The Bombay High Court bench, comprising of Justice Sandeep V. Marne, has held that promoters who are part of a real estate project but haven’t received any consideration from the allottee will still be classified as “Promoters” under Section 2(zk). Consequently, they will be liable to refund the amount with interest to the allottees under Section 18 of the Real Estate (Regulation and Development) Act, 2016.

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Background Facts

Respondent No. 2 (SSS Escatics Pvt. Ltd) launched “The Nest” project in Mumbai under the Slum Rehabilitation Scheme. A Joint Development Agreement was signed between Respondent No. 2 and the Appellant to jointly develop the project.

Following the registration of project on RERA, Respondent No. 1 (Mr. Vijay Choksi) noticed discrepancies in the carpet area mentioned on the MahaRERA website compared to the actual area booked.

Disappointed with the project’s progress and the discrepancies, Respondent No. 1 approached MahaRERA seeking a refund with interest. However, MahaRERA, in its order dated September 24, 2021, rejected the refund claim.

Subsequently, Respondent No. 1 appealed against the MahaRERA order. In its order dated October 18, 2022, the Tribunal directed both Respondent No. 2 and the Appellant to refund the entire amount paid by Respondent No. 1 with interest.

The appellant filed an appeal before the Honorable Bombay High Court against the Tribunal’s order dated October 18, 2022, contending that Respondent No. 2 alone received the entire consideration from Respondent No. 1, and since Respondent No. 1 has not paid any amount to the Appellant, the Appellant cannot be directed to refund any amount.

High Court Verdict

The High Court, while upholding the order of MahaREAT held that both appellant and Respondent No. 2 will fall under the definition of ‘Promoters’ and are jointly liable to refund the amount with interest under Section 18 of the RERA Act.

The High Court relied on Section 2(zk) of Real Estate (Regulation and Development) Act, 2016, which states:

2(zk). Promoter

ExplanationFor the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the person who sells apartments or plots are different persons, both of them shall be deemed to be promoters and shall be jointly liable as such for the functions and responsibilities specified under this Act or the rules and regulations made thereunder.

The High Court further discussed the scope of the term “Promoter” under Section 2(zk) of RERA and held that the definition is wide enough to include every person associated with the construction of the building, such as a builder, colonizer, contractor, developer, estate developer, or by any other name, or even one who claims to be acting as the holder of a power of attorney from the owner of the land.

In conclusion, the Bombay High Court, while dismissing the appeal and upholding the MahaREAT order, held that co-promoters are also liable to refund the amount to the homebuyers under Section 18 of RERA.

Case: Wadhwa Group Housing Private Ltd V/s. Mr. Vijay Choksi and SSS Escatics Pvt. Ltd

Citation: SA(St.)21842-2023-FC

Counsel for Appellant: Mr. Naushad Engineer with Mr. Chirag Kamdar, Mr. Abir Patel and Ms. Lavina Bhargava i/by. M/s. Wadia Ghandy & Co.

Counsel for Respondent No 1: Mr. Ashish Kamat, Senior Advocate with Mr. Vikram Garewal, Mr. Sagar Deb, Mr. Amani i/by. Mr. Anmol Bastariva.

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