Examining validity of West Bengal’s HIRA Act

By Vikram Wadehra and Nupur Rathi, Vidhii Partners
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The West Bengal Housing Industry Regulation Act, 2017 (HIRA), was notified on 1 June 2018. Section 20 of which established the Housing Industry Regulatory Authority (authority). The statute regulates all projects above 500 square metres or more than eight apartments in total, and section 3 requires them to be registered with the authority. HIRA intends the authority to regulate and promote real estate in West Bengal state in a transparent manner by protecting the interest of consumers.

From the start, it appears that the government contemplated constituting a sub-committee in the central advisory council with the objective of persuading the West Bengal government to adopt the Real Estate (Regulation and Development) Act, 2016 (RERA), in place of its own legislation. However, the Supreme Court recently admitted a plea challenging the constitutional validity of the HIRA and has directed the West Bengal state and the central government to respond (Forum for People’s Collective Efforts (FPCE) and Anor v The State of West Bengal and Anor).

HIRA
Vikram Wadehra
Partner
Vidhii Partners

The petitioner argues that the central government’s RERA is an exhaustive and complete code and that there is no scope for similar legislation to be enacted in a state, except in circumstances where article 254(2) of the constitution applies. Article 254 recognizes the possibility of repugnancy arising between laws made by state and central legislatures. In such cases the law enacted by the central legislature would prevail. The only exception to this is where the law enacted by the state legislature has received the assent of the president; in that case the law enacted by the state legislature would prevail, unless parliament subsequently enacts any law with respect to the same matter. This would include any law adding to, amending, varying or repealing the law so made by the legislature of the state.

It is argued that HIRA was neither reserved for consideration of the president nor had the assent of the president ever been obtained. Even more pertinently, RERA was in force before the state of West Bengal enacted HIRA. It is also argued that HIRA is in direct conflict with the earlier enacted RERA. The conflict between the two statutes includes such differences as the sale of open car parking spaces as opposed to garages with walls and roofs, the compounding of offences, which courts should try such offences and the definition of force majeure events. Both HIRA and RERA were enacted with similar objectives, that is to ensure better accountability to consumers and to regulate and promote the real estate sector. The question to be decided is what happens where there is inconsistency or repugnancy.

While it may be argued that HIRA is repugnant by its very nature, repugnancy only applies when the allegedly conflicting laws have been enacted under the concurrent list (Hoechst Pharmaceuticals v State of Bihar). This view was upheld by the Supreme Court in the cases of Bondu Ramaswamy v Bangalore Development Authority and Offshore Holdings Private Limited v Bangalore Development Authority. It is pertinent to emphasize that HIRA appears to have been derived from entry 24 of the state list, which deals with industries, as against RERA which was enacted under entries 6 and 7 (which deal with contracts and the transfer of property) to the concurrent list.

On the contrary, given the circumstances, it appears that the state legislature could have enacted amendments, as it did in the case of several other central laws, instead of bringing in its own statute. The state could also have brought the law into force constitutionally, under the concurrent list, by obtaining the assent of the president under article 254(2) of the constitution. Even though HIRA was enacted under the ambit of the state list, while RERA was enacted under the concurrent list, HIRA may nevertheless not pass the test of constitutionality as laid down by the Supreme Court in the cases cited above.

At present, the future of RERA is clouded by uncertainty because it is ineffective on many counts. However, its implementation should be upheld as it represents a significant and transformative measure. The positive impact of the enactment is readily apparent. On the other hand, with the future of HIRA also uncertain with its constitutional validity in question, the objective of having a uniform code together with the establishment of a transparent and efficient body governing the real estate sector seems to be under threat. It will be interesting to see the reasoning and approach of the Supreme Court when it reaches a decision on the constitutional validity of HIRA and its implementation in West Bengal.

Vikram Wadehra is a partner and head of the Kolkata office of Vidhii Partners. Nupur Rathi is an associate at the firm.

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