Image source - https://bit.ly/30x5BH6

This article is authored by Akash Krishnan, a law student from ICFAI Law School Hyderabad. It discusses in detail the recent Supreme Court judgment wherein the Constitutional validity of the West Bengal Housing Industry Regulation Act, 2017 (WB-HIRA) was challenged.

Introduction

The case in question is Forum for People’s Collective Efforts (FPCE) vs. the State of West Bengal (2021). In this case, the Constitutional validity of the West Bengal Housing Industry Regulation Act, 2017 (WB-HIRA) was challenged on the ground of repugnancy with the Union law on the same subject matter, i.e., the Real Estate Regulation Act, 2016 (RERA). The Court after examining the provisions of RERA and WB-HIRA came to the conclusion that the provisions were clearly overlapping each other and the State of West Bengal cannot be allowed to run a parallel regime when a Union law exists on the same subject matter.

Brief facts

Legislative history

Prior to the enactment of the Real Estate Regulation Act, 2016 (RERA), several laws were enacted by the State legislatures to regulate the real estate transactions occurring within their states. One of these acts was the West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993 (West Bengal Act) which received Presidential assent and was published in the Official Gazette in March 1994. Some other prominent examples of state-enacted real estate laws include the Maharashtra Housing (Regulation and Development) Act, 2012 (Maharashtra Act) and the Kerala Real Estate (Regulation and Development) Act, 2015 (Kerala Act).

However, after the enactment of RERA, the Kerala State Legislative Assembly repealed the Kerala Act and the Maharashtra Act was specifically repealed under the provisions of RERA. On the other hand, the West Bengal Act was repealed under the provisions of the newly enacted WB-HIRA that received the assent of the Governor in October 2017.

RERA – the legislative process

The real estate sector plays an important role in meeting the growing demand for housing and infrastructure facilities in the country. Even though the industry has grown and evolved considerably in recent years, there are no strict laws regulating it. This results in the lack of professionalism, standardisation and adequate consumer protection thereby constraining the healthy and orderly growth of the industry. With these issues in mind, the Central Government decided to enact RERA for regulating the real estate market and ensuring proper and orderly growth of the real estate sector.

The statement of objects and reasons of the RERA Bill stated that the Bill will not only ensure greater accountability towards consumers but also reduce incidents of fraud and delays in the real estate market. The aim is to create a balance between the interests of the consumers and the promoters and impose mutual obligations on both parties and ensure transparency in real estate transactions between promoters and allottees and establish a special dispute resolution mechanism for dealing with matters of real estate. 

Salient features of RERA

A real estate project is defined as the development of buildings or apartments, development of land into plots or apartments with the intention of selling the said plots or apartments post-development. This also includes the development of common areas, easement structures and appurtenances etc.

The real estate project should be mandatorily registered with the Real Estate Regulatory Authority before any advertisement or offer to sale is being made regarding the real estate project.

Real estate agents should be mandatorily registered before facilitating any form of transaction regarding the real estate project.

Details of the real estate project should be mandatorily disclosed on the website of the Real Estate Regulatory Authority.

Functions and duties of promoters:

  • Disclosure of details of the real estate proposal.

Ensure proper transfer of title via a registered deed.

Ensure that there is no dfault and in case of default appropriate refunds are made.

Rectification of structural defects within a specified time period.

An advance of more than 10% of the amount cannot be accepted without a written agreement for sale between the promoter and the allottee. 

Rights and obligations of allottees:

Make an informed decision by obtaining the details of the real estate project from the Real Estate Regulatory Authority.

Duty to make payments at appropriate times in accordance with the time schedule agreement.

Duty to take possession.

A Real Estate Regulatory Authority should be established in each State and Union Territory by the appropriate government.

Establishment of a Real Estate Appellate Tribunal.

Section 88 of the Act provides that the provisions of the Act are in addition to and not in derogation of any other laws for the time being in force.  

Section 89 of the Act gives it an overriding effect over any inconsistency contained in any other law for the time being in force.

Salient features of WB-HIRA

  1. The main objectives of this Act were to regulate and promote the housing sector in the State of West Bengal and to ensure transparency in the sale of real estate projects within the State. It also laid down provisions for the protection of the interests of the consumers in real estate transactions and for the establishment of a dispute resolution mechanism.
  2. Section 83 of the Act provides that the provisions of the Act are in addition to and not in derogation of any other laws for the time being in force.
  3. No overriding effect is given to this Act under any of its provisions.

