The judgment quashes the 21 March 2022 order and the recovery warrants only insofar as they seek recovery from H. Rishabraj Developers. It does not absolve Bhakti Enterprises, the earlier developer, of its undertakings to repay the allottees, and it leaves open the validity of the 9th-floor allotment letter, the Section 36 sanction question, and whether the Trust is a co-promoter.
- Case
- H. Rishabraj Developers v. State of Maharashtra & Ors.
- Court
- High Court of Bombay
- Decision
- Citation
- 2026:BHC-AS:45327-DB
- Bench
- Suman Shyam; Gautam A. Ankhad
- Judgment by
- Gautam A. Ankhad
- Case numbers
- W.P. 894/2024; W.P. 7618/2022
- Outcome
- Both writ petitions allowed. The MahaRERA order of 21 March 2022 and the Adjudicating Officer's order of 26 November 2024 are quashed insofar as they fasten liability on the petitioner, and the distraint orders of 23 March and 30 May 2022 and the attachment of the petitioner's bank accounts are quashed. Rule made absolute.
The decision
A Division Bench of the Bombay High Court, comprising Justices Suman Shyam and Gautam A. Ankhad, has held that a developer appointed to complete a stalled redevelopment project is not liable to pay interest on a refund that was owed by the developer it replaced. The common judgment, delivered on 5 November 2026, allows two writ petitions filed by H. Rishabraj Developers.
The Court quashed MahaRERA's order of 21 March 2022, which had directed the petitioner and the earlier developer to pay interest on ₹37 lakh from 17 May 2018, and also quashed the distraint orders under which the petitioner's bank accounts had been attached and frozen. The Rule was made absolute.
The project and the ₹37 lakh
The dispute concerns the 'Samaj Darshan' redevelopment project in Mumbai. The Khambhati Modh Vanik Samaj, a charitable trust, owns the land and a tenanted building with 44 tenements. In 2011 the trust resolved to redevelop the dilapidated building with Bhakti Enterprises, the earlier developer, and on 7 December 2015 executed a registered development agreement in its favour. On 22 January 2015 Bhakti Enterprises had issued a letter of allotment to Kinjal M. Karia and Mahesh Karia for Flat No. 902 on the 9th floor, on payment of ₹37 lakh.
By 2017 only seven floors had been built. The trust terminated the agreement on 15 July 2017, and the dispute went to arbitration: an award dated 12 May 2025 directed Bhakti Enterprises to pay the trust ₹5,39,50,173 with interest at 10% per annum, and its challenge under Section 34 of the Arbitration and Conciliation Act, 1996 is pending without a stay. The allottees had complained to MahaRERA on 6 March 2018 seeking refund of the ₹37 lakh with interest and compensation; by an order dated 17 May 2018, MahaRERA disposed of the complaint on Bhakti Enterprises' written undertaking to repay the ₹37 lakh principal, an undertaking it repeated in July 2018 and in affidavits before the High Court.
In the Section 9 arbitration proceedings, the High Court directed the Court Receiver to hand the property to the trust so a new developer could be appointed. The trust engaged H. Rishabraj Developers on 7 July 2021, and on 21 January 2022 MahaRERA registered the project in the petitioner's favour, recording that the petitioner would not be liable for past liabilities or claims; a rectification order in December 2022 recorded the same for the trust. The Appellate Tribunal had remanded the Review-cum-Execution Application to MahaRERA on 30 July 2021. Shortly afterwards, by the impugned order dated 21 March 2022, MahaRERA directed the petitioner and Bhakti Enterprises to pay interest on the ₹37 lakh from 17 May 2018; distraint orders dated 23 March and 30 May 2022 under Section 180 of the Maharashtra Land Revenue Code, 1966, then attached and froze the petitioner's two Cosmos Co-operative Bank accounts.
The issue
The common question was whether a developer appointed through a court-sanctioned process, on what the Court called a clean-slate basis, inherits the earlier promoter's crystallised refund liability — here, interest on ₹37 lakh — under Sections 2(zk), 15 and 18 of the Real Estate (Regulation and Development) Act, 2016.
The petitioner also contended that it had never been a party to the proceedings at any stage. MahaRERA's order proceeded on the footing that the petitioner had stepped into the shoes of the erstwhile promoter.
