Case Background
The petitioner is a private infrastructure company based in Patna. It entered into a registered development agreement on 25.08.2011 with two landowners (respondent nos. 4 and 5) for construction of a residential project on their land.
On the same date, a supplementary agreement was executed. Under these agreements, the developer agreed to construct a multi-storeyed residential building and to give specified flats, with parking, to the landowners in lieu of their land. Clause 7 fixed three years for completion, plus a grace period of six months from sanction of the plan or handing over of vacant possession. Clause 7.2 provided that if the developer failed to complete in time, it would pay compensation at Rs. 8,000 per flat per month to the landowners.
The project was later registered under the Real Estate (Regulation and Development) Act, 2016 (RERA). The developer could not complete the project within the agreed time frame. Respondent nos. 4 and 5 then filed Complaint Case Nos. 81 and 82 of 2018 before the Bihar Real Estate Regulatory Authority (RERA) under Section 31 of the Act, alleging breach of the development agreement.
The developer opposed the complaints, arguing that the landowners had not alleged any violation of provisions of the RERA Act or Rules, and therefore RERA lacked jurisdiction. Despite this, by order dated 09.08.2019, RERA directed the developer to hand over possession of three specified flats with parking to each landowner, and also directed that the landowners were not required to pay anything under the supplementary agreement dated 31.01.2011.
The developer’s appeals (Appeal Case Nos. 08 and 09 of 2019) before the Real Estate Appellate Tribunal, Bihar were dismissed. A Miscellaneous Appeal against that order is still pending before the Patna High Court.
Meanwhile, the landowners filed compensation proceedings before the Adjudicating Officer, RERA, in Case Nos. RERA/AO/233/2019 and RERA/AO/234/2019 under Section 31 read with Section 71 of the Act and Rule 37 of the Bihar Rules, 2017. On 09.03.2021, the Adjudicating Officer directed the developer to pay litigation cost, compensation and interest to each landowner within 60 days, failing which they could initiate execution proceedings.
Aggrieved, the developer filed Appeal Case Nos. 28 and 29 of 2021 before the Bihar Real Estate Appellate Tribunal. On 02.07.2021, the Tribunal ordered the developer to deposit 30% of the awarded amount under Section 43(5) RERA as a pre-condition to hearing the appeals. The developer complied and deposited 30% for each landowner.
At the instance of the landowners, the Tribunal reviewed this order. On 10.08.2021, relying on decisions of the Madras High Court in T. Chitty Babu v. Union of India and the Punjab and Haryana High Court in Janta Land Promoters Pvt. Ltd. v. Union of India, it modified its earlier order and directed the developer to deposit the total amount of compensation, interest and litigation cost as awarded by the Adjudicating Officer before the appeal could be heard.
The developer then approached the Patna High Court under Article 226, seeking quashing of the Tribunal’s order dated 10.08.2021 and a direction that its appeals be heard on merits on deposit of only 30% of the awarded amount.
What the Court Examined and Decided
The Patna High Court, through Hon’ble Mr. Justice Sandeep Kumar, examined two main questions:
(i) Whether disputes between a landowner and a developer under such a development agreement fall within the jurisdiction of RERA and the Adjudicating Officer; and
(ii) Whether, in an appeal by a promoter against an order awarding compensation and interest to an allottee, the pre-deposit under Section 43(5) RERA is 30% or the entire awarded amount.
The developer argued that landowners are not “allottees” under Section 2(d) of the RERA Act and therefore cannot invoke RERA jurisdiction. It submitted that it is a promoter under Section 2(zk), whereas respondents 4 and 5, being landowners, fall only within the definition of “promoter” (because they “cause to be constructed”) and not “allottee”.
On this basis, the developer contended that any disputes under a development agreement between landowner and promoter fall outside RERA and lie only before the civil court. It relied on earlier decisions of RERA and the Appellate Tribunal in Case No. 63 of 2018 and Appeal No. 16 of 2021, where such disputes had been held to be outside RERA’s jurisdiction.
The developer further argued that the supplementary agreement dated 25.08.2011 was unregistered and hence invalid under Section 17 of the Registration Act, 1908, making RERA’s reliance on it unlawful. It also contended that, since the agreement preceded the RERA Act (2011 vs 2016), any proceedings under RERA were unsustainable. Additionally, Clause 17 of the development agreement contained an arbitration clause, and the developer claimed that disputes should have gone to arbitration, not to RERA.
On the pre-deposit question, the developer challenged the Tribunal’s 10.08.2021 order directing 100% deposit. It said the Tribunal had initially correctly fixed 30% under Section 43(5) and later enhanced it to 100% without reason. It also pointed out that the High Court judgments relied upon by the Tribunal (T. Chitty Babu and Janta Land Promoters) had been stayed by the Supreme Court.
