Mumbai, Nov 27: The Real Estate Appellate Tribunal (REAT), in its recent judgment, has ruled that a successor developer who takes over a stalled project is legally bound to honour the original allotment contracts.

The Tribunal, in its order, cited the Bombay High Court’s ruling, which states that when a claim is raised in respect of a real estate project by a purchaser, all promoters become jointly liable to that flat purchaser, irrespective of whether there was privity of contract with each of the promoters or not.

Therefore, the Tribunal held that developers M/s Sai Enterprises and M/s Sethi Infrastructure are equally liable to discharge the obligations of M/s Super Constructions.

Flat Purchaser Booked Home in 2010; Project Stalled for Years

The case centered on a Peddar Road resident, Sangeeta Punjabi, represented by advocate Nilesh Gala before the Tribunal, who had booked a flat in the “Sun Gates”, a Malad-based project in 2010. After years of delay and the original developer, M/s Super Constructions, stalling the project, the development rights were transferred to a new promoter, M/s Sai Enterprises, in 2017.

The new entity launched a project on the same land, “Sethia Imperial Avenue,” and refused to honour the old booking, claiming a lack of direct contractual relationship (privity of contract) and arguing that the original agreement was void due to non-performance (frustration of contract).

New Promoter Claimed No Matching Flat Was Available

The respondents in their application maintained that there was no flat of the specification and type claimed by the allottee. “The plans of ‘Sethia Imperial Avenue’ are 1BHK configurations admeasuring 365 sq. ft., and all flats are already sold, and no flat is available in the project. It is not in dispute that M/s Sai Enterprises has acknowledged the right of the allottee and also agreed to perform the part of M/s Super Constructions. The Transfer of Property Act talks about the priority of rights created by a transferee. It lays down that where a person purports to create by transfer, at different times, rights in or over the same immovable property, and such rights cannot all exist or be exercised to their full extent together, each later-created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created.”

Respondents Argue They Were Not Promoters

Meanwhile, the advocate appearing on behalf of Basantraj Meghraj Sethia and others submitted that these respondents were not liable to discharge the obligations of M/s Super Constructions because they were not the promoters.

REAT Rejects All Defences; Cites 2017 Agreement Clauses

The Tribunal unequivocally rejected the new promoter’s defences. It found that the 2017 development agreement expressly included clauses (10, 11, and 12, along with Annexure VII) that acknowledged the appellant as an existing allottee and transferred the obligation to complete the contract to M/s Sai Enterprises.

Successor Cannot “Appropriate Benefits and Reject Liabilities”

The REAT held that the new promoter, having voluntarily assumed the liabilities of the original developer to secure the development rights, could not later disclaim them. This application of the doctrine of election prevents the successor from “approbating and reprobating”—that is, accepting the benefits of the development agreement while refusing its attached burdens.

Tribunal Rejects Frustration and Limitation Defences

Furthermore, the Tribunal dismissed the claim of frustration of contract, stating that the cause of action was continuous and crystallised only when the new promoter formally refused to perform in 2019, thus also rejecting the defence of limitation.

Directors and Partners Held Jointly and Severally Liable

The order further maintained that, to extend relief to the allottee, the REAT invoked the broad definition of “promoter” under the RERA Act. It held that all partners and directors of the involved firms and companies were jointly and severally liable for the project’s obligations.

“This ensures that the allottee has a fully enforceable remedy against the entire consortium involved in the project transfer,” the Tribunal held.

REAT Directs Promoter to Allot 775 Sq Ft Flat and Pay Interest

The Tribunal, in its order, directed the new developers to allot a flat of equivalent area (775 sq. ft.) to Sangeeta Punjabi in the new “Sethia Imperial Avenue” project and immediately execute a registered sale agreement.

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The developers were also ordered to pay simple interest on the total amount paid by the appellant from September 2013 until possession is physically handed over. This interest is to be calculated at the State Bank of India’s Marginal Cost of Lending Rate (MCLR) plus 2%.

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