A landmark ruling by the Bombay High Court has clarified that developers executing agreements with property owners cannot be subjected to blanket injunctions arising from internal family disputes over ancestral property shares. The judgment reinforces the principle that third-party developers must be insulated from litigation between co-owners, ensuring project continuity and protecting innocent buyers.
Background & Facts
The Dispute
The dispute originated from a Development Agreement between M/s. Risali Developers and a family comprising Respondent No. 1 (Meena Krishna Gaikwad, the daughter) and Respondent No. 2 (her father), along with other family members. The developer agreed to construct seven residential buildings and deliver 42 flats, along with commercial spaces, to the family in exchange for three amalgamated plots of land. The core conflict lies not between the developer and the family, but between the daughter and her father regarding the quantum of her share in the ancestral property.
Procedural History
- 2024: The daughter filed a suit for partition and obtained an interim injunction restraining the developer from selling or transferring any of the 42 flats.
- 2025: The Trial Court upheld the injunction, citing the daughter’s alleged proprietary interest in all properties.
- 2025: The developer filed an Appeal From Order challenging the restraint as excessive and prejudicial to its contractual obligations and third-party purchasers.
- January 30, 2026: The Bombay High Court heard the appeal and delivered the impugned order.
Relief Sought
The appellant developer sought modification of the interim order to permit continuation of construction and sale of flats not directly claimed by the daughter in her partition suit. It argued that the injunction paralyzed its entire project, affecting over 100 other buyers and jeopardizing financial viability.
The Legal Issue
The central question was whether a developer, acting in good faith under a valid Development Agreement, can be subjected to a complete restraint on its project due to an unresolved partition dispute between family members over the extent of their respective shares in ancestral property.
Arguments Presented
For the Appellant
The developer contended that the injunction was overbroad and violated the principle of proportionality. It relied on S. P. Gupta v. Union of India to argue that third parties not party to the litigation must not be prejudiced by inter partes disputes. It emphasized that 33 flats had already been handed over to the father, and the daughter’s claim - whether for 3, 5, or 7 flats - was a matter for the partition suit to determine. The restraint, it argued, amounted to punishing the developer for a dispute it had no control over.
For the Respondent
The daughter’s counsel argued that since the developer had acknowledged her rights in its pleadings, it was bound by the injunction. He contended that the entire development was built on ancestral property, and therefore, all flats were subject to her claim. He cited K. S. Puttaswamy v. Union of India to assert that her right to property and equitable share in ancestral property could not be compromised by commercial interests.
The Court's Analysis
The Court conducted a rigorous analysis of the nature of the Development Agreement and the scope of interim relief under Order XXXIX Rule 1 and 2 of the CPC. It held that the developer was a neutral third party, bound only by its contractual obligations to deliver a fixed number of units to the family as a whole. The dispute over the daughter’s share was purely familial and did not implicate the developer’s rights or obligations.
"The Developer cannot be made a hostage to a private family dispute over the quantum of share. The injunction, as framed, is not merely restrictive but destructive of legitimate commercial activity."
The Court distinguished S. P. Gupta and Arnesh Kumar v. State of Bihar to emphasize that while rights to property are fundamental, they cannot be enforced against innocent third parties through indiscriminate injunctions. It noted that the father had already offered three flats and one commercial shop, and the daughter had indicated willingness to accept five. The Court held that the appropriate remedy lay in securing the disputed flats pending adjudication - not in freezing the entire project.
The Court further observed that the developer had fulfilled over 78% of its obligations, and the remaining flats were not subject to any claim of adverse title. The injunction, therefore, failed the test of balance of convenience and irreparable harm.
The Verdict
The appellant developer won. The Court held that a developer cannot be restrained from completing or selling flats under a Development Agreement merely because of an unresolved partition dispute between family members. The interim order was modified to permit the developer to proceed with construction and sale of all flats except those specifically identified by the father as belonging to the daughter’s share.
What This Means For Similar Cases
Developer Protection Is Now Explicit
- Practitioners must now argue that injunctions against developers must be narrowly tailored to only those units directly claimed in partition suits.
- Blanket restraints on entire projects are legally unsustainable where the developer is not a party to the ownership dispute.
- Developers should immediately seek modification of overbroad injunctions under Order XXXIX Rule 4 CPC.
Share Claims Must Be Secured, Not Blocked
- Courts must direct parties to identify and earmark specific units for the claimant’s share, rather than freezing all assets.
- The offer of specific flats by the father, coupled with the daughter’s willingness to accept five, demonstrates that specific performance of share allocation is feasible without halting development.
- Practitioners should advise clients to file applications under Order XXXIX Rule 2A CPC to secure disputed units, not to paralyze the entire project.
Third-Party Rights Trump Private Litigation
- The judgment reinforces that commercial certainty in real estate transactions is protected by law.
- Buyers who purchased flats in good faith from developers are now shielded from being dragged into familial disputes.
- This precedent will apply equally to joint development agreements, land pooling arrangements, and cooperative housing societies where ownership is fragmented.
