Q: I thank you for replying to my query in the last Consumer Connect (November 10), where you clarified that homebuyers in a redevelopment project cannot insist that the housing society accommodate them if the society has duly terminated the developer with whom they had executed the agreement for sale. Although you cited a couple of Bombay High Court judgments, the fact remains that homebuyers’ money has gone into the redevelopment project, and, in fairness, the society should accommodate them in the same project. As a consumer organisation, what is the stand of Mumbai Grahak Panchayat (MGP) on this issue, and how would MGP protect the genuine interests of such homebuyers who, through no fault of their own, are being unfairly penalised and deprived of their homes? – Prakash Athavale, Dadar (West) A:
You are right that when a society terminates a developer in a redevelopment project for valid reasons, innocent homebuyers should neither be punished nor denied the flats they booked. MGP fully agrees with this view. Although there is no ‘privity of contract’ between homebuyers and the society in a redevelopment project, the development agreement clearly states that the society has permitted the developer to construct and sell flats in a defined ‘sale component’ of the project. On the basis of this permission, the developer/promoter executes registered agreements for sale with homebuyers, allots specific flats, and collects payments from time to time to complete the society’s redevelopment project.
These registered agreements are executed after paying the requisite stamp duty and registration fees. In effect, the developer creates rights, title, and interest in the society’s redevelopment project – with the society’s full knowledge and approval. Even the money paid by homebuyers goes directly into the same redevelopment project. In most redevelopment projects, the building is substantially financed by homebuyers’ contributions. Therefore, if the developer is terminated for default, the society must accommodate homebuyers in the project; they cannot be abandoned. How can a society enjoy the benefits of homebuyers’ funds yet deny them the homes they paid for?
It appears that these crucial aspects were not adequately considered by the High Court in the ‘Goregaon Pearl CHSL’ case referred to in last week’s column. Notably, the court’s emphasis in that case was largely on the absence of ‘privity of contract’ between homebuyers and the society. However, another High Court judgement dated February 26, 2025 – Wadhwa Group Housing Ltd vs Vijay Choksi & Another – offers a different perspective.
Though the facts of that case may vary, its ratio is valuable for homebuyers affected by a society’s termination of the developer. In this judgment, the court extensively analysed the definition of ‘promoter’ under RERA and the promoter’s obligations toward homebuyers. Paragraph 24 of the judgment states: “Where a claim is raised in respect of a real estate project by a flat purchaser, all promoters become jointly liable qua that flat purchaser, irrespective of whether there is a privity of contract with each of the promoters or not. This is the scheme of RERA, and mere absence of ‘privity of contract’ with a particular promoter does not relieve such promoter of liabilities under RERA.”
Thus, we now have two conflicting High Court judegments – one emphasising ‘privity of contract’ and the other stating that such privity is unnecessary for granting relief to homebuyers. Naturally, these contradictions create confusion among already distressed homebuyers. It is time for the Central government to take the initiative and urge Parliament to amend RERA appropriately, addressing issues arising from the redevelopment of old buildings and the vulnerability of homebuyers in such projects.
(Advocate Shirish V Deshpande is chairman, Mumbai Grahak Panchayat. Queries can be sent to him on email: shirish50@yahoo.com)
To get details on exclusive and budget-friendly property deals in Mumbai & surrounding regions, do visit: https://budgetproperties.in/
