Introduction
The Real Estate (Regulation and Development) Act, 2016 ("RERA/Act") was enacted to enhance transparency and accountability within the real estate sector. In furtherance of this objective, section 3 of RERA requires every real estate project to be registered with the authority, unless they satisfy the conditions for exemption stipulated in section 3(2) of RERA. Out of the exemption conditions specified in section 3(2) of RERA, interpretation of the exemption covered under sub-clause (a) of section 3(2) of RERA has been subject to debate with real estate regulatory authorities adopting conflicting interpretation. The crux of the debate lies in the interpretation of the word "or" in this section.
This article examines the divergent interpretation of the term "or" in section 3(2)(a) of RERA by real estate regulatory authorities across different states. By highlighting these disparities, it aims to explore the broader implications of how interpretation of a single word can influence the practical enforcement of a law.
Analysis of State-Wise Interpretation of Section 3(2)(a) of the RERA1
Sub-section (2)(a) of section 3 of RERA states:
"(2) Notwithstanding anything contained in sub-section (1), no registration of the real estate project shall be required—
- where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight inclusive of all phases:
Provided that, if the appropriate Government considers it necessary, it may, reduce the threshold below five hundred square meters or eight apartments, as the case may be, inclusive of all phases, for exemption from registration under this Act;"
While real estate regulatory authorities of some states have treated "or" as disjunctive, suggesting that meeting any one condition i.e., condition relating to either the area of land or the number of apartments is sufficient to exempt the project from registration under RERA, others have read it conjunctively, essentially meaning that the project must have both, an area of land less than 500 square meters and fewer than eight apartments in order to qualify for non-registration. These differing interpretations have created inconsistencies in how the law is applied, leading to distinct legal obligations for developers depending on the jurisdiction of their real estate project.
States which have interpreted the word "or" conjunctively:
West Bengal – Pursuant to the proviso to section 3(2)(a) of RERA, the Government of West Bengal, Housing Department, RERA Cell issued a notification dated 6 June, 2023 ("WB Notification"),2 whereby real estate projects were exempt from the requirement of registration "where the threshold area of land proposed to be developed does not exceed two hundred square meters or the threshold number of apartments proposed to be developed does not exceed six apartments, as the case may be, inclusive of all phases, in the State of West Bengal." Pursuant to the notification, the threshold in terms of area of land proposed to be developed, as well as number of apartments to be developed were reduced.
Subsequently on 19 September, 20243, the Government of West Bengal, Housing Department, issued a circular clarifying the meaning of section 3(2)(a) of RERA and the WB Notification. The circular states that "where land to be developed by the said project is more than 200 square meters (2.99 katha) or where the number of flats / apartments / plots to be developed are more than 6 (six), those projects are compulsorily to be registered with WBRERA Authority. If any of the two conditions, as mentioned above, are fulfilled by any Real Estate Project, then the concerned Promoter is liable to compulsorily register the said project with the WBRERA Authority by submitting online Application for registration in the WBRERA website"; thus interpreting the term "or" in section 3(2)(a) of the RERA conjunctively.
Bihar – In Birendra Kumar Singh v. M/s Arya Building Construction Pvt Ltd4, by an interim order dated 24 August 2021, the Bihar Real Estate Regulatory Authority interpreted section 3(2)(a) of the Act and held that if either of the two conditions are not fulfilled, then the project gets covered under the Act.
Rajasthan – By an office order dated 8 March 20225 released by the Rajasthan Real Estate Regulatory Authority ("Rajasthan RERA"), the authority decided that a real estate project is not required to be registered under the Act only if it satisfies both the conditions mentioned in section 3(2)(a) of RERA.
The aforementioned office order was further relied upon by Rajasthan RERA in Kundan Lal v. Harish Jasuja & Ors,6 wherein, the authority held that "when the word 'OR' is used between two conditions of a restrictive or prohibitory provision, it has the effect of 'AND'. For example, if a provision says that you shall not do this or do that. This is how the word 'or' in clause (a) of sub-section (2) of section 3 of the Act has to be read."
Delhi – Vide a public notice dated 28 April, 2022, the Delhi Real Estate Regulatory Authority clarified that both the conditions will have to be satisfied for a real estate project in NCT of Delhi to qualify for exemption under section 3(2)(a) of RERA. The authority further illustrated its stance by stating that "even if six flats or two floors or four showrooms are being constructed as a Real Estate Project on a 501 square meter plot it would require registration with RERA, NCT of Delhi".
