Sections 15 & 18 RERA | Court-Appointed Developer Not Liable for Erstwhile Promoter's Refund Dues : Bombay HC

The Bombay High Court has held that a new developer appointed through court-sanctioned process cannot be saddled with the refund obligations of an erstwhile promoter, quashing a MahaRERA order that directed the incoming developer to pay interest on amounts received by the previous developer. The Division Bench ruled that MahaRERA lacked jurisdiction to impose liability on a party not impleaded in the proceedings, and that Sections 15 and 18 of the RERA Act do not operate to transfer crystallised debts of a former promoter to a subsequent developer on a clean-slate basis.

Background & Facts

The Dispute

The petitioner, H. Rishabraj Developers (a partnership firm), was appointed as the new developer for the redevelopment project "Samaj Darshan" in Kandivali West, Mumbai, pursuant to orders of the Bombay High Court in arbitration proceedings between the landowner trust and the erstwhile developer. The petitioner challenged an order dated 21 March 2022 passed by the Maharashtra Real Estate Regulatory Authority (MahaRERA) which directed the petitioner, along with the erstwhile developer, to pay interest on Rs. 37 lakhs from 17 May 2018 until actual realisation. The interest liability arose from a refund obligation of the erstwhile developer, Jayant Mehta (sole proprietor of Bhakti Enterprises), towards allottees Kinjal M. Karia and Mahesh Karia (Respondents 3 and 4) for Flat No. 902.

Key Facts

• The Khambhati Modh Vanik Samaj (Trust), a charitable trust, owned the property comprising land and a tenanted building with 44 tenements.
• On 2 January 2014, the Trust and Respondent No. 5 (Jayant Mehta) executed a Memorandum of Understanding (MOU) for redevelopment, stipulating Respondent No. 5 alone would be responsible for claims against the Trust.
• On 22 January 2015, Respondent No. 5 issued a Letter of Allotment (LOA) to Respondents 3 and 4 for Flat No. 902 on the 9th floor.
• The Charity Commissioner sanctioned the redevelopment under Section 36 of the Maharashtra Public Trusts Act, 1950 on 8 June 2015.
• On 7 December 2015, the Trust executed a registered Development Agreement with an irrevocable Power of Attorney in favour of Respondent No. 5.
• By 2017, Respondent No. 5 had constructed only seven floors. Disputes arose, and the Trust terminated the Development Agreement on 15 July 2017 and invoked arbitration.
• On 31 August 2017, Respondent No. 5 unilaterally registered the project with MahaRERA (Registration No. P51800010479), projecting itself and the Trust as co-promoters.
• On 6 March 2018, Respondents 3 and 4 filed a complaint before MahaRERA against Respondent No. 5 and the Trust seeking refund of Rs. 37 lakhs with interest and compensation.
• By order dated 17 May 2018, MahaRERA disposed of the complaint recording Respondent No. 5's undertaking to refund Rs. 37 lakhs per an agreed schedule; the complainants agreed to accept principal without interest.
• Within two weeks, Respondent No. 5 defaulted on the first tranche. On 12 June 2018, Respondents 3 and 4 filed a Review-cum-Execution Application seeking interest and compensation.
• On 9 July 2018, Respondent No. 5 furnished a fresh undertaking to repay by 27 July 2018, but defaulted again.
• By order dated 13 August 2018, MahaRERA rejected the review but directed the Collector to issue a recovery warrant against Respondent No. 5 for interest. On 9 July 2019, a boja/charge of Rs. 37 lakhs was recorded on the property card.
• The arbitral Award dated 12 May 2025 directed Respondent No. 5 to pay Rs. 5,39,50,173 with 10% interest to the Trust (challenge pending).
• On 21 February 2019, the Trust and Respondent No. 5 entered consent terms before the High Court; defaults continued.
• The Trust filed Notice of Motion No. 99 of 2019 seeking appointment of a Court Receiver. By orders dated 26 November 2020 and 11 December 2020, the Court directed the Receiver to take possession and hand over to the Trust to appoint a new developer.
• On 7 July 2021, the petitioner executed a registered Development Agreement with the Trust.
• Respondents 3 and 4 appealed the 13 August 2018 order before the Appellate Tribunal. By order dated 30 July 2021, the Tribunal partly set aside and remanded for fresh consideration of interest and compensation.
• On 21 January 2022, in Suo Motu Case No. 215 of 2022, MahaRERA permitted registration in the petitioner's name, recording the change of promoter was pursuant to Court directions and that the petitioner would not be liable for past liabilities (rectified on 19 December 2022 to also exempt the Trust).
• On 7 February 2022, a RERA registration certificate was issued to the petitioner.
• On 21 March 2022, MahaRERA passed the impugned order allowing the Review-cum-Execution Application and directing Respondent No. 5 and the petitioner (described as "new promoter") to pay interest on Rs. 37 lakhs from 17 May 2018 until actual realisation; compensation claim rejected for want of proof.
• Distraint Orders dated 23 March 2022 and 30 May 2022 were passed by the Tahsildar under Section 180 of the Maharashtra Land Revenue Code, 1966, attaching the petitioner's bank accounts (Nos. 122100101069 and 122100101090) with Cosmos Co-operative Bank.
• On 29 June 2022, the High Court stayed further steps under the Distraint Orders. On 26 November 2024, the Adjudicating Officer issued a recovery warrant against the petitioner and Respondent No. 5 for principal and interest; stayed by the Court on 10 January 2025 qua the petitioner.

