LEGAL ISSUE: Repugnancy between State and Central laws on the Concurrent List

CASE TYPE: Constitutional Law, Real Estate Regulation

Case Name: Forum for People’s Collective Efforts (FPCE) & Anr. vs. The State of West Bengal & Anr.

Judgment Date: 4 May 2021

Date of the Judgment: 4 May 2021
Citation: (2021) INSC 239
Judges: Dr Justice Dhananjaya Y Chandrachud and Justice M R Shah
Can a state law regulating the real estate sector stand if it mirrors a central law on the same subject? The Supreme Court of India addressed this critical question in a recent judgment, examining the constitutional validity of the West Bengal Housing Industry Regulation Act, 2017 (WB-HIRA) in light of the Real Estate (Regulation and Development) Act, 2016 (RERA). The core issue revolved around whether WB-HIRA, a state law, was repugnant to RERA, a central law, and thus unconstitutional. The Supreme Court, in a landmark decision, declared WB-HIRA unconstitutional, emphasizing the supremacy of parliamentary law in areas of concurrent jurisdiction. The judgment was authored by Dr Justice Dhananjaya Y Chandrachud, with Justice M R Shah concurring.

Case Background

The case originated from a challenge to the constitutional validity of the West Bengal Housing Industry Regulation Act, 2017 (WB-HIRA). Before the enactment of RERA in 2016, several states had their own laws regulating the real estate sector. Among them was the West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993 (WB 1993 Act), which received Presidential assent on 9 March 1994. Other states, like Maharashtra and Kerala, also had similar laws.

The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced in the Rajya Sabha on 14 August 2013, passed by both houses of Parliament in March 2016, and received Presidential assent on 25 March 2016. It was partially enforced on 1 May 2016 and fully enforced on 19 April 2017. Following this, Maharashtra and Kerala repealed their state laws.

In West Bengal, despite framing draft rules under RERA on 18 August 2016, no further progress was made. Instead, the state legislature passed the WB-HIRA Bill, which received the Governor’s assent on 17 October 2017 and was enforced on 29 March 2018, repealing the WB 1993 Act. This led to the present challenge, arguing that WB-HIRA was unconstitutional due to its conflict with RERA.

Timeline

Date Event
9 March 1994 West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993 received Presidential assent.
14 August 2013 The Bill for enactment of the RERA was introduced in the Rajya Sabha.
25 March 2016 RERA received the assent of the President.
1 May 2016 RERA was partially enforced.
18 August 2016 Draft rules under the RERA were framed in West Bengal.
19 April 2017 The rest of the provisions of RERA were enforced.
16 August 2017 The motion for passing the WB-HIRA Bill was adopted in the State Legislative Assembly.
17 October 2017 WB-HIRA received the assent of the Governor of West Bengal.
29 March 2018 Remaining provisions of WB-HIRA were enforced.
8 June 2018 The State of West Bengal framed rules under WB-HIRA.

Course of Proceedings

The case was initiated as a writ petition under Article 32 of the Constitution, challenging the constitutional validity of WB-HIRA. The petitioners argued that WB-HIRA was repugnant to RERA, as both laws related to subjects in the Concurrent List and WB-HIRA had not received Presidential assent. The Supreme Court heard arguments from all parties, including the petitioners, the Union of India, and the State of West Bengal, before delivering its verdict.

Legal Framework

The core legal issue revolved around the interpretation of Article 254 of the Constitution, which deals with inconsistencies between laws made by Parliament and laws made by the legislatures of States. Both RERA and WB-HIRA were enacted under Entries 6 and 7 of the Concurrent List, which pertain to the transfer of property and contracts, respectively.

Key provisions of RERA and WB-HIRA, such as those related to registration of real estate projects, functions and duties of promoters, rights and obligations of allottees, and establishment of regulatory authorities, were analyzed. The court also considered Sections 88 and 89 of RERA, which deal with the application of other laws and overriding effect of RERA, respectively.

The court also examined the definitions of key terms such as “real estate project” (Section 2(zn) of RERA), “apartment” (Section 2(e) of RERA), “common areas” (Section 2(n) of RERA), and “promoter” (Section 2(zk) of RERA) to understand the scope and ambit of both the central and state laws.

