The Supreme Court has set aside a Bombay High Court order that restrained the Maharashtra Housing and Area Development Authority (MHADA) from enforcing a Permanent Alternate Accommodation Agreement (PAAA) executed under the Maharashtra Housing and Area Development Act, 1976 (MHAD Act). The Court held that developers cannot resile from their statutory obligations under the redevelopment scheme, directing execution and handover of three flats within two months.
Background & Facts
The Genesis of the Redevelopment Scheme
The respondents are the owner-developers of a cessed building in Mumbai governed by the Maharashtra Housing and Area Development Act, 1976 (MHAD Act) and the Development Control Regulations for Greater Bombay, 1991 (DC Regulations). The MHADA regulates redevelopment of cessed buildings to ensure that occupants are provided alternate accommodation in the reconstructed building. The statutory scheme mandates that all occupants who vacate the premises for redevelopment must be accommodated in the new building with equal carpet area, subject to minimum and maximum limits prescribed under the MHAD Act.
The Occupants and Their Claim
The appellants are the legal heirs of Ms. Gool Peshotan Unwalla, who was the original tenant of Room No. 5 on the third floor of the old building. The first appellant was also shown as an occupant in contemporaneous documents, including a public notice issued by the developer in 2010 and the certified list approved by the MHADA. The MHADA’s NOC dated 21.09.2010 and revised NOC dated 21.08.2012 recognized Ms. Unwalla and the first appellant as eligible occupants entitled to alternate accommodation in the redeveloped building.
The Permanent Alternate Accommodation Agreement (PAAA)
On 17.10.2019, the developer executed a PAAA with the first appellant, agreeing to allot three flats with a total built-up area of 309.98 sq. mtrs. (3336.50 sq. feet), including 35% fungible area. The agreement was executed after the original tenant’s death in 2012, and possession of the old premises was handed over to the developer for redevelopment. The developer also accepted possession of the new premises as per Annexure P25, which was not disputed.
Procedural History
- 21.04.2010: Developer issued a public notice identifying Ms. Unwalla as tenant and the first appellant as occupant of Room No. 5.
- 21.09.2010: MHADA issued NOC for redevelopment, mandating allotment of alternate accommodation to eligible occupants as per the certified list.
- 17.10.2019: PAAA executed between the developer and the first appellant, allotting three flats with specified area.
- 22.11.2022: MHADA extended the deadline for handover of flats to 21.09.2023.
- 10.06.2024: First appellant approached MHADA seeking intervention for registration of PAAA and handover of possession.
- 28.05.2025 & 27.06.2025: MHADA directed the developer to execute PAAA and handover possession as per the agreement.
- 10.07.2025: MHADA issued Show Cause Notice (SCN) for non-compliance.
- 30.10.2025: MHADA passed final order directing compliance.
- 06.02.2026: Developer filed a civil suit (CS No. 4579 of 2026) challenging the PAAA and the appellants’ claim.
- Date of High Court Judgment: Impugned order passed by the High Court on an unspecified date, restraining MHADA from taking further coercive steps.
- 23.07.2026: Supreme Court delivered the judgment in the present appeal.
The Parties' Positions
For the Appellants
The appellants contended that the PAAA is a statutory agreement executed under the MHAD Act and DC Regulations, and the developer is bound to execute and register it. They relied on the definition of ‘occupant’ under Section 2(25) of the MHAD Act and Rule 33(7) of the DC Regulations, which includes persons in occupation of the premises. The appellants also pointed to the certified list approved by the MHADA, which recognized their status as occupants, and the developer’s acceptance of possession of the old premises for redevelopment.
For the Respondents (Developer and MHADA)
The developer argued that the PAAA was a concocted document, executed by a person expelled from the premises for misdemeanors. It contended that the first appellant was not a tenant and had no right to allotment, as the original tenant’s tenancy stood extinguished on her death in 2012. The developer also relied on a consent terms agreement dated 09.03.2024, which purported to absolve it from obligations under the PAAA. The MHADA, however, maintained that it had exercised its statutory powers judiciously and directed compliance with the PAAA based on the certified list of eligible occupants.