The landowners opposed the writ petition. They pointed to the clauses of the development agreement confirming that in exchange for land the developer would give flats of super built-up area equal to 2.25 times of the land area, with the exact share of the landowners specified in a supplementary agreement. Clause 21 provided for proportionate distribution of additional area if the building exceeded G+5 floors. Clause 7 and 7.2 fixed the completion period and monthly per-flat compensation for delay.
They argued that they were “allottees” under RERA because they were receiving flats in lieu of land. They relied heavily on the Bihar Real Estate Regulatory Authority (General) Regulations, 2021, notified on 05.08.2021, in particular Regulation 6(3): where there is a development agreement between promoter and landowner, the landowner will be treated as an allottee under the Act (unless the agreement states otherwise) because he is getting apartments in lieu of land, and the project promoter is responsible for RERA obligations.
The landowners also relied on the Supreme Court’s decision in M/s Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. (C.A. Nos. 6745-6749 of 2021), which clarified the jurisdiction of the Authority and Adjudicating Officer and the nature of compensation under Sections 12, 14, 18 and 19. They further cited Bunga Daniel Babu v. M/s Sri Vasudeva Construction & Ors., (2016) 8 SCC 429, where the Supreme Court held that landowners in similar arrangements are “consumers” under the Consumer Protection Act.
On the pre-deposit, they submitted that Section 43(5) provides for two categories: (a) cases of penalty, where at least 30% of the penalty (or higher as determined by the Tribunal) must be deposited; and (b) cases where the total amount to be paid to the allottee, including interest and compensation, is in issue, in which case the “total amount” must be deposited. Since the Adjudicating Officer’s order awarded interest and compensation, not penalty, they argued that the second category applied and 100% pre-deposit was mandatory.
After considering submissions from both sides and assistance from an amicus curiae, the Patna High Court first analysed Section 31 RERA. It noted that the section allows “any aggrieved person” to file a complaint with the Authority or the Adjudicating Officer for any violation or contravention of the provisions of the Act or rules and regulations against any promoter, allottee or real estate agent. The phrase “any aggrieved person” was considered to have wide import, capable of including landowners.
The Court referred to the preamble to the RERA Act, which states that the law is meant to protect the interests of “consumers” in the real estate sector and to provide for speedy dispute redressal. It then cited paragraph 21 of Bunga Daniel Babu, where the Supreme Court had held that in a similar development arrangement, the landowner was a “consumer”, as he was entitled to a specified constructed area, had no control over construction and was not a partner or co-adventurer.
The Patna High Court examined the development and supplementary agreements in the present case. It held that the supplementary agreement, though unregistered, was in continuation of the registered development agreement and executed on the same date, and therefore was not compulsorily registerable under Section 17 of the Registration Act.
The Court highlighted that the supplementary agreement clearly stipulated that the developer would give three flats to the landowners. In the definition of “allottee” in Section 2(d), the words “or otherwise transferred by the promoter” were said to be wide enough to cover a transaction where a developer agrees to give flats to landowners in lieu of land. Therefore, the transaction fell within the definition of allottee, and the landowners could invoke RERA jurisdiction.
The Court also examined Clause 8.2 of the development agreement, which expressly stated that the agreement would not constitute a partnership of any sort between the parties. There was no revenue-sharing arrangement and the landowners were not involved in day-to-day construction. These features, along with the Supreme Court’s approach in Bunga Daniel Babu, reinforced the conclusion that the landowners were in the position of allottees or consumers, not co-promoters.
Turning to Regulation 6(3) of the Bihar RERA General Regulations, 2021, the Court noted that it expressly treats landowners in development agreements as allottees unless the contract says otherwise. The Court then considered whether this regulation applied retrospectively to an agreement of 2011. Relying on State of Bihar & Ors. v. Ramesh Prasad Verma, (2017) 5 SCC 665, it held that clarificatory, declaratory or explanatory instruments made to clear doubts or supply an omission generally operate retrospectively.
The Court found the 2021 Regulations to be clarificatory and explanatory, intended to clear doubts in the RERA framework as to the status of landowners. Hence, it held that the Regulations had retrospective effect. Once that was accepted, respondents 4 and 5 had to be treated as allottees under RERA, and their complaints before RERA and the Adjudicating Officer were maintainable.
On the pre-deposit requirement, the Court reproduced the text of Section 43(5) and its proviso. It agreed with the landowners that the proviso contemplates two distinct situations: one involving penalties under Sections 59 to 69 of the Act, where at least 30% of the penalty or a higher percentage fixed by the Tribunal must be deposited, and another involving the total amount to be paid to the allottee, including interest and compensation, where the “total amount” is to be deposited.
The Court noted that in the present case the Adjudicating Officer had awarded compensation and interest, not penalty. Such orders fall in the second category. It relied on Newtech Promoters to note that Section 71 confines the Adjudicating Officer to adjudging compensation under Sections 12, 14, 18 and 19, and that such amounts are to be paid as compensation and interest.
