FULLY CONSTRUCTED BUILDING WITHOUT COMMON AREAS CONSTRUCTION & COMPLETION CERTIFICATE | REGISTRATION UNDER RERA REQUIRED

The Real Estate (Regulation and Development) Act, 2016 (RERA) has brought about a major transformation in the real estate sector of India, by regulating the entire process of development of real estate projects and making it more transparent for protection of the interest of consumers in the real estate sector.

Under RERA, for all projects which were ongoing on the date of commencement of RERA and for which completion certificate had not been issued, the promoters of such projects were required to apply for registration of such projects within 3 months from the date of commencement of RERA. However, The Maharashtra Real Estate Regulatory Authority (MahaRera) in one of its Order dated 21 September 2017 (Complaint No CC006000000000615) has held that building which is fully constructed and occupied and which has not received occupancy certificate (OC) does not require registration under RERA.

MahaRera contrastingly in its recent Order dated 5 February 2018 (Complaint No CC006000000000136) has held that even a building which has been fully constructed without providing common areas and agreed amenities but is occupied by all flat purchasers without OC as on the date of commencement of RERA requires registration under RERA. MahaRera brings out a subtle difference in the two orders which is briefly captured in this update below.

Facts of the Case:

• Mr Parag Pratap Mantri (Complainant) was residing in a flat in E-Wing of the project of Green Space Developers’ (Respondent) in Pune since 2013. The Complainant made a complaint to MahaRera against the Respondent, alleging that the Respondent had contravened Section 3 of RERA by not registering the project as the completion certificate for E-Wing had not been issued to the Respondent till date and further the construction of common areas and amenities was also not complete.

• The Respondent contended that (i) the Complainant had been residing in his flat in the said project since 2013; (ii) the construction of the building was complete prior to the enactment of RERA; and (iii) he had applied for the completion certificate on 16 August 2013 itself but it was still awaited. The construction of common areas and amenities was under way along with construction of a new H-Wing in the same complex which was under construction and had been registered. The Respondent therefore contended that MahaRera had no jurisdiction to entertain this complaint.

Decision:

• MahaRera held that E-Wing of the said project was an ongoing project and attracts Section 3 (Prior registration of real estate project with Real Estate Regulatory Authority) of RERA which stipulates that all ongoing projects on the date of commencement of RERA for which completion certificate had not been issued, require to be registered under RERA within 3 months from the date of commencement of RERA.

• In the present case, since the completion certificate was not issued AND the construction of common areas and provision of agreed amenities were still pending, the conditions for registration of the project under Section 3 were applicable and therefore E-Wing required registration.

• The Respondent also contended that on the date of commencement of the RERA, all the units in the E-Wing were booked and agreed to be sold and nothing remained to be sold. MahaRera observed that the Respondent had merely entered into agreements for sale for the units of E-Wing and had not executed sale deeds as yet. As a result, such agreements, though registered, did not pass any title to the buyer. Therefore, the Respondent was required to execute the conveyance deed in favour of the allottees/society by executing registered instrument under RERA.

• MahaRera further held that since the complainant was an ``aggrieved party`` under RERA the complaint was maintainable.

• On account of the above facts, MahaRera passed an order directing the Respondent to register E-Wing along with the other buildings in the project which were being/have been developed by the Respondent namely F, P, N-Wings with MahaRera within 30 days of the date of passing the order and further imposed a penalty of Rs 50,000/- on the Respondent for failure to register E-Wing with MahaRera.

MHCO COMMENT:

The aforesaid order passed by MahaRera is significant since it demonstrates that even though a building may be fully constructed, but any part of it including the common areas are yet to be constructed, it amounts to an ongoing project and therefore completion certificate for the same needs to be obtained by the promoter and the project needs to be registered under RERA. However, the previous order dated 21 September 2017 passed by MahaRera provides that a fully constructed and occupied building, though it has not received occupancy certificate, need not be registered under RERA.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance

BOARD MEETINGS THROUGH VIDEO CONFERENCING

The National Company Law Appellate Tribunal (NCLAT) in its order in Achintya Kumar Barua vs Ranjit Borthakur, 2018 recently clarified the ambivalence regarding the binding nature of the option of a Director on a Company to participate in a Board meeting through video conferencing or other audio visual means. This update briefly summarises the position of law after the judgement.

BRIEF FACTS:

1. Respondent No. 1, a director of W.G. Resorts Assam Private Limited (Company), had moved an application before the National Company Law Tribunal (NCLT) seeking the facility of attending Board meetings of the Company through video conferencing.
2. NCLT allowed the application filed by Respondent No. 1 directing that a video conferencing facility should be made available pursuant to Section 173(2) of the Companies Act, 2013 (New Act).
3. Appellants Nos. 1 and 3 are other Directors of the Company and the Appellants had filed this appeal on behalf of the Company.

CONTENTIONS:

1. It was the Appellants’ contention that if a director participates in the meetings through video conferencing, it would not be possible for the Chairman to ensure confidentiality with regards to the contents of the meeting as there could be some more people around who can observe the said Board meeting
2. It was also contended by the Appellants that the Secretarial Standards on Meetings of the Board of Directors had considered this aspect therein which prescribes that the option of video conferencing or other audio visual facilities should be resorted to only “if the Company provides such facility” and accordingly it did not seem to be mandatory to all the companies.
3. They also contended that the use of the word “may” in the above Section 173(2) of the New Act makes it clear that the provision is directory and not mandatory.

