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Part II: An Analysis of Constitutionality of WBHIRA

Author: Nupur Agrawal


In this two-part essay, the author analyses the seeming repugnancy caused by the passage of the West Bengal Housing Industry Regulation Act, 2017 pursuant to the enactment of the Real Estate (Regulation and Development) Act 2016.


In this part, following from the discussion in the earlier part regarding 'pith and substance' of the WBHIRA, the author analyses the scope of entries to Schedule VI of the Constitution under which both the WBHIRA and RERA are said to be constituted. Further, she comments on the constitutionality of WBHIRA in this context.


Introduction


Part I of the article led to the conclusions about the pith and substance of WBHIRA and its apparent repugnancy to RERA. In furtherance of which it becomes pertinent to analyse the scope of the entries under which the two legislations, in question, are claimed to have been formulated. It would lead us to determine, which list of the constitution favours the enactment of the two identical legislations.

Scope of the Entries


- Entry 24, List II, Schedule VI- “Industries subject to provisions of Entries 7 and 52 of List I.”[1]


According to the state of West Bengal, the act has been formulated to regulate the housing sector which falls under the category of ‘industry’.

It becomes pertinent to ascertain the scope of ‘industry’ as used in Entry 24 (List II).


Section 2(j) of The Industrial Dispute Act 1947 defines ‘industry’. According to the definition, ‘industry’ means any activity which is carried on by workers which are employed either directly or indirectly for production, supply or distribution of goods or services to satisfy human wants and wishes[2].


However, there have been several contentions over the scope of this terminology used. It was contended in many cases that the entry does not cover only the process of manufacturing and production but also the matter ancillary to the process. The ancillary process includes acquiring raw materials required for the process of production and disposal of finished products of that industry. But the law was settled in the case of Tika Ramji and Ors. v state of Uttar Pradesh[3]. In this case, the court said that if interpreted in the widest term, ‘industry’ would include three aspects: 1) raw materials 2) process of manufacturing or production 3) distribution of the products of the industry. While the first and third aspects i.e. raw materials and distribution would be included in Entry 27 (subject to Entry 33, List III), the second aspect of manufacturing and production will fall under Entry 24 (List II)[4].


As the distribution part of ‘industry’ falls within Entry 27 (List II), it becomes pertinent to analyse the scope of the same. It is important to be able to conclude, whether the scope of either of these entries supports the formation of legislation regulating the sale of real estate property.


- Entry 27, List II, Schedule VI- “Production, supply and distribution of goods subject to provision of Entry 33 of List III.”[5]

Definition of “goods” is given in under A-366(12) of the Constitution of India which reads as, “includes all materials, commodities, and article”[6]. According to this definition, it includes both raw material and finished products subject to provision of Entry 33, List III.[7] Apart from this definition, ‘goods’ is also defined under section 2(7) of the Sale of Goods Act 1930[8] which explicitly restricts the scope of ‘goods’ to ‘movable property’.


In light of this definition, the scope of this entry has also been enunciated in many case laws. In the case of Kerala State Electricity Board v Indian aluminium, it was ruled that under this entry, the state legislature has the power to restrict the export of essential commodities for maintaining their supply. This entry also gives the power to the state legislature to fix the prices of such commodities.[9]


Legal definitions as well as the judicial rulings, when read together, reflect upon the purpose of the entry which is not to include the sale of ‘immovable property’ like real estates for instance. Instead, the scope of the entry is limited to regulating the supply of movable property in the market to control the market of such products. The entry does not give power to the state legislature to regulate the sale of real estate properties as neither the subject matter nor the purpose of this entry supports the same.


Analysis of both these entries is sufficient to conclude that construction of houses, buildings, apartments etc, for commercial benefits, duly falls under the category of ‘industry’ as mentioned in Entry 24 (List II). But the Entry does not engulf all the aspects of ‘industry’. As has been laid down in the case of Tika Ramji and Ors. v state of Uttar Pradesh[10], Entry 24 (List II) includes only the process of manufacturing and production, while the other two aspects viz. raw materials and distribution of those finished products are taken care under Entry 27 (List II). But the analysis of Entry 27 (List II) manifests that the entry is not a blanket cover for the distribution of all finished products of all the industries as mentioned under Entry 24 (List II). Rather, the entry only supports distribution of movable property and is mainly aimed at regulating the market of that commodity by regulating its price and quantity of supply. Since the pith and substance of WBHIRA reflect that the act does not govern ‘construction or manufacturing’ of real estate projects but only their ‘sale’, the power to enact the legislation cannot be provided by either Entry 24 or Entry 27 (List II).