Arguments

G.1 For the petitioners

  • ✓ RERA is a comprehensive code regulating the real estate sector, and WB-HIRA is a replica of RERA, encroaching on an occupied field.
  • ✓ WB-HIRA is repugnant to RERA due to inconsistencies and a lack of Presidential assent.
  • ✓ The State government changed its stance, initially claiming WB-HIRA was under Entry 24 of List II (housing industry) but later conceding it falls under Entries 6 and 7 of List III.
  • ✓ Sections 88 and 89 of RERA do not permit states to create parallel regimes without Presidential assent.
  • ✓ The State was under a constitutional mandate to act under Article 256 rather than enacting its own law without Presidential assent under Article 254(2).
  • ✓ Upon the declaration of WB-HIRA as unconstitutional, the 1993 legislation in West Bengal may also be declared as repealed.

G.2 For the Union of India

  • ✓ RERA was enacted to protect consumers, ensure uniformity, and standardize business practices in the real estate sector.
  • ✓ WB-HIRA is a parallel regime that is substantially identical to RERA.
  • ✓ There are direct conflicts between RERA and WB-HIRA, especially in the definitions of “car parking area”, “garage,” and “force majeure.”
  • ✓ RERA was intended to be a comprehensive code, and WB-HIRA obstructs its implementation.
See also  Supreme Court Upholds Extension for Sugar Factory, Prioritizing Economic Factors and Farmer Welfare: Swami Samarth Sugars vs. Loknete Marutrao Ghule Patil (2022) INSC 604 (13 July 2022)

G.3 For the State of West Bengal

  • ✓ RERA does not cover the whole field and is not exhaustive, as it relies on state laws for sanctioned plans and completion certificates.
  • ✓ WB-HIRA is complementary to RERA and not repugnant, as substantial identity does not constitute inconsistency.
  • ✓ Sections 88 and 89 of RERA allow for co-existence with other laws, and the expression “for the time being in force” includes future laws.
  • ✓ The inconsistencies between WB-HIRA and RERA are minor and do not warrant striking down the state law.
Main Submission Sub-Submissions (Petitioners) Sub-Submissions (Union of India) Sub-Submissions (State of West Bengal)
Nature of RERA and WB-HIRA
  • RERA is a complete code.
  • WB-HIRA is a replica of RERA.
  • RERA regulates contracts and property transfers.
  • RERA aims for uniformity and transparency.
  • WB-HIRA creates a parallel regime.
  • RERA is a central legislation.
  • RERA is not exhaustive.
  • RERA relies on state laws.
  • WB-HIRA is complementary to RERA.
Repugnancy
  • Subject matter is in the Concurrent List.
  • WB-HIRA not under Entry 24, List II.
  • WB-HIRA lacks Presidential assent.
  • Direct conflicts exist.
  • RERA is intended to be exhaustive.
  • WB-HIRA obstructs RERA’s operation.
  • No real conflict.
  • State law is complementary.
  • WB-HIRA is substantially similar to RERA.
State’s Change of Stance
  • Initially claimed under Entry 24, List II.
  • Now concedes to Entries 6 and 7, List III.
  • Governor was not informed of RERA.
  • State government’s stand is incorrect.
  • WB-HIRA intends to regulate housing sector.
  • WB-HIRA is a State legislation.
  • State has the power to legislate.
Effect of Sections 88 and 89 of RERA
  • State cannot bypass Presidential assent.
  • RERA impliedly repeals overlapping provisions.
  • Uniform national law is essential.
  • Sections 88 and 89 cannot be isolated.
  • State law obstructs RERA.
  • RERA and other laws can co-exist.
  • Sections 88 and 89 allow for co-existence.
  • Parliament did not repeal all State laws.
  • State has plenary legislative powers.
Applicability of Article 256
  • State should have acted under Article 256.
  • Parallel regime causes inconvenience.
  • State shifted role from delegate to delegator.
  • State law obstructs RERA.
  • State law must yield to central law.
  • Union government cannot direct State legislature.
  • WB-HIRA follows cooperative federalism.
Effect of striking down WB-HIRA
  • 1993 Act may be declared repealed.
  • Section 86 of WB-HIRA may be severed.
  • WB-HIRA is valid.

Issues Framed by the Supreme Court

  1. Whether WB-HIRA is constitutionally valid given the existence of RERA?
  2. Whether WB-HIRA is repugnant to RERA, and if so, what is the effect of such repugnancy?

Treatment of the Issue by the Court

Issue Court’s Treatment
Whether WB-HIRA is constitutionally valid given the existence of RERA? The Court held that WB-HIRA is unconstitutional as it is repugnant to RERA and lacks Presidential assent. The court emphasized that WB-HIRA was enacted on the same subject matter as RERA and was not a complimentary legislation.
Whether WB-HIRA is repugnant to RERA, and if so, what is the effect of such repugnancy? The Court concluded that WB-HIRA is indeed repugnant to RERA, as it creates a parallel regime and conflicts with the central law. The effect of this repugnancy is that WB-HIRA is void to the extent of the inconsistency.

