04 May 2121

Overlapping of subject matter between central and state law leads to repugnancy under article 254 of the constitution - Supreme Court of India

Case : Forum for People’s Collective Efforts (FPCE) & Anr. v. The State of West Bengal and Anr. Writ Petition (C) No. 116 of 2019

Court : Supreme Court of India

Bench : Justice Dr. Dhananjaya Y Chandrachud and M. R. Shah

Decided on : 04 May 2121

Relevant Statutes

Article 246 and 254 of the Constitution of India

Section 88 and 89 of The Real Estate (Regulation and Development) Act, 2016

Brief Facts and Procedural History

1. Many state legislature has enacted several laws to regulate the relationship between promoters and purchasers of real estate among them was the West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993, this act also received presidential assent and was published in Official Gazette in 1994. Many other states also enacted laws like Maharashtra and Kerala.

2. In the year 2013 bill for the enactment of The Real Estate (Regulation and Development) Bill, 2016 was introduced in the Rajya Sabha and was passed by Rajya Sabha and Lok Sabha both and received presidential assent on 25th March 2016 and was published in the Official Gazette. Next day the Maharashtra act was repealed by The Real Estate (Regulation and Development) Act, 2016 and a State Legislative Assembly of Kerala repealed earlier law and the State of West Bengal Rules were drafted under The Real Estate (Regulation and Development) Act, 2016 but no further progress was made. On 16th August 2017 motion for passing West Bengal Housing Industry Regulation Act, 2017 was introduced in the legislative assembly and received ascent of governor in October 2017 and also repealed West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993. 

3. The Court looked into the legislative process while passing The Real Estate (Regulation and Development) Act, 2016 and noted down that it was introduced after the standing committee on Urban Development submitted its 13th report relating to real estate and the committee emphasized the need for comprehensive legislation to regulate the real estate sector. When The Real Estate (Regulation and Development) Bill was introduced in Rajya Sabha it was referred to 21 member Standing committee which held 17 settings in different parts of the country and 445 persons appear before this Select Committee from different categories and groups of stakeholders for giving suggestions. After these suggestions were noted, the committee pointed out the grievances of consumers and many of which were duped by unscrupulous promoters and were made to run from pillar to post to secure possession of apartments that were agreed to be sold or a refund of their money.

4. The committee after observing all the concerns of the consumer noted down that the real estate sector was largely being developed through promoters all of whom could not be tarred with the same brush. There was a need to ensure that a renewed impetus is provided for the growth of the real estate sector to fulfil the government subjective of ensuring house for all and at the same time protecting the interest of the consumer 

5. Following this report The Real Estate (Regulation and Development) Bill, 2016 was introduced the object of which is to regulate the real estate sector which adequately addresses all the concerns of buyers and the promoter in that sector and the main objective of this will be the interest of effective protection, uniformity and standardization of business practices and transactions in the real estate sector

The Issue of the Case

Whether the West Bengal Housing Industry Regulation Act, 2017 is constitutionally valid?

The Observations of the Court

1. The Honourable Supreme Court started analysis with the point that West Bengal Housing Industry Regulation Act, 2017 is intended to cover which field for that court refer to statement of objective and reason of West Bengal Housing Industry Regulation Act, 2017 which clearly mentioned, “an act to stabilize housing industry, regulating authority for regulation and promotion of housing sector” and further court referred to counter affidavit where defence counsel dwells on entry 24 of the state list and mentions that,

a. housing as an industry falls to entry 24 of the state list

b. entry 24 is subject to the provision of entries 7 and 52 of list 1

c.there is no declaration by parliament within the meaning of entry 7 or 52

2. Therefore, the West Bengal Housing Industry Regulation Act, 2017 falls within the ambit of ‘industry’ in entry 24 of the state list and argued that entries 6 and 7 of the concurrent list would not cover the subject of ‘housing industry’ since the field covered by this industry merely enables the manner and mode in which the properties to be transferred and contracts are to be executed.

