Bombay High Court Rules New Developer Not Liable For Previous Builder's ₹37 Lakh Debt To Flat Buyers

Mumbai: The Bombay High Court has clarified that a developer appointed to complete a stalled redevelopment project cannot automatically be held responsible for the financial liabilities incurred by the previous developer towards flat buyers. The court said that merely taking over a project does not mean that the new developer also takes over the earlier developer’s debts.

Court Quashes MahaRERA Order Against H Rishabraj Developers

A bench of Justices Suman Shyam and Gautam Ankhad set aside a Maharashtra Real Estate Regulatory Authority (MahaRERA) order directing H Rishabraj Developers, the new developer of a redevelopment project in Kandivali, to pay interest on Rs 37 lakh owed by the previous developer to a couple who had booked a flat.

The court also quashed orders attaching and freezing the developer’s bank accounts for recovery of the amount.

Kandivali Redevelopment Dispute Involves ₹37 Lakh Paid By Flat Buyers

The dispute relates to the redevelopment of a property owned by Khambhati Modh Vanik Samaj trust, which had appointed Jayant Mehta as the original developer. In 2015, Mehta allotted a flat on the ninth floor to Kinjal and Mahesh Karia, who paid Rs 37 lakh.

However, after disputes arose between the trust and Mehta, the development agreement was terminated in July 2017. The trust subsequently appointed H Rishabraj Developers as the new developer in July 2021, following orders passed by the High Court.

Couple Approaches MahaRERA After Previous Developer Fails To Refund Money

The couple approached MahaRERA in 2018 seeking a refund. Mehta had undertaken to repay the amount but failed to honour his commitment. In March 2022, MahaRERA directed both Mehta and the new developer to pay interest on the Rs 37 lakh from May 17, 2018, until its actual repayment.

Challenging the order, the new developer argued that it was not a party to the original proceedings and could not be made responsible for the previous developer's default.

Accepting the contention, the bench observed that MahaRERA could not impose financial liability on a person who was not made a party to the proceedings.

“A judgment or order of a court or quasi-judicial authority, rendered in adversarial proceedings, binds only the parties to those proceedings,” the court said.

It further observed that the original developer had repeatedly undertaken before MahaRERA and the High Court to repay the amount. “If a default is committed by the Respondent No.5 (previous developer), it cannot be retrospectively transferred to a third party,” the bench said.

The court clarified that its order would not absolve Mehta of his repayment obligations and allowed the couple to pursue recovery proceedings against him, and the trust if legally maintainable.

Both petitions filed by H Rishabraj Developers were allowed.

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