The provisions in play
Section 2(zk) of the RERA Act defines 'promoter' widely: where the person who constructs and the person who sells are different persons, both are deemed to be promoters and are jointly liable for the functions and responsibilities under the Act, so that a person performing a promoter's substantive functions cannot evade responsibility by splitting the transaction. Section 15(1) bars a promoter from transferring its majority rights and liabilities in a project to a third party without the consent of two-thirds of the allottees and the Authority's approval, and Section 15(2) requires the incoming promoter, upon a permitted transfer, to comply with the pending obligations under the Act and under the agreements for sale.
Section 18(1) entitles an allottee who wishes to withdraw from a project, where the promoter fails to complete or give possession, to a return of the amount received by the promoter, with interest and compensation. The Court described Section 18 as compensating the allottee for the use of its money by the promoter who held it.
The reasoning
First, the petitioner was not a party to the proceedings: not to the complaint of 6 March 2018, the review-cum-execution application, the appeal, or the remand. The impugned order's cause title named only Bhakti Enterprises and the trust, and no application was ever made to implead the petitioner. An order in adversarial proceedings binds only its parties, the Court held, and the non-joinder was fatal on its own. Second, interest follows the principal: the 17 May 2018 order had fastened the ₹37 lakh liability on Bhakti Enterprises alone, which had undertaken repayment three times, and a default cannot be retrospectively transferred to a third party who entered the field three years later. Third, MahaRERA's own registration order of 21 January 2022 had expressly stated that the petitioner would not be liable for past liabilities, and a rectification order in December 2022 recorded the same for the trust; the impugned order, passed shortly afterwards by another member, took the opposite view without recording any basis, demonstrating complete non-application of mind.
Fourth, the statute did not support the transfer. Section 2(zk)'s wide definition of co-promoter cannot be read as automatically transferring every financial liability of one promoter to a subsequent promoter, and Wadhwa Group Housing was distinguishable, since it concerned a promoter's liabilities towards another co-promoter's allottees, not a court-appointed replacement. Section 15 was not attracted: Bhakti Enterprises had not transferred its rights and liabilities to the petitioner, the development agreement had been terminated in 2017, the petitioner derived its rights through the court-sanctioned process, and there was no privity between them; and a refund order already passed on the earlier promoter's own undertaking is not a 'pending obligation' that passes to whoever completes the building. Fifth, Section 18 could not apply, because the money was admittedly retained by Bhakti Enterprises, the petitioner received nothing, and interest from 17 May 2018 covered more than three years before the petitioner had any connection with the project. Knowledge of another's liability is not assumption of it, and the claim that Bhakti Enterprises spent about ₹32 crore on construction lay between it and the trust under the award.
The outcome
Both petitions were allowed. In Writ Petition No. 894 of 2024, the Court quashed the MahaRERA order of 21 March 2022 and the Adjudicating Officer's order of 26 November 2024 in the execution proceedings. In Writ Petition No. 7618 of 2022, it quashed the distraint orders of 23 March and 30 May 2022 and directed the removal of the attachment on the petitioner's two Cosmos Co-operative Bank accounts.
The Court clarified that the quashing operates only insofar as the orders seek recovery from the petitioner. Bhakti Enterprises' obligations under its undertakings to repay the allottees stand, and the allottees remain free to pursue their remedies against Bhakti Enterprises, and against the trust if maintainable, for all their dues including interest. The questions whether the 9th-floor allotment letter was valid, whether the Section 36 sanction under the Maharashtra Public Trusts Act, 1950 was a mere formality, and whether the trust is a co-promoter were left open. The Rule was made absolute.
BANTHRY ANALYSISFor law students
This judgment separates three questions that often get merged in RERA disputes: who was a party to the proceedings, what the statute actually transfers, and who held the money. The non-party point alone decided the case. Section 15 then failed on its own terms, because a court-ordered replacement is not a 'transfer or assignment' by the outgoing promoter, and a crystallised refund debt is not a 'pending obligation' of the project.
Note the Court's handling of Section 18: it is compensatory, not punitive, and it follows the money. Interest compensates the allottee for the promoter's use of the allottee's funds, so it cannot be fastened on a party that never received those funds.
READING PROMPTSQuestions for a closer reading
- Why did the Court hold that the non-joinder of H. Rishabraj Developers in the proceedings before MahaRERA was fatal to the order against it?
- Why does Section 15 of the RERA Act not make a court-appointed replacement developer liable for a refund order already passed against the earlier promoter?
- How did the Court use MahaRERA's own registration order of 21 January 2022 in deciding the case?
