rera-vs-sarfaesi_supreme-court-confirms-homebuyers-can-use-rera-to-stop-bank-recovery-actions-overriding-sarfaesi
In the significant judgment in Union Bank of India v. Rajasthan Real Estate Regulatory Authority & Ors (SLP ( C) Nos. - 1861-1871/2022, Date : 14.02.2022) by the Supreme Court of India explored the balance between the Real Estate (Regulation and Development) Act (RERA) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) with respect to cases involving banks as secured creditors and homebuyers seeking protection for their investments.
Union Bank of India initiated recovery proceedings under the SARFAESI Act against a real estate developer who had defaulted on loans. At the same time, homebuyers who had already invested in the project approached the Rajasthan Real Estate Regulatory Authority (RERA), seeking protection of their interests. The moot issue was whether RERA could exercise jurisdiction over complaints involving banks when those banks were exercising their rights as secured creditors under SARFAESI.
The Supreme Court held in favor of homebuyers, holding that RERA has the authority to intervene and protect the interest of home buyers, even when a bank is enforcing its security interest under SARFAESI. The ruling emphasized that when the rights of homebuyers are in conflict with the rights of secured creditors like banks, RERA provisions must take precedence over SARFAESI.
However, the Court also clarified the scope of RERA’s jurisdiction. It ruled that RERA could not interfere with transactions between banks and borrowers if the security interest was created before RERA came into force unless there is clear evidence of fraud or collusion between the bank and the developer.Â
The Supreme Court's decision in this case marked a significant step in protecting the rights of homebuyers in India’s real estate sector and clarifying the issue of RERA vs SARFAESI .Â
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