11.8.2020 but claimed that there is nothing mentioned in the allotment with regard to prior payment of the complainant. Claiming that no document has been produced by the complainant showing payment of Rs.33 lakhs to the respondent no.2, the respondent no.1 has pointed out that the MoU dtd. 5.9.2020 clearly reveals that the complainant has paid Rs.10 lakhs. The respondent no.1 has asserted to have never and nowhere acknowledged any payment claimed to have been made by the complainant. It is further submitted that para-10 of the agreement for sale dtd. 6.9.2020 clearly stipulates that, ‘the buyer hereby agrees to pay all the amount payable as per the terms of the agreement as and when the same or any of them would become due and payable’. As the complainant has not made any payment except Rs.10 lakh, she is not entitled to get the relief as claimed by her. It is also submitted that the respondent no.6-bank has taken possession of the property by invoking the provisions of the SARFAESI Act, 2002. However, the respondent no.1 is in talks with the said bank for repayment of the loan and recall of its action. Respondent no.1 has further submitted that it has no objection if the complainant wants to withdraw from the project but as per her claim for refund of money, she is entitled to receive only Rs. 10 lakh which she has paid. With the aforesaid pleas, the respondent no.1 prayed to dismiss the complaint case.
The respondent no.3 filed its show cause admitting the fact that the complainant had entered into a MoU with it on 2.7.2015 for purchase of a land measuring 2000 sq. ft in mouza-Raghunathpur Jali and accordingly had paid a sum of Rs.10,00,000/- in two phases. However, as the land could not procured for some reason, the project could not be started within the stipulated period of two years. Accordingly, the amount was refunded to the complainant through her bank account and hence there is no further liability of the respondent no.3. The respondent no.3 therefore prayed to dismiss the complaint.
The respondent no.5 in his show cause to the complaint has claimed that the complainant case is without any cause of action against him and hence is not maintainable. The entire averments in the complaint shows no role of the respondent no.5 in the alleged delay in delivery of possession of the flat in question to the complainant by the respondent no.1 and the process initiated by the respondent no.6 for auction sale of the project. The respondent no.5 has accordingly prayed for dismissal of the complaint.
The learned Regulatory Authority on perusal of the pleadings of the complainant and the respondents no.1,2,3,5 and 6 framed four points for consideration and on hearing both the parties as well as going through the documents filed by them passed the impugned order as follows :
“The case is allowed, in part, on contest against the respondent nos.1,2,3,5 and 6 and ex parte against the respondent no.4 without cost.
(i) The Respondent no.6 is directed to complete the construction of the project ‘Ganapati Homes’, obtain occupancy certificate from the competent authority, execute conveyance deed in respect of flat no.72 (Type-B) in the 7th floor of the project over plot no.788/1444, Sampur, Dist-Khurda in favour of the complainant on receiving the balance consideration amount of Rs.44,50,000/- from her and handover the occupancy certificate and other documents to her within a period of two months from the date of obtaining occupancy certificate.
(ii) The respondent no.1 is directed to pay interest @ 9.50% per annum on the amount of Rs.10,00,000/- payable from 1.7.2015 till the date of delivery of possession.
iii) The complainant is directed to pay the balance consideration amount of Rs.44,50,000/- to the respondent no.6 on the date of registration of the sale deed under section 17 (1) of the Act.
(iv) The respondent no.6 is directed not to auction flat no.72 in the 7th floor of the project ‘Ganapati Homes’ over Plot No.788/1444, Sampur, Dist-Khurda by not creating 3rd party interest.
v) The promoter-respondent no.6 is directed to register the project with ORERA under Sec. 3 of the Act within two months from the order.
The Respondents no.1 and 6 and the complainant are directed to comply the order as above failing which, the order shall be enforced as per law.”
