Can You Drag Your Bank to RERA? Karnataka High Court says yes.

The Battle Lines: RERA vs. SARFAESI

At the heart of this legal dispute is a conflict between two powerful statutes. The Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted to protect homebuyers from errant developers. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) was designed to protect banks from defaulting borrowers giving them the power to seize and sell mortgaged properties without court intervention.

When a developer defaults, banks typically invoke Section 13(4) of SARFAESI to take possession of the mortgaged property which often happens to be the very land on which homebuyers have booked their flats. The homebuyers, caught in the crossfire, would run to RERA. The banks would invoke SARFAESI. And the courts had to decide: which law wins?

Jaipur Answers First: The Rajasthan High Court’s Landmark Ruling

The Rajasthan High Court at Jaipur was the first to deliver a comprehensive answer. In Union Bank of India v. Rajasthan Real Estate Regulatory Authority, decided on 14 December 2021, a Division Bench examined a series of writ petitions filed by Union Bank of India challenging the jurisdiction of the Rajasthan RERA to entertain complaints filed by homebuyers against the bank.

The High Court upheld RERA’s jurisdiction in unambiguous terms. Its conclusions, summarised in Paragraph 36 of the judgment, established the following:

First, in the event of a conflict between RERA and SARFAESI, the provisions of RERA prevail. RERA is a later, special legislation enacted with the specific object of protecting homebuyers, and it contains a non-obstante clause under Section 89 that overrides other laws.

Second, RERA would not apply to transactions between a borrower (developer) and a bank where the security interest the mortgage was created before RERA came into force, unless that mortgage was fraudulent or collusive.

Lastly and most importantly,if a bank invokes Section 13(4) of SARFAESI against a mortgaged property, homebuyers who have booked flats in that property can file a complaint before RERA. The RERA authority has the jurisdiction to entertain such a complaint.

The Court recognised a fundamental equity: a homebuyer who has paid crores for an apartment cannot be left helpless simply because the developer has borrowed against the same land. RERA’s mandate is to protect such buyers, and that mandate does not vanish the moment a bank enters the picture.

New Delhi Confirms: The Supreme Court Speaks

The bank appealed to the Supreme Court. The matter came before a bench comprising Justice M.R. Shah and Justice B.V. Nagaratna. On 14 February 2022, the Supreme Court dismissed the bank’s Special Leave Petition and expressed its complete agreement with the view taken by the Rajasthan High Court.

The Supreme Court’s order in Union Bank of India v. Rajasthan Real Estate Regulatory Authority & Ors., reported as 2022 LiveLaw (SC) 171, specifically confirmed Paragraph 36(v) of the High Court’s judgment that RERA has jurisdiction to entertain a homebuyer’s complaint against a bank acting as a secured creditor under Section 13(4) of SARFAESI subject to one clarification: this applies specifically when proceedings before RERA are initiated by homebuyers to protect their rights.

With the Supreme Court’s seal of approval, the legal position became settled: RERA is not powerless against banks. When banks act as secured creditors in ways that affect the rights of homebuyers in a RERA-registered project, the regulator can and must intervene.

Bengaluru Reinforces: Justice Suraj Govindaraj’s Order

The Karnataka High Court has added another dimension to this jurisprudence. In Kunal Patel v. Union of India & Ors., Writ Petition No. 36780 of 2025, decided on 8 December 2025, Justice Suraj Govindaraj was faced with a petition by homebuyers of a project developed by Ozone Urbana Infra Developers Pvt. Ltd., who had taken loans from Indiabulls Housing Finance Limited (now known as Sammaan Capital Limited). The builder had stalled; the lender was recovering EMIs despite no possession being delivered.

The petitioners approached the High Court seeking relief including a direction to the lender to cease recovery of EMIs until possession was handed over. Justice Govindaraj made a significant observation at Paragraph 6 of the order:

“Needless to say, RERA would have the jurisdiction in respect of all banks, financial/commercial institutions, NBFCs or the like who had advanced any amounts to the Apartment purchaser or the developer, which is the subject matter of present writ petition.”

The Court went on to hold that the final relief sought directing possession and stopping EMI recovery could only be granted by RERA, not the High Court, since these matters fell within RERA’s exclusive jurisdiction. The petition was accordingly disposed of, with liberty to the petitioner to approach RERA for the relief sought.

Justice Govindaraj’s order is remarkable for its breadth. The Court did not limit RERA’s jurisdiction to SARFAESI situations alone. It stated categorically that RERA would have jurisdiction over all banks, financial institutions, and NBFCs that have advanced amounts either to the homebuyer or to the developer in respect of a RERA project. The scope is wider than one might initially expect.

So, When Can You Approach RERA Against Your Bank?

Reading the three decisions together, the following legal positions emerge:

1. When the bank invokes SARFAESI against the project property: If a bank exercises its rights under Section 13(4) of SARFAESI to take possession of or sell the mortgaged property the very property where your flat is located you can file a complaint before RERA to protect your rights as a homebuyer.

2. When the bank has disbursed loans without following RBI/NHB guidelines: Banks and Housing Finance Companies are required by the Reserve Bank of India and the National Housing Bank to disburse home loans in stages linked to the progress of construction. When a lender disburses the entire loan amount to a developer before construction is complete, it burdens homebuyers with EMIs on an incomplete project. Courts have consistently directed homebuyers to seek relief before RERA in such situations.

3. When RERA and SARFAESI conflict: Where the rights of homebuyers under RERA are in direct conflict with a bank’s rights under SARFAESI, RERA prevails. The Supreme Court has made this clear.

4. Where the mortgage was created before RERA: If the developer mortgaged the project land to the bank before RERA came into force, RERA may not automatically apply to that transaction unless the mortgage itself was fraudulent or collusive. This is an important carve-out, and homebuyers must examine the facts carefully before filing.

The Bigger Picture

These judgments represent a decisive rejection of the argument that banks occupy a zone of legal immunity when they transact with real estate developers. They do not. When their actions or inactions harm homebuyers who have invested their savings and taken on debt to secure a home, RERA is empowered to step in.

The law recognises a simple truth: the homebuyer’s vulnerability does not diminish because a bank is on the other side. If anything, the institutional power of a large lender makes the homebuyer’s need for regulatory protection even more acute.

The Rajasthan High Court said it. The Supreme Court confirmed it. The Karnataka High Court reinforced it.

If your bank is recovering EMIs on a stalled project or worse, threatening to seize the very property you paid for RERA may well be your remedy.

Key Judgments Referenced

1. Union Bank of India v. Rajasthan Real Estate Regulatory Authority & Ors. | D.B. Civil Writ Petition No. 13688/2021 | High Court of Rajasthan at Jaipur | 14 December 2021