Legal Update | Promoter Liability for Housing Societies in Redevelopment
The Hon'ble Maharashtra Real Estate Appellate Tribunal (MREAT) vide order dated 2 June 2025 in the case of D. N. Nagar Shivneri CHS Ltd. v. Various Allottees held that a cooperative housing society undertaking self-redevelopment does not automatically qualify as a "promoter" under the Real Estate (Regulation and Development) Act, 2016 (RERA Act), and is not liable for obligations toward third-party flat purchasers from a terminated developer under Section 18 of the RERA Act.
Brief Facts
The case concerns a dispute involving D. N. Nagar Shivneri CHS Ltd. (Society), a Maharashtra Housing and Area Development Authority (MHADA) leaseholder, which appointed M/s Sai Siddhant Developers (Developer) for redevelopment through an agreement dated 24 December 2010. The Developer failed to fulfil its obligations, leading to arbitration and termination of the agreement on 30 January 2020. The Society then undertook self-redevelopment and obtained a part occupation certificate in 2024.
Third-party purchasers (Allottees), who had purchased flats from the erstwhile developer, filed complaints before Maharashtra Real Estate Regulatory Authority (MahaRERA), which on 17 April 2025, held the Society jointly and severally liable as a "promoter" and directed it to pay interest and refunds and file affidavits under RERA, for which the Society challenged this order.
Issues for Adjudication
- Whether the Society qualifies as a "promoter" under Section 2(zk) of the RERA Act.
- Whether the Society is required to comply with the mandatory pre-deposit requirement under the proviso to Section 43(5) of the RERA Act before filing appeals.
- Whether the Society has any obligations toward third-party allottees under terminated agreements executed by the Developer.
Held
The Tribunal set aside the MahaRERA order and held that the Society does not fall within the definition of "promoter" under Section 2(zk) of RERA and that it had no revenue/area sharing arrangement with the erstwhile developer, nor did it enter into agreements for sale with allottees. It was further held that the Society's role was confined to land ownership and redevelopment for its own members. The developer was solely responsible for third-party sales, and post-termination, the Society resumed construction as permitted by the Bombay High Court. Consequently, the Society is not liable for the claims of third-party purchasers made against the developer. The Tribunal also ruled that the Society is exempt from the pre-deposit requirement under Section 43(5) RERA as it is not a "promoter".
MHCO Comment
This decision settles the position of cooperative housing societies pursuing self-redevelopment post-termination of a development agreement. It establishes that such societies are not automatically promoters under RERA for acts of third-party developers and are insulated from liabilities to flat purchasers of the developer's free-sale component, provided there is no revenue/area sharing or contractual privity. This decision provides relief and clarity to many societies across Maharashtra facing similar disputes, ensuring they are not unfairly burdened with obligations stemming from third-party transactions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
