Classification Of Society As A Promoter Under RERA

The question whether a society is a "promoter" under Real Estate (Regulation and Development) Act, 2016 ("RERA") has acquired immense significance since the onset of RERA especially owing to the exhaustive definition of promoter provided under RERA. This question has also been dealt with by multiple courts in the past wherein it has been held that classification of a society as a promoter depends on multiple aspects including the society's role and entitlements within the development framework, the structure of the development agreement, and how the project is registered and disclosed to the relevant RERA authority. This article sets out the statutory position and analyses a recent order passed by the Maharashtra Real Estate Appellate Tribunal ("MahaREAT") in the case of D. N. Nagar Shivneri CHS Ltd. Vs Kamila Parasmal Jain & Ors.¹ ("Shivneri Matter") that shapes the current position on this issue.

Section 2(zk) of RERA defines "promoter" as under:

""promoter" means, —

(i) a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or

(ii) a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or

(iii) any development authority or any other public body in respect of allottees of— (a) buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or (b) plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or

(iv) an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or

(v) any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or

(vi) such other person who constructs any building or apartment for sale to the general public.

Explanation.—For the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the person who sells apartments or plots are different person, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified under this Act or the rules and regulations made thereunder;"

It is therefore clear that the definition of a promoter under RERA is an exhaustive definition that covers within its ambit not only a person who constructs but also a person who causes to construct building, apartments, etc. Further clarity was provided with respect to landowners who enter into area or revenue sharing arrangements with developers in the circular no. 12/2017 dated 4^th December, 2017 ("said Circular") issued by MahaRERA wherein it was inter-alia clarified that developers (who actually obtain building permissions and construct) of a real estate project enter into arrangements with individuals/organizations such as land owners or investors, by which the said individuals/organizations are entitled to a share of the total revenue generated from sale of apartments or share of the total area developed for sale which are also marketed and / or sold by such individuals/organizations and that such individuals/organizations who fall within the definition of the term 'promoter' on account of being landowners or investors, shall be specified as such, at the time of online registration with MahaRERA.

Facts and Observations in Shivneri Matter

The appellant society was the holder of the property on lease from Maharashtra Housing and Area Development Authority ("MHADA") and had entered into a development agreement with the erstwhile developer for re-development of its property. Under the development agreement, the society had authorized the erstwhile developer to construct a building and sell flats/premises therein to allottees. The said development agreement was subsequently terminated by the society due to non-performance by the erstwhile developer. The respondents are allottees in the project having executed and registered agreements for sale for the respective flats with the erstwhile developer. The appeal was filed by the society against the order passed by the Maharashtra Real Estate Regulatory Authority which inter-alia held the society as a promoter under RERA and that the society is jointly and severally liable for acts, liabilities and responsibilities of the erstwhile developer. The Maharashtra Real Estate Appellate Tribunal ("MahaREAT"), vide its order pronounced on 10^th October, 2025 ("said Order"), dealt with the question on classification of society as a promoter on various grounds as specified hereunder:

1. Privity of contract: MahaREAT observed that under the development agreement, the society was kept absolved of any obligation relating to the erstwhile developer towards allottees and the terms of the development agreement did not create any vested rights or obligations of allottees which the society was liable to discharge as a "promoter". Further, it was observed that there was no document to establish that the society had privity of contract with the allottees. Thus, it was observed that the society cannot be termed as a "promoter", liable to perform obligations towards allottees and hence does not call for registration as promoter or society cannot be shown as promoter on the web page of the developer and therefore, the third-party purchasers have no rights on the assets of the societ The case of Goregaon Pearl CHSL Versus Dr. Seema Mahadev Paryekar & Ors.² ("Goregaon Pearl") was also referred to in the said Order wherein it was held that none of the provisions of RERA either make the owner of the freehold or leasehold interest in the land, who enters into a development agreement with a developer (who, in turn, enters into flat purchase agreements with third parties on the basis of such development agreement), liable for complying with the obligations of the developer under RERA. In the background of the aforesaid observations made in the case Goregaon Pearl, MahaREAT, in the Shivneri Matter observed that there was no privity of contract with the society, who has validly terminated development agreement with the erstwhile developer. The MahaREAT also referred to the law laid down in Vaidehi Akash Housing Pvt. Ltd. Versus New D. N. Nagar Co.-Op. Housing Society Union Ltd. & Ors³ ("Vaidehi Matter") and observed that society is not a promoter and third-party purchasers from the old developer cannot claim their rights against the society or anyone claiming through society including the new promoter. MahaREAT also referred to the case of Kapilkunj Co-operative Housing Society Ltd Versus State of Maharashtra & Ors⁴, wherein the Hon'ble Bombay High Court has held as under:
   
   "This necessarily means that after termination of the agreement, third party flat purchasers have no rights, claims or equities in respect of assets of the Society. This means not only the original structure but the entire redevelopment project including all additional FSI and all free sale components".
   