- Entry 18, List II, Schedule VI- “Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization”[11]


The reason behind this entry being contended to have given the power to the state of West Bengal for enacting WBHIRA is because of the preamble of the legislature mentions ‘sale of plot’ as one of the objectives of the act. But the only way this entry could have given the power to the state to enact legislation which is mainly to regulate the sale of real estate property is only in two situations. First, if the scope of the section also includes regulating the sale of land and second, ‘land’ includes ‘buildings’ as well.


The phrase ‘rights in and over land’ has a wide connotation and includes rights as between landlords and tenants, collection of rents, land reforms, alteration of land tenures, prevention of encroachments on public lands etc. but it does not include acquisition of land as it is covered in Entry 42, List III neither does it include the transfer of property other than agricultural land which is included in Entry 6, List III.[12]


Further, there was another dispute regarding this Entry. Whether the word ‘land’ includes ‘buildings’? The opinions of various High Courts were divided on this question[13] until it was finally decided in the case of Indu Bhushan Bose v Rama Sundari Devi[14]. The court, in this case, ruled that power of the state legislate in respect of landlord-tenant relation concerning a building falls under Entries 6, 7 and 13, List III of Schedule VI. This is because ‘land tenures’ does not cover the tenancy of buildings or house accommodations.[15]


These legal positions around this entry make it clear that its scope is limited to agricultural land and does not include the sale or acquisition of any kind of land or real estate property. The state alone does not have any power to enact legislation, exercising power under Entry 18 (List II), about non-agricultural land. Legislative power to enact such legislation lies only under Entry 6 (List III) of the Constitution.[16] Hence, the Entry cannot be said to have provided the state with the power to enact WBHIRA.


In light of this observation, it becomes pertinent to analyse the scope of Entry 6 and Entry 7 (List III) of the constitution.


- Entry 6, List III, Schedule VI- “Transfer of property other than agricultural land; registration of deeds and documents.”[17]


As the title of the entry suggests, it gives the power to both the state and the centre to enact legislation regulating the transfer of property. The word ‘transfer’ needs to be interpreted based on the definition provided in section 5 of the Transfer of Property Act 1882. According to that definition, transfer of property is the act by a living person of conveying property to one or more living persons or himself.[18] There is only one limitation put on this entry which is concerning the agricultural property because the same is the subject matter falling under Entry 18, List II.


Apart from transfer of property, the entry also talks about registration of deeds which means it also includes all those legislations which regulate the registration of documents. One such central enactment being The Indian Registration Act 1908.[19] The objective of the act is pristine through its long title[20] and the provisions.


As the provisions of WBHIRA mentions the process to be followed for the sale of such projects as well as also lays down the registration procedure of real estate projects and the agents, the act is covered under Entry 6 (List III).


Hence, both state and the centre can enact laws relating to the immovable property under this entry (excluding the domain of agricultural lands). But in case of any repugnancy between the legislations enacted by the two, the state legislation becomes void to the extent of repugnancy due to A-254 of the constitution provided that both are occupying the same field.[21]

- Entry 7, List III, Schedule VI- “Contracts including partnership, agency, contracts of carriage, and other special forms of contracts, but not including contracts relating to agricultural land.”[22]


The term ‘contracts’ has been assigned a wide meaning to make the entry effective and meaningful.[23] Scope of this entry can be very well understood by some of the central legislations which are part of this entry, such as, Indian Contracts Act 1872, Indian partnership Act 1932, Indian Sale of Goods Act 1930 etc. [24]


Analysis of the provisions of WBHIRA reveals that apart from regulating the sale of real estate projects, it also seeks to regulate the functions of the real estate agents and their relationship with the owner of the property as well as the potential buyer. This aspect of WBHIRA duly falls under entry 7 which seeks to include all the contracts including the contract of agency.


