From Beneficiary To Promoter: The Bombay High Court On Housing Society Liability Under RERA

Introduction

The Real Estate (Regulation and Development) Act, 2016 (“RERA”) was enacted to protect homebuyers and promote transparency and accountability in the real estate sector. A key feature of the Act is the definition of “Promoter” under Section 2(zk), as it determines the persons or entities that bear statutory obligations and liabilities towards homebuyers.

In its order dated 8 April 2026 in Shri Sai Vishram Co-operative Housing Society Ltd. v. Ninad Padmakar Paralkar & Ors. (Writ Petition No. 2221 of 2025), the Bombay High Court examined whether a cooperative housing society (“Society”) that derives substantial commercial benefits from a redevelopment arrangement can be regarded as a “Promoter” under RERA.

Answering the question in the affirmative, the Court held that a cooperative housing society that derives significant commercial benefits from a redevelopment project may fall within the definition of a promoter and be held accountable for obligations owed to homebuyers under the Act.

The decision clarifies that promoter status is determined not merely by the label assigned to a party, but by the nature of its involvement in the project and the commercial benefits it derives from it. This article examines the Court's reasoning and analyses the significance of the ruling in strengthening accountability and enhancing the protection available to homebuyers in redevelopment projects.

Case Background

The case arose from a redevelopment project undertaken by Shri Sai Vishram Co-operative Housing Society Limited (“Society”) at Ambernath in Thane District. The Society had entered into a Development Agreement dated 15 March 2013 (“DA”) with SAAGA Infraprojects Pvt. Ltd. (“Saaga”) for the redevelopment of its property. However, Saaga was unable to complete the project, resulting in the termination of the DA. Thereafter, to continue the redevelopment, the Society entered into a Memorandum of Understanding dated 23 December 2017 (“MoU”) with AARYADEEP Builders (“Aaryadeep”), a partnership firm.

Under the MoU, the Society and Aaryadeep agreed to share the constructed area equally in a 50:50 ratio. In addition, the Society was entitled to receive a corpus fund of Rs.3 crore from Aaryadeep. These benefits distinguished the Society from a passive landowner merely permitting redevelopment of its property. By securing a share in the developed area together with a corpus fund, the Society acquired commercial and a direct economic interest in the redevelopment project.

The parties subsequently executed a Supplementary Agreement dated 3 September 2018 (“SA”), further formalising the terms and implementation of the redevelopment arrangement. The SA contemplated the accommodation of certain allottees who had originally booked flats with Saaga, the erstwhile developer. When the project stalled and possession was not delivered, several allottees filed complaints before MahaRERA under Section 18 of RERA seeking refund of the amounts paid along with interest. In these proceedings, the allottees impleaded Aaryadeep and the Society as respondents.

After considering the submissions of the parties, MahaRERA held the Society jointly and severally liable with Aaryadeep to refund the amounts paid by the complainant-allottees together with interest. Aggrieved by these orders, the Society preferred appeals before the Maharashtra Real Estate Appellate Tribunal (“Appellate Tribunal”).

By a common order dated 18 September 2024, the Appellate Tribunal substantially upheld the findings of MahaRERA. The Appellate Tribunal held that the Society qualified as a “Promoter” under Section 2(zk) of RERA. In doing so, it relied, inter alia, on MahaRERA Circular No. 12 of 2017 (“Circular”), which clarifies that in redevelopment projects both the developer and the society or landowner are to be treated as promoters and may be held jointly liable for obligations arising under RERA.

The Society thereafter appealed to the Bombay High Court, contending that the matter involved a substantial question of law. It argued that the Appellate Tribunal had incorrectly classified it as a “Promoter” under RERA and had erroneously relied upon MahaRERA Circular No. 12 of 2017 in reaching that conclusion.

Society submissions

the Society raised several contentions before the High Court. It argued that there was no privity of contract between the Society and the allottees of the erstwhile developer, Saaga. The allottees had booked their flats with Saaga and paid the consideration to Saaga. In the absence of any direct contractual relationship with the allottees, the Society contended that it could not be burdened with liability for refund.

The Society relied on certain  decisions of the Bombay High Court including Vaidehi Akash Housing and Infrastructure Pvt. Ltd. v. Union of India, Goregaon Pearl CHSL v. Piramal Realty Pvt. Ltd., and Deepak Prabhakar Thakoor v. Abhiraj Developers, to contend that a landowner or cooperative housing society does not automatically become a “Promoter” merely by entering into a development agreement.

The Society challenged the Appellate Tribunal's reliance on the Circular.  It argued that a Circular cannot expand the scope of the statutory definition of a “Promoter” beyond that prescribed by the legislature under RERA.

Court's Analysis

The Court acknowledged the general principle that a cooperative housing society does not become a “Promoter” merely by entering into a development agreement. It accepted that, where a society merely permits redevelopment of its property in exchange for rehabilitated flats for its existing members, it may not fall within the definition of a “Promoter”.

The Court distinguished cases between societies that merely facilitate redevelopment and those that derive substantial commercial benefits from it. It observed that different considerations arise where a society is entitled to a share in the developed area or receives revenue or other commercial benefits from the sale of flats to third-party purchasers. In such cases, the society assumes a direct commercial stake in the project and ceases to be a mere passive participant in the redevelopment process, thereby potentially attracting the status of a “Promoter” under RERA.

