Introduction

The Maharashtra Real Estate Regulatory Authority ("MahaRERA") has delivered an order on 28th September, 2022 in the matter of Vijayshree Ajay Pandya and Another versus Prahsanti Land Developers Private Limited ("Order")1. Under the said Order, MahaRERA, inter alia directed the allottees of a lapsed housing project to withdraw from it only after the Association of Allotees or any new developer appointed by the said association has completed the project. The said Order addresses the conflict between the rights of an allottee vis-à-vis the objective of development of real estate projects, under the provisions of the Maharashtra Real Estate (Regulation and Development) Act, 2016 ("the Act").

Factual Background

The allottees had purchased a flat in a project known as 'Victory Platinum' ("Project") being developed by Prahsanti Land Developers Private Limited ("Developer"). The allottees had purchased a flat in the said Project under a registered Agreement for Sale ("AFS"), for a total consideration out of which more than 90 percent of the consideration amount was paid to the Developer.

In terms of the AFS, the Developer was obligated to handover the possession of the flat by March, 2016, however, the Developer failed to handover the flat.

Due to the delay in handing over the possession of the flat, the Developer waived the remaining 10 percent of the consideration amount and extended the date of possession to March 2020, despite the date of possession being 31st December, 2018, which was further renewed up to 31st December, 2019, on the MahaRERA website.

The 48-month delay from the agreed date of possession being March 2016 was unacceptable to the allottees. In pursuance thereof, the Developer and allotees decided to settle their dispute amicably and executed a Memorandum of Understanding dated 12th October, 2019 ("MOU"), whereby the Developer agreed to buy-back the flat of the allottees for an amount of Rs. 3,15,00,000/- (Rupees Three Crore Fifteen Lakh only) inclusive of the principal amount paid along with the interest from 1st April, 2016 till 31st August, 2019, at the rate of 9 percent per annum. Accordingly, 4 cheques were issued to the allottees, however, the cheques were dishonored and consequently, the Developer failed to comply with the terms and conditions of said MOU.

At the same time, the Developer failed to get the project registration extended and on account of which, the said Project lapsed.

Aggrieved by the non-compliance of the Developer of the terms of the AFS and MOU, the allottees filed a complaint before the MahaRERA seeking refund of the consideration amount along with the interest thereon and compensation under section 182 of the said Act.

The said Order:

MahaRERA while adjudicating the present complaint of the allottees, took cognizance of the Order dated 8th August, 2022,3 passed by the MahaRERA in a complaint filed by inter alia Association of Allottees ("AOA") of the said Project, whereby it was inter alia directed that:

  • The complaint against the Developer was allowed under section 84 of the said Act;
  • The registration of the said Project was confirmed as lapsed;
  • Permission was granted to the AOA to takeover the project or appoint a new promoter for the same and complete the project as per the provisions of the said Act;
  • The AOA or the promoter appointed by the AOA shall have to apply for the registration of the said Project within a period of 30 days from the date of the Order dated 2nd August, 2022;
  • The AOA or the newly appointed promoter shall protect and safeguard the bonafide rights of the complainants of the said Project as well as any new allottee (due to sale of unsold flats, etc) and the same shall remain unaltered upon the change of the promoter of the said Project.

Pursuant to the aforesaid Order dated 8th August, 2022, the AOA or any new promoter appointed by the AOA will have to be construed as the new promoter of the said Project and the liabilities of the previous promoter i.e., Developer herein will be shifted upon the AOA or the new promoter that may be appointed, including the present complaint and those under provisions of section 18 of the said Act.

However, in the present complaint, MahaRERA attempted to strike a balance between the right of the allottees against the larger interests of the said Project and has acknowledged the rights of allottees to seek a remedy under the provisions of section 18 of the said Act against the AOA or the new promoter, as also to safeguard the larger interest of the Project and to concerned itself with the implementation of real estate projects.

Therefore, by way of an Order, MahaRERA inter alia passed the following directions:

  • The allottees are allowed to withdraw from the Project only after completion of the said Project by the AOA or any new promoter appointed by the said AOA;
  • The AOA or any new promoter appointed by the said AOA, after completion of the Project may sell off the complainants flat and refund the money paid by the allottees towards the consideration of the flat (Rs. 1,47,00,000/- as acknowledged by the Developer) along with interest at the rate of SBI's Highest Marginal Cost Lending Rate (MCLR) plus 2% as prescribed under the provisions of section 18 of the said Act and the Rules made thereunder from the date of default of the Developer (in this case from 31-03-2020 i.e. the revised date of possession mentioned in the MOU dated 12-10-2019), till the actual realisation of the said amount to the allottees.

Takeaways

While acknowledging the rights of the allottees to get a refund, the MahaRERA has also sought to achieve a balance by attempting to ease the burden on the AOA/new promoter who is tasked with completing an already delayed project while assuming all existing liabilities of an errant developer.

By asking the allottee to stay put in the project until completion and explicitly allowing the AOA/new promoter to sell off the allottee's flat to refund monies paid by him, this judgment can be viewed positively by associations/developers seeking to salvage delayed project.

Footnotes

1.MahaRERA Order dated 28th September, 2022, passed in Complaint No. CC006000000182019.

2. Section 18 of the said Act states inter alia that (1) If the promoter fails to complete or is unable to give possession of an apartment, plot or building,— (a) in accordance with the terms of the agreement for sale or, as the case may be, duly completed by the date specified therein; or (b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act or for any other reason, he shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under the said Act. (3) If the promoter fails to discharge any other obligations imposed on him under this Act or the rules or regulations made thereunder or in accordance with the terms and conditions of the agreement for sale, he shall be liable to pay such compensation to the allottees, in the manner as provided under the said Act.

3. MahaRERA Order dated 8th August, 2022, passed in Complaint No. CC006000000195746 and 16 others.

4. Section 8 of the said Act states inter alia that:. Upon lapse of the registration or on revocation of the registration under this Act, the Authority, may consult the appropriate Government to take such action as it may deem fit including the carrying out of the remaining development works by competent authority or by the association of allottees or in any other manner, as may be determined by the Authority: Provided that no direction, decision or order of the Authority under this section shall take effect until the expiry of the period of appeal provided under the provisions of this Act: Provided further that in case of revocation of registration of a project under this Act, the association of allottees shall have the first right of refusal for carrying out of the remaining development works.

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