Procedural History

• 06.03.2018: Complaint filed before MahaRERA by Respondents 3 and 4 (CC006000000023601)
• 17.05.2018: MahaRERA order disposing complaint on basis of Respondent No. 5's undertaking
• 12.06.2018: Review-cum-Execution Application filed by Respondents 3 and 4
• 13.08.2018: MahaRERA order rejecting review, directing recovery warrant for interest
• 30.07.2021: Appellate Tribunal order remanding Review-cum-Execution Application
• 21.01.2022: MahaRERA order in Suo Motu Case No. 215/2022 permitting registration in petitioner's name, recording no liability for past claims
• 19.12.2022: MahaRERA rectification order extending exemption to Trust
• 07.02.2022: RERA registration certificate issued to petitioner
• 21.03.2022: Impugned MahaRERA order directing petitioner and Respondent No. 5 to pay interest
• 23.03.2022 & 30.05.2022: Distraint Orders by Tahsildar under Section 180 MLRC attaching petitioner's bank accounts
• 29.06.2022: High Court stay on Distraint Orders (WP 7618/2022)
• 26.11.2024: Recovery warrant by Adjudicating Officer against petitioner and Respondent No. 5
• 10.01.2025: High Court stay on recovery warrant qua petitioner
• 07.10.2026: Judgment reserved
• 05.11.2026: Judgment pronounced

The Parties' Positions

Petitioner (New Developer): MahaRERA lacks power to review its own orders; petitioner not impleaded in original proceedings; liability to refund Rs. 37 lakhs is solely of Respondent No. 5; petitioner appointed on clean-slate basis per Court orders and MahaRERA's own 21 January 2022 order; Sections 2(zk), 15, 18 RERA Act do not apply; LOA for 9th floor invalid as Commencement Certificate covered only up to 8th floor.

Respondents 3 & 4 (Allottees): Writ petitions not maintainable as petitioner withdrew review and appeal without liberty; Regulation 36 RERA Regulations empowers MahaRERA to review; petitioner appeared and filed submissions, cannot now allege non-joinder; Trust and Respondent No. 5 were co-promoters; project transferred under Section 15 RERA Act; petitioner liable as co-promoter under Section 2(zk); Section 18 creates statutory right to interest; petitioner took over with knowledge of liabilities.