   In the case of Wadhwa Group Housing Private Ltd. V/s. Mr. Vijay Choksi⁵ ("Wadhwa Matter"), Bombay High Court, had clarified that even persons/entities with whom a flat purchaser does not enter into contract are also covered by definition of the term 'promoter' under Section 2(zk) of RERA. The Hon'ble High Court has specifically observed that it is not necessary that there has to be an agreement between every promoter and the flat purchaser. However, MahaREAT distinguished the present case with the Wadhwa Matter and stated that the context in the above judgement was that the appellant therein had a share in the joint venture in the constructed area which it was entitled to sell. Further, the appellant therein was shown in the registration as co-promoter. Therefore, the question framed was whether the allottees are expected to have privity of contract with each one of the promoters, to which the Hon'ble Bombay High Court held that it is not necessary to have privity of contract with each promoter and all the promoters are jointly liable to discharge their obligations towards the allottees under RERA. In the present case, the appellant was not shown as a promoter when the erstwhile developer registered the project.
2. Area/revenue sharing arrangements – It was the contention of the allottees that society should be classified as a promoter on the basis of the Circular which stipulates that all landowners "having either an area sharing and/or a revenue sharing arrangement with the promoter of a project" shall also to be considered as promoter/co-promoter of the project. MahaREAT referred to the judgment of the Hon'ble Bombay High Court in the case of Goregaon Pearl wherein it was observed that if at all there is any doubt in respect of the position of landowners vis-a-vis development projects registered under RERA, particularly where such landowners are entitled to a share in the total revenue generated from sale of apartments, the same has now been clarified by MahaRERA that only such individuals/organizations would fall within the definition of promoter in RERA, on account of being landowners, as would be specified as such at the time of on-line registration with the authority. MahaREAT therefore observed that in the Shivneri Matter, the society was not mentioned as "promoter/co-promoter- area/revenue sharing landowner" at the time of registration of the project by the erstwhile developer.
3. Principal-agent relationship – It was contended that on a conjoint reading of the clauses under the development agreement and the power of attorney executed along with the same between the society and the erstwhile developer, the documents created a relationship between the society and erstwhile developer as that of a principal and an agent and that the developer had acted as an agent of the society while entering into transactions with the allottees. MahaREAT, in the Shivneri Matter, observed that although on interpretation of the clauses of the development agreement and the power of attorney, in general it can be said that there exists a principal-agent relationship between the society and the developer, however, MahaREAT made reference to the Vaidehi Mayter and Goregaon Pearl matter, wherein it has been held that there should be privity of contract between the society and allottees for coming to the conclusion that society is covered under the definition of promoter.
4. The judgment of National Consumer Disputes Redressal Commission in case of Sandeep Grover & Anr V/s. Sai Siddhi Developers Case No.875, 1103, 1710 of 2026⁶, was also relied upon by the allottees as a contrary stand was taken in the said judgments as compared to the view taken in the Vaidehi Matter. However, MahaREAT noted that although the National Consumer Disputes Redressal Commission in the said matter has taken contrary views to the view taken by the Bombay High Court in Vaidehi Akash Housing Pvt. Ltd. Versus New D.N. Nagar C.H.S. Union Ltd & Others (supra), MahaREAT is bound by the law laid down by the Hon'ble Bombay High Court.
5. Self development by society: MahaREAT observed that the appellant society had completed the project by itself, sold flats/shops to homebuyers and thus acted de facto as a developer without formally registering as developer/builder with the authority. Although as per the law laid down by the Hon'ble Bombay High Court in the aforementioned orders and judgments, the third-party purchasers who executed agreements for sale with erstwhile developer cannot claim their rights against the society or anyone acting through the society, however the society was under obligation to register the project with society as a developer especially when the society sold flats/shops to home buyers pursuant to termination of development agreement with the erstwhile developer. MahaREAT observed that this was a violation of section 3 of RERA by its deliberate actions which makes it liable for penal action under section 59 of RERA. By its conduct of carrying out construction of the remaining work of the building and selling flats/shops to third party purchasers, pursuant to termination of development agreement with the erstwhile developer, the society became "promoter" under the provision of section 2(zk) of RERA without formally registering it as promoter with the MahaRERA vis-a-vis the allottees whom the society has sold the flats/shops.

Key Takeaways

In light of the aforesaid orders and judgments, it can be inferred that a society shall be deemed to be a promoter for the purposes of RERA and therefore, societies must be mindful of the same at the time of undertaking development or execution of development agreements with developers. It is also pertinent to note that societies must approach with caution while undertaking self-development post termination of a developer as the same also risks assuming promoter obligations under RERA vis-a-vis the allottees to whom the society sells flats/units.

Footnotes

1. M.A. No. 377/2025 [Exemption for 43 (5)] M.A. No. 378/2025 (Stay) In Appeal No. AT06/00376/2025

2. Appeal from Order (Stamp) No.22143 of 2019 decided on 14h September, 2019 by the Hon'ble Bombay High Court

3. 2014 SCC Online Bom.5068

4. W.P.No.2157 of 2021 decided on 12 & 13 December, 2023 by the Division Bench of Hon'ble Bombay High Court

5. Second Appeal No. (Stamp) No.21842 of 2023 decided by the Hon'ble Bombay High Court on 26th February, 2024

6. (2023) 06 NCDRC CK 0079 National Consumer Disputes Redressal Commission, New Delhi decided on 20th June, 2023

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.