Breaking: "Encroachment Of State Legislature Upon The Domain Of Parliament": Supreme Court Strikes Down West Bengal Housing Industry Regulation Act

The Supreme Court on Tuesday struck down the West Bengal Housing Industry Regulation Act, 2017( WBHIRA), holding it to be unconstitutional in view of the 2017 Real Estate (Regulation and Development) Act (RERA) which is the central legislation on the identical subject-matter.

However, with a view to prevent any chaos in the real estate industry in the state, the Court in exercise of its powers under Article 142, clarified that all sanctions and registrations previously granted under the HIRA prior to  the date of this judgment shall continue to prevail.

The Court also added that the striking down of the 2017 state Act would not revive the 1993 Act which was in force in the state for the regulation of promotion of construction as the same stood impliedly repealed by the enactment of the RERA.

The bench of Justices Chandrachud and M. R. Shah was pronouncing the judgment on the plea filed by the Forum For People's Collective Efforts, an umbrella homebuyers association, challenging the constitutional validity of West Bengal Housing Industry Regulation Act, 2017, which is more or less identical to the Centre's RERA.

"RERA was in force before the state of West Bengal enacted HIRA. Both HIRA & RERA were enacted to ensure better accountability to consumers and to promote and regulate the real estate sector. 95 to 98%, the WB HIRA is a complete copy-paste of the RERA, but on a few aspects it is in direct conflict with RERA. The differences include sale of open car parking spaces as opposed to garages with walls and roofs, the compounding of offences which should be tried by courts and definition of events falling under force majeure", the petitioner has argued.

It has been pointed out that despite the field being occupied by the 2016 Central law RERA, the impugned state Act, notified in June, 2018, was neither reserved for the consideration of the President nor was the Presidential assent obtained so as to make it valid under Article 254(2).

"Two fundamental features become evident on the comparison of the two statutes- that there is a significant and overwhelming overlapping between the state law and the central Act, later having been bodily lifted word-for-word by the state legislature. Also, the state enactment does not complement the central law, it does not fortify the rights and remedies under the central Act, it does not contemplate any additions to the central law. The state Act is identical to the central Act and is an attempt on the part of the state government to set up a parallel mechanism or regime", said the bench.

The bench further noted that the WB HIRA is on the same subject matter as the RERA and its statutory provisions, which are identical to the RERA, are also referable to Entries 6 and 7 in the Concurrent List.

The bench was of the view that accordingly, the state enactment attracts the third test of repugnancy- where the state law is unconstitutional because it is on the identical subject matter as a law made by the parliament, whether prior or later in point of time.

"This repugnancy ensues not because there is a conflict between the provisions of the two Acts but because once the Parliament has enacted a law, it is not open to do so, and in this case, bodily lift the provisions of the central law and enact them verbatim as a state law", said the bench.

"As this court has held in the case of Innovative Industries(2017), A conflict may arise when Parliamentary law and State law seek to exercise their powers over the same subject matter. This need not be in the form of a direct conflict, where one says "do" and the other says "don't". Laws under this head are repugnant even if the rule of conduct prescribed by both laws is identical.", said the bench.

"The WB HIRA purports to occupy the same subject matter as the Centre's RERA which is constitutionally impermissible and the state Act stands impliedly repealed", ruled the bench.

Referring to section 88 of the RERA, the bench said  that the Parliament does not preclude the states from enacting legislation on any cognate or allied subjects. "If any areas have been left out in the RERA, the state legislatures can provide for them by way of a cognate legislation so long as they deal with a subject which is incidental", noted the bench.


"However, in the instant case, the state legislature encroaches upon the authority of the Parliament which has supremacy in so far as the concurrent list is concerned", ruled the bench.

The bench also found the HIRA to be in 'direct conflict' with the RERA- "The HIRA failed to incorporate valuable institutional safeguards to protect the homebuyers. Not only is this a failure of the state legislature to incorporate statutory safeguards for real estate purchasers, but it brings the state law it in direct conflict with the RERA. The state legislature has transgressed the limitations on its powers"


Background

"Can a state, in the name of cooperative federalism, enact a legislation under the Concurrent List to occupy the same field that the Parliament has occupied?", Justice Chandrachud had asked in the course of the hearing.

"This is the first time it has happened!", remarked Justice Chandrachud.

The judge explained how an inconsistency may result between a state Act and a Central law- "Repugnancy can be by way of a direct conflict, with the Parliament saying 'X' and the state saying 'X minus'. Then, there is occupied field (Article 254(1); if there exists a Central law on a concurrent subject, then a State law cannot override it). And then there is the case where the state enacts a law, not to supplement the Central law, but to do the exact same thing that the Parliament is doing by means of its law..."

"Can a state, in the name of cooperative federalism, by a legislation under the Concurrent List, occupy the same field that the Parliament has occupied? It may be that states are resistant (to intervention by the Centre) in a field that has been historically occupied by them. But can they say, 'You enacted a law, now we will enact a similar law and enforce that and not yours'? Is that really permissible?", asked the judge.

Last week, Justice Chandrachud had expressed that it was "baffling" why a state would make an Act exactly similar to the Central law. "What was the intent of the West Bengal government? No State does that!", he had said.


Justice Chandrachud had propounded an interesting theory as regards the purport of a state government in essentially re-enacting the provisions of a Central Act as a state legislation- if it could be to denude the Government of India of its authority under Article 256 over the state.

Article 256 provides that the executive power of every State shall be so exercised as to ensure compliance with the laws made by Parliament and any existing laws which apply in that State, and the executive power of the Union shall extend to the giving of such directions to a State as may appear to the Government of India to be necessary for that purpose.


"If RERA was in force in West Bengal, the central government could issue directions to the state in exercise of its executive power. If the state government had not framed the requisite Rules under the Act, the central government could ask it to do so under Article 256. It could say that 'Otherwise, my legislation is not being enforced in your state'", ventured Justice Chandrachud.


The judge reflected that if a Central law is in force in the state, the executive power of the Union of India, by virtue of Article 162, extends under Article 256 so as to instruct the state government and the state government is bound to comply- If the state government has not formulated any Rules under the law, the central government can obligate it to do so under Article 256.


(The Proviso to Article 162 states that in any matter with respect to which the State Legislature and Parliament have power to make laws, the executive power of the State shall be subject to, and limited by, the executive power conferred by the Constitution or by any law made by Parliament upon the Union or its authorities)

Justice Chandrachud continued to observe that the state government then cannot reduce the Act to a dead letter. "If there is a central law in force in a state, the Union of India, in exercise of its executive power under Article 256, can give directions to the state government for its enforcement. Then, the state cannot say, 'Enact the law, we won't make any rules to enforce it'", he remarked.


But, the judge added, where the state enacts a pari materia law under the Concurrent List, the Government of India has no such authority.


"The moment there ceases to be a central law, the Union of India has no such right. Once the state enacts a pari materia law under the Concurrent List, the Government of India has no authority and it becomes the exclusive domain of the state. If it is a state law, the central government cannot require such framing of the Rules", commented Justice Chandrachud.