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In a case of Redevelopment Agreement with Society, on termination of Agreement with Promoter what is status of Society ? Is Society a Promoter? What happens to Rights of Flat buyers of free sale component? Does Judgment need a serious Review at earliest?

October 29, 2019

 In recent Judgement of Bombay High Court in the matter of A.O Stamp No  22143 of 2019 Goregaon Pearl C.H.S.L. vs. Dr. Seema Mahadev Paryekar & Ors. that  its not a promoter and how this is an erroneous Judgment we shall discuss here. Let us see first FACTS of the case:   In an Appeal from Order Appellants  challenged an order passed by Bombay City Civil Court at Dindoshi, Mumbai on a notice of motion. By the impugned order, the Appellant (original Defendant) was restrained from alienating, or creating any third party interest in, the suit flat. This was by way of an ad-interim protection to the Respondents (original Plaintiffs).In the above matter  Appellant had opted for redevelopment of their property, who is a cooperative housing society of about sixty members, who have already handed over possession of their respective flats for redevelopment and are currently said to be roofless. The redevelopment was entrusted by the Appellant society to Respondent No.2 developer (original Defendant No.2) under a development agreement. Under this agreement, the developer was duty bound to complete the project within twenty-two months from the date of receipt of commencement certificate with a three months grace period. The project involved construction of two wings of the new building, Wings A and B. Both wings were to partly accommodate the members of the Appellant society and partly third party purchasers of the free sale component of the project. In pursuance of the agreement, all members of the Appellant society vacated their respective flats by handing over possession to Respondent No.2 developer. Respondent No.2 had executed a bank guarantee in favour of the society in the sum of Rs.5 crores for fulfilling his commitment under the agreement. On or about 17 June 2008, a commencement certificate for construction of the new building was issued by the Municipal Corporation of Greater Mumbai (‘MCGM’) to the developer. Though construction was undertaken in pursuance thereof, it was nowhere near completion even as late as by August 2016, that is to say, even after passage of eight years from issuance of the commencement certificate. In the premises, by their notice dated 16 August 2016, the Appellant revoked the Power of Attorney given by it to the developer for development of the suit property. This was followed by an arbitration petition under Section 9 of the Arbitration and Conciliation Act, 1996 (“Act”) by the Appellant society seeking inter alia appointment of a court receiver for taking over the redevelopment project and completing it. Various breaches on the part of Respondent No.2 developer was alleged in the arbitration petition. These included non-completion of the project within the stipulated period of 25 months, change of plans without the society’s consent and unauthorised construction of two additional floors for which stop-work notice was issued by MCGM. In the meantime, the bank guarantee of Rs.5 crores was invoked and en-cashed by the Appellant society. After various interim orders passed by Bombay High Court on that arbitration petition, finally, on or about 7 July 2017, the parties entered into Consent Terms. Under these Consent Terms, the total liability of the developer […]

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