5) In the hearing of the appeal, the learned counsel for the appellant has submitted that, the learned Regulatory Authority has erred in directing the appellant-bank to act as the promoter in place of respondent no.2 ignoring the provisions of the SARFAESI Act, 2002. It is further submitted that the learned Regulatory Authority while passing the impugned order dt. 10.1.2024 in CC No.266/2022 has ignored the order dt. 15.12.2023 passed in an identical case i.e. CC No.1/2022 direction has been given to the respondents no.2 and 3 to complete the construction of project ‘Ganapati Homes, obtain occupancy certificate from the competent authority and execute the conveyance deed in respect of the flat in favour of the complainants on receiving the balance consideration amount from them and handover the occupancy certificate as well as other documents to them. It is further submitted that, the learned Regulatory Authority have not applied their mind while deciding that RERA would have retrospective effect as in the case of Union of India Vrs Rajasthan Real Estate Regulatory Authority, the Hon’ble Apex Court have held that, RERA would not apply unless and until it is found that creation of such mortgage or transaction prior to the introduction of the Act is fraudulent or collusive. In the present case no such fraud or collusion has been averred in the complaint petition by the respondent no.1. It is further submitted that the appellant-bank has prior charge over the property as Section 26 (E) of the SARFAESI Act, 2002 came into force on 1.9.2016, whereas Section 89 of the RERA Act came into force on 1.5.2016. It is further submitted that, the mortgage was created on 8.2.2014 and therefore the RERA Act coming into force on 1.5.2017 and having no retrospective effect, is not applicable to the present case and the complaint should have been dismissed on this ground. It is further submitted that, the appellant being a public financial institution, the direction to it to act as promoter, collect money from allottees and construct the flats is practically not possible. Further submitting that, the appellant being neither a promoter, nor an allottee nor a real estate agent, the learned Regulatory Authority have no jurisdiction to restrain the appellant from putting the project land in auction sale, the learned counsel for the appellant has made the prayer as mentioned earlier in para-3.
6) On the other hand, the learned counsel for the respondent no.1 has stuck to the averments made in the complaint petition. It is submitted that, as the respondent no.2-promoter failed to clear the loan which it had taken by mortgaging the project land, the appellant bank proceeded against it under section 13 (4) of the SARFAESI Act, 2002 without any information or notice to the respondent no.1. The learned counsel for the respondent no.1 has drawn the attention of this tribunal to the decision of Hon’ble Apex Court in the case of Bikram Chaterji V. Union of India wherein it is held that, in cases of conflict between the SARFAESI Act and the RERA Act, the provisions contained in RERA Act would prevail. The learned counsel for the respondent no.1 has also drawn the tribunal’s attention to the decision of Hon’ble Supreme Court in the case of Union Bank of India versus Rajasthan Real Estate Regulatory Authority reported in 2022 SCC Online Sc-1885, wherein it is held that, ORERA has jurisdiction to entertain a complaint by an aggrieved person against the bank as a secured creditor of the bank takes recourse to any of the provisions contained in Sec. 13 (4) of the SARFAESI Act. It is further submitted that the appellant bank has taken over the possession of the property under the SARFAESI Act and as the possession over the project continued after the RERA Act came into force, it is adversely affect the interest of respondent no.1. Further, contending that, the mortgage through was created in favour of the appellant bank on 8.2.2014 but the construction of the project has gone beyond the date of commencement of the RERA Act and hence the Act is applicable to the project, the learned counsel for the respondent no.1 terming the impugned order passed by the learned Regulatory Authority in C.C. No.266/2022 as just and legal, has prayed for dismissal of the appeal.
The learned counsel for the respondents no.2 and 3 have contended that, though the respondent no.1 is the allottee of Flat No.72 (Type-B) having an area of 2088 Sq. ft on the 7th floor of the project situated at mouza-Sampur and as per the sale agreement dtd. 11.8.2020 the consideration price of the said flat was fixed at Rs.54.50 lakh, but no payment was made in accordance with the said agreement by the respondent no.1. It is further contended that due to reasons beyond the control of the respondent no.2 including the arrest and remand of the directors of the respondent no.2 inside the jail custody, the project work was suspended and after their release from custody the respondent no.2 is trying to sort out the issues. It is further submitted that the respondent no.2 availed a loan of Rs.460 lakh by mortgaging the project land with the appellant in order to complete the project in time but as there was cost overrun and non receipt of timely payments from the allottees, the respondent no.2 defaulted in timely repayment of EMIs to the bank and the bank initiated recovery proceeding under the SARFAESI Act in which it seized the entire project property by taking physical possession of the same. It is further submitted that the respondent no.2 had paid Rs.40 lakh to the appellant as per the OTS approval, but due to arrest and remand of its directors it could not repay the loan in full. The respondent no.2-promoter has however claimed to be endeavouring to sort out all the issues including settlement of the dues of the appellant-bank and to complete the project as soon as possible. While making it clear that he does not contest the impugned order as he has no intention to deprive the allottees from their rightful claim, the respondent no.2-promoter has also chosen not to comment anything on the grounds of appeal.
7) The undisputed facts amongst the parties emerging from their pleadings in the complaint case and documents relied on by them such as the copies of the memorandum of understanding dtd.5.9.2020, the allotment letter dtd. 6.9.2020, the sale agreement dtd. 6.9.2020, money receipts, letter of sanction of term loan, notice u/sec. 13 (2) of the SARFAESI Act and order dated 24.6.2019 of the District Magistrate, Khurda u/Sec. 14 of the SARFAESI Act are :
i)The respondent no.1-allottee and the respondent no.2-promoter had entered into sale agreements in respect of flat no.72 (Type-B) in the 7th floor of the project over plot no.788/1444, Sampur, Dist-Khurda, Bhubaneswar on 11.8.2020 and 6.9.2020.
ii) The cost of the flat agreed to was Rs.54,50,000/- in the sale agreement dtd. 11.8.2020.
iii)The respondent no.1 also agreed to pay all statutory taxes including service tax as and when applicable and also pay registration charges at the time of registration.
iv)The respondent no.1 has paid Rs.10,00,000/- towards part consideration price of the aforesaid flat on 3.9.2020.
v) The project is still not complete for the respondent no.1 to take delivery of possession of the flat in question from the respondent no.2.
vi) The respondent no.2-promoter has mortgaged the project land to the appellant-bank on 8.2.2014 for a loan of Rs.460.00 lakhs.
vii) Due to failure on the part of the respondent no.2- promoter to repay the outstanding loan amount of Rs.40959761.95 , the appellant-bank after declaring the loan account as non-performing asset and issuing notice to it u/sec. 13 (2) of the SARFAESI Act, 2002 has taken recourse to Section 13 (4) of the said Act by obtaining permission of the District Magistrate & Collector, Khordha u/sec. 14 of the said Act vide order No.278 dated 24.6.2019 in BMC No.41/2017 for taking physical possession of the project land and publishing the auction sale notice in respect of the project land in the English daily newspaper ‘The Statesman’ dated 7.3.2020.
viii) The project being not completed till now is certainly covered under the RERA Act.
8) The transaction between the respondent no.1 and the respondent no.2 relating to the flat in question is mainly based on the sale agreement dtd.6.9.2020. In the MoU dtd. 5.9.2020 it is agreed that respondent no.2 has received Rs.10,00,000/- towards part consideration of the flat. Though the respondent no.1 has claimed to have paid an amount of Rs.33,00,000/- in total towards part cost of the flat, but has not explained as to why she agreed to execute the MoU dtd. 5.9.2020, allotment letter dtd. 6.9.2020 and sale agreement dtd. 6.9.2020 admitting to have paid only Rs.10,00,000/- out of the total cost. We are therefore of the opinion that, the latest admitted transactions between the respondent no.1 and respondent no.2 i.e. MoU dtd. 5.9.2020, the allotment letter dtd. 6.9.2020 and the agreement for sale dtd. 6.9.2020 shall prevail over any other transactions and the same confirm the fact that out of the total agreed cost of Rs.54,50,000/- as per the agreement dtd. 11.8.2020, the respondent no.1 has so far paid Rs.10,00,000/- to the respondent no.2. Having failed to complete the project and unable to give possession of the flat to the respondent no.1, the respondent no.2-promoter is undoubtedly liable to pay interest to the respondent no.1, who does not exclusively intend to withdraw from the project, on the payments received from her, for every month of delay, till the handing over of the possession, in accordance with the proviso to section 18 (1) (b) of the RERA Act, at the rate prescribed in Rule 16 of the ORERA Rules, 2017 i.e. SBI highest Marginal Cost of Lending Rate plus two per cent.
In normal circumstance, on adjudicating a complaint involving grievance of an allottee with regard to the promoter’s failure to complete and deliver possession of his/her allotted apartment flat as per the terms of the sale agreement, the Regulatory Authority on proof of such failure would have passed a simple order directing the promoter to deliver possession of the flat to the allottee together with interest at the aforesaid prescribed rate for every month of delay on the amount received by him in respect of the flat till the delivery of its possession. However, in the present case the project having been mortgaged by the respondent no.2-promoter to the appellant-bank and it having failed to repay the loan, the mortgagee i.e the appellant-bank has taken over the possession of the project land and has also taken step for its auction sale by advertisement in the daily news paper. So, it is for this reason, the learned Regulatory Authority in the impugned order dated 10.01.2024 has placed the appellant-bank as promoter in the place of respondent no.2 to discharge all the responsibilities of the promoter to complete the project and to secure the interest of the respondent no.1 and other allottees including the directions in the para-15 (i) & (iv) of the impugned order. The learned Regulatory Authority in the impugned order has held that, by virtue of the order of the DRT, Cuttack, the appellant-bank has taken possession of the mortgaged property and as a secure creditor is to realise the loan amount by putting the property into auction, and hence the appellant Bank has become the promoter of the project. The appellant-bank has challenged this finding of the learned Regulatory Authority on the ground that, it being the secured creditor is within its right to enforce its security under the provisions of the SARFAESI Act to recover its dues against the respondent no.2-promoter and taking possession of the secured asset is one of the provisions of law to which the appellant is entitled. The appellant-bank has therefore claimed that, it has not become the promoter of the project in place of respondent no.2.
