Supreme Court Strikes Down the West Bengal Housing Industry Regulation Act of 2017 by Observing It Unconstitutional and in Conflict With RERA

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Facts of the Case

In this case, the constitutional validity of the West Bengal Housing Industry Regulation Act, 2017 (“WB-HIRA”/the “State enactment”) was challenged in a petition under Article 32 of the Indian Constitution. In July 2019, the Supreme Court had directed the West Bengal Government to respond to homebuyers’ petition challenging the constitutional validity of the West Bengal Housing & Industrial Regulation Act 2017 (WBHIRA). The petition was filed by the Forum for People’s Collective Efforts (FPCE), an umbrella homebuyers association. To be more elaborate, West Bengal was the only state in India that didn’t accept RERA. Instead, it had implemented its act named as West Bengal Housing & Industrial Regulation Act 2017 (WBHIRA). The Central Real Estate (Regulation and Development) Act (RERA) came into effect on May 1, 2017, precisely a year after it was passed by the Parliament. This central law was passed in 2016 to avoid exploitation of home buyers and to ensure orderly growth of the housing sector. Furthermore, West Bengal had enacted WBHIRA creating a regime parallel to the Parliament-enacted RERA. WBHIRA was substantially identical to RERA and that too without the Presidential assent. This state enactment was challenged by the Petitioners on the ground that both the legislations dealt with subjects falling under Entries 6 (property transfer), 7 (matters of contract), and 46 (matters concerning the jurisdiction of courts other than Supreme Court) of the Concurrent List in the Constitution of India, while both the Central and State governments may make laws on such subjects, the State law would have to yield to the Central law if there is any conflict between the two. Also, this legislation of West Bengal was challenged by the RERA experts. As the RERA experts contended that HIRA defeated the very purpose of the Central enactment, RERA. 

Petitioners’ Arguments

The Learned counsel of the Petitioners, Devashish Bharuka contended that West Bengal had enacted WBHIRA which was constitutionally impermissible. Further, he stated that the WBHIRA was substantially identical to RERA and that also without the Presidential assent. The foremost contention was based upon the nature of RERA and WB-HIRA. By pointing out the nature of the legislation, the Counsel stated that WB-HIRA covered the identical field of regulating the contractual behaviour of promoters and buyers in real estate projects. Moreover, The state law is a ‘copy and paste’ replica of the central legislation (except for certain provisions that are inconsistent with RERA) and covers the field occupied by the central enactment. In the same context, the Counsel stated that in the Indian federal structure, once the Parliament makes a law, a State cannot be permitted to frame identical laws has been accepted by the Apex Court. Not only the WBHIRA has been declared unconstitutional but also the earlier West Bengal 1993 law has been declared to be impliedly repealed by RERA. By putting forward his next contention he concluded that WB-HIRA was repugnant to RERA.

Further, it was stated that it is a complete change of stance by the State government. Moreover, as per the effects of 88 and 89 of RERA, allowing the State to provide a “duplicate regime would result in complete chaos in the real-estate sector. Also, the WB- HIRA was challenged on the ground that while Article 254(2) allows law made by the State on a Concurrent list subject to survive over Central law on the same subject, such State law to receive the assent of the President. In this case, the same was not obtained. Hence, based on the aforementioned grounds, it was submitted that WB-HIRA was void for want of legislative competence.

Respondent’s Arguments

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Ms Aishwarya Bhati, learned Additional Solicitor General appearing on behalf of the Union of India urged that the objects of the state legislatures are synonymous with RERA and the State statute deals with the same subject matter identically. In effect, the State of West Bengal has set up a parallel mechanism and parallel regime that is similar to the RERA on a majority of counts. Further in the context of Article 254 of the Constitution and repugnancy the Counsel further stated that the Central government had established a fund of Rs 25,000 crores (known as the SWAMIH) to provide for last-mile funding for projects which are net-worth positive and registered under RERA, including those projects declared as NPAs or those which are the subject matter of proceedings before the NCLT under the IBC. If the state law is allowed to hold the field, buyers of real estate projects in the State of West Bengal which is not registered under the RERA will lose the benefit of the above provision. Moreover, the state enactment had only created an identical but parallel and mutually exclusive regime in the State of West Bengal, which cannot co-exist with the regime which was enacted under RERA. Based on the failure of the three tests of repugnancy it was concluded that while the failure of the first test would only require WB-HIRA to yield to RERA to the extent of the repugnancy since the State enactment in the present case completely obstructs and hinders the Parliamentary law. The repugnancy is, thereby, absolute and complete.

