The Supreme Court on Friday upheld the retroactive application of the Real Estate (Regulation and Development) Act, 2016 to the real estate projects which were ongoing at the commencement of the Act.
The bench comprising Justices Uday Umesh Lalit, Ajay Rastogi and
Aniruddha Bose observed that the RERA Act does not apply to the
projects already completed or to which the completion certificate has been
granted at the commencement of the Act.
The court rejected the contentions raised by Promoters/Developers that
the first proviso to Section 3(1) of the Act is violative of Articles 14 and
19(1)(g) of the Constitution of India.
Section 3(1) RERA
Section 3(1) states that no promoter shall advertise, market, book, sell
or offer for sale, or invite persons to purchase in any manner any plot,
apartment or building, as the case may be, in any real estate project or part
of it, in any planning area, without registering the real estate project with
the Real Estate Regulatory Authority. The proviso reads as follows: Provided
that projects that are ongoing on the date of commencement of this Act and for
which the completion certificate has not been issued, the promoter shall make
an application to the Authority for registration of the said project within a
period of three months from the date of commencement of this Act.
Background
In this case, the single member of the RERA on the complaint instituted
at the instance of the home buyers/allottees directed the promoter/real estate
developer to refund the principal amount along with interest. The Developer
approached the High Court by filing a writ petition challenging the
jurisdiction of the Tribunal. This writ petition came to be dismissed by the
High Court. In appeal, one of the issues considered by the Apex Court was whether
RERA is retrospective or retroactive in its operation and what will be its
legal consequence if tested on the anvil of the Constitution of India.
Taking note of the statutory provisions especially Section 3 of the
RERA, the court observed that all "ongoing projects" that commence
prior to the Act and in respect to which completion certificate has not been
issued are covered under the Act. It said:
"It manifests that the legislative intent is to make the Act
applicable not only to the projects which were yet to commence after the Act
became operational but also to bring under its fold the ongoing projects and to
protect from its inception the inter se rights of the stake holders, including
allottees/home buyers, promoters and real estate agents while imposing certain
duties and responsibilities on each of them and to regulate, administer and
supervise the unregulated real estate sector within the fold of the real estate
authority."
Contentions
The Developer's contention was that the agreement of sale was executed
in the year 2010-11, i.e. much before the coming into force of the Act
and the present Act has retrospective application. It was contended that the
registration of ongoing project under the Act would be in contravention to the
contractual rights established between the promoter and allottee under the
agreement for sale executed which is impermissible in law and further submits
that Sections 13, 18(1), 19(4) of the Act 2016 to the extent of their
retrospective application is in violation of Articles 14, 19(1)(g) of the
Constitution of India. On the other hand, the Centre defended the retroactive
application of the law and submitted that the provisions make it clear that it
operates in future, however, its operation is based upon the character and status
which have been done earlier and the presumption against retrospectivity in
this case is ex-facie rebuttable.
The bench, made the following observations:
The legislature consciously enacted a retroactive statute
The clear and unambiguous language of the statute is retroactive in
operation and by applying purposive interpretation rule of statutory
construction, only one result is possible, i.e., the legislature consciously
enacted a retroactive statute to ensure sale of plot, apartment or building,
real estate project is done in an efficient and transparent manner so that the
interest of consumers in the real estate sector is protected by all means and
Sections 13, 18(1) and 19(4) are all beneficial provisions for safeguarding the
pecuniary interest of the consumers/allottees. In the given circumstances, if
the Act is held prospective then the adjudicatory mechanism under Section 31
would not be available to any of the allottee for an ongoing project. Thus, it
negates the contention of the promoters regarding the contractual terms having
an overriding effect over the retrospective applicability of the Act, even on
facts of this case.
Parliament is always competent to enact any law affecting the
antecedent events
What the provision further emphasizes is that a promoter of a
project which is not complete/sans completion certificate shall get the project
registered under the Act but while getting the project registered, promoter is
under an obligation to prescribe fresh 26 timelines for getting the remaining
development work completed and from the scheme of the Act, we do not find that
the first proviso to Section 3(1) in any manner is either violative of Articles
14 and 19(1)(g) of the Constitution of India. The Parliament is always
competent to enact any law affecting the antecedent events under its fold
within the parameters of law
It cannot be said to be either violative of Articles 14 or 19(1)(g) of
the Constitution of India.
At the given time, there was no law regulating the real estate sector,
development works/obligations of promoter and allottee, it was badly felt that
such of the ongoing projects to which completion certificate has not been
issued must be brought within the fold of the Act 2016 in securing the
interests of allottees, promoters, real estate agents in its best possible way
obviously, within the parameters of law. Merely because enactment as prayed is
made retroactive in its operation, it cannot be said to be either violative of
Articles 14 or 19(1)(g) of the Constitution of India. To the contrary, the
Parliament indeed has the power to legislate even retrospectively to take into
its fold the preexisting contract and rights executed between the parties in
the larger public interest.
Legislative power to make the law with prospective/retrospective effect
is well recognized
The consequences for breach of such obligations under the Act are
prospective in operation and in case ongoing project, of which completion
certificate is not obtained, are not to be covered under the Act, there is
every likelihood of classifications in respect of underdeveloped ongoing
project and the new project to be commenced.
The legislative power to make the law with prospective/retrospective
effect is well recognized and it would not be permissible for the
appellants/promoters to say that they have any vested right in dealing with the
completion of the project by leaving the allottees in lurch, in a helpless and
miserable condition that at least may not be acceptable within the four corners
of law.
Thus, it is clear that the statute is not retrospective merely
because it affects existing rights or its retrospection because a part of the
requisites for its action is drawn from a time antecedent to its passing, at
the same time, retroactive statute means a statute which creates a new
obligation on transactions or considerations already passed or destroys or
impairs vested rights.
The Parliament intended to bring within the fold of the statute the
ongoing real estate projects in its wide amplitude used the term
"converting and existing building or a part thereof into apartments"
including every kind of developmental activity either existing or upcoming in
future under Section 3(1) of the Act, the intention of the legislature by
necessary implication and without any ambiguity is to include those projects
which were ongoing and in cases where completion certificate has not been
issued within fold of the Act.
RERA application is retroactive in character
That even the terms of the agreement to sale or home buyers
agreement invariably indicates the intention of the developer that any
subsequent legislation, rules and regulations etc. issued by competent
authorities will be binding on the parties. The clauses have imposed the
applicability of subsequent legislations to be applicable and binding on the
flat buyer/allottee and either of the parties, promoters/home buyers or allottees,
cannot shirk from their responsibilities/liabilities under the Act and implies
their challenge to the violation of the provisions of the Act and it negates
the contention advanced by the appellants regarding contractual terms having an
overriding effect to the retrospective applicability of the Authority under the
provisions of the Act which is completely misplaced and deserves
rejection.
From the scheme of the Act 2016, its application is retroactive in
character and it can safely be observed that the projects already completed or
to which the completion certificate has been granted are not under its fold and
therefore, vested or accrued rights, if any, in no manner are affected. At the
same time, it will apply after getting the ongoing projects and future
projects registered under Section 3 to prospectively follow the mandate of the
Act 2016.
Case name and Citation: Newtech Promoters And Developers Pvt.
Ltd. vs. State of UP | LL 2021 SC 641
Case no. and Date: CA 6745 6749 OF 2021 | 11 November 2021
Coram: Justices Uday Umesh Lalit, Ajay Rastogi and Aniruddha Bose
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