3. The Honourable Supreme Court noted down that these submissions that the claim of West Bengal Housing Industry Regulation Act, 2017 and being referable to entry 24 of the state list as it deals with housing industry is not accurate and is not being pressed. The Honourable Supreme Court referred to the submission made by defense counsel referring to case Tika Ramji v. State of Uttar Pradesh, AIR 1956 SC 676, and noted down that this judgment was followed by the by a judgment of constitution bench in Calcutta Gas Company v. State of West Bengal, 1962 AIR 1044, which held that the expression industry in all the three list must be given the same meaning and further referred to another judgment of ITC limited v. Agricultural Product Market Committee wherein court re-iterated the principle laid down in Tika Ramji v. State of Uttar Pradesh, AIR 1956 SC 676 and finally came to the conclusion that it is still very much settled that, “the ambit of entry 24 of list 2 to the Seventh schedule there is no doubt that the object of West Bengal enactment is not industry wherein the meaning of entry 24 and both the central legislation The Real Estate (Regulation and Development) Act, 2016 and the state legislation West Bengal Housing Industry Regulation Act, 2017  have substantially similar provisions and both the state law and the central law provide for remedial measures to enforce compliance with contractual rights and corresponding obligations thus it has been rightly pointed out that the subject of both the legislations falls under entry 6 and 7 Of the Concurrent list.”

4. The Honourable Supreme Court further moving onto the constitutional scheme of article 254 and repugnancy noted down that distribution of legislative power, we saw that parliament relation extends to the entire territory of India while state legislation extends the law to the whole or any part of the state and court referred to the salient feature of article 246 which were:

a. An exclusive power has been interested to parliament to legislate on matters enumerated in list one

b. State legislature has exclusive power to make laws for the state for the matter in list two

c. Clause 1 and 2 of Article 246 employ non-obstante provision in respect of exclusive power interested to parliament over list 1 and power interested to parliament over list 3.

5. The Honourable Supreme Court while referring to article 254 pointed out that clause 1, provides that in the event of repugnancy between a law enacted by state legislatures and provision of law made by parliament which is competent to enact with respect to a matter enumerated in the concurrent list, the law enacted by parliament is to prevail, whether it was enacted before or after the state law and referred to the case of Zaver Bhai Amol Das v. State of Bombay, 1954 AIR 752, wherein Justice Venkatarama Aiyer, noted down that if the later legislation does not deal with the matter of earlier legislation then article 254(2) will have no application and the principle laid down is very clear that when there is legislation covering the same ground both with centre and state and both of them being competent to enact then the centre should prevail over the law of a state.

6. Further, The Honourable Supreme Court referred to the decision in Deep Chand v. State of Uttar Pradesh, 1959 AIR 648, wherein court while referring to Tika Ramji v. State of Uttar Pradesh, AIR 1956 SC 676 and Zaver Bhai Amol Das v. State of Bombay, 1954 AIR 752, cited the three pre-longed test of repugnancy formulated by Nicholas in the text of Australian constitution and finally Justice Subbarao noted down that; “Repugnancy between two statutes can be ascertained from three principles

a. Whether there is direct conflict between them

b. Weather parliament and intended to lay down an exhaustive code

c. Whether the law made by parliament and state legislature occupies the same field”

6. The Honourable Supreme Court also referred to the judgment in a State of Orissa v. M/s M A Tulloch, 1964 AIR 1284, wherein court noted down that, “the only criterion to decide repugnancy is not only based on whether to legislation contain contradictory provision but also if a competent legislature passes a law with an intent to cover the whole field then the enactment of other legislature whether before or after would be considered repugnant.”