Authorities

Cases Relied Upon by the Court:

Case Name Court Legal Point How it was used
Tika Ram Ji v State of UP, (1956) SCR 393 Supreme Court of India Definition of ‘industry’ Explained that the term ‘industry’ does not include raw materials or distribution of products.
Calcutta Gas Co. Ltd. v State of West Bengal, (1962) Supp. 3 SCR 1 Supreme Court of India Definition of ‘industry’ Reiterated that the term ‘industry’ should be given the same meaning in all the three lists.
ITC Ltd. v Agricultural Produce Market Committee & Ors., (2002) 9 SCC 232 Supreme Court of India Definition of ‘industry’ Reaffirmed the principles laid down in Tika Ram Ji regarding the meaning of ‘industry’.
Accountant and Secretarial Services Pvt. Ltd. v UOI (1988) 4 SCC 324 Supreme Court of India Definition of ‘industry’ Clarified that the term ‘industry’ does not have a wide meaning.
Ashoka Marketing Ltd. v Punjab National Bank, (1990) 4 SCC 406 Supreme Court of India Definition of ‘industry’ Reiterated that the term ‘industry’ does not have a wide meaning.
Indu Bhushan Bose v Rama Sundari Debi, (1969) 2 SCC 289 Supreme Court of India Definition of ‘industry’ Reiterated that the term ‘industry’ does not have a wide meaning.
Zaverbhai Amaldas vs State of Bombay, (1955) 1 SCR 799 Supreme Court of India Repugnancy of Laws Discussed the concept of repugnancy and the rule of implied repeal.
Deep Chand vs State of UP, (1959) Supp (2) SCR 8 Supreme Court of India Repugnancy of Laws Explained the three tests of repugnancy.
State of Orissa vs M/s M A Tulloch, (1964) 4 SCR 461 Supreme Court of India Repugnancy of Laws Held that a later law can impliedly repeal an earlier law if they occupy the same field.
M Karunanidhi vs Union of India, (1979) 3 SCC 431 Supreme Court of India Repugnancy of Laws Formulated the principles governing repugnancy.
Hoechst Pharmaceuticals Ltd. vs State of Bihar, (1983) 4 SCC 45 Supreme Court of India Repugnancy of Laws Clarified that Article 254(1) applies only when both laws are in the Concurrent List.
State of Kerala vs Mar Appraem Kuri Company Ltd., (2012) 7 SCC 106 Supreme Court of India Repugnancy of Laws Held that a central law can occupy the entire field, thus making a state law repugnant.
Innoventive Industries Ltd. vs ICICI Bank, (2018) 1 SCC 407 Supreme Court of India Repugnancy of Laws Reiterated the three tests of repugnancy.
M D Frozen Foods Exports Private Limited vs Hero Fincorp Limited, (2017) 16 SCC 741 Supreme Court of India Interpretation of “in addition to and not in derogation of” Held that a statute can be in addition to another, without being in derogation.
KSL and Industries Limited vs Arihant Threads Limited, (2015) 1 SCC 166 Supreme Court of India Interpretation of “in addition to and not in derogation of” Held that a statute can co-exist with another when it is in addition to and not in derogation of it.
Pioneer Urban Land and Infrastructure Limited vs Union of India, (2019) 8 SCC 416 Supreme Court of India Interpretation of “in addition to and not in derogation of” Held that remedies under RERA are additional and not exclusive.
Sasanka Sekhar Maity vs Union of India, (1980) 4 SCC 716 Supreme Court of India Interpretation of “law for the time being in force” Held that “law for the time being in force” includes laws enacted later.
Thyssen Stahlunion GMBH vs Steel Authority of India, (1999) 9 SCC 334 Supreme Court of India Interpretation of “law for the time being in force” Held that “law for the time being in force” includes laws in force at the time of the arbitration proceedings.
Municipal Corporation of Delhi vs Prem Chand Gupta, (2000) 10 SCC 115 Supreme Court of India Interpretation of “law for the time being in force” Held that “law for the time being in force” means rules in force from time to time.
Yakub Abdul Razak Memon vs State of Maharashtra, (2013) 13 SCC 1 Supreme Court of India Interpretation of “law for the time being in force” Held that “law for the time being in force” includes laws in existence and laws enacted later.
Union Territory of Chandigarh vs Rajesh Kumar Basandhi, (2003) 11 SCC 549 Supreme Court of India Interpretation of “law for the time being in force” Held that the meaning of “for the time being” depends on the context.
Department of Customs vs Sharad Gandhi, (2020) 13 SCC 521 Supreme Court of India Interpretation of “law for the time being in force” Held that “law for the time being in force” must be construed ejusdem generis.
National Insurance Company Limited vs Sinitha, (2012) 2 SCC 356 Supreme Court of India Interpretation of “law for the time being in force” Held that “law for the time being in force” in Section 144 of the Motor Vehicles Act would not override Section 163A of the same Act.
Rajiv Sarin v. State of Uttarakhand, (2011) 8 SCC 708 Supreme Court of India Presidential Assent and Article 254(2) Held that Presidential assent requires pointed attention to the repugnancy between the central and state laws.
See also  Supreme Court Upholds US Court Order in Child Custody Case: Arathi Bandi vs. Bandi Jagadrakshaka Rao (2013)

