Bombay HC Quashes RERA Order Making Court-Appointed New Developer Pay Interest On Old Builder’s ₹37-Lakh Refund

H. Rishabraj Developers (“the Petitioner”) became the new developer of the Samaj Darshan redevelopment project under a fresh Development Agreement executed with the owner-Trust in July 2021, after the Trust’s earlier Development Agreement with Jayant Mehta (“the erstwhile developer”) had been terminated and the Court Receiver had been directed to hand over possession to the Trust for appointment of a new developer.

In May 2018, MahaRERA disposed of flat purchasers Kinjal and Mahesh Karia’s complaint after recording the erstwhile developer’s undertaking to refund their payment of ₹37 lakh. Following the developer’s default, MahaRERA later directed the erstwhile developer and the Petitioner, described as the “new promoter,” to pay interest on ₹37 lakh from 17 May 2018 until realisation.

The Petitioner had not been impleaded in the original complaint, the review-cum-execution proceedings, the appeal, or the proceedings on remand, though it attended the remand hearing after receiving notice.

The Petitioner challenged MahaRERA’s order in Writ Petition No. 894 of 2024 and challenged consequential distraint orders attaching and freezing its bank accounts in Writ Petition No. 7618 of 2022. The Court considered the petitions together.

Section 2(zk) of the RERA Act treats persons who construct and sell as promoters, and may make them jointly responsible for statutory functions, but does not automatically transfer every financial liability of one promoter to a subsequent developer.

Section 15 governs a promoter’s transfer or assignment of majority rights and liabilities and requires the incoming promoter, where such a transfer is made, to comply with pending statutory and agreement-for-sale obligations; it does not apply where the new developer obtains rights through a separate, court-directed process rather than from the erstwhile developer.

Section 18 provides an allottee’s right to refund and prescribed interest against the promoter responsible for the relevant failure; on the facts here, the money had been received and retained by the erstwhile developer, not the Petitioner.

A quasi-judicial order in adversarial proceedings cannot impose liability on a person who was not made a party and against whom no pleaded case was advanced.

Section 180 of the Maharashtra Land Revenue Code, 1966 permits revenue-recovery measures, but consequential attachment cannot survive where the underlying liability order is set aside against the person proceeded against.

The Court also held that it need not decide the validity of Regulation 36 of the MahaRERA Regulations because no pleadings or prayer challenged its validity.

The Court held that the Petitioner’s attendance at the remand hearing and filing of written submissions did not substitute for formal impleadment: the application had not been amended to seek relief against it, and no case had been pleaded explaining its alleged liability under the RERA Act.

The original refund order and the subsequent undertakings identified the erstwhile developer as responsible for repayment; its default could not retrospectively transfer the interest burden to a developer that entered the project years later.

Nor did Sections 2(zk), 15 or 18 supply an independent basis for liability: the Petitioner’s rights arose under a fresh Development Agreement following court-supervised proceedings, not by assignment from the erstwhile developer, and it had not received the purchasers’ money.

The Court further noted that MahaRERA’s unchallenged registration order had stated that the Petitioner would not be liable for past project liabilities, making the contrary direction in the impugned order an additional indication of non-application of mind.

Because the liability order could not be enforced against the Petitioner, the consequential attachment and freezing orders could not stand against it either.

It quashed MahaRERA’s order of 21 March 2022 and the recovery warrant insofar as they sought recovery from the Petitioner, and set aside the consequential distraint orders; the Petitioner’s bank accounts were to be relieved of the resulting attachment.

The decision did not absolve the erstwhile developer of its repayment obligations: the allottees remained free to pursue their remedies against that developer and, if maintainable, the Trust, with their rights and contentions preserved.