Bombay HC upholds MahaRERA and RERA Appellate Tribunal orders directing Developer to pay Rs. 5 crore compensation for 80-month delay

The Bombay High Court has directed real estate developer Renaissance Infrastructure (Developer) to pay Rs. 5.04 crore as compensation to a allottee, for a delay of over 80 months in handing over his property thereby upholding the earlier judgements passed by the of the Maharashtra Real Estate Regulatory Authority (MahaRERA) and the RERA appellate tribunal after the developer challenged the same.

The allottee had bought six plots of land along with pre-engineered portal framed rectangular frame termed 'warehousing building' from the developer in December 2009. As per the sale agreement, the warehousing building and plots were to be handed over to the allottee by 9 March 2010. The agreement also mentioned that in case the developer failed to hand over the properties on time, he would be liable to pay the allottee a compensation amount (for loss of rent) at the rate of Rs. 10 per sq feet per month.

The allottee approached the state RERA when the developer failed to hand over the property. MahaRERA calculated the compensation amount as Rs. 5.04 crore (calculated up to 30 June 2018, after the grace period of six months of the agreed date of possession and till the time of filing of the complaint-i.e. for about 80 months).

Renaissance Infrastructure challenged this order with the appellate tribunal which directed the developer to deposit 50% of the compensation amount as per the RERA Act for entertaining the appeal.

Renaissance Infrastructure failed to deposit the amount and therefore the appeal was dismissed by the Appellate Tribunal by its final order dated 20 March 2019. The developer then filed a second appeal in the HC.

The counsel for Renaissance claimed that the agreement with the allottee was in lieu of a partnership, hence Renaissance was not a Promoter. He also argued that the original claim of the allottee was pre-mature and devoid of merits. He also submitted that the order was in the nature of liquidated damages, which the authority has no jurisdiction over.

In his order, single bench of Justice S C Gupte dismissed the case after observing that there were no infirmities in the orders passed by the RERA and the appellate tribunal. He held that the orders do not give rise to"any substantial question of law for the consideration of the High Court". He said the Renaissance Infrastructure was liable to hand over the property as agreed to, regardless of whether the allottee was a former partner.

The Court observed, "Under this agreement, termed as agreement for sale, the appellant (Renaissance) was bound to hand over possession of the suit premises to the respondent within an agreed period" and thus the agreement is "nothing less than an agreement for sale."

Justice Gupte said, "It may be that the allottee was an erstwhile partner of the promoter firm and the agreement was executed with a view to satisfy the allottee's claim towards his share in the partnership upon his retirement. That does not, however, make the agreement any the less an agreement for sale. After all, consideration of an agreement for sale, instead of money, may well be any valuable consideration, including satisfaction of the allottee's share in the promoter's partnership. It is nevertheless an instance of allotment and sale of constructed premises with land, its consideration being satisfaction of the allottee's claim in the business and assets of promoter partnership. The project is very much a real estate project; it is being developed by the Appellant as a promoter; and the Respondent is an allottee, to whom plots of land together with a building have been allotted and agreed to be sold (free-hold or leasehold) or otherwise transferred by the promoter. Prima facie all ingredients of promotership of the Appellant are satisfied in the present case and there is no reason why its appeal before the Appellate Tribunal should not be treated as an appeal filed by a promoter."

It was also noted that none of the other grounds argued by the developer's lawyer "call for dispension of pre-deposit" before the appellate Tribunal under Section 43(5) of the RERA Act, which is mandatory.

The Court ordered Renaissance Infrastructure to pay the amount within a period of four weeks failing which the disputed property would be attached by the Tehsildar for sale.

The lawyer of the developer applied for a stay of this order which was rejected by the High Court.