Legal Provisions Considered by the Court:

Provision Description How it was used
Article 32 of the Constitution of India Right to constitutional remedies Used as basis for the writ petition challenging WB-HIRA.
Article 246 of the Constitution of India Subject matter of laws made by Parliament and by the Legislatures of States Discussed the legislative powers of the Union and the States.
Article 254 of the Constitution of India Inconsistency between laws made by Parliament and laws made by the Legislatures of States The core provision on which the decision on repugnancy was based.
Entries 6 and 7 of List III of the Seventh Schedule of the Constitution Concurrent List entries related to transfer of property and contracts Determined the legislative competence of both RERA and WB-HIRA.
Section 2(g) of RERA Definition of “appropriate government” Explained the role of the State government in implementing RERA.
Section 2(m) of RERA Definition of “commencement certificate” Recognized the existence of local laws governing construction.
Section 2(p) of RERA Definition of “competent authority” Recognized the existence of local authorities under State laws.
Section 2(zq) of RERA Definition of “sanctioned plan” Recognized the existence of town and country planning laws.
Section 2(q) of RERA Definition of “completion certificate” Recognized the role of local authorities in issuing completion certificates.
Section 2(zc) of RERA Definition of “local authority” Recognized the existence of municipal and local bodies.
Section 2(zf) of RERA Definition of “occupancy certificate” Recognized the role of local authorities in issuing occupancy certificates.
Section 2(zr) of RERA Definition of words and expressions used but not defined in RERA Recognized the applicability of other laws.
Section 3 of RERA Prior registration of real estate project with Real Estate Regulatory Authority Discussed the mandatory requirement of registration.
Section 4 of RERA Application for registration of real estate projects Discussed the procedure for registration.
Section 5 of RERA Grant of registration Discussed the procedure for grant of registration.
Section 6 of RERA Extension of registration Discussed the conditions for extension of registration.
Section 7 of RERA Revocation of registration Discussed the conditions for revocation of registration.
Section 8 of RERA Obligation of Authority consequent upon lapse of or on revocation of registration Discussed the powers of the authority upon revocation.
Section 9 of RERA Registration of real estate agents Discussed the registration of real estate agents.
Section 11 of RERA Function and duties of promoter Discussed the obligations of promoters.
Section 12 of RERA Obligations of promoter regarding veracity of the advertisement or prospectus Discussed the obligations of promoters.
Section 13 of RERA No deposit or advance to be taken by promoter without first entering into agreement for sale Discussed the obligations of promoters.
Section 14 of RERA Adherence to sanctioned plans and project specifications by the promoter Discussed the obligations of promoters.
Section 18 of RERA Return of amount and compensation Discussed the obligations of promoters.
Section 19 of RERA Rights and duties of allottees Discussed the rights of allottees.
Section 20 of RERA Establishment and incorporation of Real Estate Regulatory Authority Discussed the establishment of the authority.
Section 21 of RERA Composition of Authority Discussed the composition of the authority.
Section 26 of RERA Removal of Chairperson and Members from office in certain circumstances Discussed the removal of the authority.
Section 28 of RERA Officers and other employees of Authority Discussed the officers and employees of the authority.
Section 31 of RERA Filing of complaints with the Authority or the adjudicating officer Discussed the procedure for filing complaints.
Section 32 of RERA Functions of Authority for promotion of real estate sector Discussed the functions of the authority.
Section 38 of RERA Powers of Authority Discussed the powers of the authority.
Section 41 of RERA Establishment of Central Advisory Council Discussed the establishment of the Central Advisory Council.
Section 42 of RERA Functions of Central Advisory Council Discussed the functions of the Central Advisory Council.
Section 70 of RERA Compounding of Offences Discussed the compounding of offences.
Section 71 of RERA Power to adjudicate Discussed the power to adjudicate compensation.
Section 74 of RERA Grants and loans by State Government Discussed the grants and loans by the state government.
Section 75 of RERA Constitution of Fund Discussed the constitution of the Real Estate Regulatory Fund.
Section 77 of RERA Budget, accounts and audit Discussed the budget, accounts and audit.
Section 78 of RERA Annual report Discussed the annual report.
Section 82 of RERA Power of appropriate Government to supersede Authority Discussed the power of the appropriate government to supersede the authority.
Section 83 of RERA Powers of appropriate Government to issue directions to Authority and obtain reports and returns Discussed the power of the appropriate government to issue directions to the authority.
Section 84 of RERA Power of appropriate Government to make rules Discussed the power of the appropriate government to make rules.
Section 85 of RERA Power to make regulations Discussed the power of the authority to make regulations.
Section 88 of RERA Application of other laws not barred Discussed the application of other laws.
Section 89 of RERA Act to have overriding effect Discussed the overriding effect of RERA.
Section 92 of RERA Repeal Discussed the repeal of the Maharashtra Housing Act.
Section 2(i) of WB-HIRA Definition of “car parking area” Discussed the definition of car parking area.
Section 2(x) of WB-HIRA Definition of “garage” Discussed the definition of garage.
Section 2(y) of WB-HIRA Definition of “force majeure” Discussed the definition of force majeure.
Section 86 of WB-HIRA Repeal and savings Discussed the repeal and saving clauses.
See also  Supreme Court Refuses to Transfer Arbitration Case Based on Territorial Jurisdiction: Neilan International Co. Ltd. vs. Powerica Limited & Ors. (2022)