After the scope of these entries is analysed it becomes important to juxtapose the same with the pith and substance of WBHIRA to ascertain in which of these entries would it fall.


The pith and substance of WBHIRA are explicit about the fact that the legislation has been formulated to regulate the sale of real estate projects rather than regulating the entire industry of real estate which also includes procuring raw materials and construction. The purpose of the act which is clear from its preamble and provisions also reflects that the act mainly revolves around the sale of real estate and setting up of a grievance redressal mechanism for all the stakeholders involved in the process of this sale.


In the light of this, as Entry 24 (List II) only includes manufacturing and construction of products, WBHIRA could not be enacted under the same. Entry 27 (List II) although includes the distribution aspect of industry but it is not a straight-jacket formula for the same. This is because the scope of the entry is limited to ‘moveable property’ and the purpose of the entry is to render the state government with the power to regulate the market of any commodity not to govern the sale of ‘immovable property’. Furthermore, Entry 18 (List II) has also proved to be toothless in respect to be of any aid for the enactment of WBHIRA. This is because, firstly, the entry is limited to agricultural lands and secondly, it does not involve the sale of any land or real estate project.


If the pith and substance of WBHIRA are juxtaposed to the substance of the entries analysed, it is not difficult to reach to a conclusion that it is a bit hard to say that WBHIRA falls under the scope of Entries 24, 27 and 18 (List II, Schedule VI). The pith and substance of the legislation suggest that it is not enacted to regulate the ‘construction’/’production’ of real estate property. Rather, the legislation is all about the sale of such properties which is explicitly the domain of Entries 6 and 7 (List III, Schedule VI).


Hence, since certain provisions of WBHIRA, which is state legislation falling under the concurrent list, are repugnant to RERA, which is central legislation falling under the concurrent list, the legislation fails at the touchstone of A-254(2) in the absence of President’s assent.


[The author is a student of Law at the National Law University, Delhi.]


Notes and References

[1] Constitution of India, Entry 24, List II, Schedule VI [2] The industrial disputes Act 1947, Section 2(j) [3] Tika Ramji and Ors. v State of Uttar Pradesh, AIR 1963 SC 676 [4] Tika Ramji and Ors. v State of Uttar Pradesh, AIR 1963 SC 676, para 28 [5] Constitution of India, Entry 27, List II, Schedule VI [6] Constitution of India, A-366(2) [7] Durga Das Basu, Shorter Constitution of India (14th edition, volume 2) p. 2384 [8] Sale of Goods Act 1930, s 2(7) [9] Kerala State electricity Board v Indian aluminium, AIR 1976 SC 1031, para 22 [10] Tika Ramji and Ors. v State of Uttar Pradesh, AIR 1963 SC 676 [11] Constitution of India, Entry 18, List II, Schedule VI [12] Durga Das Basu, “Shorter Constitution of India” (14th edition, volume 2) p. 2378 [13] Durga Das Basu, “Shorter Constitution of India” (14th edition, volume 2) p. 2379 [14] Indu Bhushan Bose v Rama Sundari Devi, (1969) 2 SCC 289 [15] Indu Bhushan Bose v Rama Sundari Devi, (1969) 2 SCC 289, para 14 [16] Durga Das Basu, Commentary of the Constitution of India (8th edition, volume 10, 2007) [17] Constitution of India, Entry 6, List III, Schedule VI [18] Transfer of Property Act 1882, s 5 [19] Lingappa Pochanna Appelwar v State of Maharashtra, AIR 1985 SC 389, para 26 [20] “An Act to consolidate the enactments relating to the Registration of Documents.” [21] G. Sridharamurti v Hindustan Petroleum Corporation Ltd. and Ors., (1995) 6 SCC 605, para 5 [22] Constitution of India, Entry 7, List III, Schedule VI [23] Welfare Association. A.R.P., Maharashtra and Ors. v Ranjit P. Gohil and Ors., (2003) 9 SCC 358, para 37 [24] Durga Das Basu, “Commentary on The Constitution of India” (8th edition 2012, vol. 10) p 12141


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