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Bombay High Court upholds the validity of Real Estate (Regulation And Development) Act

The Bombay High Court on Wednesday, led by a bench of Justices Naresh Patil and Rajesh Ketkar upheld the validity of the Real Estate (Regulation and Development) Act (RERA).

A bunch of petitions had been filed by real estate developers and individual plot owners, all challenging the constitutional validity of the Act that was brought into effect earlier this year on May 1, 2017. Earlier the Supreme Court had stayed the proceedings in other courts after several petitions challenging RERA were filed in High Courts across the country in September and had suggested that the Bombay High Court hear its RERA cases first while directing the High court to expedite the hearings.

Senior advocates Aspi Chinoy, Dr. Veerendra Tulzapurkar, Girish Godbole and S. U. Kamdar appeared for the petitioners in the matter, Additional Solicitor General Anil Singh appeared for the Union of India, Advocate General of Maharashtra A. A. Kumbhakoni appeared for the state as well as Maharashtra RERA.

Senior advocate Darius Khambata was the amicus curiae in this case; Naira Jejeebhoy and Pheroze Mehta assisted the amicus curiae.

The RERA Act was enacted by the Parliament as Act 16 of 2016 in the year 2016. The objects and reason behind enactment of RERA Act was that the real estate sector was growing significantly, unregulated, with absence of professionalism and standardization and lack of adequate consumer protection. Therefore to regulate such business practices and transactions in the real estate sector the Act was laid down.

The Act, among other things, mandated that all developers register themselves under a common regulatory authority. It also allowed buyers to claim compensation for delay in possession, and envisaged cancellation of a developer’s registration in case the developer fails to complete the project within stipulated deadline.
Under the present petition legality and constitutional validity of certain provisions of the RERA Act, 2016 were challenged as being violative of the provisions of Articles 14, 19(1)(g), 20 and 300-A of the Constitution of India.

Petitioners had challenged Section 3, 5, 7, 8, 11(h), 14(3), 15, 16, 18, 22, 43(5),59,60,61,63 and 64 of the Real Estate (Regulations and Development) Act, 2016 and Rules 3(f), 4,5,6,7,8,18,19, 20 and 21 of the Registration of real estate projects, Registration of real estate agents, Rates of interest and disclosures on website Rules, 2017 as arbitrary, and therefore unconstitutional.

A provision of ‘force majeure or a natural disaster’ was challenged by most of the developers, where any extension beyond a year for completion of project would have led to penalties

Decision of the Court:

A 330-page judgement was authored by Justice Naresh Patil which stated that the provisions of RERA are prospective in nature and hence the penalty under Sections 18, 38, 59, 60, 61, 63 and 64 is to be levied on account of contravention of provisions of RERA, prospectively and not retrospectively. These provisions, therefore, were not
violative of Articles 14, 19(1)(g), 20(1) and 300-A of the Constitution of India.

“We hold that challenge to constitutional validity of first proviso to Section 3(1), Section 3(2)(a), explanation to Section 3, Section 4(2)(l)(C), Section 4(2)(l)(D), Section 5(3) and the first proviso to Section 6, Sections 7, 8, 18, 22, 38, 40, 59, 60, 61, 63, 64 of the Real Estate (Regulation and Development) Act, 2016 fails. These provisions are held to be constitutional, valid and legal.” The court held.

The court further added, “However, one of the qualifications for appointment of a Judicial Member prescribed in Section 46(1)(b) as, ‘or has been a member of the Indian Legal Service and has held the post of Additional Secretary of that service or any equivalent post’ is severed and struck down.”

The court clearly laid down that in the constitution of the Tribunal, majority of the members shall always be judicial members . Hence two members Bench of the Tribunal shall always consist of a Judicial Member.

Read the judgment below:

 

Cover image by A. Savin (Own work) [FAL], via Wikimedia Commons.

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