DECISION:

1. NCLAT denied the Appellants contentions on confidentiality and stated that it is the responsibility of the director to ensure the privacy of the said Board meeting.
2. NCLAT finds that these provisions have been introduced under the New Act and following these provisions would be in the interest of any company and its directors.
3. NCLT had come to the conclusion that the provisions of Section 173 (2) of the New Act are mandatory and companies cannot be permitted to deviate therefrom.
4. NCLAT found no reason to interfere with the NCLT decision and dismissed the appeal reiterating that provisions of Section 173 (2) of the New Act are mandatory.

NCLAT also brought attention to matters that specifically cannot be permitted to be conducted by Board meetings through video conferencing or other audio visual facilities, which are as follows:

• approval of annual financial statement;

• approval of the Board’s report;

• approval of the prospectus;

• audit Committee Meetings for consideration of accounts; and

• approval of matters relating to amalgamation, merger, demerger, acquisition and takeover.

In light of the aforesaid, companies have no choice but to provide their directors with video conferencing or other audio visual facilities for participation in a Board meeting in case they request for participation through such modes.

Also according to the Companies (Amendment) Act, 2017, a proviso, although not notified yet, has been added to Section 173 (2) of the New Act whereby even if the quorum is met through physical presence of directors, any other director can avail of his option to participate through video conferencing or other audio visual means and the company will have to arrange for the same. 

MHCO COMMENT:

The judgement has come in order to facilitate more participation of directors and resolve the issues arising out of wrong recordings of Board meetings.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance

SUPREME COURT PROVIDES DIRECTION | RESOLVES DUMPING OF CONSTRUCTION DEBRIS ISSUE IN MUMBAI

 Redevelopment projects in Mumbai were stalled following the directions of the Bombay High Court (BHC) pursuant to its order dated 26 February 2016. BHC had passed its order after noting that more than half of the solid waste generated in the city of Bombay were dumped contrary to the Municipal Solid Waste Management Rules. Since, there was no alternative to the dumping grounds in Deonar and Mulund, the BHC had asked the Municipal Corporation of Greater Mumbai (BMC) not to issue any fresh permissions for new projects. The Supreme Court in its recent order has lifted this ban imposed by the BHC for a period of six months subject to certain strict conditions.

This update briefly summarizes the relevant conditions laid down by the Supreme Court which are as follows:

1. BMC shall permit a developer to carry on construction on their sites by imposing the condition in the IOD or any such similar permission, that the construction debris generated from this particular site, shall be transported and deposited at specific sites inspected and approved by the BMC.
2. All construction waste would be deposited at any of the 10 sites identified by BMC while the small generators of construction waste will have the debris collected by municipal agencies, which will then deposit the same at the identified landfill sites or use it for construction of roads etc.
3. The landfill site shall be governed by the Construction and Demolition Waste Management Rules, 2016 (New Rules). In particular, the landfill sites shall be the ``Sanitary Landfill Sites`` as defined in the Solid Waste Management Rules.
4. BMC shall not permit any construction whether in respect of pre-existing IOD or fresh IOD unless it has first located a landfill site and has obtained NOC /consent of the landowner that such debris may be deposited at that particular site. BMC shall incorporate in the IOD the condition that the construction is being permitted only if such construction debris is so deposited.
5. In so far as the small generators of construction waste are concerned they shall dispose construction waste as per Debris-On Call Scheme i.e. authorized agencies shall collect the debris which shall be unloaded at designated disposal sites. However, large generators of construction waste shall dispose the construction waste at designated sites as mentioned at the time of grant of IOD.
6. In the event for any reason whatsoever the consent given by the disposal site owner/authority is revoked and/or in the event the time limit during which the disposal site was available has expired, the relevant construction activity will be stopped after issuance of a Show Cause Notice and till such time the Waste Management Plan/Debris Management Plan has been appropriately amended to provide a new disposal site for dumping of C & D Waste which is approved by BMC.
7. The applicant for development permissions must give a Bank Guarantee to the tune of Rs 5 lakhs to Rs 50 lakhs depending upon the size of the project and mode of development, which bank guarantee shall remain in force solely for the purpose of ensuring compliance of the Waste Management Plan/Debris Management Plan approved by BMC from time to time, till the grant/issuance of the Occupation Certificate.
8. The Monitoring Committee shall be entitled to inspect the record of BMC pertaining to the grant of IODs and shall also be entitled to visit and inspect the landfill sites. The Monitoring Committee shall be entitled to bring to the notice of BMC any breach in the permission or in the conditions of IOD. Further BMC shall pass a speaking order on such objections within a period of one month.
9. In view of the above, BMC shall submit a detailed report to the SC after the expiry of 6 months.
10. Supreme Court has made it clear that the present arrangement will operate only for 6 months. 
    
    
    MHCO COMMENT:
    These Supreme Courts directions are expected to give a boost to the redevelopment activity in the Mumbai suburbs which had been paralyzed for the last 2 years. This order is anticipated to give relief to approximately 700 projects, which have been stuck due to the BHC Order that had banned all construction activity in February 2016.
    
    The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance