MahaREAT - Society That Owns Land On Which It Is Established and Authorizes Developer For Redevelopment Falls Under Definition Of Promoter

Background Facts

In this case, the Society (Appellant) entered into a redevelopment agreement in 2011 with the builder (Respondent No. 4) to demolish an old building and construct a new one. The project was named New Sangeeta Co-operative Housing Society Ltd.

The agreement stipulated that the builder would hand over possession of the new flats along with an Occupation Certificate to the homebuyers (Respondent Nos. 1 to 3) by September 30, 2017. In case of delay the builder was liable to pay a penalty of Rs. 6,000 per day from October 1, 2017 until possession was delivered.

By March 2017, construction was progressing well with the builder having completed up to the 6th floor. However, the construction speed slowed as the builder faced financial difficulties.

Further, a dispute arose between the Builder and the Society leading to arbitration. Eventually the Society terminated the agreement with the Builder and took over the project. The Society attempted to appoint a new Builder to complete the construction. This internal conflict jeopardized the project leaving homebuyers without their promised flats.

Therefore, being aggrieved the homebuyers filed a complaint before the Authority. Through its order dated August 6, 2019, the Authority directed the Society to join the homebuyers as its members, give possession after obtaining the Occupation Certificate and imposed a penalty of Rs. 15 lakhs on the Society for violating provisions of RERA, 2016.

Consequently, the Society filed an appeal before the Tribunal seeking to set aside the Authority's order.

Issues before Tribunal

1. 1.Whether Society falls under the definition of Promoter as defined under Section 2(ZK) of the RERA, 2016?
2. 2.Whether Society is liable to perform the obligation of developer?

Observation and Direction by Tribunal

The Tribunal held that the society is a promoter because it invested its land in the project and authorized the developer to construct both the rehab and sale components, benefiting from the construction of the rehab building for its members.

Additionally, the society sought permission from the Arbitrator to complete the project and later applied for project registration, acting as a developer. As per Section 2(zk) of the RERA Act, 2016, anyone who acts as a builder or developer qualifies as a promoter. Considering these factors, the Tribunal concluded that the society as the landowner falls within the definition of a promoter.

The Tribunal held that since the society is a promoter, it has certain obligations under the RERA Act, 2016 and cannot escape its responsibilities. After the developer terminated the development agreement, the society decided to complete the project itself and took over from Respondent No. 4. By applying for project registration, the society assumed all pending obligations of the former developer.

The Tribunal set aside the ₹15 lakh penalty imposed on the society, holding that there was no violation of Section 15 of the RERA Act, 2016. It noted that the society as a promoter was obligated to complete the project and did not require consent from two-thirds of the homebuyers or permission from the Authority.

Therefore, Tribunal Partly allowed the appeal.

Case – M/S New Sangeeta CHS Ltd Versus Kushal M. Haria & others

Citation – Appeal No. AT006000000031756/19

Date – 20^th December

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