Trust: Supports petitioner; MahaRERA lacks review power; LOA issued before Charity Commissioner sanction and without Trust's signature; appointment of new developer was fresh, not transfer under Section 15; arbitral Award upholds termination; Respondent No. 5 undertook to repay.

Respondent No. 5 (Erstwhile Developer): Supports allottees; petitioner cannot retain benefit of Rs. 32 crores construction costs while disclaiming liabilities; LOA valid as parties treated sanction as formality; termination not final as Award challenged.

Relief Sought

The petitioner sought: (i) quashing of MahaRERA order dated 21 March 2022; (ii) setting aside of Adjudicating Officer's order dated 26 November 2024; (iii) quashing of Distraint Orders dated 23 March 2022 and 30 May 2022; (iv) direction to Cosmos Bank to remove attachment on bank accounts 122100101069 and 122100101090.

The Legal Issue

The central questions were: (1) Whether the writ petitions are maintainable after the petitioner withdrew its review application and appeal before MahaRERA and the Appellate Tribunal; (2) Whether MahaRERA could impose financial liability on the petitioner without impleading it as a party to the Review-cum-Execution Application; (3) Whether the petitioner, as a new developer appointed through court-sanctioned process, is liable under Sections 2(zk), 15, and 18 of the RERA Act for the refund obligations and interest liability of the erstwhile promoter; (4) Whether the Distraint Orders under Section 180 MLRC can survive when the underlying MahaRERA order is set aside.

Arguments Presented

For the Petitioner

Mr. Mayur Khandeparkar submitted that MahaRERA has no inherent power of review; Section 53(4)(e) RERA Act confers review power only on the Appellate Tribunal; Regulation 36 cannot exceed the enabling Act. The petitioner was never impleaded in the original complaint, review application, appeal, or remand proceedings; mere appearance through counsel does not cure non-joinder. The liability to refund Rs. 37 lakhs crystallised against Respondent No. 5 alone, who undertook repayment on three occasions (17 May 2018, 9 July 2018, and affidavits dated 10 April 2018 and 23 April 2018 in Anticipatory Bail Application No. 476/2018). The petitioner entered via Court orders on a clean-slate basis; MahaRERA's own order dated 21 January 2022 expressly recorded the petitioner would not be liable for past liabilities. Section 15 RERA Act requires transfer/assignment by the erstwhile promoter with allottees' consent; here, the Development Agreement was terminated and the petitioner appointed by Court Receiver - no privity with Respondent No. 5. Section 18 applies to the promoter who received and retained the money (Respondent No. 5), not the petitioner who received nothing. Reliance placed on Kapra Mazdoor Ekta Union v. Birla Cotton Spinning & Weaving Mills Ltd., Deepak Prabhakar Thakoor v. MHADA, Mohammed Zain Khan v. Emnoy Properties India, and Tuvin Construction LLP v. State of Maharashtra.

For the Respondents

Respondents 3 & 4 (Ms. Vinodini Srinivasan): Writ petitions not maintainable per Sarguja Transport Service v. State Transport Appellate Tribunal - withdrawal without liberty constitutes abandonment. No pleading challenging vires of Regulation 36; Union of India v. Manjurani Routray requires specific plea. Petitioner appeared and filed submissions, cannot now claim non-joinder. Appellate Tribunal's remand order unchallenged. Trust and Respondent No. 5 were co-promoters under Section 2(zk); project transferred under Section 15; petitioner liable for pending obligations. Section 18 creates statutory right to interest. Petitioner took over with knowledge of liabilities. Registration order of 21 January 2022 was administrative; impugned order adjudicatory. Reliance on Wadhwa Group Housing Pvt. Ltd. v. Vijay Choksi.

Trust (Mr. Vishal Kanade): Supports petitioner on review power. LOA issued before Charity Commissioner sanction (8 June 2015) and without Trust's signature; not binding on Trust. Appointment of new developer was fresh, not transfer under Section 15. Arbitral Award dated 12 May 2025 upholds termination and awards Rs. 5.40 crores to Trust. Respondent No. 5 undertook repayment before multiple forums.

