Bombay High Court Calls For Action Against Developers In Default Of Transit Rent To Residents

A division bench of Justice GS Patel and Justice Neela Gokhale, in a writ petition involving a property that has been under redevelopment since 2012 without any progress, remarked :-

“We will not sit by and allow residents of this city to be treated as a necessary evil, an irritant or a nuisance in developers’ pursuit of profits or their worship of Mammon…Indeed, the situation across the city is now so dire that we believe it is necessary for the government to step in with drastic steps to curb errant builders in default of their obligations.”

The court also warned developers that it will cancel the no objection certificates for their projects in case of default in their obligations.

“Every developer will now realise that if there is a default in meeting its obligations to residents, societies and tenants, we will not even direct MHADA to cancel the No Objection Certificate (“NOC”). We will terminate that NOC ourselves. Far too many of our citizens are being subjected to this day in and day out. It is time that this Court said enough is enough”.

The petition was filed by 65 residents of the property regarding default in payment of transit rent by the builder. The petitioners brought their concerns before the court against various respondents including the State of Maharashtra, Maharashtra Housing and Area Development Authority (MHADA), and several developers.

The building's redevelopment was entrusted to Parekh Constructions by its owner, while Nishcon Realty Private Limited joined the project later. The petitioner’s claimed that Rs. 11 crores are due to them as transit rent over the past decade. Nishcon Realty accepted that it is in arrears of transit rent since 2020, amounting to a little over Rs 7 crores.

The court expressed deep concern over the distress faced by the occupants who have been out on transit rent since 2012. The old structure has been demolished, but for the last 10 years nothing at all has happened on site, the court noted, highlighting the loos of community faced by the petitioners. The court highlighted that the amount due to the petitioners as transit rent, without including interest or penalty, was approximately Rs 11 Crores.

“Rs 11 Crores has remained unpaid as transit rent. Occupants of the Parvati building have lost their homes. They are now, as the cause title itself shows, dispersed across the city and even beyond this city at distant places — Navi Mumbai, Thane, Surat, Alibaug and elsewhere. An entire community is fractured”, said the court.

The court sternly criticized the prevailing trend of developers prioritizing their profits over the interest of the affected residents, stating that residents' rights were paramount.

“…in case after case in this city we see a situation where developers argue that their rights to profit must be safeguarded, that they must be given enlarged time to make good on their defaults, that their profits are somehow to be preserved at all costs but that the interest of the society members, tenants and occupants are secondary”, the court highlighted.

The court firmly stated, “We are having none of this. If this is the approach or the argument, our answer is “not on our watch”…The rights of genuine and eligible residents are primary. The developers’ rights are distinctly secondary and will remain subordinated to the rights of such residents”.

The court ordered Nishcon Realty, Parekh Construction, and their joint partnership firm to deposit the first 50% of the due amount (according to Nishcon), approximately Rs 3.5 crores, by August 11, 2023, with the Prothonotary and Senior Master of the court. The court stated that if this is not done, it would direct MHADA to cancel necessary approvals for the developers.

Further, the court proposed to outline a structured program for the completion of the buildings' redevelopment up to the stage of an Occupancy Certificate application, including provisions for an event of default.

The court also directed the developers to pay the transit rent for August 2023 to all occupants in full by August 25, 2023, and to pay every month’s transit rent on or before the 25th of that month thereafter.

The matter is scheduled for further hearing on August 11, 2023, at 2:30 pm.

Case no. – Writ Petition (L) No. 20423 of 2023

Case Title – Sushila Gordhandas Parikh & Ors v. State of Maharashtra & Ors