The Madhya Pradesh High Court has clarified that recovery proceedings initiated under the Madhya Pradesh Land Revenue Code cannot proceed without a judicial determination of interest owed under a RERA order. This ruling reinforces procedural fairness in real estate disputes and prevents arbitrary enforcement against developers who are willing to pay but contest the quantum of interest.
Background & Facts
The Dispute
The petitioner, Vatsalya Builders and Developers Private Limited, was directed by the Real Estate Regulatory Authority (RERA) to pay Rs. 9,72,000 as principal along with interest to a homebuyer. The petitioner acknowledged liability for the principal but contested the interest amount calculated by RERA, arguing that it was not properly substantiated or audited.
Procedural History
- 28 February 2023: RERA passed an order directing payment of principal and interest.
- Post-order: The Naib Tehsildar initiated recovery proceedings under Section 147(1)(b) of the Madhya Pradesh Land Revenue Code, 1959, threatening auction of the petitioner’s land.
- Petition filed: The petitioner approached the High Court under Article 226, seeking stay on recovery proceedings pending determination of the correct interest amount.
Relief Sought
The petitioner sought a stay on land auction and requested that the interest amount be determined by the State Government’s designated authority (Respondent No. 2), rather than being enforced as per RERA’s unilateral calculation.
The Legal Issue
The central question was whether recovery proceedings under Section 147(1)(b) of the Madhya Pradesh Land Revenue Code can be initiated and enforced without a prior judicial or quasi-judicial determination of the interest component when the principal amount is undisputed but the interest is contested.
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that RERA’s order, while binding, did not constitute a final adjudication of interest under civil or revenue law. He relied on the principle of natural justice and the need for a fair hearing before deprivation of property. He emphasized that the petitioner had offered to deposit the principal and was ready to pay any interest determined through a proper process.
For the Respondent/State
The State contended that RERA’s order was final and enforceable under Section 43 of RERA, and that the Naib Tehsildar was merely executing a valid order. The respondent argued that delay in payment justified the recovery process and that the petitioner’s willingness to pay was insufficient without actual deposit of the full amount as stated in the RERA order.
The Court's Analysis
The Court examined the nature of RERA orders and the procedural safeguards under the Land Revenue Code. It held that while RERA orders are enforceable as decrees, they do not automatically validate the quantum of interest without due process when contested. The Court distinguished between enforceability of a decree and the method of determining its precise components.
"The petitioner has not disputed the principal liability. The only point of contention is the quantum of interest. To permit recovery proceedings to proceed on an unverified figure would violate the principle of audi alteram partem."
The Court noted that Section 147 empowers revenue authorities to recover amounts, but does not authorize them to adjudicate disputes over interest calculation. That function, the Court held, lies with the authority that originally determined the liability - in this case, RERA - or a designated neutral authority. The Court emphasized that property rights under Article 300A cannot be extinguished without a fair opportunity to contest the amount.
The Verdict
The petitioner succeeded. The Court held that recovery proceedings cannot proceed until the interest amount is judicially determined by a neutral authority, and directed the State to accept a provisional deposit of Rs. 17 lakh while the interest calculation is finalized within 30 days.
What This Means For Similar Cases
Interest Cannot Be Enforced Without Independent Verification
- Practitioners must now challenge recovery notices under Land Revenue Code if interest is contested, even if principal is admitted.
- RERA orders are not self-executing on interest; a separate determination process is mandatory.
- Developers may deposit a reasonable provisional amount to stay enforcement while contesting interest.
Procedural Compliance Overrides Administrative Convenience
- Revenue authorities cannot act as adjudicators of complex financial disputes arising under RERA.
- Courts will intervene where recovery mechanisms bypass due process, even if the underlying order is valid.
- Petitioners should file writs early to prevent irreversible actions like land auctions.
Deposit as Stay Mechanism Is Now Recognized
- Courts may accept partial or provisional deposits as a condition for staying recovery proceedings.
- This creates a new procedural pathway: deposit + contest → neutral determination → final payment.
- Practitioners should draft petitions to include a proposed deposit amount and request appointment of a neutral accountant or authority for interest calculation.
