Bombay High Court Clarifies MahaRERA's Jurisdiction Over Projects Lacking Occupancy Certificate

Court and Bench

High Court of Bombay (Appellate Side)

Citation

• Neelkamal Realtors Suburban Pvt. Ltd. & Anr. v. Union of India & Ors.
• 2017 SCC OnLine Bom 9302
• (2018) 1 Mah LJ 5
• AIR 2018 Bom 1

Facts

Several real estate developers challenged the constitutional validity of the Real Estate (Regulation and Development) Act, 2016 (RERA Act 2016), particularly focusing on certain provisions that brought 'ongoing projects' within its ambit. They argued that applying RERA retrospectively to projects initiated before its commencement, especially those nearing completion but lacking an Occupancy Certificate (OC), was unconstitutional and beyond the legislative competence of Parliament.

The developers contended that projects whose plans were sanctioned and construction commenced before the RERA Act 2016 came into force should not be subject to its provisions. They particularly opposed the mandatory registration of such projects with the Real Estate Regulatory Authority (RERA) and the implications of its penal provisions.

Issues

1. Whether the RERA Act 2016 is unconstitutional on the grounds of being retrospective or violative of Article 14, 19(1)(g), or 300A of the Constitution of India.
2. Whether 'ongoing projects' (projects where construction commenced before RERA but OC has not been issued) fall within the scope of the RERA Act 2016.
3. Whether the Real Estate Regulatory Authority and the Appellate Tribunal have jurisdiction to entertain complaints and direct refunds or compensation for such ongoing projects.

Holding

The Bombay High Court upheld the constitutional validity of the RERA Act 2016. The Court held that the Act is not retrospective but retroactive in nature. It affirmed that 'ongoing projects' for which an Occupancy Certificate has not been issued as of the date of commencement of the RERA Act 2016 (i.e., 1 May 2017) fall squarely within its purview. Consequently, the MahaRERA (Maharashtra Real Estate Regulatory Authority) possesses the jurisdiction to entertain complaints from allottees in such projects and issue appropriate directions, including refunds and compensation.

Ratio

The Court reasoned that the RERA Act 2016 aims to protect the interests of allottees and promote transparency and accountability in the real estate sector. The inclusion of 'ongoing projects' is crucial for achieving this objective, as many allottees had invested in projects that were stalled or delayed prior to the Act's enforcement.

Key aspects of the ratio include:

• Retroactive Application: The Court distinguished between retrospective and retroactive application. It stated that RERA is not retrospective, as it does not reopen concluded transactions. Instead, it is retroactive, meaning it applies to existing projects that are 'ongoing' (i.e., without an OC) on the date of its commencement, regulating their future conduct and obligations. This approach ensures that allottees who made investments before the Act can also seek remedies.
• Legislative Competence: The Parliament was competent to enact RERA under Entry 6 and Entry 7 of the Concurrent List of the Seventh Schedule to the Constitution of India, pertaining to 'transfer of property other than agricultural land' and 'contracts', respectively.
• Occupancy Certificate as a Benchmark: The issuance of an Occupancy Certificate was deemed a critical threshold. A project is considered 'ongoing' until the OC, signifying completion and habitability, is obtained. Once an OC is issued, the project is considered complete and falls outside the ambit of RERA, preventing endless regulatory oversight.
• Protection of Allottees: The judgment emphasized that the primary purpose of RERA is consumer protection. Bringing 'ongoing projects' under RERA ensures that developers complete such projects within stipulated timelines and honour their commitments, preventing project abandonment and financial loss to homebuyers.

Practical Takeaways

• Mandatory Registration: Developers of projects that commenced prior to the RERA Act 2016 but had not received an Occupancy Certificate by 1 May 2017 were compulsorily required to register them under RERA. Failure to do so could lead to penalties.
• MahaRERA's Authority: The MahaRERA has full authority to address issues pertaining to 'ongoing projects,' including directing refunds, compensation for delays, and other remedies as per the RERA Act 2016.
• Implications for Homebuyers: Homebuyers in projects that were incomplete when RERA came into force gained significant protection, allowing them to approach RERA for redressal of grievances relating to possession, quality, and other contractual breaches.
• Due Diligence for Developers: Developers must ensure timely completion and obtain the OC to avoid RERA’s jurisdiction and its associated compliance burden and potential penalties.
• Clarity on 'Completion': The judgment provides a definitive benchmark for project completion (Occupancy Certificate) from a regulatory perspective, impacting contractual obligations and regulatory oversight.