BOMBAY HIGH COURT - The liability of refund falls upon all the listed promoters even if they may not have received the amount in consideration.

BOMBAY HIGH COURT - The liability of refund falls upon all the listed promoters even if they may not have received the amount in consideration.

Wadhwa Group Housing Private Ltd vs Vijay Choksi & SSS Escatics Pvt. Ltd

SECOND APPEAL (Stamp) NO. 21842 OF 2023

Decided on 26 February 2024

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

Time line of the Matter :-

1. Allottee approached MahaRERA U/s 12 and 18 of the RERA act and sought refund of amount of Rs.2,62,35,056/- along with interest as well as compensation and costs.
2. On 24/09/2021 MahaRERA passed the Order holding that Allottee could not claim any equity under the provisions of act and his prayer for refund was rejected, and directed parties to execute registered agreement for sale within 30 day failing which the entire amount was directed to be refunded to the Allottee within six months.
3. Allottee filed Appeal U/s 43 of the RERA Act before the Appellate Tribunal.
4. On 18/10/2022 Appellate Tribunal partly allowed the appeal and set aside the Order directing both the Builders to Jointly refund the amount paid by the Allottee with interest.
5. Aggrieved by the Appellate Tribunal’s Order to put the liability to refund the amount received by SSS Escatics Pvt. Ltd the other Builder Wadhwa Group Housing Private Ltd chose to file this appeal.

Question of Law Framed in Second Appeal

"Whether a promoter who has not received any consideration from an allottee can be made liable for giving refund with interest under Section 18 of the Real Estate (Regulation and Development) Act, 2016?"

Fact of the Case:-

1. Builder SSS Escatics Pvt. Ltd, launched a project called “The Nest” as a Slum Rehabilitation Scheme.
2. On 05/09/2012 A JDA (Joint Development Agreement) came to be executed between both the Builders SSS Escatics Pvt. Ltd and Wadhwa Group Housing Private Ltd.
3. Under the said JDA Wadhwa and SSS segregated the constructed area amongst themselves for being sold to customers.
4. On 19/07/2013, Allottee booked a 3BHK Flat bearing B-502 admeasuring 2385 sq.ft in the said project for agreed consideration of Rs.2,65,35,000/-
5. Allottee paid an amount of Rs.1,20,00,000/- towards part consideration.
6.  On 24/07/2013 SSS issued allotment letter to Allottee.
7. The project remained incomplete on the date of coming into force of RERA Act, 2016.
8. The project was accordingly registered as ongoing project under Section 3 of the RERA by SSS in which the Wadhwa was declared as a Promoter (Investor).

Submissions by Appellant

1. Wadhwa cannot be held responsible for refund of any amount to the Allottee as he has not paid any amount to the Wadhwa and that therefore there is no question of refunding any amount to him.
2. As per the JDA both builders identified their respective entitlements in constructed portion of the building and the flat in question falls in the share of SSS, and it  alone received the entire consideration from the Allottee thereby no question of Wadhwa refunding the amount which it did not receive.
3. Mere a change in law requiring reflection of name of wadhwa as Promoter does not create its liability, which did not exist prior to introduction of RERA.  

Submissions by Respondent

1. Wadhwa is undoubtedly covered by definition of the term ‘Promoter’ per se Section 2(zk) of RERA.
2. Definition U/s 2(zk) makes it clear that all promoters are jointly liable under the Act.
3. That a promoter cannot be permitted to defeat the rights of the flat purchasers by making internal arrangements with investors, land owners, etc 