7. The Honourable Supreme Court referred to its various precedents like M Karunanidhi v Union of India, 1979 AIR 898, Hoechst Pharmaceuticals Limited v. State of Bihar, AIR 1983 SC 1019, State of Kerala v. Mar Appraem Kuri Company Limited, (2012) 7 SCC 149, Innoventive Industry Limited v. ICICI Bank, (2018) 1 SCC. 407, finally came to the conclusion that “a law made by the legislature of a state can be considered to be repugnant to a provision of law made by parliament whether respect to one of the matters in the concurrent list which parliament is competent to enact. Article 254 has employed the expression repugnant while providing that law enacted by the legislature of a state which is repugnant to a law enacted by parliament or an existing law on a matter within the concurrent list shall, if it has received the assent of the president, prevails in the state”. Court contemplated three types of repugnancy:

a. A situation of an absolute conflict why do in provisions contain any state legislation and parliament law weather friends to concurrent list this brings direct collision

b.The second situation is when parliament has enacted with the intent to occupy the whole field

c. Third is when the law made by parliament and by legislature regulates the same subject

8. The Honourable Supreme Court while looking into the repugnancy between The Real Estate (Regulation and Development) Act, 2016 and West Bengal Housing Industry Regulation Act, 2017 notice that for union territories the word “appropriate government” as defined in section 2(g) is bifurcated into three categories,

a. a union territory without legislature

b. the union territory of Puducherry and

c. the union territory of Delhi

9. And looked into various provisions enshrined in section 2 of the Real Estate (Regulation and Development) Act, 2016 and noted down that these provisions are indicative of the fact that parliament was very much aware of the position that various activities regarding the construction of the project are governed by municipal and local legislation and all the definitions which court have referred have clearly indicated that the existence of state legislation which governs and regulates construction activities through municipal bodies and The Real Estate (Regulation and Development) Act, 2016 has not attempted to remove these state enactment and therefore has followed the distribution of legislative powers.

10. And their other aspect of The Real Estate (Regulation and Development) Act, 2016 which is to be looked into is that it has a diverse provision which is regulated and enforced by real estate regulatory authority which is constituted under section 20 by the appropriate government, which under section 2(g) means the state government and besides all these provisions of The Real Estate (Regulation and Development) Act, 2016 it also provides for the establishment of Real Estate Appellate Tribunal by the appropriate government in Chapter 7.

11. The Honourable Supreme Court considers it necessary to analyze the provision of section 88 and 89 of The Real Estate (Regulation and Development) Act, 2016 and observed that section 88 talks about ‘application of other laws not barred’ and at the same time section 89 provides for ‘overriding effect to the provision of The Real Estate (Regulation and Development) Act, 2016’. Court referred to the counter affidavit and arguments from the side of West Bengal that West Bengal Housing Industry Regulation Act, 2017 falls within their ambit of list two of the 7th schedule but now the submissions of West Bengal accepts that in any sense the West Bengal Housing Industry Regulation Act, 2017 contains substantial overlap with The Real Estate (Regulation and Development) Act, 2016  and is the law which state legislature has enacted in the exercise of its legislative authority under article 246(2) while legislating on the subject in the concurrent list.

12. The Honourable Supreme Court while evaluating section 88 of The Real Estate (Regulation and Development) Act, 2016 refer to the judgment of M D Frozen Foods Exports Private Limited v. Hero Fincorp Limited, (2017) 16SCC 741, wherein the court while looking into the meaning of, ‘act to override other laws’ and ‘application of other laws not barred’ observed that SARFAESI act provides a remedy in addition to the provision of Arbitration Act and SARFAESI proceedings are in the nature of enforcement proceedings while arbitration is an adjudicatory proceeding. Court further referred to KSL and Industries Limited v. Arihant Threads Limited, [2008] INSC 1421 and Pioneer Urban Land & Infrastructure Limited v. Union of India, 2019 SCC OnLine SC 1005 noted down that,  “notwithstanding the non-obstante clause contained in  Recovery of Debt and Due to Banks and Financial Institutions act which was later in time then the non-obstante clause in the Sick Industries Companies Act, 1985 and the principle that the later act would prevail over the earlier was departed only because of the presence of provisions like section 88 of The Real Estate (Regulation and Development) Act, 2016 which made it clear that act was meant to be in addition and not in derogation of other statutes where court finally held that the Real Estate (Regulation and Development) Act, 2016 and IBC must be held to coexist and in the event of clash The Real Estate (Regulation and Development) Act, 2016 must give way to Insolvency and Bankruptcy Code.”

