Bombay High Court Allows 78 Flat Purchasers To Complete Stalled Residential Project Through Self-Development

Justice RI Chagla passed the order after the developer East and West Builders agreed to the appointment of court receiver and to let the flat purchasers' association complete the project.

“Admittedly there has been no construction activity since the year 2012… The said project is now to be completed by the Plaintiff Association through self-development”, the court stated.

The court also directed Municipal Corporation of Greater Mumbai to grant expeditious approvals for the completion of the project, subject to necessary compliances.

“MCGM shall extend all co-operation to the Court Receiver, High Court, Bombay and/or Project Completion Committee in granting expeditious approvals for the purpose of completion of the present project. This is of course, subject to appropriate compliances and subject to payment of costs and charges in that regard”, the court held.

The building has been partially constructed up to 14 floors, but there has been no construction activity since 2012. Thus, the plaintiff – a residents welfare association of the 78 flat purchasers, filed a suit against the builder for specific performance of their flat sale agreements. The plaintiff association filed the present notice of motion in the suit seeking appointment of a court receiver to complete the building.

The association in 2021 had resolved that the project would now comprise of a 26-storey building with ground and podium having 117 flats. The flats will be constructed for 84 flat purchasers, and 10 flats will be allotted to MCGM towards reservation for public housing. The association decided to sell five flats to generate funds towards the cost of completion of the project.

The court held that the association shall complete the construction through self-development by appointment of a contractor, Project Management Consultant, architect etc. under the supervision and control of the court receiver. The association has the power to sell unsold flats, transfer, settle and/or compromise with third parties and make and receive payments regarding the project, the court said.

The court noted that the estimated expenditure of the project of about Rs. 50 Crores exceeds the payment that the flat purchasers have to make as per their agreements (about 32 Rs. Crores). Thus, the association has to decide the proportion of contribution from each member in addition to the payment mentioned in the respective agreements, the court said.

The court held the court receiver is entitled to receive applications or conduct sale of the five flats and file appropriate report to the High Court in order to confirm the sale.

The court also granted a temporary injunction restraining the builder from interfering with the construction of the project. The court directed the builder to hand over all original documents such as agreement for sale, allotment letters, payment receipts, function plan etc to the court. The court also directed the Court Receiver open an Escrow Account in a Nationalised Bank for the purposes of all transactions concerning the project.

Six flat purchasers who have not yet joined the plaintiff association have the option to join under the same terms available to the other members, the court held.

The plaintiff-association submitted that a 13-member Project Completion Committee (PCC) has been constituted. The committee has the power to limit the construction such that it accommodates all flat purchasers and creates least financial burden on them but only after obtaining consent from the majority of the association, the court held.

The committee will appoint and make payments to the contractor, architect, security guard project management consultant etc. towards cost of construction, taxes, dues, charges premium or any other required payment, the court said. All decisions regarding the completion of the project RNA Palazzo have to be taken by the Committee by passing a resolution of the majority, the court added.

The committee is bound by the principles under the Maharashtra Cooperative Societies Act 1916, and the Rules therein till the society is formed and registered, the court said. The court further held that the committee could apply for amendment of the existing plans without affecting the area the association members are entitled to under their respective allotment agreements.

The Committee will be responsible for day-to-day operation of the bank accounts through which all transactions related to the project are to be undertaken. The committee has to retain an accountant and submit quarterly project reports having all expenses to the court receiver. This project report has to be available to all stakeholders, the court directed.

In case of a dispute concerning the project completion, the committee has to resolve it by a majority resolution in a meeting convened with a notice of at least 7 days. If any further dispute remains, the affected party can apply to the court receiver who will resolve the dispute after hearing all concerned parties, the court said.

Advocates Mayur Khandeparkar, Sneha Prabhu, Kinnari Mehta represented the plaintiff-association while advocates Nilesh Ojha, Tanweer Nizam, Hania Shaikh, Manali Jain, and Dipashri Raorane represented the defendant-builder.

Case no. – Notice of Motion (L) No. 2049 of 2018

Case Title – RNA Palazzo Residents Welfare Association v. East and West Builders and Ors.