REPEAL OF MOFA REASONS WHY PEOPLE ARE AGAINST IT

Author

Ajit R. Powar

Updated on 29/06/2023

The newspapers and social media in the last week of September 2022 went viral with the news of the Maharashtra government asking the Cooperatives department (cooperative commissioner) whether the Maharashtra Ownership Flats ( Regulation of the promotion of construction, sale, management, and transfer)Act, 1963 (MOFA) should be repealed and inquiring about the number of housing societies that have completed deemed conveyance process or pending till date, which has left a lot of stakeholders like purchasers of flats, Housing societies and federations representing the housing societies within Maharashtra disturbed raising serious objections to repeal of MOFA.

The hue and cry over the government’s move purportedly to repeal MOFA, is mainly because of certain provisions of MOFA, which establish important rights of Flat purchasers or their associations, there are no corresponding provisions in The Real Estate (Regulation and Development) Act, 2016 (RERA ) and repeal of MOFA would amount to curtailing these rights. Let us discuss some of these provisions. Section 12A of MOFA is in respect of essential services wherein under sub-section 1 the promoter or any person in charge of management or connected with the management of a block or building of flats, whether as a member of a managing committee, director, secretary or otherwise is responsible for the maintenance thereof cannot, without just and sufficient cause curtail or reduce any essential supply or service and prescribes the procedure to be followed in case of contravention of the sub section.
Another such provision is section 4A in respect of non-registered agreement for sale, entered into before or after the commencement of MOFA 1983, which remains unregistered for any reason. The section approves such an agreement as evidence of a contract in a suit for specific performance or as evidence of part performance of a contract for the purpose of section 53A of TP Act 1982 or as evidence of any collateral transaction not required to be effected by a registered instrument.

Apart from the above two provisions discussed, people are miffed with any move towards repeal of MOFA particularly because of sections 11(3) & 13. Section 11(3) provides for unilateral deemed conveyance in case the promoter fails to transfer the title to the cooperative society/association of flat purchasers under section 11(1). RERA does not have a corresponding provision to protect the interest of persons who have purchased /taken flats or association of flat purchasers or co-operative society in case the promoter does not convey the title. The provision for deemed conveyance becomes even more important when we talk of redevelopment of old projects where the occupants are left with no title to the property which would be the basic document required before proceeding for any redevelopment plan. Thus the apprehension that in case MOFA is repealed there will be no effective remedy available as RERA lacks in respect of a similar provision.

Besides under section 13 of MOFA the rights of persons who have taken flats, co-operative housing societies or the association of buyers under the Act are protected as the section provides for penal consequences of imprisonment or fine or both if the promoters fail to comply with sections 3,4,5,10 & 11 and for other offenses as laid down under the section and the prosecution for all the offenses under the section lies with the judicial magistrate of the first class as per section 13A. Sections 3,4,5,10 & 11 lay down important rights and obligations of promoters and buyers of flats and Cooperative societies or any association representing them.
• Section 3 enumerates the general liabilities of promoters,

• section 4 makes it mandatory for the promoter to enter into a written agreement which should be registered before the promoter accepts any advance which should not be more than 20% of the sale price and the section also lists down the contents to be covered in any such agreement,

• section 5 creates an obligation on the promoter to maintain a separate account of sums taken as advance or deposit and to be trustee of the amount so collected / deposited and disburse them for the purpose for which they are given which is one of the important sections preventing the promoters from diverting funds to other projects and noncompliance of the provisions will amount to criminal breach of trust under section 13(2) which is cognizable & non bailable offence.

• Further section 10 requires the promoter to take steps for the formation of cooperative society or company while the proviso to section 10 entitles persons who have taken flats to directly make an application for the formation of a society in case the promoter fails to take an initiative under section 10(1)

• and finally we have section 11 which requires the promoter to convey title to the society or a company or to an association of flat takers within the period stipulated therein while sub-section 3 provides for deemed conveyance in case the promoter fails to convey the title as per section 10(1).

In short, the stakeholders can initiate criminal proceedings for noncompliance of sections 3,4,5,10 & 11 by the promoter. However, the corresponding provisions under the RERA do not provide a similar alternative in case the promoter does not comply with the provisions but merely prescribe civil remedies with penalties that do not deter the errant promoters which is one more reason the stakeholder are against repeal of MOFA as the Act fills in the blanks left by RERA.

The reasons discussed above being the primary reasons for opposition to repeal of MOFA one also has to accept that the provisions of both the acts overlap and since RERA is the central enactment the provisions of MOFA would be open for challenge more frequently as time passes on the issue of repugnancy. However, when it comes to repugnancy the reason that the act has stood the tests of repugnancy is because there is no direct conflict between two as RERA itself upholds the applicability of local laws in many of its provisions when the act uses the words “as provided under the local laws” at the same time under section 88 of the Act, the provisions of RERA are made applicable in addition to and not in derogation of, the provision of any other law ( MOFA being one) for the time being in force. Besides, MOFA fills in the blanks where RERA falls short more particularly in the form of proviso to section 10(1) and section 11(3) and section 13 as discussed above. However, the state can certainly endeavour to bring about uniformity in the laws in respect of real estate development and for uniformity in the regulations governing the sale and purchase between promoters and buyers in the real estate sector by bringing some major amendments to MOFA as well as the Maharashtra Rules of RERA.

We, therefore, come to the main part of the discussion whether repealing MOFA can resolve the problem or major amendments including culling out those provisions of the act which may be directly in conflict with RERA would resolve the issue. While amending provisions that may be directly in conflict with RERA or which are vulnerable to be challenged for being repugnant to the central Act may be an arduous task for the government and may not be possible in the case of all provisions, the repeal of MOFA would imply curtailing certain rights of the persons who have taken flats, or the rights of their association (stakeholders). Accordingly, in case the state government goes ahead with the repeal of MOFA then it would be expected from the government to protect the rights of the stakeholder as prescribed under the Act, either by way of a new legislation incorporating these provisions discussed above or incorporating these provisions in Maharashtra Rules of RERA by amending the Rules as permissible under the constitution, as these provisions cannot be dispensed with.

While summing up in the present scenario, though RERA is more exhaustive in nature and covers more or less the entire field in case of regulations for the real estate sector, in Maharashtra it cannot effectively replace MOFA unless it provides some of the remedies similar to what MOFA provides for, and till then MOFA should not be dispensed with taking into consideration the interest of the buyers of flats or their associations.

Finally, in case MOFA is repealed and replaced with new legislation or with amendments to the provisions of Maharashtra Rules of RERA one thing which cannot be overlooked is the fact that RERA lags behind in the case of execution of the Order of the Regulatory Authority or Adjudicating Officer. Therefore, the legislators should certainly ponder upon the possibility of incorporating provisions similar to sections 72(1),(2) & (3) of the Consumer Protection Act. 2019, which imposes punishment up to three years or fine or both, on anyone who does not comply with the orders of the District Commission, State Commission or National Commission while empowering the District Commission, State Commission or National commission with the powers of Judicial Magistrate of the First Class.

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The contents of this article are the views and opinions of the author on the subject matter. The readers are expected to take expert advice based on the facts and circumstances of their case.