Director’s Authority Binds Developer; Flat Purchasers Recognised as Consumers under CPA 1986 | Redevelopment Flat Sale | NCDRC

The National Consumer Disputes Redressal Commission upheld the Maharashtra State Consumer Disputes Redressal Commission's orders, confirming that a developer cannot escape liability by disputing the authority of its director after accepting payments and that flat purchasers are consumers entitled to relief under the Consumer Protection Act, 1986.

Background & Facts

The Dispute

The appellant, Tejaswini Homes Pvt. Ltd., a real-estate developer, along with its directors Mr. Rameshwar S. Sambari and Mr. Ajay V. Patil, was challenged by two separate groups of flat purchasers (the “Complainants”). The complainants alleged that they had entered into agreements for flats in a redevelopment project at Ganesh Galli, Lalbaug, Mumbai, paid substantial consideration, but the developer failed to deliver possession.

Key Facts

• Project: Redevelopment of Plot No. 52, Survey No. 2569, CTS No. 53/47 at Ganesh Galli, Lalbaug, Mumbai.
• Flat No. 501 (Complainant Mohan Baburao Divekar): 850 sq ft., consideration Rs 51,50,000. Payments: Rs 2,00,000 (11.06.2007), Rs 10,00,000 (14.06.2007), Rs 4,00,000 (26.06.2007), Rs 3,00,000 (02.12.2007), stamp duty Rs 1,62,000. Agreements dated 15.06.2007 and 26.12.2007.
• Flat No. 503 (Complainant Sachin Sudhir Diwadkar): 550 sq ft., consideration Rs 21,50,000. Payments: Rs 1,75,000 (24.06.2005), Rs 2,25,000 (05.07.2005), Rs 1,00,000 (23.07.2005), Rs 1,00,000 (02.08.2005), stamp duty Rs 1,47,850. Agreement dated 29.07.2005.
• Agent: Mr. Atul Y. Potnis acted as the authorised director of the appellant at the time of execution of the agreements.
• Alleged Internal Change: The appellant claimed Mr. Potnis ceased to be a director on 01.09.2007, with a public notice on 15.12.2009.
• State Commission Orders (24.04.2017): Directed delivery of alternate flats of equivalent area, compensation of Rs 2,00,000 and costs of Rs 10,000 to each complainant.
• Ex-parte Order: State Commission proceeded ex-parte against Mr. Potnis on 02.04.2014 due to his non-appearance.

Procedural History

• 29.07.2005: Agreement for Flat No. 503 executed.
• 15.06.2007: First agreement for Flat No. 501 executed.
• 26.12.2007: Second agreement for Flat No. 501 executed.
• 24.04.2017: Maharashtra State Consumer Disputes Redressal Commission issued orders in Consumer Complaints Nos. 302 and 303 of 2011.
• 02.04.2014: Ex-parte order against Mr. Potnis.
• 15.12.2009: Public notice of Mr. Potnis’s cessation (post-transaction).
• FA No. 1427 of 2017 and FA No. 1428 of 2017: Appeals filed by Tejaswini Homes Pvt. Ltd. and its directors.
• 26.05.2026: NCDRC reserved judgment.
• 06.08.2026: NCDRC pronounced judgment dismissing the appeals and affirming the State Commission orders.

Parties' Positions

• Appellant: Contended no privity of contract existed; argued that Mr. Potnis acted in personal capacity after his removal; claimed consideration was paid to him personally, not to the company; asserted procedural prejudice due to denial of a written statement.
• Respondent (Complainants): Maintained that Mr. Potnis was acting as an authorised director at the time of execution; payments were made to the developer; the developer owed possession and compensation; the internal corporate dispute should not prejudice the consumers.

Relief Sought

• Appellant: Set aside the State Commission orders dated 24.04.2017; alternatively, remand for fresh adjudication with opportunity to file a written version.
• Complainants: Confirmation of the State Commission orders, delivery of alternate flats or possession, compensation of Rs 2,00,000 each and costs of Rs 10,000 each.