States which have interpreted the word "or" disjunctively:
Maharashtra – In M/s Geetanjali Aman Constructions vs. Hrishikesh Ramesh Paranjape ("Geetanjali Case"),7 the Maharashtra Real Estate Appellate Tribunal ("MahaREAT") held that on happening of any of the two contingencies, a project needs no registration under section 3(2)(a) of RERA. It further stated that "the unambiguous language of clause (a) of Section 3(2) of the Act of 2016 makes it clear that 'or' is to be read disjunctively and not conjunctively as conjunctive reading would make legislative intent redundant and would amount to changing the texture of the fabric which is not permissible in law."8 However, in Sanjay Jawaharlal Surana v. Kaushalya Developers,9 the MahaREAT gave a split decision, with one member interpreting the word 'or' conjunctively and the other member reading it disjunctively.
Post the Geetanjali case, vide circulars dated 11 October 201910 and 9 June 202311, the Maharashtra Real Estate Regulatory Authority ("MahaRERA")had clarified the same position as taken in the Geetanjali case with respect to exemption of real estate projects from registration under the Act. Recently vide order no. 62/2024 dated 22 October 2024, the MahaRERA has once again clarified that the exemption will apply as long as any one of the condition is satisfied. This order supersedes the 2019 and 2023 circulars.
Goa – After the Geetanjali Case, the Goa Real Estate Regulatory Authority ("Goa RERA") had issued an explanatory note on 18 January 202312 clarifying that a project is registrable if it is constructed in an area of more than five hundred square meters comprising more than eight units inclusive of all phases. Subsequently, the Goa RERA released a circular dated 17 August 202313,where it once again clarified that satisfaction of one of the conditions stipulated in section 3(2)(a) of the Act is enough to exempt a real estate project from registration.
In Deepti Agarwal vs. Isprava Vesta Private Limited,14 the Authority stated that both the conditions in section 3(2)(a) of RERA are distinct and are not interconnected with each other. It held that "if any of the conditions is satisfied then the exemption would come into play and registration of the project would be exempted."
Odisha – By an order dated 15 July, 202115, the Odisha Real Estate Regulatory Authority clarified that both the conditions of section 3(2)(a) of RERA are to be read disjunctively and not conjointly. It further stated that "if the land area does not exceed five hundred Square meters, but the apartments proposed to be developed exceeds eight inclusive of all phases, there is no requirement of registration. Similarly, if land area is more than five hundred Square meters, but the apartment proposed to be developed exceeds eight inclusive of all phases, no registration is required to be taken from this Authority."
Tamil Nadu – In the year 2020, the Tamil Nadu Real Estate Appellate Tribunal ("TNREAT"), in the matter of M/s. Devinarayan Housing Board and Property Developments Private Limited v. Mr. Manu Karan, ("Devinarayan Case")16 interpreted that the exemption conditions stipulated in section 3(2)(a) of the RERA should be read conjunctively. However, by an order dated 20 September, 2023, the Madras High Court set aside the decision of the TNREAT in the Devinarayan Case and held that "on perusal of Report of the Standing Committee, it is clear that the word 'or' used in Section 3(2) (a) of the RERA has to be read disjunctively. Further, this Court would like to point out herein, though the word 'OR' is a conjunction, and if it is read conjunctively, it would make legitimate intention to become redundant, which is not possible in law."
Further, vide an office circular dated 12 October, 202317, the Tamil Nadu Real Estate Regulatory Authority clarified that "registration of real estate projects (buildings) shall be processed only where the area of land proposed to be developed exceed five hundred square meters and the number of apartments proposed to be developed exceed eight inclusive of all phases."
The aforesaid demonstrates the inconsistency in interpretation of section 3(2)(a) of the statute by the authorities of the various states. In this context it may be useful to refer to the 30th Report of Standing Committee on Urban Development of The Real Estate (Regulation And Development) Bill, 2013 ("Bill") dated February 2014 ("Standing Committee Report"). It appears from pages 24-25 of the Standing Committee Report that the Standing Committee had strongly recommended amendment to Clause (section) 3 for extending applicability of the Bill "for residential construction upto 100 sq. mtrs, and/or number of apartments to be developed (not exceeding 3) instead of 1000 sq. mtrs (apartments not exceeding 12 in number) as proposed in the Bill." On July 30, 2015, the Select Committee of the Rajya Sabha after deliberation on this issue submitted its report recommending no changes relating to the word 'or' except the area and number of flats to be reduced for exemption. Though there were recommendations, as noted above, to use the words 'and/or' in clause 3, it is seen that the Bill introduced in 2015 in the Rajya Sabha retained the word 'or' in section 3(2)(a) of the Bill and was passed by the Rajya Sabha in the form of the Act as it exists today with the word 'or' in section 3(2)(a).