Issues

  1. Whether RERA and WB-HIRA are enacted under Entries 6 & 7 of List III of the Constitution and therefore cover the same subject matter?
  2. Whether WB-HIRA has received Presidential assent?
  3. Whether the State Legislature can enact laws over the same subject matter as of the Union and create a parallel regime?
  4. Whether WB-HIRA satisfies the test of repugnancy and thus is unconstitutional?

Submissions of the parties

Submissions for the Petitioner

  1. RERA is a central legislation and is a complete and exhaustive code. It regulates the transactions between a promoter and an allottee in the real estate sector and therefore it is a special statute. WB-HIRA is identical to RERA and the provisions under WB-HIRA are an exact replica of the provisions under RERA with some exceptions/inconsistencies.
  2. Due to these exceptions/inconsistencies, the test of repugnancy should be applied. This is a three-fold test. The essential parameters of this test are as follows:
  1. The provisions of the competing statutes should be either conflicting in nature or there should be an existence of a direct inconsistency between the provisions. 
  2. If a law made by the Parliament occupies the entire subject matter then a state law based on the same subject matter would be deemed to be repugnant and inoperative.
  3. A conflict of laws arises when the State Legislature has made laws over the same subject matter as the Parliament. 
  1. On application of the aforesaid test in the present scenario, since the real estate sector is covered by an exhaustive code, the State of West Bengal cannot enact a law on the same subject matter. Thus, the WB-HIRA is void and violative of Article 254(2) of the Constitution.
  2. Both the RERA and WB-HIRA are enacted through the powers vested with the respective governments under the Concurrent List. Sections 88 and 89 of RERA clearly indicate that any future legislation that is covering the same field as RERA would be valid only if it passes the test laid down under Article 254 i.e., the State cannot enact such a law without obtaining Presidential assent. No Presidential assent was obtained in this case for the enactment of WB-HIRA.
  3. Section 89 read with Article 254(2) of the Constitution, impliedly repeals any provision that overlaps the provisions of RERA.

Submissions for the Union of India

  1. The Parliament enacted RERA with the following objectives:
  1. To ensure a greater degree of accountability of the promoters towards the allottees and reduce incidents of fraud and delays in the real estate market.
  2. To ensure the balance between the interests of allottees and promoters is maintained and that there should be transparency in the real estate transactions. 
  3. To establish a special dispute resolution mechanism for dealing with matters of real estate. 
  1. The Statement of Objects and Reasons of WB-HIRA indicates that the purpose for which the Act was enacted is identical to the purpose of RERA and thus the state of West Bengal had set up a parallel regime in the same area.
  2. The inconsistency between the provisions of RERA and WB-HIRA are apparent and therefore the first test of repugnancy is satisfied.
  3. The entire subject matter of WB-HIRA is identical to RERA and therefore the second test of repugnancy i.e., the occupied field of law is satisfied.
  4. Both RERA and WB-HIRA were enacted with the intent of regulating the real estate sector and therefore the third test of repugnancy i.e., implied repeal is satisfied.

Submissions for the State of West Bengal

  1. RERA is not exhaustive legislation and does not cover the whole field as the objective of RERA is limited to creating a balance between the interests of the consumers and the promoters and imposing mutual obligations on both parties including that of transparency in contractual conditions and the establishment of a fast-track dispute resolution mechanism.
  2. The WB-HIRA was enacted under Entry 24 of the State List and is protected under the ambit of being a housing industry whereas RERA was enacted under Entries 6 and 7 of the Concurrent List. Thus, a matter falling under Entry 24 of List II cannot cover the matter falling under Entries 6 and 7 of List III.
  3. There is no conflict between the state and central laws. Moreover, since both these laws have been enacted under different provisions, they cover different subject matters. Thus, the test of repugnancy is not satisfied in the present case.
  4. India follows a federal system and federalism has been declared as a basic feature of the Constitution. Therefore, the Union government is not empowered to pass an order directing the repeal of a law passed by the State Legislature. 
  5. Also, Section 88 and 89 indicate that the provisions of RERA are in addition to existing laws and thus it cannot be deemed as a complete code. 

Judgment and analysis

Entry 24, List II – West Bengal’s ‘housing industry’ defence

  1. In Tika Ramji vs. State of Uttar Pradesh (1956), the Supreme Court held that there are three different aspects that have to be looked into while determining the scope and meaning of the term industry. These aspects are raw materials, the process of manufacture and production and distribution of products of the industries. In Calcutta Gas Co. vs. State of West Bengal (1962), the Supreme Court held that the term industry should be construed to have the same meaning under all the three Lists.
  2. In light of the aforesaid observations, the Court held that the WB-HIRA did not fall under the ambit of the term industry within the meaning of Entry 24 of the State List.
  3. It further observed that since both RERA and WB-HIRA have the same provisions and the objectives for the enactment of these legislations were also similar, WB-HIRA will also fall under Entries 6 and 7 of the Concurrent List.