The Legal Issue
The central question was whether the developer, having obtained consent and possession from the occupants for redevelopment under the MHAD Act, could resile from its obligations under a PAAA executed in favor of the appellants, and whether the High Court erred in restraining the MHADA from enforcing its orders.
Arguments Presented
For the Appellant
- The PAAA is a statutory agreement executed under the MHAD Act and DC Regulations, and the developer is bound to execute and register it.
- The appellants are ‘occupants’ as defined under Section 2(25) of the MHAD Act and Rule 33(7) of the DC Regulations, and their status is recognized in contemporaneous documents, including the public notice and certified list approved by the MHADA.
- The developer accepted possession of the old premises for redevelopment and executed the PAAA, which cannot be resiled from after years of compliance with the statutory scheme.
- The civil suit filed by the developer is mala fide, as it seeks to challenge the PAAA after giving an undertaking before the High Court that two flats would be conceded to the appellants.
For the Respondent
- The PAAA is a concocted document, executed by a person who was expelled from the premises for misdemeanors.
- The first appellant was not a tenant and had no right to allotment, as the original tenant’s tenancy stood extinguished on her death in 2012.
- The developer relied on a consent terms agreement dated 09.03.2024, which absolved it from obligations under the PAAA.
- The civil suit is maintainable, as the PAAA is a private arrangement not amenable to writ jurisdiction.
The Court's Analysis
The Supreme Court examined the statutory scheme under the MHAD Act and the DC Regulations, which mandates that occupants of cessed buildings be provided alternate accommodation in the redeveloped building. The Court noted that the MHADA’s role is regulatory, ensuring that redevelopment proceeds only after all eligible occupants are accommodated.
The Court rejected the developer’s contention that the PAAA was a private arrangement, emphasizing that it was executed under the statutory scheme and recognized by the MHADA. The Court observed:
"The PAAA is regulated by the statute and the regulations, the enforcement of which is an authority conferred on the MHADA under whose NOC the project itself is commenced. The space as delineated in the PAAA by the developer has to be necessarily handed over to the appellants."
The Court also rejected the developer’s argument that the first appellant was not an occupant, noting that her status was recognized in contemporaneous documents, including the public notice and certified list approved by the MHADA. The Court held:
"Even without a probate, the 1st appellant was entitled to the premises in the new building as per the PAAA executed with her; validating her status as an occupant which cannot be merely brushed aside."
The Court further held that the developer’s conduct in executing the PAAA and accepting possession of the old premises for redevelopment, followed by years of non-compliance, was mala fide. The civil suit filed by the developer was held to be misconceived, as it sought to resile from an undertaking given before the High Court.
The Court set aside the High Court’s order restraining the MHADA from enforcing its directions and directed the developer to execute the PAAA and handover possession of the three flats within two months. The Court also restrained the High Court from proceeding with the civil suit, holding that the suit was mala fide and misconceived.
The Verdict
The Supreme Court allowed the appeal, set aside the impugned judgment of the Bombay High Court, and directed the first and second respondents to execute the PAAA and handover possession of three apartments in the new building within two months from the date of the judgment. The Court also:
- Restrained the High Court from proceeding with Civil Suit No. 4579 of 2026.
- Directed the respondents to pay damages at the monthly rental value for the three flats if possession is not handed over within the stipulated period.
- Awarded costs of Rs. 50,000 each to the appellants before the High Court and the Supreme Court, payable by the first and second respondents.
What This Means For Similar Cases
Statutory Compliance Is Non-Negotiable
- Developers cannot resile from their obligations under the MHAD Act and DC Regulations after executing a PAAA and accepting possession of the old premises for redevelopment.
- The MHADA’s role is regulatory, and its orders directing compliance with the PAAA are sustainable under the statutory scheme.
Occupant Status Is Determined by Contemporaneous Documents
- The status of ‘occupant’ is determined by contemporaneous documents, including public notices, certified lists approved by the MHADA, and agreements executed under the statutory scheme.
- The Court rejected the developer’s argument that the first appellant was not an occupant, noting that her status was recognized in such documents.
Civil Suits Challenging PAAA Are Mala Fide
- Civil suits filed by developers to challenge PAAA after giving undertakings before the High Court are mala fide and misconceived.
- The Court restrained the High Court from proceeding with such suits, holding that they are not maintainable in the context of the statutory scheme.