Court’s Decision
The Bombay High Court dismissed a group of appeals challenging the trial court’s order rejecting interim injunctions sought by third-party purchasers against a cooperative housing society and its new developer in a redevelopment project.
Justice Kamal Khata held that third-party purchasers who claim through a developer whose development agreement has been terminated cannot assert any independent rights against the society or its new developer. The Court reaffirmed that a society as landowner does not assume the status of “promoter” under the Maharashtra Ownership Flats Act (MOFA) and that such purchasers’ remedies, if any, lie only against the erstwhile developer.
The Court concluded:
“Purchasers claiming through a terminated developer have no enforceable rights against the society or its new developer. Their rights perish with the termination of the developer’s authority.”
Facts
The appellants were third-party purchasers who had bought flats or obtained allotment letters from a developer appointed by a cooperative housing society for redevelopment of its property in Kurla, Mumbai.
The society had entered into a Development Agreement (DA) in 2008 and a Supplementary Agreement in 2011 with the developer. Subsequently, disputes arose over delays and defaults, leading to the termination of the development agreement in 2015. Arbitration was invoked, culminating in a Final Arbitral Award dated 7 November 2022, which upheld the society’s termination and rejected the developer’s counterclaim.
After termination, the society appointed a new developer to complete the project. The appellants—purchasers under agreements, MOUs, or allotment letters executed by the terminated developer—sued for injunctions restraining demolition, sale, or modification of plans. They claimed that the society, as owner, was a “promoter” under MOFA and hence bound by obligations arising from the developer’s sale agreements.
The trial court dismissed their applications for interim relief, leading to the present appeals under Order XLIII of the Code of Civil Procedure, read with Section 9 of MOFA.
Issues
- Whether third-party purchasers who acquired flats from a developer prior to termination of the development agreement can assert rights against the society or its new developer.
- Whether a cooperative housing society qualifies as a “promoter” under MOFA when it undertakes redevelopment of its own property.
- Whether an arbitral award terminating the developer’s rights extinguishes derivative rights of purchasers claiming through such developer.
- Whether earlier judgments like Vaidehi Akash Housing, Farhat CHSL, and Goregaon Pearl CHSL were binding precedents.
Petitioner’s Arguments
The appellants argued that the society, being the landowner, was a “promoter” within the meaning of Section 2(c) of MOFA. They relied on several documents—development agreements, powers of attorney, supplementary agreements, and sale agreements—to demonstrate that the society had ratified the developer’s acts and thereby created privity with purchasers.
They contended that clauses in the Power of Attorney authorised the developer to execute sale agreements, collect funds from purchasers, and represent the society before registration authorities, which amounted to the society’s consent and participation in the sales.
Further, they argued that judgments like Farhat Co-operative Housing Society Ltd. v. Malkani Enterprises (2014) and Ramniklal Tulsidas Kotak v. Varsha Builders (1993) recognised that owners who empower developers to sell flats act as promoters. They claimed that since the developer’s authority was irrevocable under Section 202 of the Indian Contract Act, the society’s termination of the developer’s rights could not prejudice purchasers who had invested their life savings.
The appellants maintained that their suits were maintainable even on the basis of unregistered MOUs and allotment letters, citing C. Radhakrishnan v. Richa Construction & Associates (2020), which allowed enforcement of MOFA obligations without a registered sale deed.
Respondent’s Arguments
The society and the new developer countered that the issue was no longer res integra, having been conclusively settled by a consistent line of Bombay High Court judgments, notably Vaidehi Akash Housing Pvt. Ltd. v. D.N. Nagar CHSL (2014), Goregaon Pearl CHSL v. Seema Paryekar (2019), and Deepak Prabhakar Thakoor v. MHADA (2023).
They argued that once the development agreement was validly terminated and such termination confirmed by an arbitral award, all rights flowing from the developer—including sale agreements with third-party purchasers—stood extinguished. The purchasers could seek damages only from the developer, not from the society or the new developer.
They further contended that the society cannot be treated as a “promoter” merely because it is the landowner or a confirming party to some agreements. The Power of Attorney was limited to redevelopment, not to sale of flats on behalf of the society. Clauses in the development agreement and POA made it clear that the developer was acting on his own account, not as the society’s agent.
Lastly, they argued that redevelopment exists primarily for rehabilitating existing members, and relief to third-party purchasers would jeopardize members’ housing rights and stall the project indefinitely.
Analysis of the Law
Justice Kamal Khata examined the statutory framework under MOFA and the Contract Act. The Court reiterated that the purpose of MOFA is to regulate promoters and developers, not to impose promoter-level obligations on cooperative housing societies redeveloping their own property.
Relying on Vaidehi Akash and subsequent decisions, the Court held that privity of contract between a society and purchasers of a terminated developer does not exist. The rights of such purchasers are purely derivative and vanish once the developer’s rights are terminated.