Violation of Article 254 of the Constitution

  1. Article 254 deals with inconsistencies between laws made by the Parliament and the State Legislatures and states that if any law made by the State Legislature in the exercise of the powers vested under the Concurrent List is inconsistent with a Union law on the same subject, then the Union law will prevail over any such inconsistency with the State law. However, the State law may prevail in a case where the legislation has received Presidential assent.
  2. In GP Stewart vs. BK Roy (1939), the Calcutta High Court held that if there is a direct conflict between two competing laws, the test of repugnancy under Article 254 is attracted. In Deep Chand vs. State of Uttar Pradesh (1959), a three-fold test to determine repugnancy was laid down by the Supreme Court. The essential parameters of this test are as follows:
  1. The provisions of the competing statutes should be either conflicting in nature or there should be an existence of a direct inconsistency between the provisions. 
  2. If a law made by the Parliament occupies the entire subject matter then a state law based on the same subject matter would be deemed to be repugnant and inoperative.
  3. A conflict of laws arises when the State Legislature has made laws over the same subject matter as the Parliament. 
  1. In State of Orissa vs. M A Tulloch (1964), the Supreme Court held that if the Parliament has enacted legislation with the intent of covering the entire subject matter involved, then any legislation passed by any State Legislature will be deemed invalid on the ground of repugnancy with the Central legislation.
  2. In Rajiv Sarin vs. State of Uttarakhand (2011), the Supreme Court held that there is a two-fold test to determine whether an Act is repugnant under Article 254 of the Constitution. The essential parameters of the test are, firstly, the repugnancy in question should be between a State and Union law, and secondly, the President has not assented to the State legislation.
  3. In light of the aforesaid observations, the Court held that the provisions of WB-HIRA substantially overlap the provisions of RERA and therefore the WB-HIRA would be deemed to be repugnant and inoperative. Also, no Presidential assent was obtained for the enactment and enforcement of WB-HIRA.
  4. Thus, the two-fold test laid down in the Rajiv Sarin case is satisfied and WB-HIRA is held repugnant to RERA under Article 254 of the Constitution.

Law for the time being in force

  1. In Yakub Abdul Razak Memon vs. State of Maharashtra (2013), the Supreme Court held that the phrase “law for the time being in force” includes both, the law in existence at the time of the enactment of legislation and any law which may be enacted in future during the existence of legislation.
  2. In light of the same, the Court observed that the phrase law for the time being in force as mentioned under Section 89 of RERA will include WB-HIRA even though it was enacted at a future date.

Conclusion

  1. The state of West Bengal through WB-HIRA has intended to enact and run a parallel regime by enacting legislation on the same subject matter as the Central legislation, i.e., RERA. 
  2. Both statutes have been enacted under Entries 6 and 7 of the Concurrent List.
  3. Due to the identical subject matter, the three-fold test for repugnancy under Article 254 is satisfied. The exception under Article 254 is not attracted since the President had not assented to the legislation.
  4. WB-HIRA is repugnant to RERA and therefore is held to be unconstitutional. However, the West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993 that was repealed through the provisions under WB-HRA shall not be revived and shall stay repealed.

 References

  1. https://www.mondaq.com/india/trials-appeals-compensation/1091538/fpce-anr-v-the-state-of-west-bengal-anr-a-step-towards-strengthening-protection-of-homebuyers#:~:text=The%20recent%20judgment%20of%20the,(FPCE)%20%26%20Anr%20v.&text=In%20doing%20so%2C%20the%20Court,on%20the%20same%20subject%20matter.
  2. https://www.livelaw.in/columns/supreme-court-forum-for-peoples-collective-efforts-state-of-west-bengal-174409
  3. https://www.lawyersclubindia.com/judiciary/forum-for-peoples-collective-efforts-v-state-of-west-bengal-others-the-pil-allowed-by-the-supreme-court-challenged-the-constitutional-validity-of-west-bengal-housing-industry-regulation-act-2017-5152.asp
  4. https://zeus.firm.in/judgment-alert-forum-for-peoples-collective-efforts-fpce-anr-petitioners-vs-the-state-of-west-bengal-anr-respondents/
  5. https://www.indianemployees.com/judgments/details/forum-for-people%E2%80%99s-collective-efforts-fpce-anr-versus-the-state-of-west-bengal-anr
  6. https://www.deccanherald.com/national/east-and-northeast/supreme-court-declares-west-bengal-law-on-real-estate-regulation-unconstitutional-982159.html

LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

LEAVE A REPLY

Please enter your comment!
Please enter your name here