RERA authority has the jurisdiction to entertain a complaint against the bank (as a secured creditor of the builder) if the bank takes recourse to any of the provisions contained in Section 13(4) of the SARFAESI Act. In such a case where the bank has taken recourse to Section 13(4) of SARFAESI Act, the homebuyers can initiate the proceedings before the RERA authority to protect their rights. This has been clarified by the Hon’ble Supreme Court in Union Bank of India vs. Rajasthan Real Estate Regulatory Authority & Ors., 2022 LiveLaw (SC) 171.
However, the provisions of RERA Act would not apply in relation to the transaction between the borrower and the banks / financial institutions in cases where security interest has been created by mortgaging the property prior to the introduction of the RERA Act (some provisions of RERA Act came into force on May 01, 2016 and the remaining provisions came into force on May 01, 2017) unless and until it is found that the creation of such mortgage or such transaction is fraudulent or collusive, as observed by the Hon’ble Supreme Court in Bikram Chatterji & Ors. vs Union of India & Ors., (2019) 19 SCC 161.
Section 13(4) of the SARFAESI Act, inter alia, provides that in case of a default by the borrower and his subsequent failure to discharge his liability, the secured creditor (bank in most cases) can take possession of the secured asset of the borrower (builder in such cases) and/or can take over the management of the business of the borrower. This is, therefore, a case of assignment of the rights of the borrower (the builder) in the favour of the secured creditor (the bank) by the operation of law. Therefore, the moment the secured creditor takes recourse under Section 13(4) of SARFAESI Act, RERA authority would have the jurisdiction to entertain complaints against the secured creditor (the bank).
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