In order to ascertain what has been the legal effect of the mortgage transaction dtd. 8.2.2014 between the respondent no.2 and the appellant, the case of Union Bank of India versus Rajasthan Real Estate Regulatory Authority and Others decided on 14.12.2021, is relevant. The Division Bench of the Hon’ble High Court of Rajasthan in this case have discussed Section 13 of the SARFAESI Act, 2002 in detail and held as follows:-
“33. In terms of the SARFAESI Act and particularly sec. 13, once a borrower is unable to repay the debt and the asset is classified as non-performing asset, it is open for the secured creditor to enforce the rights without intervention of the court. After issuance of notice under sec. 13 (2) and disposing of objections of the borrower in terms of Section 13 (3A), a secured creditor could proceed to take steps as envisaged in sub-section (4). These measures which a secured creditor can take include taking possession of the secured asset including right to transfer by way of lease, assignment or sale for realising the secured asset, to take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset........”
35.Clauses (a), (b) and (c) of sub-section (4) of Section 13 vest power in the secured creditor to take all steps as the borrower himself could take in relation to the secured asset. Clause (d) goes a step further and enables the bank to recover its dues directly from a debtor or the borrower who has acquired any of the secured assets. For all purposes thus the secured creditor steps in the shoes of the borrower in relation to the secured asset. This is thus a case of assignment of rights of the borrower in the secured creditor by operation of law. In other words the moment the bank takes recourse to any of the measures under sub-section (4) of Section 13, it triggers statutory assignment of right of the borrower in the secured creditor. Till this stage arises the bank or financial institutions in whose favour secured interest may have been created may not be in isolation in absence of the borrower be amenable to the jurisdiction of RERA. However the moment the bank or the financial institution takes recourse to any of the measures available in sub-section (4) of Section 13 of the SARFAESI Act, RERA authority would have jurisdiction to entertain the complaint filed by an aggrieved person.”
The above mentioned observation of the Hon’ble High Court of Rajasthan finds approval from the order dated 14.02.2022 of the Hon’ble Supreme Court of India in the Petition for Special Leave to Appeal (Civil) Nos.1861-1871 of 2022 filed by the Union Bank of India. The appellant-bank after taking recourse to Section 13(4) of the SARFAESI Act, more particularly having taken possession of the mortgaged project land, has certainly stepped into the shoes of the respondent no.2-promoter, who is the borrower, in relation to the secured asset. So, the contention of the appellant-bank that the learned Regulatory Authority has erred in directing it to act as the promoter in place of respondent no.2 ignoring the provisions of the SARFAESI Act, 2002, is not acceptable.
9) As already mentioned above, the project in question being still not a completed one is definitely under the fold of the RERA Act. The respondent no.1 has filed the complaint case seeking redressal of her grievance under the RERA Act relating to the flat allotted to her on the project land, whereas the appellant-bank has claimed its right as a secured creditor under section 13 of the SARFAESI Act over the project land as a whole. It is the categorical plea of the appellant-bank in the complaint case that in view of section 35 of the SARFAESI Act, 2002, the Act will override the provisions of the RERA Act, 2016. In this regard, in their order dated 14.12.2021 the Hon’ble High Court of Rajasthan in the case of Union Bank of India Vrs. Rajasthan Real Estate Regulatory Authority and others (Supra) have referred to the settled law in the decision of Hon’ble Supreme Court of India in the case of Bikram Chatterji and Others versus Union of India and Others reported in (2019) 19 SCC-161 that, in the event of conflict between the RERA Act and the SARFAESI Act, the provisions contained in the RERA Act would prevail. However, in dealing with the Hon’ble Supreme Court’s decision in the Bikram Chaterji case (Supra), the Hon’ble High Court of Rajasthan has put a rider by observing that, RERA would not apply in relation to the transaction between the borrower and the banks and financial institutions in cases where security interest has been created by mortgaging the property prior to the introduction of the Act unless and until it is found that the creation of such mortgage or such transaction is fraudulent or collusive.
