PIONEER URBAN LAND AND INFRASTRUCTURE LIMITED & ANR. v. UNION OF INDIA & ORS.

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A “It is a rule wider than the rule of ejusdem generis; rather the latter rule is only an application of the former. The rule has been lucidly explained by Gajendragadkar, J. in the following words: ‘This rule, according to Maxwell [ Maxwell, Interpretation of Statutes (11th Edn., 1962) 321.] , means that when two or more B words which are susceptible of analogous meaning are coupled together, they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general.’” C The learned author on further discussion has expressed the view that meaning of a word is to be judged from the company it keeps i.e. reference to words found in immediate connection with them. It applies when two or more words are susceptible of analogous meanings are coupled together, to be read and understood in their cognate sense. [Principles of Statutory Interpretation by G.P. D Singh (8th Edn.) 379.] Noscitur a sociis is merely a rule of construction and cannot prevail where it is clear that wider and diverse etymology is intentionally and deliberately used in the provision. It is only when and where the intention of the legislature in associating wider words with words of narrowest E significance is doubtful or otherwise not clear, that the rule of noscitur a sociis is useful.”

75Copy pinpoint75. It is clear from a reading of these judgments that noscitur a sociis being a mere rule of construction cannot be applied in the present case as it is clear that wider words have been deliberately used in a F residuary provision, to make the scope of the definition of “financial debt” subsume matters which are not found in the other sub-clauses of Section 5(8).This contention must also, therefore, be rejected.

76Copy pinpoint76. It remains to deal with arguments on the effect of a deeming fiction. Under the explanation added to Section 5(8)(f), any amount raised G from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing.

77Copy pinpoint77. In every case in which a deeming fiction is to be construed, the observations of Lord Asquith in a concurring judgment in East End

PIONEER URBAN LAND AND INFRASTRUCTURE LTD. 523 & ANR. v. UNION OF INDIA & ORS. [R.F. NARIMAN, J.]

Dwellings Co. Ltd. v. Finsbury Borough Council (1952) Appeal A Cases 109 are cited. These observations read as follows: “If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it…. The statute says that you must imagine a certain state of affairs. It does not say that, having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.” These observations have been followed time out of number by the decisions of this Court.(See for example, M. Venugopal v. Divisional Manager, LIC (1994) 2 SCC 323 at page 329).

78Copy pinpoint78. But then it was argued that, relying upon Commissioner of Income Tax, Bombay v. Bombay Trust Corporation AIR 1930 PC 54 at 55, that the reason that a deeming fiction is introduced is that the subject matter of that fiction is not so in reality, which why Parliament requires such subject matter be treated as if it were real. To similar effect are the observations in K. Kamaraja Nadar v. Kunju Thevar and Ors. AIR 1958 SC 687 at paragraph 28, where this Court put it thus: E “The effect of such a legal fiction, however, is that a position which otherwise would not obtain is deemed to obtain under those circumstances.”

79Copy pinpoint79. It was also argued, relying upon Delhi Cloth & General Mills Co. Ltd. and Anr. v. State of Rajasthan and Ors. (1996) 2 F SCC 449, that a deeming fiction can only be as to facts and cannot be the deeming of a legal position. It was further argued relying upon Daiichi Sankyo Company Limited v. Jayaram Chigurupati and Ors. (2010) 7 SCC 449, that a deeming provision cannot be destructive of the main provision and cannot be construed as such. G

80Copy pinpoint80. A closer look at Delhi Cloth & General Mills Co. Ltd. (supra) would show that the judgment in essence followed this Court’s judgment in Shri Prithvi Cotton Mills Ltd. & Anr. v. Broach Borough Municipality & Ors. 1969(2) SCC 283, in that the validating

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A statute in question had not cured the defect that was pointed out. This becomes clear on a reading of paragraph 16 and 17 of the judgment which read as follows: “16. The Validating Act provides that, notwithstanding anything contained in Sections 4 to 7 of the 1959 Act or in any judgment, B decree, order or direction of any court, the villages of Raipura and Ummedganj should be deemed always to have continued to exist and they continue to exist within the limits of the Kota Municipality, to all intents and for all purposes. This provision requires the deeming of the legal position that the villages of Raipura and Ummedganj fall within the limits of the Kota Munici- C pality, not the deeming of facts from which this legal consequence would flow. A legal consequence cannot be deemed nor, there- from, can the events that should have preceded it. Facts may be deemed and, therefrom, the legal consequences that follow.

