Bombay HC: Co-promoter is also liable for flat delays

In a significant verdict, the Bombay High Court has declared that under the Real Estate (Regulatory and Development) Act (Rera), a co-promoter is equally accountable for refunding amounts in case of flat delays, regardless of whether they have directly received funds from flat buyers.

The ruling, issued by the Bombay HC, asserts that the definition of ‘promoter’ within the 2016 Act, effective from 2017, is expansive enough to encompass co-promoters, thereby extending their responsibility for refunds with interest under Rera regulations.

The decision, delivered on February 26, has stirred the real estate industry, legal experts note, as it addresses a fundamental legal query that many have been monitoring. Furthermore, it carries implications for numerous redevelopment projects in the city, according to legal pundits.

Justice S V Marne, in the ruling, delved into the legal intricacy of whether a co-promoter, who has not directly received payments from flat allottees, can still be held accountable for providing refunds with interest under Section 18 of Rera.

The case revolved around an appeal lodged by Wadhwa Group Housing Pvt Ltd against an October 2022 order of the Rera appellate tribunal. The tribunal had imposed refund liability on Wadhwa Group Housing, a co-promoter, in connection with an SRA project in Andheri.

In the project, which commenced with a joint development agreement in 2012, the constructed area slated for sale was divided between Wadhwa Group Housing and another builder, SSS Escatics.

The complaint, lodged by flat buyer Vijay Choksi to MahaRera, sought the refund of a partial payment amounting to Rs 1.2 crore, paid to the co-developer SSS Escatics. The refund claim was based on the developer’s failure to meet the project deadline of 2019.

During the legal proceedings, Wadhwa Group Housing contested its joint liability as a co-promoter, arguing that the amount in question was paid directly to SSS Escatics by the flat buyer and, therefore, only SSS Escatics should be directed to refund it with interest.

The court, however, dismissed this argument, emphasizing that the source of the payments received by the promoters is irrelevant in determining their joint liability under Rera regulations, even in cases where there is no contractual agreement between builders and buyers.

The ruling establishes a clear precedent regarding the accountability of co-promoters in real estate projects, redefining their legal obligations within the framework of Rera regulations.

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