Statutory Pre-deposit for RERA Appeals Cannot Be Diluted by Substituting Contractual or Market Interest Rates

The appellants (allottees) entered into agreements in 2013 to purchase apartments in the "Hoysala EVM" project, with a promised completion date of October 2016.

Upon the promoter's failure to complete the project, the Kerala Real Estate Regulatory Authority (RERA) directed the promoter to pay simple interest at 16.85% per annum (SBI's Benchmark Prime Lending Rate (BMPLR) + 2%) as per Rule 18 of the Kerala RERA Rules, 2018.

The promoter appealed to the Appellate Tribunal, which insisted on the mandatory pre-deposit of the entire interest amount under the proviso to Section 43(5) of the RERA Act, 2016.

The promoter challenged this via writ petitions, and a learned Single Judge passed an interim order permitting the promoter to calculate the pre-deposit using the Marginal Cost of Funds based Lending Rate (MCLR) instead of the statutory BMPLR, effectively reducing the deposit amount.

The allottees filed these writ appeals challenging that interim substitution.

Section 43(5) of the Real Estate (Regulation and Development) Act, 2016, which mandates a 100% pre-deposit of interest/compensation ordered by RERA before a promoter's appeal can be "entertained".

Rule 18 of the Kerala RERA Rules, 2018, which prescribes the interest rate as SBI’s BMPLR plus 2%.

The Supreme Court precedent in Newtech Promoters and Developers Pvt. Ltd. v. State of UP, which upheld the constitutionality of the pre-deposit condition as a "class in itself" to protect home buyers.

The Full Bench decision in K.S. Das v. State of Kerala, permitting appeals against intermediate orders that cause substantial prejudice or touch upon vital rights.

The court reasoned that Rule 18 is a piece of delegated legislation and its choice of BMPLR+2% was a conscious policy decision by the State to provide a "deterrent rate" against defaults, despite the existence of the MCLR regime in 2018.

By substituting MCLR for BMPLR via an interim order, the Single Judge effectively amended a statutory rule through judicial intervention, violating the doctrine of separation of powers.

The court noted that the difference in liability (nearly Rs. 20 lakhs per flat in this case) significantly undermined the legislative intent to protect allottees.

The court found the order appealable under the K.S. Das doctrine because it was an "intermediate order" that conferred jurisdiction on the Appellate Tribunal where none existed under the statute, thereby causing final and substantial prejudice to the allottees' statutory safeguards.

The Court allowed the appeals, vacated the interim orders of the Single Judge, granted the promoter two weeks to deposit the shortfall, and held that if the promoter fails to deposit the amount as per the statutory rate, the Appellate Tribunal is entitled to dismiss the appeals for non-compliance.