13. The Honourable Supreme Court while considering the meaning of ‘law for the time being in force’ referred to previous judgments of Sasanka Sekhar  Maity v. Union of India, 1981 AIR 522, Thyssen Stahlion GMBH v Steel Authority of India Limited, AIR 2002 Delhi 255, Municipal Corporation of Delhi v Prem Chand Gupta, Yakub Abdul Razak Memon v. State of Maharashtra, 2015 (4) SCALE 649, Union Territory of Chandigarh v. Rajesh Kumar Basandhi, 2004 (1) SCT 680, Department of Customs v. Sharad Gandhi, came to the conclusion that the expression ‘any other law for the timing in force’ does not only mean that such laws were in existence when the statutory provision was enacted but it also means that such laws which may come into existence at a later stage and finally observed that the statutory context and the scheme will determine the nature and extent of the expression ‘any other law for the time being in force’. In the case of The Real Estate (Regulation and Development) Act, 2016 the expression ‘law for the time being in force’ as used in various sections mentions that words and expressions which are not defined in any law for the time being in force shall have the meaning assigned to them in that law.

14. The Honourable Supreme Court from all the above discussion and after the comparison of The Real Estate (Regulation and Development) Act, 2016 and West Bengal Housing Industry Regulation Act, 2017, pointed out:

a. There is a significantly large part of the West Bengal Housing Industry Regulation Act, 2017which overlaps with The Real Estate (Regulation and Development) Act, 2016

b. The West Bengal Housing Industry Regulation Act, 2017does not compliment the Real Estate (Regulation and Development) Act, 2016 especially by enacting those provisions which are regarded as in addition to the obligation and remedies created by the central government,

15. Finally deciding on the recognition part and observing three different perspectives of repugnancy noted down that the present case is not one where West Bengal Housing Industry Regulation Act, 2017deals not with the matters which form the subject matter of parliamentary legislation what the other enactment matter of cognate and allied nature but on the contrary West Bengal Housing Industry Regulation Act, 2017 occupy the same subject matter as provided in the parliamentary legislation which is constitutionally impermissible.

16. With respect to section 88 of The Real Estate (Regulation and Development) Act, 2016, the Honourable Supreme Court observed that parliament never waste to house to the lady power of a state and agreement to enact laws on cognate and delete subject or in other words can be said that space which is left by The Real Estate (Regulation and Development) Act, 2016 can be legislated upon by state legislature but only up to incidental or cognate matters but what the state legislature in the present case has done is not to enact cognate or a little isolation but has overlapped and is identical to the parliamentary law the state legislature is enclosed upon the legislative authority of parliament and is plainly unconstitutional.

17. The Honourable Supreme Court finally looked into the argument of lack of presidential assent for West Bengal Housing Industry Regulation Act, 2017 under article 254(2) and refers to the constitution bench judgment of Rajiv Sareen v. The State of Uttarakhand, (2011) 8 SCC 708, wherein court observed that for repugnancy under article 254, there are 2 requirements;

a. there has to be repugnancy

b. Presidential accent has to be held as being non-existence hence it is clear that West Bengal Housing Industry Regulation Act, 2017 did not have a presidential accent and was repugnant to The Real Estate (Regulation and Development) Act, 2016 under Article 254.

18. The Honourable Supreme Court came to the conclusion that West Bengal Housing Industry Regulation Act, 2017 is recognized to the provisions of The Real Estate (Regulation and Development) Act, 2016 and also West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993also stand repealed upon the enactment of The Real Estate (Regulation and Development) Act, 2016 in accordance with section 88 and 89 read with 254(1) of the Constitution. 

The Decision Held by the Court

1. The Honourable Supreme Court held that the West Bengal Housing Industry Regulation Act, 2017 is unconstitutional and is repugnant as per Article 254 of the Constitution.

2. Therefore, the West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993 stands repealed.

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