INTRODUCTION:-
The Real Estate (Regulation and Development) Act, 2016 was brought into power on May 2016, it was an act to establish the Real Estate Regulatory Authority whose purpose is the regulation and promotion of real estate sector and to ensure sale of plot, apartment or building or sale of real estate project in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and establish an appellate tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith and incidental thereto. The act includes 92 sections and was enforced in 14 states, including Karnataka.
A common question that arises in the real estate sector is whether the RERA judgments are applicable to transactions concluded before the date of judgement. This question brings up the issue whether real estate projects that were ongoing at the time of implementation of the Real Estate (Regulation and Development) Act, 2016 are also subject to provisions of the act. This also leads to the question as to whether the act is a retroactive act.
WHAT IS RETROACTIVE LAW:-
Black’s Law Dictionary defines a retroactive law as a law “that looks backward or contemplates the past, affecting acts or facts that existed before the act came into effect.”. In simple terms a law which can affect acts or facts which occured before the implementation of the law is a retroactive law. The Supreme Court of India has also defined what retroactive law is. According to the Bench comprising Justice AK Sikri, Justice Ashok Bhushan and Justice S Abdul Nazeer quoted from Advanced Law Lexicon by P. Ramanath Aiyar, “Retroactive- Acting backward; affecting what is past. (Of a statute, ruling, etc.) extending in scope or effecting matters that have occurred in the past. It can also be termed retrospective.
‘Retroactivity’ is a term often used by lawyers but rarely defined. On analysis, it soon becomes apparent, moreover, that it is used to cover at least two distinct concepts. The first, which may be called ‘true retroactivity’, consists in the application of a new rule of law to an act or transaction which was completed before the rule was promulgated. The second concept, which will be referred to as ‘quasi-retroactivity’, occurs when a new rule of law is applied to an act or transaction in the process of completion…. The foundation of these concepts is the distinction between completed and pending transactions….”.
IS RERA ACT A RETROACTIVE LAW:-
In the case of Neelkamal Realtors Suburban Pvt. Ltd. v/s Union of India’s 2017 KC online Bom 9302,The Hon,ble Bombay High Court observed that the Real Estate (Regulation and Development) Act, 2016 is not a retrospective act but rather a retroactive act. In para 122 of the Judgement, the high court quotes:-
“122-We have already discussed that above-stated provisions of the RERA are not retrospective in nature. They may to some extent be having a retroactive or quasi-retroactive effect but then on that ground, the validity of the provisions of RERA cannot be challenged. The Parliament is competent enough to legislate law having retrospective or retroactive effect. A law can be even framed to affect subsisting/existing contractual rights between the parties in the larger public interest. We do not have any doubt in our mind that the RERA has been framed in the larger public interest after a thorough study and discussion made at the highest level by os-wp-2737-17 & ors-RERA-JT.doc the Standing Committee and Select Committee, which submitted its detailed reports. As regards Article19(1)(g) it is settled principles that the right conferred by sub-clause (g) of Article 19 is expressed in general language and if there had been no qualifying provisions like clause (6) the right so conferred would have been an absolute one”. The Bombay High Court clearly states that the act is retroactive or quasi retroactive in nature and the validity of the provision of the act is also further affirmed by the court.
Further in the case of Newtech Promoters and Developers Limited v. State of UP which was argued at The Supreme Court of India. Apart from the technicalities of RERA, one of the issues considered by the Apex Court was whether the Real Estate (Regulation and Development) Act, 2016 is retrospective/retroactive in its operation and what will be its legal consequence if tested on the anvil of the Constitution of India. Following are the key observations of the verdict: –
1. After taking note of the statutory provisions especially Section 3 of the RERA, the court observed that the RERA is retroactive (taking effect from a date in the past) in nature and covers all ongoing projects for which completion certificate has not been issued.
2. The apex court said 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 the rights of the stakeholders, 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.
3. The Supreme Court also made it clear that 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.
4. It was also held by the court that the parliament is always competent to enact any law affecting the antecedent events: Court held that merely because enactment 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.
CONCLUSION:-
The provisions and features of the Real Estate (Regulation and Development) Act, 2016 make it retroactive in nature. The provisions of the act serve as safeguards for the real estate projects which commenced since the passing of the act, but also enforces itself upon ongoing projects existing prior to the date when this act was brought into force. Thus, it is clear that this statute is not retrospective simply because it affects existing rights or its retrospection but because a part of the requisites for its action is drawn from a time prior to its passing.
This blog is written by Varun Nair Vivek, an intern of Smriti Legal LLP
Author Bio