10) As regards the claim of the appellant-Bank that no fraud or collusion is involved in the mortgage transaction dated 8.2.2014, it is to be noted that the respondent no.2-promoter has executed the sale agreement relating to the flat in question of the project with the respondent no.1-allottee on 6.9.2020, which is much after the mortgage transaction. The RERA Act having been operative since 1.5.2017, the security interest created in favour of the appellant-bank through the mortgage transaction on 8.2.2014 is certainly prior to the introduction of the Act. When the appellant-Bank has sanctioned the loan of Rs.460 lakhs to the respondent no.2-promoter on an equitable mortgage of the project land on a date which is much prior to the date of the sale agreement between the respondent no.2-promoter and the respondent no.1-allottee, the transaction between the respondent no.1-allottee and the respondent no.2-promoter cannot be said to be in the knowledge of the appellant-bank. It is however to be noted that, earlier relating to the present mortgage transaction between the promoter and the Bank this tribunal in disposing of OREAT Appeal No.49 of 2023, OREAT Appeal No.148 of 2023 and OREAT Appeal No.26 of 2024 vide orders dtd. 30.6.2025 and 17.11.2025 respectively has already held the transaction of mortgage between the promoter and the bank involving the present project land to be a collusive one and hence under the applicability of the RERA Act.
11) In view of the discussions made in the preceding paragraphs Nos.7 to 10, we come to the conclusion that, the appellant-Bank after taking recourse to Section 13(4) of the SARFAESI Act i.e. obtaining physical possession of the project land and publishing advertisement in the newspaper for its auction sale is certainly an assignee of the respondent no.2-promoter and has stepped into its shoes. The RERA Act which prevails over the SAFAESI Act will apply to the mortgage transaction dated 08.02.2014 in spite of the fact that security interest has been created by mortgaging the project land prior to the introduction of the RERA Act as it has been already held by this Tribunal in OREAT Appeal No.49 of 2023, OREAT Appeal No.148 of 2023 and OREAT Appeal No.26 of 2024 that creating such mortgage is the result of collusion between the appellant-Bank and the respondent no.2-promoter. It is further held that ORERA has the jurisdiction to entertain the present complaint case by the respondent no.1 against the appellant-Bank as a secured creditor as the appellant-Bank has taken recourse to the provision contained in section 13(4)
of the SARFAESI Act and the respondent no.1 has initiated the proceeding to protect her rights. We are also of the opinion that, practical issues are likely to arise if the appellant-bank who has stepped into the shoes of the respondent no.2-promtoer, is entrusted the remaining construction work of the project without any expertise, experience and resources in this regard, when it is unwilling to take the said responsibility.
Accordingly, we think it appropriate in the facts and circumstances of the case to issue the following directions :
i) The direction of the learned Regulatory Authority in para-15 (ii) and (iv) of the impugned order are hereby confirmed.
ii) As regards the directions of the learned Regulatory Authority in para-15 (i), (iii) and (v) of the impugned order are concerned, the same are modified as follows :
(i) Like its obligation under Section 8 of the RERA Act in the event of lapse of the registration or on revocation of the registration under the Act, the ORERA may consult the appropriate Government to carry out the remaining development works of the project by the competent authority or by the association of allottees (if such association exists), or in any other manner as may be determined by the ORERA which may include appointment of an external developer through public tender with consent of the respondent no.1 and other allottees in consultation with the appellant-bank. The respondent no.1 shall pay the balance amount, if any, to the developer determined by the ORERA at the time of registration of the sale deed relating to her flat. The respondent no.2 shall transfer the amount of Rs.10,00,000/- taken from the respondent no.1 to the developer, who shall take steps for registration of the project with the ORERA U/sec. 3 of the Act.
(ii) The appellant-bank shall be without any entitlement to resort to section 13 (4) of the SARFAESI Act in respect of the interests of the respondent no.1 and other investing allotees in the project.
(c) The appellant-bank being the collusive creditor and the assignee of respondent no.2-promoter shall extend all co-operation to the ORERA in enforcing the above direction in (b) (i) of this para for completing the project and securing possession of the flats to the respondent no.1 and other allottees.
With the above mentioned directions and modifications, the appeal is disposed of on contest against the respondents no.1,2 and 3 and ex parte against the respondents no.4 to 6.
Send an authentic copy of this order alongwith the record of the complaint case to the learned Regulatory Authority for information and necessary action. Also send a copy of this order each to the appellant, the respondent no.1 and the respondent no.2.
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