Bombay HC Upholds Validity Of Real Estate (Regulation And Development) Act [Read Judgment]

In a huge relief to thousands of home buyers, the Bombay High Court has upheld the constitutional validity of the Real Estate (regulation and Development) Act.

A bench of Justice Naresh Patil and Justice RG Ketkar passed the judgment after hearing all parties in the matter and upheld the provisions of the new Act that came into effect on May 1, 2017.

The Supreme Court had earlier directed other high courts in the country to wait for the Bombay High Court to decide all pleas and petitions challenging the validity of the RERA Act.

Senior advocates Aspi Chinoy, Dr Veerendra Tulzapurkar, Girish Godbole and SU Kamdar appeared for the petitioners in the matter, Additional Solicitor General Anil Singh appeared for the Union of India, Advocate General of Maharashtra AA Kumbhakoni appeared for the state as well as Maharashtra RERA while senior advocate Darius Khambata was the amicus curiae in this case.

Case Background

The petitioners are builders and developers who are aggrieved by the new provisions of the said Act which contains specific provisions to tackle problems like delay in possession, arbitrary interests levied on home buyers etc.

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.

The said Act calls for prior registration of concerned projects with the Regulatory Authority under RERA, also registration of real estate agents. It defines functions of real estate agents and promoters.

Under the new Act, the promoters have obligations towards home buyers in case a real estate project is transferred to a third party and in case, a promoter fails to deliver possession he is liable to repay the entire amount with interest.

Over 13,000 such projects had already been registered in Maharashtra, as of October this year.

What Court Said

It was argued on behalf of the promoters that penalties under Sections 18, 38, 59, 60, 61, 63 and 64 of the RERA Act, are violative of Articles 14, 19(1)(g) and 20(1) of the Constitution of India and amount to unreasonable restrictions. This argument was rejected by Justice Naresh Patil who authored the 330-page judgement. He said-

“I have already indicated that the provisions of RERA are prospective in nature. 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, cannot be said to be violative of Articles 14, 19(1)(g), 20(1) and 300-A of the Constitution of India.”

Thus, the Court said-

“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.”

However, Section 46 (b) of the Act was set aside as it included any officer who has held the post of Additional Secretary to be eligible for membership of the two-member tribunal. Court held that the majority of the total members of the tribunal should always be judicial members.