17. Sections 4 to 7 remained on the statute book unamended when the Validating Act was passed. Their provisions were mandatory. They had admittedly not been followed. The defect of not following these mandatory provisions in the case of the villages of Raipura and Ummedganj was not cured by the Validating Act. The curing of the defect was an essential requirement for the passing of a valid validating statute, as held by the Constitution Bench in the case of Prithvi Cotton Mills Ltd. [(1969) 2 SCC 283 : (1970) 1 SCR 388] It must, therefore, be held that the Validating Act is bad in law and it must be struck down.”

81Copy pinpoint81. It was in this context that it was stated that the fiction of a F legal consequence cannot be deemed, whereas facts which preceded such consequence can so be deemed. In the present case, the deeming provision, as has been held by us, is only clarificatory of the true legal position as it already obtained. The present case does not concern itself with validating statutes at all. The ratio of this judgment, therefore, would have no application to this case. G

82Copy pinpoint82. Equally, in Daiichi Sankyo Company Limited(supra), it was found that the deeming provision contained in sub-clause (2) of Regulation 2(1)(e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 flew in the face of the very idea of “persons acting in concert”, as a result of which it H

PIONEER URBAN LAND AND INFRASTRUCTURE LTD. 525 & ANR. v. UNION OF INDIA & ORS. [R.F. NARIMAN, J.]

was held that a deeming fiction cannot do away with the very concept A of “persons acting in concert” contained in the main provision. In the present case however, far from doing away with the concept of a “financial creditor”, we have already found that the deeming provision is only clarificatory of the fact that allottees are to be considered as “financial creditors” for the reasons already given by us hereinabove. B

83Copy pinpoint83. Although a deeming provision is to deem what is not there in reality, thereby requiring the subject matter to be treated as if it were real, yet several authorities and judgments show that a deeming fiction can also be used to put beyond doubt a particular construction that might otherwise be uncertain. Thus, Stroud’s Judicial Dictionary of Words and Phrases (Seventh Edition, 2008), defines “deemed” as follows: C

“Deemed”-, as used in statutory definitions “to extend the denotation of the defined term to things it would not in ordinary parlance denote, is often a convenient device for reducing the verbiage or an enactment, but that does not mean that wherever it is used it has that effect; to deem means simply to judge or D reach a conclusion about something, and the words ‘deem’ and ‘deemed’ when used in a statute thus simply state the effect or meaning which some matter or things has- the way in which it is to be adjudged ; this need not import artificiality or fiction; it may simply be the statement of an indisputable conclusion.” E

84Copy pinpoint84. In Hindustan Cooperative Housing Building Society Limited v. Registrar, Cooperative Societies and Anr. (2009) 14 SCC 302, this Court in dealing with legal fictions generally quoted a large number of authorities thus at paragraph 17: “17. “13. … It is, as noted above, a deeming provision. Such a F provision creates a legal fiction. As was stated by James, L.J. in Levy, Re, ex p Walton [(1881) 17 Ch D 746 : (1881-85) All ER Rep 548 (CA)] : (Ch D p. 756) ‘… When a statute enacts that something shall be deemed to have been done, which in fact and truth was not done, the court is G entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to.’ After ascertaining the purpose full effect must be given to the statutory fiction and it should be carried to its logical conclusion H

