Western India Regional Council of
The Institute of Chartered Accountants of India

(Setup by an Act of Parliament)

September 24, 2019

CA. Ashwin Shah, CA. Vyomesh Pathak

LANDMARK JUDGEMENT - HON’BLE HIGH COURT, MUMBAI

In the matter of M/S. Samruddhi Developers V/s. Kiran Vasant Verekar and others.

Second Appeal No. 27914/2018 and Civil application No. 1313/2018 pronounced on 17th September, 2019.

Facts of the case :-

Various allottees have filed complaints before authority with claim of relief u/s 18 of the Act for interest on delayed possession.

Authority has dismissed the complaint of allottees without granting any relief u/s 18 of the Act.

Allottee then preferred Appeal before Maharashtra Real Estate Tribunal seeking interest u/s 18 of the Act, for delay in possession.

Tribunal allowed the Appeal of the allottees and directed Developer to pay interest from 1st January, 2018 till handing over possession.

Aggrieved by Tribunal order, Developer preferred Appeal before Hon’ble High Court, Mumbai.

Originally society granted Development Rights to M/s Rebuilt Developers on 13th December 12 , 2007.

M/s Rebuilt Developers assigned Development Rights to new developers, M/s Samruddhi Developers with consent of society on 9th November , 2015

The various allottee who had executed Agreement for sale with M/s Rebuilt Developers then claimed interest for delayed possession from New developer , which is subject matter of current dispute.

Appellant i.e. New Developer M/s Samruddhi Developer raised the following arguments before Hon’ble High Court, Mumbai :-

a) There is no privity of contract between allottee and Appellant.
b) Appellant was appointed as new developer to complete remaining construction work which was left undone by the old developer.
c) None of the allottees were parties to Deed of Assignment dated 9/11/15.
d) It was clearly mentioned in the Deed of Assignment that appellant will not commence construction work for 8th Floor until commencement certificate is procured by Appellant.
e) The consideration paid by various allottee was not received by Appellant but by the old developer.
f) Society Terminated Development Agreement of Appellant on 1st February , 2019 which was after the order of RERA Tribunal.
g) Appellant cannot now complete the construction as society has terminated Development Agreement on 1st February , 2019.
h) Original Developer has not obtained consent from allottee while executing Deed of Assignment and hence the said Deed of Assignment is not enforceable by the allottees against Appellant.
i) Appellant is not liable to pay any interest to any of the allottees.
j) Since the Development Agreement is terminated on 1/2/19, Appellant cannot do any thing for construction work and therefore can not be made liable to pay any liability to any of the allottees.
k) Appellant contended that Hon’ble Tribunal has failed to consider various arguments and explanations of appellant while disposing off the Appeal by the Tribunal.

Decision :-

It is the responsibility of new developer to take over all the rights and obligation of old developer as mentioned in the Deed of Assignment.

Even though appellant has not received consideration from allottees or had no premity of contract with allottee, still appellant is liable to all the allottees in terms of section 15 of the Act.

Appellant cannot be saddled with the obligation towards allottees merely for the reason that there is termination of Development Agreement by the society.

There is no substantial question of law arises in this appeal filed by appellant and thus no interference is warranted with the order passed by RERA Tribunal.

These Appeals are totally devoid of merit and hereby dismissed.

POINTS TO PONDER :-

Whether Society becomes Developer Promoter upon termination of Development Agreement?

Whether Society can terminate Development Agreement without taking consent of 2/3 rd of allottees and consent of RERA Authority as required and mandated by Section 15 of the Act ? Because it results in transfer of rights in the project and Society being land Owner is Promoter under the Act.

Once the Termination of Development Agreement is effective , how outgoing Developer be made liable for delay in possession from the date of Termination?

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