The Karnataka High Court last week set aside a 2020 circular of the Karnataka Real Estate Regulatory Authority (KRERA) that had the effect of imposing a “delay fee” when there were belated submission of quarterly updates and annual audit statements by promoters.
A single-judge bench of Justice M Nagaprasanna held on September 19 that the fee was “without distinction to the scale of the project, the stage of development, or the peculiar circumstances surrounding it”.
Several petitions had been filed against the circular. The bench noted that having taken the submissions into account, the issue was whether the action was within the ambit of the parent law, the Real Estate (Regulation and Development) Act 2016 and the relevant rules.
Having perused the sections of the Act cited by the state in defence of the circular, the court observed that none of the provisions enabled the KRERA to impose the fee in question. It explained, “None of the provisions quoted therein empower the Authority to impose a fee. A perusal at the Circular does not indicate any source of power for imposition of a fee, and does not have the method of calculation of fee as well. Therefore, the Circular apart from it being issued at its whim, does not trace its power to the Act.”
The bench added that it was clear from past legal precedent that no tax or fee could be levied but by clear authority of a statute, explaining that it must either be mentioned in a law or delegated within the boundaries of the said law.
The bench stated, “Tested on the anvil of these principles, the impugned Circular, whereby a so-called delay fee has been sought to be imposed on promoters and developers stands exposed as utterly failing of statutory parentage. It finds no sustenance in the Act; it locates no foundation in the Rules…”
The high court thus quashed the circular.