Landmark Judgment: Bombay HC Rules Co-promoters Jointly Liable for Refunds in Delayed Flat Possession

In a recent decision, the Bombay High Court (HC) expanded the scope of the term ‘promoter’ under the Real Estate (Regulatory and Development) Act (Rera), stating that it encompasses co-promoters, even those who haven’t received funds directly from flat buyers. The ruling makes them jointly liable to refund amounts, along with interest, for project delays.

The HC emphasized that the 2016 Act, effective from 2017, defines ‘promoter’ so extensively that it practically includes anyone involved in the building’s construction. According to the HC, this definition applies even if there’s no specific agreement between every promoter and a flat buyer. The court clarified that individuals, such as investors benefiting from the project alongside promoters, fall within the ‘promoter’ category.

The decision, issued on February 26, has significant implications for the real estate industry, particularly in Mumbai, affecting numerous redevelopment projects. Legal experts suggest that the ruling addresses a crucial legal question and pertains to the refund liability of promoters.

Justice S V Marne focused on whether a promoter, not receiving payments from an allottee, can still be held liable for refunding with interest under Section 18 of Rera. The case involved Wadhwa Group Housing challenging its joint liability as a co-promoter in an SRA project in Andheri. The dispute arose when a flat buyer sought a refund for a payment made to the co-developer, who failed to meet project deadlines.

Wadhwa Group Housing argued that as Choksi, the flat buyer, paid the entire amount to the co-developer, only the co-developer should be responsible for the refund. The HC disagreed, stating that the account in which funds are received is irrelevant in determining joint liability under Rera.

The court further highlighted that the complexities of joint development agreements between developers do not exempt promoters from Rera responsibilities. It emphasized that if promoters wish to avoid liability, they must exit the joint venture before project registration.

Wadhwa Group Housing sought an eight-week stay on execution proceedings to appeal to the Supreme Court, but the HC did not grant it. The ruling is expected to have a lasting impact on the real estate landscape, prompting a reevaluation of joint responsibilities and liabilities in construction projects.

Posted and reproduced in Public Interest by 

Adv. Sulaiman Bhimani Legal Consultant

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