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The Karnataka High Court recently struck down a 2020 circular issued by the Karnataka Real Estate Regulatory Authority (K-RERA) that sought to retrospectively impose a delay fee on real estate developers for late submission of quarterly updates and annual audit statements. The court highlighted that such fees require legislative backing and cannot be imposed solely through administrative orders. The judgment reflects the importance of statutory authorization in financial regulations and provides relief to developers who faced penalties without clear legal sanction.
The Karnataka High Court has cancelled a 2020 circular from K-RERA that sought to impose retrospective delay fees on developers for not submitting quarterly updates and annual audit statements on time. The court observed that such fees cannot be imposed without clear legislative authorization. The court ruled that K-RERA did not have legislative authority to impose such charges, emphasizing that only laws enacted by the legislature can authorize financial obligations. Advertisement
The circular, issued on September 3, 2020, required builders, developers, promoters, and individuals in the development business to submit quarterly updates and annual audit statements under Section 7 of the Real Estate (Regulation and Development) Act, 2016. Non-compliance was linked to a delay fee. Petitioners challenged this, arguing that the Act did not empower K-RERA to impose fees, and that delays were often caused by circumstances beyond their control, including the COVID-19 pandemic.
The government's advocate argued that the Act mandates promoters to provide quarterly updates on project progress on the K-RERA portal and that failure to submit these could justify fee collection.
Justice M Nagaprasanna clarified that no fee or tax can be levied on citizens without statutory authority, referencing Article 265 of the Constitution. He explained that a law must clearly grant the power to impose such a fee and that administrative circulars or executive orders alone are insufficient. The court concluded that the circular lacked legislative sanction and could not be enforced retroactively.
The judgment also stressed that any authority to impose financial obligations must be directly derived from legislation or explicitly delegated by it. Applying this principle, the court found the 2020 circular imposing the delay fee on developers and promoters to be legally invalid.
This ruling aligns with earlier cases where retrospective financial charges without statutory support were struck down. It ensures that developers are not penalized for delays caused by uncontrollable circumstances and underlines the necessity of legal clarity before imposing monetary obligations.
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