Reference in this regard may also be drawn to the de minimis exemption notification issued by the Ministry of Corporate Affairs, from time to time, exempting combinations from the applicability of the Competition Act, 2002, as the de minimis notification is also similarly worded as the provisions of section 3(2)(a) of the RERA Act. The exemption notification stipulates certain asset threshold and turnover threshold, upon the satisfaction of which a combination is exempt and the two conditions are separated by 'or'. The de minimis notification has always been interpreted to mean that if any one of the condition i.e. either asset threshold or turnover threshold is satisfied, the combination is exempt i.e. satisfaction of both conditions is not required to avail the exemption.
It is a settled principle of interpretation that words in a statute should be interpreted literally and the courts while interpreting a statute should proceed on the footing that the legislature intended what it has said and cannot add words to a statute or read words into it which are not part of it, especially when a literal meaning of the same produces an intelligible result.18 The Supreme Court in Commissioner, Customs Central Excise and Service Tax, Patna vs. M/s Shapoorji Pallonji and Company Private Ltd & Ors,19 while interpreting the usage of "or" in the definition of government authority in an exemption notification dated 30 January 2014 issued under the Finance Act, 1994 held that words should be read in their ordinary, natural and grammatical meaning and a different meaning cannot be assigned unless it leads to vagueness or makes the clause absolutely unworkable. The court in this case interpreted the word "or" as used in the exemption notification to denote an alternative, giving a choice.
The States by issuing circulars/office orders providing a conjunctive meaning to the word "or," have in our view, attempted to reinterpret or modify the language of the legislation. Judicial precedents firmly establish that administrative circulars issued by State authorities cannot go beyond the framework of statutory provisions. In Chairman and Managing Director, FCI v. Jagdish Balaram Bahira20, the Supreme Court held that "administrative circulars and government resolutions are subservient to legislative mandate and cannot be contrary either to constitutional norms or statutory principles. No government resolution or circular can override constitutional or statutory norms". Similarly, in Ajay Kumar Das v. State of Orissa21, the Supreme Court emphasized that government circulars cannot override statutory provisions and whatever be the efficacy of the executive orders or circulars or notifications, statutory rules cannot be altered or amended by such executive orders or circulars or notifications, nor can they replace the statutory rules.
Conclusion
Divergent interpretation of Section 3(2)(a) of the Act by various real estate regulatory authorities risk undermining the uniformity and efficacy of the legislation. A harmonized approach rooted in the Act's plain language and legislative purpose is essential to ensure equitable and consistent application across all States. However, until this issue is finally adjudicated, the ongoing conundrum is bound to continue.
Footnotes
1. This article shall not be treated as an exhaustive analysis of interpretation of section 3(2)(a) of the Act across all states
2. No. 42-H4/2M-01/2023
3. Memo No. 315/H4/2M-10/24
4. CC/1834/2020
5. No. F.1(31)RJ/RERA2019/550
6. Complaint No. RAJ-RERA-C-2019-2818 and 13 other complaints, order dated May 9, 2022
7. Complaint No. SC10000672 and Complaint No. SC10000691
8. It may be noted that an appeal is pending before the High Court against the said decision.
9. Complaint No. SC10000491 date of order July 29, 2020
10. Circular No. 25/2019
11. Circular No. 25A/2023
12. F.No: 1/RERA/SOP/2019/73
13. F.No: 1/RERA/Circulars/2019/811
14. Complaint (3)/2018/1032 dated 30 December 2022
15. No. 2009/RERA/Misc(Regd)-25/21
16. Appeal No. 70 of 2019
17. Circular No: TNRERA/A4/9869/2023
18. Rohitash Kumar v. Om Prakash Sharma, 2013 (11) SCC 451
19. Civil Appeal No. 3991 of 2023
20. 2017 (8) SCC 670
21. 2011 (11) SCC 136
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