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REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016.
The Real Estate (Regulation and Development) Act, 2016 is an Act of the Parliament of India which seeks to protect home-buyers as well as help boost investments in the real estate industry. The Act also establishes the Real Estate Regulatory Authority in each state for the regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution. The RERA Bill was introduced by the UPA Government in 2013. In December 2015, the Union Cabinet of India had approved 20 major amendments to the bill based on the recommendations of a Rajya Sabha Committee that examined the bill. The Bill was passed by the Rajya Sabha on 10th^ March 2016 and then by Lok Sabha on 15 March 2016. The Act finally came into force on 1st^ May 2016 with 59 of 92 sections notified. The Act however led to several Builders/ Promoters facing challenges and difficulties in their operation and Thus, saw the Act being challenged on the grounds of Constitutionality in the case of Neelkamal Realtors Suburban Pvt. Ltd. and Anr. vs. Union of India and Ors., Writ Petition No. 2737 of 2017).
NEELKAMAL REALTORS SUBURBAN PVT. LTD. AND ORS. VS. UNION OF INDIA AND
ORS.
BACKGROUND/ FACTS
A group of Writ Petitions were filed before the Bombay High Court by various Builders/ Promoters challenging the validity of the Real Estate (Regulation and Development) Act, 2016 (RERA). These Writ Petitions were filed by them as they were facing extreme difficulties and challenges under the RERA. They felt compelled by the mandate to having their ongoing/ pre- existing projects registered under RERA, which were retrospective application of the provisions. Further the RERA allowed only one year extension for the registration in case the Builders/ Promoters failed to complete the project on time. These provisions led to the Builders/ Promoters facing extreme challenges, these challenges were further amplified considering the fact that most of the large scale projects were worth thousands of crores. Therefore, there were a batch of Writ Petitions filed by several Builders/ Promoters and they were all clubbed and hear together.
ISSUES
Several provisions of the Act were challenged for their constitutionality. The sections below mentioned were challenged as being violative of Articles – 14, 19(1)(g), 20 and 300A of the Constitution. These sections had been challenged, however arguments were mainly advanced for the validity of section 3(1), Section 3(2)(a), explanation to Section 3, Section 4(2)(l)(C), Section 4(2)(l)(D), Section 5(3), first proviso to Section 6, Sections 7, 8, 18, 38, 40, 46(1)(b), 59, 60, 61, 63, 64. Further they were challenged on three grounds – Retrospective/Retro-active application of provisions, Unreasonable restrictions and Mandatory requirements.
ARGUMENTS/ ANALYSIS
PETITIONERS
Several contentions were made by the petitioners challenging other sections of RERA. However, the most prominent ones have been below. Firstly , section 3 of the RERA which provided for registration of projects, including current and ongoing projects was argued by the petitioner as to having retrospective application, hence arbitrary. Further the interest payable for delay under section 18 of RERA were understood as penal and having a retrospective nature, thus could not be validated. It was also contested by
[(2010) 11 SCC 1] which stated that ‘ whenever an authority would discharge adjudicatory functions, presence of a judicial member is mandatory’. RESPONDENTS Firstly, the Respondents contended that the legislature has the competence to rewrite contracts executed by private parties. Bringing ongoing projects under the ambit of RERA under section
- Further, it was contended that section 3 does not violate the parties’ rights or make RERA retrospectively applicable as it does not take away or impair the rights of the parties. Secondly, it was contended by the Respondents that section 6 of RERA cannot be said to be discriminatory provision as the same would defeat the purpose of RERA of timely delivery of possession. Thirdly, it was contended by the Respondents that section 8 of RERA, merely creates an agency in the project and the agent shall not replace the Builder/Promoter but only aim at completing the project on their behalf and return the possession of the same upon its completion. Fourthly, it was contended by the Respondents section 18 of RERA for payment of interest for delay, is only in case the buyer wishes to continue, and reimbursement in case where they buyer wishes to withdraw, are aimed at compensating the allottees who have invested large sums in the undertaking and not to penalize the promoter.
JUDGEMENT
The Hon’ble High Court initially had appointed an amicus curiae to address the matter at hand with a wider perspective at the law. Firstly, on the question of retrospective applicability of several provision of RERA (Section 3, 18, etc), the Court stated that it shouldn’t be confused as retrospective application as the developmental projects hadn’t yet received its certificate of competition, there existed an ongoing transaction between the Allottee and Builder/Promoter had been included to ensure and foster the interest of the consumers and regulate the real estate market. Secondly, The court on the validity of section 4 of RERA states that there existed a fair reason of protecting the rights of the Builder/Promoter’s power. Further, the court stated that in addition to controlling the misuse of power, also ensured fair use of funds and provided relaxation to genuine promoters.
Thirdly, the court on the validity of section 6 of RERA stated that in case the Authority was satisfied that there are exceptional and compelling circumstances due to which the Builder/Promoter could not complete the project in spite of the extension granted under the said section, then the Authority would be entitled to continue registration of the project on a case to case basis. Fourthly, the court with respect to section 46(1)(b) of RERA favoured the arguments of the petitioner. In doing so the court stated that the section was bad in law to the extent of allowing a non-judicial, Indian Legal Services member to hold a judicial position in the tribunal and struck down the same. Fifthly, the Court stated the section 59 to 64 of RERA clarified that the mentioned provisions were enacted in larger public interest and did not retrospectively penalize the act done by a person prior to registration under the Act. The court while upholding the provisions of RERA stated that “ RERA is not a law relating to only regulating concerns of the promoters but its object is to develop the real estate sector, particularly the incomplete projects, across the country. The problems are enormous and it’s time to take a step forward to fulfill the dream of the ‘Father of the Nation- To wipe out tears from every eye.”
CONCLUSION/ ANALYSIS
The RERA was a big breakthrough in the field of real estate and caused great wreck for the parties involved as promoters in this field. Hence, this case was of utmost importance as it challenged several provisions of the Act. However, the Court upheld the provisions and stated that they were not contrary to Article 14, 19(1)(g) and 20 of the Constitution of India. Therefore the judgement is a major relief for home-buyers, protecting their interests under RERA but also a respite for the Builders/Promoters as it has enlarged RERA authority’s powers to grant an extension of time in exceptional cases. Since, RERA remains in its natal stage, it is required to wait and test the implementation of the provisions in the real fact situation emerging from case to case. Irrespective, this judgment has certainly brought clarity on many aspects with a view to correctly implement the provisions of RERA.