Respondent No. 5 (Ms. Nikita Jacob): Petitioner cannot retain benefit of Rs. 32 crores construction costs while disclaiming liabilities. Sections 2(zk) and 15 RERA Act impose joint liability. LOA valid as parties treated sanction as formality; affirmative steps taken prior (plan approvals, demolition, PA agreements). Termination not final as Section 34 challenge pending.

The Court's Analysis

The Court first addressed maintainability. It held the withdrawal of the review and appeal was without prejudice to the writ petition, as disclosed in paragraph 3(p) of WP 894/2024. The principle in Sarguja Transport applies to repeated invocation of the same jurisdiction after abandonment, not to withdrawal of statutory remedies to pursue a writ petition. Availability of alternative remedy is a rule of prudence, not a jurisdictional bar; relegating the petitioner at this stage (with interim protection since 29 June 2022) would serve no practical purpose.

On the challenge to Regulation 36, the Court found it unnecessary to decide vires in the absence of pleadings seeking a declaration of ultra vires. Per Union of India v. Manjurani Routray, a party must set out grounds and seek relief to declare a provision ultra vires. The prayers sought only certiorari to quash the impugned order. Regulation 36 was treated as operative; Kapra Mazdoor (no inherent review power for quasi-judicial bodies) was thus not applied.

The Court then held the non-joinder of the petitioner fatal. The petitioner was not a party to the original complaint (6 March 2018), Review-cum-Execution Application (12 June 2018), appeal, or remand proceedings. The impugned order's cause title named only Respondent No. 5 and the Trust; the petitioner was referred to merely as "new promoter." No application was made to implead the petitioner, nor was the review application amended to seek relief against it. On remand, MahaRERA only issued a notice to attend. A judgment binds only parties to the proceeding; an adjudicating authority cannot pass orders against a non-party. Mere appearance and written submissions do not cure this. There was no pleading setting out any case against the petitioner under Sections 2(zk), 15, or 18. The petitioner could not effectively respond without knowing the nature of liability sought to be imposed.

On merits, the Court held the liability to refund Rs. 37 lakhs and pay interest is of Respondent No. 5 alone. The 17 May 2018 order recorded Respondent No. 5's undertaking; the Trust was not directed to refund. Respondent No. 5 accepted liability on three occasions (17 May 2018, 9 July 2018, and bail affidavits). The impugned order's direction to the petitioner to pay interest from 17 May 2018 - over three years before the petitioner's involvement - is unsustainable. A default by Respondent No. 5 cannot be retrospectively transferred to a third party.

The Court further held the petitioner not liable under Sections 2(zk), 15, or 18. Section 2(zk) deems both constructor and seller as promoters jointly liable for functions under the Act; Wadhwa Group deals with liabilities qua allottees of a co-promoter, not a subsequent developer appointed on a clean-slate basis after termination. Section 15(1) requires transfer/assignment by the promoter with allottees' consent and Authority approval. Here, Respondent No. 5 did not transfer rights to the petitioner; the Development Agreement was terminated (15 July 2017), the Court directed the Receiver to hand over to the Trust, and the Trust executed a fresh Development Agreement with the petitioner (7 July 2021). MahaRERA waived allottees' consent precisely because there was no transfer from Respondent No. 5. Section 15(2) refers to "pending obligations" under agreements for sale; a refund order already passed against Respondent No. 5 on its undertaking is not a pending obligation of the project but Respondent No. 5's personal debt.

Section 18(1) compensates the allottee for use of its money by the promoter who held it. The money was admittedly retained by Respondent No. 5; the petitioner received nothing. Section 18 cannot be applied against the petitioner. Knowledge of another's liability does not amount to taking it over; no contract, statute, or competent authority order made the petitioner liable for Respondent No. 5's refund obligation.

