2017 (12) TMI 1580 - HC - Indian Laws

Legality and constitutional validity of certain provisions of the Real Estate (Regulation and Development) Act, 2016 - declaration is sought that the first proviso to Section 3 (1), Section 3 (2)(a) & (c), Explanation to Section 3, Sections 4(2)(c) & 4(2) (d) (e) (f) (g) (k), Sections 4 (2) (l) (C) and 4 (2) (l) (D), Sections 5(1)(b), 5 (3) and the first proviso to Section 6 of the RERA are unconstitutional, illegal, ultra vires, without jurisdiction and without authority of law. Held 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 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. 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 - In the constitution of the Tribunal, majority of the members shall always be judicial members. Prayer dismissed.

Summary

Issues Involved:
1. Constitutional validity of various provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA).
2. Retrospective/retroactive application of RERA.
3. Reasonableness of restrictions imposed by RERA.
4. Requirement of Judicial Member in the Authority and Appellate Tribunal under RERA.

Analysis of the Judgment:

1. Constitutional Validity of Various Provisions of RERA:
The petitioners challenged the legality and constitutional validity of several provisions of RERA, arguing that they violated Articles 14, 19(1)(g), 20, and 300A of the Constitution of India. The court examined the provisions in detail, considering the object and purpose of RERA, which aims to regulate the real estate sector, protect consumer interests, and ensure transparency and accountability.

Key Findings:
- The court upheld the constitutional validity of the 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, and 64 of RERA.
- The court found that these provisions were reasonable and in the larger public interest, balancing the rights of promoters and allottees.

2. Retrospective/Retroactive Application of RERA:
The petitioners argued that the application of RERA to ongoing projects (projects without a completion certificate as of the commencement date) was retrospective and violated their rights.

Key Findings:
- The court held that the application of RERA to ongoing projects was not retrospective but prospective, as it applied to ongoing projects from the date of registration under RERA.
- The court emphasized that the provisions of RERA aimed to protect consumers and ensure the completion of projects, which justified the regulation of ongoing projects.

3. Reasonableness of Restrictions Imposed by RERA:
The petitioners contended that certain provisions of RERA imposed unreasonable restrictions on their right to carry on business, violating Article 19(1)(g).

Key Findings:
- The court examined the provisions related to the deposit of 70% of amounts realized from allottees, the time period for project completion, and the penalties for non-compliance.
- The court found these provisions reasonable, as they aimed to prevent misuse of funds, ensure timely completion of projects, and protect consumer interests.
- The court also noted that the provisions allowed for extensions and provided mechanisms for addressing genuine difficulties faced by promoters.

4. Requirement of Judicial Member in the Authority and Appellate Tribunal:
The petitioners argued that the absence of a Judicial Member in the Authority and the definition of Judicial Member in the Appellate Tribunal were contrary to the principles laid down by the Supreme Court.

Key Findings:
- The court upheld the composition of the Authority under Section 22, finding no requirement for a Judicial Member.
- However, the court severed and struck down the part of Section 46(1)(b) that included a member of the Indian Legal Service who held the post of Additional Secretary as a Judicial Member.
- The court mandated that a two-member Bench of the Tribunal must always include a Judicial Member and that the majority of the Tribunal's members must be Judicial Members.

Conclusion:
The court upheld the constitutional validity of most provisions of RERA, emphasizing the need for regulation in the real estate sector to protect consumer interests and ensure transparency. The court provided a harmonious interpretation of the provisions to balance the rights of promoters and allottees. The requirement of a Judicial Member in the Appellate Tribunal was reinforced, ensuring adherence to judicial principles.