SC says WB Housing Industry Regulation Act of 2017 ‘unconstitutional’, in conflict with Centre's RERA

The Supreme Court on May 4 struck down West Bengal's Housing Industry Regulation Act (WBHIRA) 2017, the law regulating the state’s real estate sector, saying it was ‘unconstitutional’ as it creates a parallel regime and is in direct conflict with the Centre’s Real Estate (Regulation and Development) Act (RERA).

The state law has encroached upon the domain of the Parliament and hence is unconstitutional, the verdict said.

The West Bengal Housing Industry Regulation Act (HIRA), 2017 is more or less identical to the Centre's RERA and hence repugnant to Parliament's law, the bench said.

“WB-HIRA is repugnant to the RERA, and is hence unconstitutional. We also hold and declare 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provisions of WB-HIRA, there shall be no revival of the provisions of the WB 1993 Act, since it would stand impliedly repealed upon the enactment of the RERA,” the apex court bench said in its 190-page order.

Housing and urban affairs minister Hardeep Singh Puri tweeted “Big relief to homebuyers of West Bengal, Hon’ble SC declares West Bengal Housing Industry Regulation Act, 2017 (WBHIRA) as unconstitutional. Benefits of RERA the consumer protection law passed by Parliament, will now also be available to homebuyers of the state.”

Pronouncing the verdict through video conferencing, Justice D Y Chandrachud said that fundamental features of WB HIRA overlaps the Centre's RERA.

It bench observed that both Centre's RERA and WB HIRA dealt with issues related to providing reliefs to homebuyers and promoting real estate sectors but some of the provisions of the State's legislation were in direct conflict with the law passed by Parliament.

The top court also said that WB HIRA has failed to include valuable safeguards for the homebuyers.

“ In material respects, WB-HIRA has failed to incorporate valuable institutional safeguards and provisions intended to protect the interest of home-buyers."

“There is, in other words, not only a direct conflict of certain provisions between the RERA and WB-HIRA but there is also a failure of the State legislature to incorporate statutory safeguards in WB-HIRA, which have been introduced in the RERA for protecting the interest of the purchasers of real estate. In failing to do so, the State legislature has transgressed the limitations on its power and has enacted a law which is repugnant to Parliamentary legislation on the same subject matter,” the bench of justices D Y Chandrachud and M R Shah said.

The state law has encroached upon the domain of the Parliament and hence is unconstitutional, the order said.

“we have come to the conclusion that WB-HIRA is repugnant to the RERA, and is hence unconstitutional. We also hold and declare 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 order said.

It said, however, that homebuyers who have purchased properties under state law before its verdict, will not have to worry as their registration and other acts would remain valid.

“Hence, in exercise of the jurisdiction under Article 142, we direct that the striking down of WB-HIRA will not affect the registrations, sanctions and permissions previously granted under the legislation prior to the date of this judgment.”

The bench also noted that the WB-HIRA did not have presidential assent and was repugnant to RERA under Article 254.

“As such, it is abundantly clear that the State of West Bengal would have had to seek the assent of the President before enacting WB-HIRA, where its specific repugnancy with respect to RERA and its reasons for enactment would have had to be specified. Evidently, this was not done. However, since we have already held WB-HIRA to be repugnant to RERA, this issue becomes moot,” it said in the order.

The bench was deciding on a petition filed by the Forum for People's Collective Efforts (FPCE), an umbrella association for homebuyers. In its plea, the association had said that if WBHIRA is allowed to continue, it would give way for state legislatures to enter into other fields to legislate under the concurrent list, which is otherwise occupied by central legislations.

Homebuyers said that “West Bengal Housing Industry Regulation Act 2017 (WBHIRA) made us nervous as the whole objective of having one pan India law was getting defeated. Besides, WBHIRA watered down certain provisions of RERA in favour of builders. Our fear was that if this was allowed to go through, other states may follow suit. This would have meant more states enacting their laws each state diluting more provisions of RERA to favour builders. RERA would have been made completely redundant. With this historic judgment, not only has RERA and interests of homebuyers been protected, a message has gone to all that any attempt to dilute RERA through back door will be illegal,” said Abhay Upadhyay, president FPCE and member, Central Advisory Council, RERA, MoHUA,

The main issue at hand and the impact going forward

West Bengal had enacted WBHIRA creating a regime parallel to the Parliament-enacted RERA, which has been held to be constitutionally impermissible. WBHIRA was substantially identical to RERA and that too without the Presidential assent.

“Our submission 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," explained Devashish Bharuka, advocate, representing the homebuyers in the matter.

The immediate impact is on West Bengal. The state government would have to take steps under RERA like framing of State Rules, shifting of all registrations under the Act, constituting of Authority and adjudicating officer and creating the entire RERA setup.

On a pan-India level, the judgment re-affirms the position of RERA and the homebuyers’ submission of one-India, one-RERA. SC has said that the State can make supplemental provisions but cannot have their own parallel law as the field is covered by RERA, he added.

Background

West Bengal is the only state in the country that has not accepted RERA. The Central Real Estate (Regulation and Development) Act (RERA) came into effect on May 1, 2017, exactly a year after it was passed by the Parliament. It has implemented its own act titled West Bengal Housing & Industrial Regulation Act 2017 (WBHIRA).

The Supreme Court in July 2019 had directed the West Bengal government to respond to homebuyers' petition challenging the constitutional validity of West Bengal Housing & Industrial Regulation Act 2017 (WBHIRA). The petition has been filed by the Forum for People's Collective Efforts (FPCE), an umbrella homebuyers association. The matter is pending before the SC for final hearing.

Rera experts have said that HIRA defeats the very purpose of Central RERA. "The first is to do with the force majeure clause or unforeseen circumstances under which a builder may not fulfil conditions laid down under the contract signed with the homebuyers. RERA clearly lays down the circumstances of force majeure such as war, flood, drought, fire, cyclone, earthquake or any other natural calamity. HIRA has made an addition to this clause and talks about '…any other circumstances as may be prescribed'. This is a major dilution."

Sale of open space as a garage or parking area was an issue dealt under RERA. HIRA has interpreted it differently. RERA defines garage to mean a place within a project that has a roof and walls on three sides for parking any vehicle but it does not include unenclosed or uncovered parking area, especially open parking. HIRA, on the other hand, states that car parking area means such an area as may be prescribed and defined garage to mean garage and parking space as sanctioned by the competent authority.

In November 2019, the central government announced a Rs 25,000-crore SWAMIH Investment Fund to help complete over 1,500 stalled housing projects, including those that have been declared non-performing assets (NPAs) or had been admitted for insolvency proceedings. The move is likely to help 4.58 lakh housing units across the country. Only RERA-registered projects with a positive net worth will be provided funds.