Introduction:
The process of carrying out redevelopment of old and dilapidated housing societies in the city of Mumbai has long been a subject of legal complexity and negotiations due to which the rights of the residents are put at stake due to various issues such as delay in handover of new premises, stoppage of construction, change in governmental policies, etc. The case of Huges Real Estate Developers LLP (“Erstwhile Developer”) versus Khernagar Adarsh Co-operative Housing Society Limited (“Society”) & Anr is one such example wherein the Hon'ble Bombay High Court was tasked with determining a balance between the contractual rights of one erstwhile developer vis-a-vis the fundamental right of society members to timely and safe housing.
Factual Background:
- In or about 2011, a Development Agreement was executed between the Society and the Erstwhile Developer (“Development Agreement”) for undertaking redevelopment of building no. 23 situate at Khernagar, Bandra (East), Mumbai (“Property”) under the then prevailing Development Control Regulations (“DCR 1991”) on the terms and conditions contained therein.
- Following the execution of the Development Agreement, proposals were submitted to Maharashtra Housing and Area Development Authority, however the same were stalled due to the introduction of the Development Control and Promotion Regulations, 2034 which replaced the DCR 1991.
- Between 2020 to 2022, various offers/ proposals were floated by the Erstwhile Developer to the Society. One such proposal was accepted by the Society in its Special General Meeting held on 27th November 2022, however, the Society vide it's Letter dated 3rd December 2022 imposed certain conditions to be complied with by the Erstwhile Developer within the timelines stipulated therein.
- Since, the Erstwhile Developer failed to fulfil the conditions contained in the aforesaid Letter dated 3rd December 2022, the Society in its Special General Meeting held on 1st January 2023 resolved to terminate the Development Agreement and accordingly a Termination Notice dated 31st January 2023 (“Termination Notice”) was issued by the said Society to the Erstwhile Developer.
- Subsequently, a Tender Document dated 28th February 2023 (“Tender”) was floated by the Society inviting bids from various developers for undertaking redevelopment of the said Property and accordingly, the Society in its Special General Meeting held on 17th September 2023 unanimously resolved to appoint Kumar Vibe Properties Private Limited (“Kumar”) as the developer for undertaking redevelopment of the said Property and a Letter dated 10th October 2023 was issued by the Deputy Registrar of Co-operative Societies confirming such resolution. One of the conditions mentioned in the Tender was that the new developer shall obtain a no objection certificate from the Erstwhile Developer for undertaking redevelopment of the said Property.
Suit filed before the Hon'ble Bombay High Court:
- The Erstwhile Developer being aggrieved by the appointment of Kumar as the developer for undertaking redevelopment of the said Property, filed a Commercial Suit (L) No. 28114 of 2023 before the Hon'ble Bombay High Court against the said Society and Kumar (“said Suit”) seeking inter alia (a) a declaration that there exists a valid, binding and subsisting contract between the Erstwhile Developer and the said Society for redevelopment of the said Property; and (b) for a declaration that the said Termination Notice is illegal, arbitrary and void ab initio and also prayed for specific performance of the Development Agreement.
- Subsequently, an Interim Application (L) No. 28499 of 2023 was filed before the Hon'ble Bombay High Court by the Erstwhile Developer in the said Suit inter alia seeking for temporary injunction in favour of Erstwhile Developers.
- By an Order dated 24th October 2024 (“2024 Order”) passed by the Hon'ble Bombay High Court in the aforesaid Interim Application , the relief sought by the Erstwhile Developer were not granted, however, so as to protect the rights of the Erstwhile Developer, directions were issued to Kumar to obtain ‘no objection certificate' from the Erstwhile Developer in terms of the said Tender.
Appeal filed before the Bombay High Court:
- The Erstwhile Developer being aggrieved by the 2024 Order, preferred a Commercial Appeal No. 45 of 2025 before the Hon'ble Bombay High Court inter alia challenging the 2024 Order.
- A cross appeal bearing Commercial Appeal (L) No. 17320 of 2025 was also filed before the Hon'ble Bombay High Court by the said Society inter alia challenging the imposition of the condition of obtaining ‘no objection certificate' from the Erstwhile Developer.
