Testing The Constitutionality Of The Real Estate (Regulation and Development) Act, 2016

by Nikhil Issar

Under Entry 18 of the State List, states can make laws related to land, or rights in or over land; land improvement; and colonization of land. In response to parliamentary questions, the Ministry had stated it is primarily the responsibility of state governments to regulate real estate and that states must monitor real estate projects.[1] However, the scope of this Act is limited to contracts between buyers and promoters, and transfer of property. Both these items fall within the Concurrent List.[2] A government press release also states this position.[3]

Thus, the constitutional basis upon which the Parliament has proposed to legislate this enactment are the following entries in the Concurrent List:

  1. Entry 6: Transfer of property other than agricultural land, registration of deeds, documents.
  2. Entry 7: Contracts, including partnership, agency, contracts of carriage, and other special forms of contracts, but not including contracts relating to agricultural land.
  1. Entry 6 of the Concurrent List would be rendered redundant if Entry 18 of the State List is given complete effect.

Entry 18 of the State List stated that matters relating to “Colonization” of Land lies with the State. A “Colonizer” has been defined to mean “a person who, in a local area; divides the land into plots, with or without developing them and transfers or agrees to transfer them gradually or all at a time, to persons desirous of settling down on those plots by constructing residential or non-residential or composite accommodation”.[4] Thus, it seems that Entry 18 of the State List might conflict with the Real Estate Act, 2016. However, it can be argued that the pith and substance of the legislation is under Entry 7 in List III which applies to special contracts other than “contracts relating to agricultural lands” and Entry 6 which specifically stipulates that transfer of non-agricultural lands would fall within the Concurrent List. Thus, if the term “Colonization” is interpreted to mean “transfer of non agricultural land” then the objective of Entry 6 would be defeated.

In P. Sankaranarayanan Nambiar and Ors. Vs. Union of India (UOI) and Ors[5] the Kerala High Court made the following observation: “There is reason for placing “land” in the State List. “Land” is primarily the State’s concern with its special features, peculiar land tenures, the wide and varying local customs and practices differing from State to State. There may be cases where legislation in respect of land may affect lands in several States. Land legislation is thus an appropriate subject in the concurrent list as well. The entries in List III also admit of a wider connotation. When two interpretations are possible on the width and content of the entries in the various lists in the three lists in the Seventh Schedule, the interpretation that gives life and meaning to all the entries has to be accepted.”

Therefore, in order to give effect to Entry 6 of the Concurrent List the term “Colonization” in Entry 18 of the State List must be interpreted to mean “Colonization of agricultural lands”, otherwise Entry 6 of the Concurrent List would be rendered redundant.

  1. Doctrine of Pith and Substance

It can be argued that with the application of the Doctrine of Pith and Substance it can be observed that the real import of the Real Estate Act, 2016 is to regulate special contracts between promoters and allottees. Therefore, the same would lie under Entry 7 of the Concurrent List. Furthermore, as the Real Estate Act prima facie wishes to regulate transfers relating to non-agricultural lands, the pith and substance of the same must be traced to Entry 6 of the Concurrent List. Therefore, it is submitted that the Real Estate Act, 2016 does not seem to be outside the legislative competency of the Parliament.

  1. Comparison with the Maharashtra Housing (Regulation and Development) Act

It is submitted that the legislative competency of the Act maybe best examined by understanding as to what was the list under which the Maharashtra Housing (Regulation and Development) Act, 2012 had been enacted. The Maharashtra Housing (Regulation and Development) Act had been enacted to “make a comprehensive law to regulate and provide for promotion of the construction, sale, management and transfer of flats on the ownership basis in the State of Maharashtra”. Under the said act the Housing Regulatory Authority and the Housing Appellate Tribunal had to work to “ensure effective implementation of the law and to promote planned and healthy development and construction, sale, transfer and management of flats, residential buildings, and other similar properties, with a view to protecting, on the one hand, public interest in relation to the conduct and integrity of promoters and other persons engaged in the development of such flats, residential buildings and other similar properties, and, on the other, facilitating the smooth and speedy construction and maintenance of such flats, buildings and properties.”[6]

The Objective of the Real Estate (Regulation and Development) Act, 2016 is also “to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, as the case may be, or sale of real estate project, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector’.[7] The scope of this Act is limited to contracts between buyers and promoters, and transfer of property.

Therefore, it can be safely stated that both the Acts occupy the same area. Thus, the Real Estate Act had repealed the Maharashtra Act[8] as the same has been enacted to be a complete code within the sphere.

It is stated that the Maharashtra Act had been passed in 2012 however the same was assented to by the President only in the year 2014.[9] The same was because the provisions of the Maharashtra Act operated in the same field as that of the erstwhile Real Estate Bill of 2011. Thus, according to Article 254(2) of the Constitution of India (which has been extrapolated below):

Where a law made by the Legislature of a State with respect to one of the matters enumerated in the concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State

There was a need for a presidential assent for this Particular Act.

Therefore, it can be concluded that the Maharashtra Act and the Central Act had been enacted under the same field in the Concurrent List; therefore a presidential assent for the Maharashtra Act was necessitated.


Nikhil Issar is a fourth year student at HNLU


endnotes

[1] Lok Sabha, Unstarred Question No. 657, Ministry of Housing and Urban Poverty Alleviation, August, 7, 2013; Lok Sabha, Unstarred Question No. 1564, Ministry of Housing and Urban Poverty Alleviation, August 21, 2012; Lok Sabha, Unstarred Question No. 4707, Ministry of Housing and Urban Poverty Alleviation, May 4, 2012.

[2] . List III (Concurrent List) has the following items. Entry 6: Transfer of property other than agricultural land, registration of deeds, documents. Entry 7: Contracts, including partnership, agency, contracts of carriage, and other special forms of contracts, but not including contracts relating to agricultural land.

[3] “Real Estate Bill to protect the interest of Consumers and Promote Fair Play in Real Estate Transactions”, Press Information Bureau, Ministry of Housing and Urban Poverty Alleviation, June 5, 2013.

[4] Section 24(a), Madhya Pradesh Vinirdishta Bhrashta Acharan Nivaran Adhiniyam, 1982, available at http://www.gad.mp.gov.in/MPVinirdishtaBhrashtaAcharamNivaramAdhiniyam1982.pdf. This Act had been held to be made under Entry 18 of the State List in the case of Pushpak Grah Nirman Sahakari Samiti Vs.  State of Madhya Pradesh, Decided On: 12.04.1994

[5] O.P. Nos. 1798 and 5310 of 1982

[6] http://bombayhighcourt.nic.in/libweb/acts/Stateact/2014acts/2014.02.pdf

[7] http://mhupa.gov.in/writereaddata/Real_Estate_Act_2016.pdf

[8] Section 92, Real Estate (Regulation and Development) Act, 2016

[9] http://www.business-standard.com/article/economy-policy/maharashtra-to-set-up-housing-regulator-in-a-month-115112200366_1.html

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