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Monday, November 15, 2021

RERA is Retroactive and not Retrospective - Views of the Supreme Court

 



INTRODUCTION

 

Today, I will talk about the case of Newtech Promoters and Developers Pvt. Ltd. v. State of UP & Others, 2021 SCC OnLine SC 1044, wherein the Hon’ble Supreme Court discussed about the constitutional validity of the Real Estate (Regulation and Development) Act, 2016 (in short, “RERA”).

 

QUESTION OF LAW

 

The Court had framed five questions of law with respect to the constitutional validity of RERA. On the present show, we will be discussing the first question that is concerned with the retrospective or retroactive applicability of RERA. The Court had asked: -

 

“Whether the Act of 2016 is retrospective or retroactive in its operation and what will be its legal consequence if tested on the anvil of the Constitution of India?”

 

In order to understand the answer to this question, let us go through the pertinent observations by the Court.

  

OBSERVATIONS BY THE COURT

 

Firstly, the Court differentiated between retrospectivity and retroactivity. According to the Court, “retrospective means looking backward, contemplating what is past, having reference to a statute or things existing before the statute in question” and a “retrospective law means a law which looks backward or contemplates the past; one, which is made to affect acts or facts occurring, or rights occurring, before it comes into force.” In contrast, retroactive signifies “characteristic or event which happened in the past or requisites which had been drawn from antecedent events” and “retroactive statute means a statute, which creates a new obligation on transactions or considerations or destroys or impairs vested rights.” Further, a retroactive statute operates in futuro and “its operation is based upon the character or status that arose earlier.”

 

Secondly, the Court observed that merely because a legislation is made retroactive in its operation, “it cannot be said to be 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 pre-existing contract and rights executed between the parties in the larger public interest.”

 

Thirdly, the Court explained that the objects and the scheme of the RERA intend to promote “effective consumer protection, uniformity and standardisation of business practices and transactions in the real estate sector, to ensure greater accountability towards consumers, to overcome frauds and delays and also the higher transaction costs.”

 

Fourthly, the Court further elucidated that the scheme of RERA makes the registration of real estate projects mandatory and even the projects that were commenced before coming into force of RERA, will have to “to make an application to the authority for registration of the said project within a period of three months from the date of commencement of the Act.”

 

Fifthly, the Court clarified that the intention of the Parliament in enacting RERA was to “bring within the fold of the statute the ongoing real estate projects” and its provisions in unequivocal terms apply to existing as well as upcoming projects. Thus, by way of necessary implication, the Parliament intended to include even those ongoing projects where completion certificate has not been issued under RERA.

 

Sixthly, according to the Court, “the clear and unambiguous language of the statute is retroactive in operation and by applying purposive interpretation rule of statutory construction, only one result is possible, i.e., the legislature consciously enacted a retroactive statute to ensure that sale of plot, apartment or building and real estate project is done in an efficient and transparent manner so that the interest of consumers in the real estate sector is protected by all means.”

 

And lastly, the Court was of the view that “even the terms of the agreement to sale or home buyers agreement invariably indicates the intention of the developer that any subsequent legislation, rules and regulations etc. issued by competent authorities will be binding on the parties.” Thus, such clauses ensure that subsequent legislations continue to apply on the ongoing projects, and it would be imprudent to say that contractual provisions will have an overriding effect on the retroactive applicability of the authorities under RERA.

 

HELD AND CONCLUSION

 

In light of the afore-stated legal exposition, it was held that from the scheme of the RERA, it is manifest that its application is retroactive and not retrospective in character and “it can safely be observed that the projects already completed or to which the completion certificate has been granted are not under its fold and therefore, vested or accrued rights, if any, in no manner are affected.”

 

Thus, I hope that it is clear that the RERA has retroactive applicability and not retrospective applicability.  

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