Furthermore, Mr Rakesh Dwivedi, learned Senior Counsel appearing on behalf of the State of West Bengal has urged that the RERA didn’t cover the whole field and was not thereby exhaustive. Besides this, it was contended that the submission of the Petitioner was based on the substantial identity between WB-HIRA and RERA. This substantial identity is indicative of consonance, conformity, and symmetry. Identity of subject matter does not constitute inconsistency or repugnancy, particularly when the central enactment is not a complete and exhaustive code. However, in the present case, the state law was complementary to the central law. Moreover, few inconsistencies present between the WB-HIRA and RERA were minor. 

Court’s Observations

The Court observed both enactments and thereby concluded that “two fundamental features that emerge are that WBHIRA overlaps with RERA and is copied word to word and it does not complement RERA. Both the statutes refer to the same entry in the concurrent list”. Thus, the State of West Bengal encroached upon the domain of Parliament in enacting WBHIRA since both WBHIRA and RERA deal with the same entry in the concurrent list and a significantly large number of provisions WBHIRA overlap with RERA. Moreover, the State has only enacted a parallel mechanism and regime entailed under RERA as WB-HIRA does not complement the RERA by enacting provisions which may be regarded as in addition to or fortifying the rights, obligations, and remedies created by the Central enactment.

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Besides this, it was observed that once parliament has enacted a law on a particular subject, then it is not open to the State legislature to enact an alike law and lift it word to word. The Court further to test whether the State law was repugnant to the parliament enacted law or not, elaborated on the tests of repugnancy. Via testing the repugnancy, the Court concluded that the overlap of both the enactments was so significant that the test of repugnance based on the identity of subject matter was established. And therefore, West Bengal had ultimately attempted to establish a parallel regime that is impermissible Constitutionally.

Further, the Court observed the submission made by the Petitioner based upon Article 254(2), which allows law made by the State on a Concurrent list subject to survive over Central law on the same subject, such State law to receive the assent of the President. The Court clarified the fact that RERA was enacted by the Central Government in 2016. And in the same year in August, the State of West Bengal had notified the draft Real Estate (Regulation and Development) Rules, 2016 under the RERA. For the finalization of these rules, a stakeholder meeting was also organized in 2017, to which the Petitioner was also invited. However, no further action was taken thereafter. Instead, the WB-HIRA, 2017 was notified in March 2018, and rules under the WBHIRA were also published in June 2018. And that too was done without the Presidential assent. Thus, it was an admitted position that the State of West Bengal neither reserved the impugned State Act for consideration of the President nor had ever obtained the President’s assent even though the entire field stood occupied by RERA, 2016 enacted by the Parliament. Some prominent cases, namely, Tika Ramji vs State of UP; Calcutta Gas Co. (Proprietary) vs State of West Bengal; ITC Ltd. vs Agricultural Produce Market Committee; O P Stewart vs B K Roy; Deep Chand vs State of UP; State of Orissa vs M/s M A Tulloch; M Karunanidhi vs Union of India; Hoechst Pharmaceuticals Ltd. vs State of Bihar; KSL and Industries Limited vs Arihant Threads Limited were referred. 

Lastly, as both, the legislations dealt with subjects falling under Entries 6 (property transfer), 7 (matters of contract), and 46 (matters concerning the jurisdiction of courts other than Supreme Court) of the Concurrent List in the Constitution of India, it was held that while both the Central and State governments may make laws on such subjects, the State law would have to yield to the Central law if there is any conflict between the two.

Therefore, the Court strikes down the state enactment but provided that the decision of the Court will not affect any registrations, sanctions, and permissions previously granted under the legislation before the date of this judgment. Since its enforcement in the State of West Bengal, the WB-HIRA would have been applied to building projects and implemented by the authorities constituted under the law in the state. Therefore, in the exercise of the jurisdiction under Article 142 and to avoid uncertainty and disruption in respect of actions taken in the past it was said that the striking down of WB-HIRA will not affect the registrations, sanctions, and permissions previously granted under the legislation before the date of this judgment. 

Court’s Decision

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For the aforementioned reasons, it was concluded that WB-HIRA was repugnant to the RERA, and hence was unconstitutional. It was also held that as a consequence of the declaration by this Court of the invalidity of the provisions of WB-HIRA, there shall be no revival of the provisions of the WB 1993 Act since it would stand impliedly repealed upon the enactment of the RERA. The writ petition was accordingly allowed in the above terms. 

Click here for the judgment


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