Decision

The Supreme Court declared the West Bengal Housing Industry Regulation Act, 2017 (WB-HIRA) to be unconstitutional. The court held that WB-HIRA was repugnant to the Real Estate (Regulation and Development) Act, 2016 (RERA), a central law, and thus void to the extent of the inconsistency. The court emphasized that since both laws were on subjects in the Concurrent List and WB-HIRA had not received Presidential assent, RERA would prevail. The court also held that WB-HIRA was not merely a complementary law but a parallel regime that substantially overlapped with RERA.

Ratio Decidendi

The ratio decidendi of the case is based on the principle of repugnancy between central and state laws under Article 254 of the Constitution. The court held that when a central law and a state law operate on the same subject in the Concurrent List, the central law prevails. The court emphasized that the state law must be consistent with the central law, and if it is not, it must receive Presidential assent to be valid. The court also clarified that the phrase “for the time being in force” in Section 88 of RERA does not allow for the enactment of parallel state laws without Presidential assent.

Obiter Dicta

The court observed that the state government’s initial stance that WB-HIRA was under Entry 24 of List II (housing industry) was incorrect. The court clarified that the subject matter of both RERA and WB-HIRA falls under Entries 6 and 7 of List III (transfer of property and contracts). The court also noted that the State government did not bring the existence of RERA to the attention of the Governor when seeking assent for WB-HIRA.

The court also observed that the state government cannot use Section 88 of RERA to enact a parallel regime without obtaining Presidential assent. The court clarified that the intention of RERA was to create a uniform national law, and state laws should complement and not obstruct this objective.

Conclusion

The Supreme Court’s decision in this case is a significant landmark judgment on the issue of repugnancy between central and state laws. It reaffirms the supremacy of parliamentary law in areas of concurrent jurisdiction and emphasizes the need for state laws to be consistent with central laws. The judgment has far-reaching implications for the real estate sector, ensuring uniformity and standardization in the regulation of real estate projects across the country. It also underscores the importance of obtaining Presidential assent for state laws that may conflict with central laws on the Concurrent List.

The decision also highlights the importance of cooperative federalism, where states and the Union should work together to implement central laws effectively, rather than creating parallel regimes that may cause confusion and inconsistency.

Flowchart of the Legal Process

Enactment of RERA (2016)
↓
Enactment of WB-HIRA (2017)
↓
Challenge to WB-HIRA in Supreme Court
↓
Supreme Court Declares WB-HIRA Unconstitutional (2021)

Source: A Landmark Judgment on Repugnancy of State Laws