K-RERA's 'Delay Fee' Circular Is An Exaction Without Authority, Lacks Statutory Power: Karnataka High Court Quashes It - 2025-09-24

Karnataka High Court Strikes Down K-RERA Circular on 'Delay Fee,' Cites Lack of Statutory Power

BENGALURU: In a significant ruling providing relief to numerous real estate developers, the Karnataka High Court has quashed a 2020 circular issued by the Karnataka Real Estate Regulatory Authority (K-RERA) that imposed a "delay fee" for the late submission of quarterly and annual compliance reports.

Justice M. Nagaprasanna, hearing a large batch of writ petitions filed by developers, declared the circular dated September 3, 2020, as "arbitrary, illegal and void," holding that the RERA Act does not grant the Authority the power to levy such a fee through an executive order. The court termed the fee an "exaction without authority" and a "levy without law."

The Core Dispute: K-RERA's 'Delay Fee'

The case centered around a circular issued by K-RERA which mandated a flat delay fee for promoters who failed to upload their quarterly project updates and annual audit statements on time. The fee was set at ₹10,000 for a delay of up to one month and ₹20,000 for every subsequent month of delay, regardless of the project's size, value, or the reasons for the delay.

Over 70 real estate developers, partnership firms, and individual promoters challenged this circular, arguing that it was ultra vires —beyond the legal power—of the Real Estate (Regulation and Development) Act, 2016 (RERA Act).

Petitioners' Arguments: An Unlawful Exaction

The petitioners, represented by a battery of senior advocates, argued that:

- The RERA Act and its corresponding Rules do not contain any provision empowering the Authority to impose a "delay fee."

- The Act prescribes specific penalties for non-compliance under Sections 61 and 63, which can only be imposed after due process and are capped at 5% of the project's estimated cost.

- The power granted to K-RERA under Section 37 to issue directions for discharging its functions cannot be expanded to include the imposition of a financial levy.

- The flat-fee structure was arbitrary and violated Article 14 of the Constitution, as it treated small and large projects, and minor and major defaulters, identically.

K-RERA's Defence: A Necessary Regulatory Tool

The Karnataka RERA contended that the circular was a necessary measure to enforce compliance with the mandatory reporting obligations under Section 11 of the Act. It argued that the power to issue such directions was inherent in its regulatory functions under Section 37 of the Act to ensure transparency for homebuyers.

Court's Analysis: No Impost Without Authority of Law

Justice Nagaprasanna undertook a detailed analysis of the RERA Act, the Constitution, and established legal principles on taxation and fees. The court's reasoning was anchored in Article 265 of the Constitution, which mandates that "no tax shall be levied or collected except by authority of law."

The judgment observed that any compulsory financial exaction, whether a tax or a fee, must be explicitly sanctioned by a legislative act. The court held:

"It is a settled principle of constitutional law... that no impost in the nature of tax or fee may be exacted from a citizen, save by the authority of law; and law in this context must mean not, the executive fiat of the Authority nor the circular of a department, but an enactment of the legislature..."

The court found that the power to levy a fee could not be inferred or implied. Examining the RERA Act, the bench concluded that while it casts duties on promoters and provides for penalties, it "nowhere contemplates the imposition of 'delay fee' in the event of non-compliance."

"The reliance placed on Sections 11, 34 and 37 of the Act by the respondents is wholly misplaced," the court noted. "Section 37 enables directions to be issued, but the power to issue directions cannot, by any stretch of judicial imagination, metamorphose into the Authority to impose compulsory pecuniary burden."

The court concluded that the circular was an "impost without lineage under the statute" and an "exercise of power unsupported by authority."

Final Verdict and Implications

In its final order, the High Court allowed all the writ petitions and quashed the impugned circular in its entirety. The court directed that all consequential benefits flowing from the quashing of the circular be extended to the petitioners.

Furthermore, in one specific case (W.P.No.4770 of 2024), the court directed K-RERA to consider the developer's application for withdrawal of their project registration without insisting on the payment of the now-illegal delay fee.

This judgment clarifies the limits of a regulatory body's power, reinforcing the principle that financial levies cannot be imposed through executive orders or circulars without express statutory backing. It provides significant relief to developers burdened by hefty fees, especially those whose projects were stalled due to factors like the COVID-19 pandemic.