The Maharashtra Real Estate Appellate Tribunal (MREAT) directed the new developer of Mumbai's Palais Royale project to maintain status quo on a home buyer's flat, preventing third-party rights until the final appeal hearing against a MahaRERA order. The project, stalled due to legal issues, saw a change in ownership under the SARFAESI Act. MahaRERA initially dismissed the buyer's complaint regarding delayed possession. However, the MREAT granted interim relief, emphasising the validity of the buyer's agreement with the former developer and affirming RERA's applicability. The ruling ensures the buyer's rights amidst the project's tumultuous legal proceedings.
The Maharashtra Real Estate Appellate Tribunal (MREAT) has issued a directive to the new developer of Mumbai's Palais Royale project, instructing them to maintain the current state regarding a home buyer's flat. Additionally, an injunction has been granted against the creation of any third-party rights over the booked flat until the final hearing of an appeal against a MahaRERA order.
Palais Royale, faced legal challenges leading to its suspension, triggered by multiple Public Interest Litigations (PILs) against the original developer, Shree Ram Urban Infrastructure Limited (SRUIL). Following this, the property was taken over by lender Indiabulls Housing Finance Limited (IHFL) under the SARFAESI Act and subsequently sold to Honest Shelters Private Limited through an e-auction on June 26, 2019. In November of the same year, SRUIL underwent a corporate insolvency resolution process before the National Company Law Tribunal (NCLT). MahaRERA approved Honest Shelters as the new promoter in March 2021.
The home buyer, a resident of Grand Paradi, purchased the flat from SRUIL in June 2013, having paid INR 12.61 crore out of the total consideration of INR 25 crore. As per clause 20 of the registered agreement, possession of the flat was promised by SRUIL on or before December 31, 2014. However, the home buyer filed a complaint with MahaRERA in July 2022, seeking interest from Honest Shelters for the delayed possession.
MahaRERA dismissed the complaint on March 20, 2023, ruling that the obligations and liabilities under RERA did not transfer with the mortgaged property when it changed hands under the SARFAESI Act. The home buyer appealed this decision to MREAT, seeking interim relief to prevent the creation of third-party rights during the appeal process.
The home buyer argued that MahaRERA overlooked its own circular from June 4, 2019, stating that even if a new promoter acquires a project under the SARFAESI Act, they must fulfil the obligations of the former promoter as per the contractual agreement. The buyer asserted that there was no default on payment, having paid INR 11.5 crore towards the flat, with the remaining INR 13.5 crore due 30 days after the developer obtains the occupancy certificate.
The developer's advocate disputed the payment of INR 1 crore towards the flat, labelling it as a disputed amount. They argued that the application for interim relief was duplicative of the appeal challenging the MahaRERA order and should be dismissed. The advocate contended that the project's transfer under the SARFAESI Act, with the approval of the Bombay High Court, should be free from the liabilities of the former promoter.
After hearing both parties, the MREAT bench, consisting of Dr. K Shivaji and Shriram R Jagtap, referred to a Supreme Court ruling in the Pankaj Majithia vs Honest Shelters Private Limited case, emphasising that the obligations of flat buyers would be governed by their agreements. The bench directed that the NCLT refrain from examining aspects troubling the parties, affirming the validity of the agreement for sale between the buyer and the former promoter, subject to the provisions of the RERA Act.
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