Therefore, the Court held that the Tribunal was justified in directing the developer to deposit the entire amount of compensation, interest and litigation cost as a pre-condition for hearing the appeal. The earlier order requiring only 30% deposit could be modified, as the Tribunal had correctly applied the statutory scheme in its later order.
Having found that RERA had jurisdiction and that the full pre-deposit requirement was lawful, the Patna High Court declined to interfere with the Appellate Tribunal’s order dated 10.08.2021. The writ petition was dismissed. The Court remitted the matter back to the Bihar Real Estate Appellate Tribunal for consideration of the developer’s appeals on merits, provided the developer complied with the pre-deposit direction.
Why This Judgment Matters
This judgment is important for landowners and developers involved in joint development projects in Bihar. It makes clear that where a landowner is to receive flats in exchange for land, he or she will generally be treated as an “allottee” under RERA.
That means landowners can use the RERA mechanism to seek possession, interest and compensation if the builder delays or violates the agreement, instead of being forced to go only to the civil court or arbitration.
The ruling also clarifies that when a builder challenges an order of the Adjudicating Officer awarding compensation and interest, the builder must deposit the full amount before the Real Estate Appellate Tribunal will hear the appeal. Depositing only 30% is not enough in such compensation cases.
For homebuyers, landowners and small investors, this sends a strong message: RERA authorities and tribunals in Bihar have wide powers to protect “consumers” in real estate, and courts will insist that promoters first secure the awarded amounts before litigating further.
Legal Issues and Answers
- Issue: Can landowners who give land in exchange for flats under a development agreement approach RERA as “allottees” and “consumers”?
Answer: Yes. The Court held that such landowners fall within the definition of “allottee”, especially in light of Section 2(d), the development and supplementary agreements, the 2021 Bihar RERA Regulations (treated as retrospective), and the Supreme Court’s decision in Bunga Daniel Babu. Their complaints before RERA and the Adjudicating Officer were held maintainable. - Issue: In an appeal by a promoter against an order awarding compensation and interest under RERA, what amount must be deposited under Section 43(5) before the appeal is heard?
Answer: Where the Adjudicating Officer has awarded compensation and interest (and not penalty), the promoter must deposit the total (100%) amount to be paid to the allottee, including interest, compensation and litigation cost, before the Appellate Tribunal entertains the appeal. - Issue: Was the Bihar Real Estate Appellate Tribunal’s order dated 10.08.2021, directing full deposit, illegal or arbitrary?
Answer: No. The Patna High Court found no illegality. The Tribunal correctly applied Section 43(5) and the nature of the Adjudicating Officer’s award. Its direction to deposit the full amount as a pre-condition for hearing the appeals was upheld.
Cases Cited by the Court
- Bunga Daniel Babu v. M/s Sri Vasudeva Construction & Ors., (2016) 8 SCC 429.
- M/s Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. and Ors., C.A. Nos. 6745-6749 of 2021.
- State of Bihar and Ors. v. Ramesh Prasad Verma, (2017) 5 SCC 665.
- The Court also noted High Court judgments in T. Chitty Babu v. Union of India (Madras High Court, W.P. No. 29933 of 2019) and Janta Land Promoters Pvt. Ltd. v. Union of India (Punjab and Haryana High Court, CWP No. 8548 of 2020), but these were referred to in the Tribunal’s reasoning and were stated to be under stay by the Supreme Court.
Case Details
Case Number: Civil Writ Jurisdiction Case No. 15444 of 2021
Case Title: M/s Nesh India Infrastructure Pvt. Ltd. v. The State of Bihar & Ors.
Citation: 2024 (4) PLJR 191
Coram: Hon’ble Mr. Justice Sandeep Kumar
Date of Judgment: 28.08.2024
Advocates:
For the Petitioner (developer company): Mr. Abhinav Srivastava, Advocate; Mr. Raushan, Advocate.
For the State Respondents: Mr. Abbas Haider (SC-6); Mr. Wasi Mohammad, A.C. to S.C.-6.
For Respondent Nos. 4 and 5 (landowners): Mr. D.K. Sinha, Senior Advocate; Mr. Alexander Ashok, Advocate.
Nature of the Case: Civil writ petition challenging an order of the Bihar Real Estate Appellate Tribunal relating to pre-deposit under Section 43(5) of the Real Estate (Regulation and Development) Act, 2016, in appeals against a compensation order of the Adjudicating Officer, RERA.
Outcome: Writ application dismissed; order of Bihar Real Estate Appellate Tribunal dated 10.08.2021 upheld; matter remitted to the Tribunal to hear the appeals if the petitioner deposits the full amount of compensation, interest and litigation cost as directed.
Link to Judgment: Click here to view the full judgment on the Patna High Court website
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