Can’t take away flats from owners over developer’s loan default: Bengal real estate tribunal

Kolkata: West Bengal Real Estate Appellate Tribunal has stopped a bank from taking over apartments from nine customers over a loan default by the developer. The apartments, in a New Alipore project, are worth several crores and were already in the buyers' possession, when the bank threatened to take possession.
In stymieing the bank's attempts earlier this month, the tribunal upheld a ruling by West Bengal Real Estate Regulatory Authority (WBRERA), which had ruled in favour of the home-buyers. This ruling was challenged by Yes Bank.
The tribunal's decision — which prevents Yes Bank from taking possession of or auctioning the flats to recover their loan amount — could be a landmark judgment. It sets a precedent for protecting homebuyers' interests against banking institutions' recovery proceedings in real estate projects.
The case involved nine complainants, who purchased flats in the Ideal Exotica project in New Alipore from Ideal Real Estates Pvt Ltd between 2021 and 2023. The property values ranged from Rs 1.95 crore to Rs 3.14 crore. The controversy arose when Yes Bank, which extended a loan of Rs 320 crore to the developer, tried to take possession of these flats through the Debts Recovery Tribunal under the SARFAESI Act, which allows banks and financial institutions to recover loans by auctioning borrowers' assets.
The flat owners, who were already in possession of their apartments and were registered members of the flat owners' association after having got the flats mutated in KMC, had approached WBRERA, seeking protection of their rights when Yes Bank obtained an order from the Debts Recovery Tribunal, Kolkata. The bank published a notice of taking possession of the nine flats by appointing a receiver so that it could sell them by auction to recover the loan advanced to the promoter.
WBRERA initially restrained the bank from taking possession and conducting auction sales of the properties and then ruled in favour of the home buyers, directing the bank to stop all proceedings, including notice for auction. It observed that by virtue of deed of mortgage executed between the promoter (Ideal Real Estates) and the lending institution (Yes Bank), the bank became a promoter as an assignee, and that all the obligations of a promoter were cast upon the bank.
When the bank approached the tribunal to challenge the WBRERA ruling, the tribunal cited provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA), Transfer of Property Act, and the Insolvency and Bankruptcy Code, to rule that RERA provisions would override those of SARFAESI Act. The tribunal also highlighted that the developer had violated Section 15 of RERA by mortgaging unsold flats without obtaining prior permission from the regulatory authority and two-thirds of project allottees.