The Court also considered Section 202 of the Indian Contract Act (irrevocable agency) and held that it has no application here, since the developer’s authority was not coupled with an interest belonging to the society but only contractual rights subject to termination.
Precedent Analysis
- Vaidehi Akash Housing Pvt. Ltd. (2014) – Held that societies are not “promoters” under MOFA and purchasers through a terminated developer have no rights against the society.
- Goregaon Pearl CHSL v. Dr. Seema Paryekar (2019) – Reaffirmed Vaidehi Akash even after RERA’s enactment; clarified that RERA did not expand a society’s liability.
- Deepak Prabhakar Thakoor v. MHADA (2023) – Division Bench approved Vaidehi Akash and held it binding law; confirmed that purchasers cannot assert rights post-termination.
- Kapilkunj CHSL v. State of Maharashtra (2023) – Stressed that any additional FSI or new development accrues only to the society; third-party sales cannot override members’ interests.
- Tuvin Constructions LLP v. State of Maharashtra (2025) – Clarified that RERA cannot require consent from purchasers of a terminated developer for project re-registration.
- Farhat CHSL v. Malkani Enterprises (2014) – Limited to deemed conveyance; not applicable to redevelopment.
- ASF Buildtech v. Shapoorji Pallonji (2025) – Clarified that determinations by Chief Justice under Arbitration Act are final and binding.
- Amar Nath v. Gian Chand (2022) and C. Radhakrishnan (2020) – Distinguished as inapplicable.
Court’s Reasoning
The Court observed that redevelopment projects are member-centric and cannot be jeopardized by third-party claims. It noted:
“Redevelopment exists primarily to secure permanent housing for society members; any relief to third-party purchasers jeopardizing this objective would be inequitable.”
The Court rejected the argument that the society was a “promoter,” clarifying that Farhat CHSL applied only where the landowner and developer jointly developed and sold flats. In the present case, the society merely granted redevelopment rights to the developer.
The Court also clarified that even if Vaidehi Akash used the term “prima facie,” its reasoning has been affirmed by Division Bench in Deepak Thakoor and thus constitutes binding precedent.
Finally, the Court held that the purchasers’ remedies were confined to damages against the erstwhile developer; the society and its new developer were not liable to honour the terminated developer’s commitments.
Conclusion
The High Court found the trial court’s order well-reasoned and free from legal infirmity. It held that:
- Purchasers claiming through a terminated developer have no enforceable rights against the society or new developer.
- Societies are not “promoters” under MOFA in redevelopment contexts.
- Arbitral awards confirming termination bind purchasers who claim through the developer.
All appeals and interim applications were dismissed, and the Court refused to continue interim protection, noting that the society’s members’ rights had already been delayed for over a year.
Justice Khata concluded:
“When the developer’s rights end, derivative claims must fall. The law cannot reward speculation at the cost of genuine members awaiting their homes.”
Implications
This judgment reinforces the finality of arbitral awards and the limited scope of third-party purchaser rights in redevelopment projects. It provides clarity that societies cannot be treated as promoters merely because they own the land, and it protects societies and new developers from indefinite litigation by non-member purchasers.
The ruling also affirms that the line of authority from Vaidehi Akash to Tuvin Constructions now forms a binding body of law governing redevelopment disputes in Maharashtra.
Judgments Cited and Relevance
| Case Name | Principle Established | Relevance Here |
| Vaidehi Akash Housing Pvt. Ltd. (2014) | Societies not promoters under MOFA; purchasers can’t sue societies. | Forms the central binding precedent. |
| Goregaon Pearl CHSL (2019) | RERA does not override MOFA principles. | Confirmed the continuing validity of Vaidehi Akash. |
| Deepak Prabhakar Thakoor (2023) | Division Bench affirmed Vaidehi Akash. | Elevates the principle to binding law. |
| Kapilkunj CHSL (2023) | FSI rights belong to society post-termination. | Clarified FSI ownership in redevelopment. |
| Tuvin Constructions LLP (2025) | No consent from old purchasers needed for new registration. | Strengthened society protection. |
| Farhat CHSL (2014) | Joint owners-developers can be promoters. | Distinguished; not applicable. |
FAQs
1. Can flat purchasers claim rights against a society after the developer’s termination?
No. Their rights end with the developer’s termination. They can only claim damages from the developer, not from the society or new developer.
2. Is a cooperative housing society a “promoter” under MOFA?
No. The Court held that societies redeveloping their own land are not promoters; MOFA applies to developers, not member societies.
3. What happens to flat buyers if an arbitral award confirms termination of the developer?
They are bound by the award under Section 35 of the Arbitration Act and cannot assert independent claims against the society.