Submissions made by the Erstwhile Developer:
- The 2024 Order failed to take into consideration that there existed a valid contract between the Erstwhile Developer and the Society as regards redevelopment of the said Property. It was submitted that the subsequent offers/ proposals and communications were not a case of novation since it only dealt with the amendments to the commercial terms contained in the original Development Agreement.
- The 2024 Order also acknowledged that the termination of the said Development Agreement only on the grounds of delay caused by the Erstwhile Developer in carrying out redevelopment of the said Property was completely flawed and in spite of that the 2024 Order failed to grant the temporary injunction in favour of the Erstwhile Developer.
Submissions made by the said Society and Kumar:
- The Erstwhile Developer had failed to honour the conditions imposed by the Society in its Letter dated 3rd December 2022 and therefore terminating the rights of the Erstwhile Developer to redevelop the said Property was completely valid, legal and in the best interest of member of the Society.
- It was further submitted that the imposition of the condition of obtaining ‘no objection certificate' from the Erstwhile Developer frustrates the entire redevelopment of the said Property as the Erstwhile Developer despite being unsuccessful in securing injunction, would continue to create obstacles in execution of the redevelopment of the said Property.
- Kumar had already offered a cheque of Rs. 2,60,00,000/- to the Erstwhile Developer showing its willingness to compensate the Erstwhile Developer. However, the Erstwhile Developer denied to accept such cheque and thereby made unreasonable demands against the said Society.
Observations made by the Hon'ble Bombay High Court:
- The Hon'ble Bombay High Court in its Order dated 19th August 2025 (“2025 Order”) passed in the aforesaid Commercial Appeals observed that the refusal to grant the temporary injunction in favour of the Erstwhile Developer was justified. It is one of the fundamental principles that the rights of the developer to earn profits through redevelopment contracts would always remain subservient to the rights of the society to have its building reconstructed. Thus, when the rights of the residents of a dilapidated buildings to reside in safe houses is pitted against the rights of the developer to earn profits through redevelopment contracts, the latter must yield to the former.
- While considering the issue of protecting the rights of the Erstwhile Developer, it was observed that the potential loss which might be caused to the Erstwhile Developer can be compensated monetarily as is evident from the prayer's made by the Erstwhile Developer seeking recovery of Rs. 8,09,51,502/- being the expenditure incurred by the Erstwhile Developer along with interest @18 % p.a. However, the aforesaid claim was found to be unreasonable, and it was therefore ordered that interest @8 p.a. be made applicable and accordingly a lump sum amount of Rs. 5,00,00,000/- would be a reasonable compensation to secure the rights of the Erstwhile Developer.
- It was further observed that imposition of the condition on the Society and Kumar to obtain ‘no objection certificate' from the Erstwhile Developer would delay the redevelopment of the said Property indefinitely and in light of the aforesaid directions as regards compensations to be paid by the Society/ Kumar to secure the rights of the Erstwhile Developer, the aforesaid condition needs to be set aside.
Final Order:
- The impugned 2024 Order was upheld;
- The Society and Kumar were directed to deposit Rs. 5,00,00,000/- with the Hon'ble Bombay High Court within 6 weeks towards compensation to be paid to the Erstwhile Developers; and
- The condition of obtaining ‘no objection certificate' from the Erstwhile Developer for undertaking redevelopment of the said Property was set side. However, in the event, the Society and Kumar fails to deposit the aforesaid amount within the stipulated timeline, then in such case, the condition of obtaining ‘no objection certificate' from the Erstwhile Developer shall be revived.
Conclusion:
The 2025 Order carries significant practical implications on the redevelopment being taken over by other developers. By clearly prioritizing the rights of the residents to housing over the developer's right to earn profits by undertaking redevelopment projects, the Court has reinforced that delay in carrying out redevelopment and related disputes cannot indefinitely stall projects where buildings are in dilapidated condition and lives of the residents are at stake. The Hon'ble Bombay High Court's approach of permitting Kumar to undertake redevelopment of the said Property while safeguarding the Erstwhile Developer against potential loss due to termination of its rights to redevelop the said Property by directing the Society and Kumar to deposit such amounts towards payment of compensation to the Erstwhile Developer sets a landmark precedent by creating a balance between the developer and resident's rights leading to potential decrease in prolonged litigations and thereby ensuring timely completion of redevelopment projects.
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