Karnataka High Court Quashes RERA Circular on Delay Fees for Quarterly Updates

Karnataka RERA issued Circular No. RERA/Finance-Section/83/2020-21 dated 3 September 2020, introducing delay filing fees for promoters who failed to submit their Quarterly Updates within the prescribed timelines.

The objective was to encourage timely disclosures and compliance with Section 11 of the RERA Act.

However, several promoters challenged the circular before the Karnataka High Court, questioning whether the Authority possessed the statutory power to introduce such fees.

The petitioners argued that the RERA Act already provides mechanisms for addressing non-compliance, including penalties imposed in accordance with the law. An additional mandatory delay fee, introduced through a circular, was therefore beyond the Authority’s powers.

The matter was heard by the Hon’ble Mr. Justice M. Nagaprasanna, who delivered the judgment on 19 September 2025.

The petitioners challenged the circular on several grounds.

1. Uniform fees irrespective of project size

The circular imposed delay fees without adequately distinguishing between projects of different sizes and circumstances.

A project comprising ten apartments and another comprising a thousand apartments could be subjected to the same prescribed fee structure, raising questions of fairness and proportionality.

2. Existing penalty provisions under the RERA Act

The petitioners submitted that the Act already contains provisions for imposing penalties for specified contraventions.

Section 61, for instance, provides for penalties that may extend up to five per cent of the estimated cost of the real estate project for applicable violations.

The petitioners contended that a separate delay fee could not be introduced independently of these statutory provisions.

3. Scope of Section 37

Section 37 empowers the Regulatory Authority to issue directions necessary for discharging its functions under the Act.

However, the petitioners argued that this power does not extend to creating new financial obligations that are not authorised by the Act or the Rules and Regulations framed under it.

4. Retrospective application

Although the circular was issued on 3 September 2020, the delay fee was applied retrospectively from the third quarter of FY 2018–19.

The petitioners questioned this retrospective application in the absence of specific legislative authorisation.

5. Absence of statutory authority

The central contention was that a compulsory financial levy must be supported by law.

An administrative circular, irrespective of its regulatory objective, cannot independently create a monetary liability without the necessary statutory authority.

The Court examined the statutory framework, constitutional principles and judicial precedents concerning the imposition of fees and other compulsory payments.

Absence of legislative authority

The Court found that the RERA Act and the applicable Rules and Regulations did not provide the necessary authority for introducing the disputed delay fee through an administrative circular.

Exercise of powers beyond the statute

The judgment considered whether the Authority had exceeded its statutory powers by creating a financial obligation through executive directions.

The Court reiterated the principle that administrative powers must operate within the boundaries established by legislation.

Constitutional principles and proportionality

The uniform application of delay fees, without sufficient consideration of differences between projects and promoters, was also examined against the principle of equality under Article 14 of the Constitution.

Requirement of statutory sanction

The judgment reaffirmed that compulsory financial levies must have a clear legal foundation. Administrative convenience or regulatory intent cannot substitute for legislative authority.

The essential question was whether Karnataka RERA could impose the disputed delay fee without an express statutory basis.

The judgment examined several decisions concerning the authority to levy taxes and fees, including:

These authorities formed part of the broader judicial discussion on statutory powers, fiscal levies and constitutional safeguards.

The Karnataka High Court allowed the writ petitions challenging the circular. The principal outcomes discussed in the judgment are summarised below.

1. Circular dated 3 September 2020 quashed

The Court struck down Karnataka RERA Circular No. RERA/Finance-Section/83/2020-21, which prescribed delay filing fees for non-submission or delayed submission of Quarterly Updates.

2. Consequential benefits to petitioners

The petitioners were held entitled to consequential benefits arising from the judgment. Depending on the facts of individual cases, promoters may seek appropriate relief concerning previously imposed fee demands or related administrative actions.

3. Future statutory levies not prohibited

The judgment does not prevent the introduction of lawful fees or penalties in the future. However, such measures must be supported by the relevant statutory provisions and comply with the applicable legal requirements.

The distinction is important: the judgment addresses the validity of the particular delay fee circular, not the underlying obligation to submit Quarterly Updates.

The judgment has practical implications for promoters who have received delay fee demands or encountered difficulties with project compliance because of the disputed circular.

Review outstanding delay fee demands

Promoters may review their project records to identify any outstanding amounts imposed under the quashed circular. Where applicable, they may approach Karnataka RERA seeking appropriate rectification, supported by the High Court judgment.

Seek relief for amounts already paid

Promoters who previously paid delay fees under the disputed circular may examine whether they are entitled to seek refunds, adjustments or other consequential relief. The appropriate course will depend on the circumstances of the individual project and the applicable legal position.

Address pending Quarterly Updates

Where historical Quarterly Updates remain pending, promoters may approach the Authority for the necessary portal access or administrative assistance to regularise their records.

Review affected applications

Promoters may also examine whether outstanding fee demands have affected registration-related applications, extensions, modifications or other regulatory processes. Where relevant, they may seek consequential relief from the Authority.

Continue timely RERA compliance

The judgment should not be interpreted as dispensing with the requirement to submit Quarterly Updates. Promoters remain responsible for complying with the disclosure and reporting obligations prescribed under the RERA Act and the applicable Rules and Regulations.

The Karnataka High Court’s judgment establishes an important distinction between the regulatory powers of an Authority and its power to impose financial liabilities. While RERA Authorities are empowered to monitor compliance and take action against violations, any compulsory financial levy must be supported by the governing legislation.

For promoters, the judgment provides an opportunity to examine delay fee demands arising from the quashed circular and seek appropriate relief wherever applicable. At the same time, timely submission of Quarterly Updates remains essential. Maintaining accurate project disclosures and meeting statutory timelines can help promoters avoid regulatory disputes, financial exposure and delays in project administration.

A proactive approach to RERA compliance remains the most effective way to minimise these risks.