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A and to that end it would be proper and even necessary to assume all those facts on which alone the fiction can operate. [Ed.: This latter sentence does not form part of what was observed by James, L.J. in ex p Walton, (1881) 17 Ch D 746 : (1881-85) All ER Rep 548 (CA) but is a paraphrase of what was observed by the Supreme Court in State of Bombay v. Pandurang Vinayak, 1953 B SCR 773 at p. 778. See also Ali M.K. v. State of Kerala, (2003) 11 SCC 632 : 2004 SCC (L&S) 136, SCC at p. 639, para 13.] [See Hill v. East and West India Dock Co. [(1884) 9 AC 448 (HL)] , State of Travancore-Cochin v. Shanmugha Vilas Cashewnut Factory [AIR 1953 SC 333] , American Home C Products Corpn. v. Mac Laboratories (P) Ltd. [(1986) 1 SCC 465] and ParayankandiyalEravathKanapravanKalliani Amma v. K. Devi [(1996) 4 SCC 76] .] In an oft quoted passage, Lord Asquith stated: ‘If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact, existed, must inevitably have flowed from or accompanied it. … The statute [states] that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.’ (See East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952 AC 109 : (1951) 2 All ER 587 (HL)] at AC pp. 132-33.) F ‘… The word “deemed” is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. G Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible.’ [Per Lord Radcliffe in St. Aubyn v. Attorney General (No. 2) [1952 AC 15 : (1951) 2 All ER 473 (HL)] , AC p. 53.] H

PIONEER URBAN LAND AND INFRASTRUCTURE LTD. 527 & ANR. v. UNION OF INDIA & ORS. [R.F. NARIMAN, J.]

14. ‘Deemed’, as used in statutory definitions [is meant] A ‘to extend the denotation of the defined term to things it would not in ordinary parlance denote, is often a convenient devise for reducing the verbiage of an enactment, but that does not mean that wherever it is used it has that effect; to deem means simply to judge or reach a conclusion about something, and the words B “deem” and “deemed” when used in a statute thus simply state the effect or meaning which some matter or thing has — the way in which it is to be adjudged; this need not import artificiality or fiction; it may simply be the statement of an undisputable conclusion.’ (Per Windener, J. in Hunter Douglas Australia Pty. v. Perma Blinds [(1970) 44 Aust LJ R 257] .) C

15. When a thing is to be ‘deemed’ something else, it is to be treated as that something else with the attendant consequences, but it is not that something else (per Cave, J., in R. v. Norfolk County Court [(1891) 60 LJ QB 379] ). D ‘When a statute gives a definition and then adds that certain things shall be “deemed” to be covered by the definition, it matters not whether without that addition the definition would have covered them or not.’(Per Lord President Cooper in Ferguson v. McMillan [1954 SLT 109] .) E

16. Whether the word ‘deemed’ when used in a statute established a conclusive or a rebuttable presumption depended upon the context (see St. Leon Village Consolidated School Distt. v. Ronceray [(1960) 23 DLR (2d) 32] ). ‘…. I … regard its primary function as to bring in something which would otherwise be excluded.’(Per Viscount Simonds in Barclays Bank v. IRC [1961 AC 509 : (1960) 3 WLR 280 : (1960) 2 All ER 817 (HL)] at AC p. 523.) ‘Deems’ means ‘is of opinion’ or ‘considers’ or ‘decides’ and there is no implication of steps to be taken before the opinion is formed or the decision is taken.[See R. v. Brixton Prison (Governor), ex p Soblen [(1963) 2 QB 243 : (1962) 3 WLR 1154 : (1962) 3 All ER 641 (CA)] at QB p. 315.]” [Ed.: As observed in Ali M.K. v. State of Kerala, (2003) 11 SCC 632 : 2004 SCC (L&S) 136, SCC at pp. 639-40, paras 13-16.]” H

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A In the present case, it is clear that the deeming fiction that is used by the explanation is to put beyond doubt the fact that allottees are to be regarded as financial creditors within the enacting part contained in Section 5(8)(f) of the Code.