The Court examined the expansive definition of “Promoter” under Section 2(zk) of RERA. It observed that the provision is not confined to a person who constructs or causes to be constructed a building for sale to others. Clause (vi) extends the definition to include any person who acts as a builder,  coloniser, contractor, developer, estate developer, or by any other name, and who develops land into a project for the purpose of selling units to other persons.

The Court emphasised that  various agreements could not be examined in isolation but had to be read as components of a single redevelopment transaction. A cumulative reading of the DA, the MoU, the SA, and the Consent Terms exhibited that the Society was not a passive participant but had a commercial interest in the project. The Society had actively facilitated the transition from the erstwhile developer to Aaryadeep, was entitled to 50% of the constructed area and a corpus fund of Rs.3 crore and had a direct commercial interest in the redevelopment project. In these circumstances, the Court upheld the Appellate Tribunal's finding that the Society fell within the definition of a “Promoter” under RERA, finding no legal infirmity in its reasoning.

The Court held that no substantial question of law arose for consideration. It observed that the Appellate Tribunal had correctly applied the relevant legal principles and that its conclusions were based on a proper evaluation of the contractual arrangements between the parties. Accordingly, the Court found no ground to interfere with the Appellate Tribunal's decision.

Strengthening Homebuyer Remedies in Redevelopment Projects

The decision is a significant development for homebuyers in redevelopment projects, who often find themselves in a particularly vulnerable position. A common issue arises when the original developer fails to complete the project and is subsequently replaced by a new developer. In such situations, cooperative housing societies frequently contend that they bear no liability towards allottees who had booked flats with the erstwhile developer. As a result, allottees are often left without an effective remedy, unable to recover their monies from a developer that has become insolvent, ceased operations, or is otherwise unable to meet its obligations, while the society simultaneously disclaims any responsibility towards them.

The decision also reinforces the joint liability framework expressed in the Explanation to Section 2(zk)(vi) of RERA. By affirming that both the society and the developer may be held jointly and severally liable, the Court has reinforced the remedies available to allottees. Consequently, where the developer is unable to fulfil its obligations, the society, having derived commercial benefits from the redevelopment project, may also be called upon to satisfy the allottee's claim.

The decision is also likely to influence the conduct of cooperative housing societies involved in redevelopment projects. Societies that derive commercial benefits from area-sharing arrangements can no longer adopt a passive approach to project implementation. The prospect of shared liability is likely to encourage better governance, accountability, and diligence, thereby strengthening protection for allottees

Redevelopment Projects, Promoter Liability, and Future RERA Enforcement

This decision has ramifications beyond the facts of the present case. Redevelopment has become the predominant mode of real estate development in cities such as Mumbai, Thane, and Pune, where the availability of undeveloped land is increasingly limited. Thousands of cooperative housing societies have entered into redevelopment arrangements with developers. The decision reinforces the principle that substantial commercial participation in a redevelopment project may attract corresponding statutory obligations and liabilities under RERA.

The decision also reinforces the regulatory approach reflected in the Circular. While the Court did not base its decision solely on the Circular, its reasoning is consistent with the regulatory objective underlying it. The Circular is intended to ensure that parties who play a substantive role in redevelopment projects, including developers and landowners or cooperative housing societies, are recognised as promoters and are accountable to allottees under RERA.

Importantly, the decision does not hold that every cooperative housing society involved in a redevelopment project is necessarily a promoter. The Court limited its decision to cases where a society derives commercial benefits beyond the rehabilitation of its existing members. This distinction preserves the position of societies that merely facilitate redevelopment and receive only rehabilitated premises for their members, ensuring that they are not exposed to promoter liability solely on that basis.

The decision is likely to serve as an important guide for MahaRERA and the Appellate Tribunal in adjudicating similar cases. It reinforces the principle that commercial participation in a redevelopment project may attract corresponding statutory liability under RERA. The decision may also serve as a useful reference for RERA authorities and courts in interpreting the scope of the term “Promoter” in redevelopment, joint development, and area-sharing arrangements.

Conclusion

This decision provides important clarity on the scope of the term “Promoter” under RERA in the context of redevelopment projects. It recognises that a cooperative housing society which derives commercial benefits from a redevelopment arrangement may, having regard to the nature and extent of its involvement, fall within the statutory definition of a promoter and be held accountable to allottees.

The decision reinforces the principle that promoter liability depends on the substance of a party's role and commercial interest in the project rather than the labels adopted by the parties. In doing so, it strengthens the accountability framework under RERA, enhances the remedies available to allottees, and advances the RERA 's objective of protecting homebuyers in redevelopment projects.

The ruling is a significant development in RERA jurisprudence. It closes a potential accountability gap in redevelopment projects, strengthens the remedies available to allottees, and advances RERA's objective of ensuring that parties who derive substantial commercial benefits from a project remain accountable to homebuyers for its successful completion and compliance with statutory obligations.

The decision is a significant contribution to the evolving jurisprudence under RERA. It mitigates a potential accountability gap in redevelopment projects, enhances the remedies available to allottees, and advances RERA’s objective of ensuring that parties with a substantive commercial stake in a project remain accountable to homebuyers for compliance with their statutory obligations.

Ashoo Gupta, Partner Shardul Amarchand Mangaldas & Co.

Views expressed are personal

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