India: Section 6 – Extension Of Registration Its Legislative History And Its Present-Day Effect

Last Updated: 24 May 2017
Article by Manisha Paranjape

Section 6 of the Real Estate (Regulation and Development) Act, 2016 deals with extension of registration granted to a real estate project. To fully understand the manner and the reasons for extension as is intended to be granted by the makers of the Act, we would like to first briefly set out the many changes the concept of extension of registration went through before coming into force in its' present form.

INTRODUCTION IN THE RAJYA SABHA

The Real Estate (Regulation and Development) Bill, 2013 ("Bill") as was originally introduced in the Rajya Sabha provided quite simply in Clause 6 that the registration granted under Section 5 could be extended by the Authority on an application made by the promoter (i) under such conditions as may be prescribed and (ii) in such form and on payment of such fee as may be specified by the regulations made by the Authority.

STANDING COMMITTEE REPORT

Thereafter the Bill was referred to the Standing Committee on Urban Development ("Standing Committee") for examination and a report thereon.

In its report dated 12thFebruary 2014, the Standing Committee recorded that suggestions were received that the Bill should deal with delays occurring on account of Government action and provision should be made for automatic extension in such cases. References in this regard were also made to orders of Haryana Government/Under Ground Water Board/Punjab and Haryana High Court stopping use of underground water for construction purposes in Haryana and that for delays arising out of such orders, the concerned authority should be held accountable and not the developer.

In response to this suggestion, the Ministry of Housing and Urban Poverty Alleviation ("Ministry") stated that the criterion and reasons for extension of registration under the said clause has been provided to be determined by rules, as it may differ from State to State, and the powers towards the same has been given to the State/UT governments.

While agreeing with this view of the Ministry, the Standing Committee however strongly recommended that delays because Government/ local authorities action should be explicitly included in the provisions of the Bill.

OFFICIAL AMENDMENTS MADE TO THE BILL

These recommendations of the Standing Committee were inter alia approved by the Union Cabinet on 7th April 2015 and by Notice of Amendments dated 22nd April 2015, the first sub-clause of Clause 6 was amended to read as follows:

"The registration granted under section 5 may be extended by the Authority on an application made by the promoter due to force majeure or under such conditions as may be prescribed which may include issue of completion certificate, approvals etc. without default on the part of the promoter, and in such form and on payment of such fee as may be specified by the regulations made by the Authority:..."

An explanation explicitly setting out the meaning of the expression "force majeure" was also inserted.

SELECT COMMITTEE REPORT

The Bill and the Official Amendments were thereafter referred to the Select Committee of the Rajya Sabha on 6th May, 2015.

In its Report presented to the Rajya Sabha on 30th July, 2015 the Select Committee was of the opinion that the words "include issue of completion certificate, approvals etc. without default on the part of the promoter" as inserted earlier in Clause 6 would have the potential of circumventing the purpose of the clause and recommended the removal of such words.

The Committee thereafter recommended giving powers to the Authority, in reasonable circumstances, to provide for extension of registration for reasons to be recorded in writing. In the Real Estate (Regulation and Development) Bill, 2015 as tabled by the Select Committee in light of its recommendations, Clause 6 was amended to read as under:

"The registration granted under section 5 may be extended by the Authority on an application made by the promoter due to force majeure in such form and on payment of such fee as may be specified by regulations made by the Authority:

Provided that the Authority may in reasonable circumstances, without default on the part of the promoter based on the facts of each case, and for reasons to be recorded in writing, extend the registration granted to a project for such time as it considers necessary, which shall in aggregate not exceed a period of one year:

Provided further that no application for extension of registration shall be rejected unless the applicant has been given an opportunity of being heard in the matter.

Explanation. — For the purpose of this section the expression "force majeure" shall mean a case of war, flood, drought, fire, cyclone earthquake or any other calamity caused by nature affecting the regular development of the real estate project."

It therefore appears that the first proviso was introduced by the Select Committee in line with its recommendation of giving powers to the Authority, in reasonable circumstances, to provide for extension of registration, without disturbing the extant provision relating to extensions due to force majeure.

APPROVAL BY THE UNION CABINET AND PASSING OF THE BILL BY BOTH HOUSES

The Union Cabinet approved the Real Estate Bill, 2015 as reported by the Select Committee on 9th December 2015. The Bill was passed by the Rajya Sabha on 10th March, 2016 and by the Lok Sabha on 15th March, 2016 without any changes made to Clause 6 as tabled by the Select Committee. The Bill subsequently received the assent of the President.

SECTION 6 AS IT STANDS TODAY

Section 6 as notified and in force today is a replica of Clause 6 as tabled by the Select Committee. From its report, it is quite clear that two types of extensions were envisaged by the Select Committee- (i) Extension arising due to force majeure and (ii) extensions in reasonable circumstances as thought fit by the Authority but subject always to reasons to be recorded in writing and which in aggregate could not exceed one year.

Whilst the rules made by several states also lend credence to the thought that two types of extensions (by prescribing fees and then providing that fees for extensions arising out of force majeure events could be waived) are permitted, some confusion arises by the placing of the second type of extension as a proviso in Section 6.

INTERPRETATION OF PROVISOS

Usually the proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception. Ordinarily, it is foreign to the proper function of proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment.

However, the Supreme Court1 has clarified that the primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the court must then strive to so interpret the statute as to promote and advance the object and purpose of the enactment.

In the present case, the legislature by adopting the very words tabled by the Select Committee, have made their intent clear of providing two different opportunities of availing extensions. Further the Select Committee, already wary of circumvention of the purpose of the Act, provided the second type of extension with inbuilt safeguards such as an outer time limit for extensions, requirement of reasonableness and no default of the promoter. In view of this, although the proviso permitting extensions for reasons other than force majeure may be challenged in a court of law on technical grounds arising out of the laws of interpretation of statutes, the legislative history set out above in our view does make clear the intent of Parliament to provide a limited opportunity for extension for reasons other than force majeure.

A THIRD OPPORTUNITY TO EXTEND TIMELINES?

Rule 6 of the Maharashtra Real Estate (Regulation and Development) (Registration of real estate projects, Registration of real estate agents, rates of interest and disclosures on website) Rules, 2017 ("Maharashtra Rules") provides that the period for which registration shall be valid shall exclude such period where actual work could not be carried by the promoter as per sanctioned plan due to specific stay or injunction orders relating to the real estate project from any Court of law, or Tribunal, competent authority, statutory authority, high power committee etc., or due to such mitigating circumstances as may be decided by the Authority.

This exclusion in effect may automatically extend the registration of a project while also bypassing the one year limit on extensions for reasons other than force majeure. While the Ministry in its responses to the suggestion put forth in the Standing Committee on automatic extensions due to governmental delays had stated that powers in relation to the same has been given to the states to determine by rules, it is not clear which precise provision of the Act empowers the State to provide for such automatic extensions. While promoters can at present reap the benefits of this rule as the format of the Registration Certificate itself makes the validity of the Certificate subject to renewals under Section 5 read with Rule 6 (when in fact extension of registration is dealt with in Section 6 and Rules 7), the legality of this type of unbridled extension may be susceptible to challenge before appropriate courts in the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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