85Copy pinpoint85. It was also argued that an explanation does not enlarge the B scope of the original section and for this purpose S. Sundaram Pillai (supra) was relied upon. This very judgment recognises, in paragraph 46, that an explanation does not ordinarily enlarge the scope of the original Section. But if it does, effect must be given to the legislative intent notwithstanding the fact that the legislature has named a provision as an explanation. [See Hiralal Ratanlal Etc. v. State of U.P and Anr. Etc. C (1973) 1 SCC 216 at 225, followed in paragraph 51 of Sundram Pillai (supra)]. In any case, it has been found by us that the explanation was added by the Amendment Act only to clarify doubts that had arisen as to whether homebuyers/allottees were subsumed within Section 5(8)(f).The explanation added to Section 5(8)(f) of the Code by the Amendment Act D does not in fact enlarge the scope of the original Section as homebuyers/ allottees would be subsumed within Section 5(8)(f) as it originally stood as has been held by us hereinabove. As a matter of statutory interpretation, that interpretation, which accords with the objects of the statute in question, particularly when we are dealing with a beneficial legislation, is always the better interpretation or the “creative E interpretation” which is the modern trend of authority, and which is reflected in the concurring judgment of Eera (through Dr. Manjula Krippendorf) v. State (NCT of Delhi) and Anr. (2017) 15 SCC 133 at paragraphs 122 and 127.This argument must, therefore, also be rejected.

86Copy pinpoint86. We, therefore, hold that allottees/home buyers were included in the main provision, i.e. Section 5(8)(f) with effect from the inception of the Code, the explanation being added in 2018 merely to clarify doubts that had arisen. Conclusion G i. The Amendment Act to the Code does not infringe Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution of India. ii. The RERA is to be read harmoniously with the Code, as amended by the Amendment Act. It is only in the event of H

PIONEER URBAN LAND AND INFRASTRUCTURE LTD. 529 & ANR. v. UNION OF INDIA & ORS. [R.F. NARIMAN, J.]

conflict that the Code will prevail over the RERA. Remedies A that are given to allottees of flats/apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code. B iii Section 5(8)(f) as it originally appeared in the Code being a residuary provision, always subsumed within it allottees of flats/ apartments. The explanation together with the deeming fiction added by the Amendment Act is only clarificatory of this position in law. C Postscript

87Copy pinpoint87. We have been informed that most of the States and Union Territories have established/appointed adjudicating officers, the Real Estate RegulatoryAuthority, as well as the Appellate Tribunal as under the RERA. Yet, despite the fact that 1st May, 2017 has long gone, some recalcitrant States and Union Territories have yet to do the needful. We direct that in those States in which the needful has not been done, in that, only interim or no adjudicating officer/Real Estate Regulatory Authority and/or Appellate Tribunal have been appointed/established, such States/ Union Territories are directed to appoint permanent adjudicating officers, a Real Estate Regulatory Authority and Appellate Tribunal within a period of three months from the date of this judgment. Copies of this judgment be sent to the Chief Secretaries of all the States and Union Territories immediately. To be placed for compliance by affidavits filed by the Chief Secretaries of these States and Union Territories within 3 months as aforesaid. Post these matters in the second week of January, 2020. F

88Copy pinpoint88. Given the declaration of the constitutional validity of the Amendment Act, it is absolutely necessary that the NCLT and the NCLAT are manned with sufficient members to deal with litigation that may arise under the Code generally, and from the real estate sector in particular. For this purpose, an affidavit be filed by the Union of India G within three months from today as to the steps taken in this behalf. Copy of this judgment be sent to the Ministry of Law and Justice, Government of India immediately. To come up with the compliance report by States and Union Territories as aforesaid in the second week of January, 2020.

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89Copy pinpoint89. All writ petitions and the civil appeal are disposed of in the light of this judgment. Stay orders granted by this Court to continue until the NCLT takes up each application filed by an allottee/ home buyer to decide the same in light of this judgment. No order as to costs.

B Nidhi Jain Matters disposed of.