BREAKING : Supreme Court Upholds Application Of RERA To Real Estate Projects Ongoing At Act's Commencement

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

41. 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 

42. 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.

45. 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 

46. 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.

47. 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.

51. 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.

52. 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

53. 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.

54. 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.

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