The Court rejected the argument that the petitioner cannot retain construction benefits (Rs. 32 crores) while disclaiming liabilities; that claim lies between Respondent No. 5 and the Trust (subject of the arbitral Award). Respondent No. 5 received and kept Rs. 37 lakhs since 2015 and cannot now argue someone else should pay interest accrued due to its own defaults. The pending challenge to the arbitral Award does not affect the petitioner's non-liability; the petitioner was appointed pursuant to Court orders (26 November 2020, 11 December 2020) directing the Receiver to hand over to the Trust for a new developer.

Since the impugned order was unsustainable, the Distraint Orders (23 March 2022, 30 May 2022) and the recovery warrant (26 November 2024) under Section 180 MLRC cannot independently survive qua the petitioner.

The Verdict

The Division Bench allowed both writ petitions. It quashed and set aside: (i) the MahaRERA order dated 21 March 2022 insofar as it seeks recovery from the petitioner; (ii) the Adjudicating Officer's order dated 26 November 2024 insofar as it seeks recovery from the petitioner; (iii) the Distraint Orders dated 23 March 2022 and 30 May 2022 passed under Section 180 MLRC. The Court directed Respondent No. 9 (Cosmos Co-operative Bank) to remove the attachment and consequent actions on the petitioner's bank accounts bearing numbers 122100101069 and 122100101090. The judgment clarified that Respondent No. 5 remains bound by its undertakings to repay Respondents 3 and 4 (recorded by MahaRERA and the High Court in the Anticipatory Bail Application), and all rights and contentions of Respondents 3, 4, and 5 are kept open for appropriate proceedings. Rule made absolute; pending interim applications disposed of.

What This Means For Similar Cases

Non-Joinder Is Fatal to Adjudicatory Orders

A regulatory authority cannot impose financial liability on a person who was never impleaded as a party to the proceedings. Mere issuance of a notice to attend a hearing, or appearance through counsel and filing of submissions, does not substitute for formal impleadment with a pleading setting out the case against that person. Practitioners must object at the earliest stage if their client is sought to be bound without being made a party; failure to object may constitute waiver, but where no relief was sought against the non-party in the pleadings, the order is a nullity.

Clean-Slate Appointment Does Not Inherit Crystallised Debts

When a new developer is appointed through a court-supervised process after termination of the prior development agreement - and the regulatory authority itself records that the new developer assumes no past liabilities - the incoming developer does not inherit the erstwhile promoter's personal refund obligations. Section 15 RERA Act contemplates a voluntary transfer/assignment with allottees' consent; it does not apply to a court-mandated substitution where the prior promoter's agreement stands terminated. The "pending obligations" under Section 15(2) refer to ongoing contractual duties (e.g., completion, possession), not a debt already adjudicated against the former promoter.

Section 18 Liability Attaches to the Promoter Who Received the Money

The statutory right to interest under Section 18(1) RERA Act compensates the allottee for the use of its money by the promoter who received and retained it. A subsequent developer who never received the allottee's funds cannot be made liable for interest accruing from a date years before its involvement. The liability is personal to the promoter who held the money. Practitioners should ensure that orders under Section 18 are sought against the correct promoter - the one who actually received the consideration.

Regulatory Orders on Liability Must Be Consistent

Where a regulatory authority passes an administrative order (registration of new promoter) expressly recording no liability for past claims, a subsequent adjudicatory order by a different member imposing such liability without explaining the departure demonstrates non-application of mind. Courts will scrutinise such inconsistencies. Practitioners should preserve and rely on prior regulatory orders that define the scope of the new promoter's obligations.

Distraint Orders Fall With the Underlying Order

Attachment orders under Section 180 MLRC (or similar revenue recovery provisions) are execution mechanisms; they cannot survive independently when the underlying adjudicatory order creating the liability is quashed. A stay on the principal order should be supplemented by a challenge to the execution proceedings.