observations made by the Hon’ble Court

1. There appears to be no dispute that the payments were made by the Allottee to the SSS.
2. it is necessary to determine whether Wadhwa falls in the definition of the term ‘promoter’.
3. While registering the project as ongoing project under Section 3 of the RERA, Wadhwa’s name has been included in the list of Promoters. Therefore, Wadhwa cannot run away from the fact that it is the promoter in respect of the project ‘The Nest’
4. Mere falling of flat in the share of the SSS under the JDA would not excuse the Wadhwa from the responsibilities and liabilities under the RERA, Rules and Regulations made thereunder qua that flat. 
5. RERA does not demarcate or restrict liabilities of different promoters in different areas and the liability is joint for all purposes under the Act, Rules and Regulations
6.  Since the Wadhwa is covered by definition of the term ‘Promoter’, it is also jointly liable to refund the amount along with the SSS.
7. Distinction between projects launched before and after coming into force of RERA cannot be a ruse to escape the liabilities as promoter under RERA.
8. The Wadhwa’s contention about absence of privity of contract between it and the Complainant is totally misplaced as it is a matter of indoor management between the Promoters and the flat purchaser who is not supposed to know the intricacies of the arrangements made between several promoters amongst themselves.

Court’s Order

Accordingly the Second Appeal is accordingly dismissed with costs.

When a person who sells the apartments is different than the one who Constructs it, then both are jointly liable

in  Maha Rera order dated 5th March 2021 in the case of Gauri Thatte V/s Nirmal Developers & Shapoorji Pallonji (COMPLAINT NO: CC006000000192458 ) 

Fact of the Case

• Nirmal Developers and Mr. Dharmesh Jain are the Promoters of the project known as Code Name-Mumbai Dreams situated at Mulund west. 

• They appointed shapoorji Pallonji Private Limited's subsidiary Lucrative Properties Private Limited as Development Manager for providing assistance in the management, planning, supervision of the project and use of their brand name for the fees to be paid and on the terms and conditions mentioned in the development management agreement dated 27.O4.2O18

• By that time, Nirmal Developers already sold 1.71 lakh sq. ft. or thereabout residential area to the prospective purchasers' 

• Lucrative Properties Private Limited undertook the responsibility of marketing and branding the project for fees.

• The name of Lucrative Properties Private Limited is mentioned in the category of "Other Professional" and not as promoter on the web page of the project.

• Clause 3.2.1 thereof provides that from condition precedent completion date, the development manager (Lucrative Properties Private Limited) wiil associate the Brand Name solely for the purpose of branding and Marketing the Project in its capacity as Development Manager for the Project.

• Clause 3.2.5 shows that they agreed that the name of the Development Manager and the Developer and their respective logos shall appear on all the brochures, pamphlets, handouts' websites' and all print and electronic media for Marketing the Project' as per branding policies in terms of the Brand Licensing Agreement and as may be approved by the Development Manager'

• Clause 4.2 provides that, during the term of the agreement' the development manager shall in addition to all other functions of development manager as contained in the agreement have the exclusive right to 

• 4.2.1-. manage, plan, supervise the project up to completion thereof and 

• 4.2.2 prepare the mutually agreed business plan in terms of the agreement

where it has been held that 

• development manager having exclusive right to sell the units of the project is included under the definition of the promoter. 

• when a person who sells the apartments is different than the one who Constructs it, then both are jointly liable

• It was argued that under Sec 2(zk) of RERA Act where the person who constructs a building into apartments or develops a plot for sale and the persons who sell apartments or plots are different Persons, both of them shall be deemed to be the Promoters and shall be jointly liable as such for the functions and responsibilities specified, under RERA law. 

• The learned Adjudicating Authority accepted this contention and held that the Development Manager is included in the definition of Promoter and directed that the Development Manager be added as promoter on the RERA web page within 30 days and 

• that Nirmal Developers and Lucrative (subsidiary of Shapoorji) shall refund the amounts of the complainants with simple interest at the rate of 9% per annum from the date of their receipt till their refund. 

Full text of the judgment is attached

https://media-exp1.licdn.com/dms/document/C4D1FAQFVTtwQRyJ-1w/feedshare-document-pdf-analyzed/0/1616418248675?e=1617728400&v=beta&t=UYChkxffBtL3u5aJ_1Gz4ZIY7sZ4O8jiijcQtpN1s34