New Delhi, July 23 — The Supreme Court on Thursday directed a Mumbai-based developer to execute a Permanent Alternate Accommodation Agreement (PAAA) and hand over possession of three flats to an occupant of a redeveloped cessed building within two months, holding that the developer could not resile from its contractual and statutory obligations after obtaining vacant possession of the old premises for redevelopment.
A Bench of Justices J.B. Pardiwala and K. Vinod Chandran set aside a Bombay High Court judgment that had restrained the Maharashtra Housing and Area Development Authority (MHADA) from taking coercive steps against the developer for non-compliance with its directions.
The apex court revived MHADA's orders directing the developer to execute the PAAA, register it and hand over possession of the promised premises to the appellants, observing that the statutory authority had acted within the framework of the Maharashtra Housing and Area Development Act and the redevelopment regulations.
The dispute arose out of the redevelopment of a cessed building in Mumbai, where occupants had vacated their premises on the assurance that they would be provided permanent alternate accommodation in the reconstructed building.
The appellants claimed enforcement of a PAAA executed in October 2019, under which they were promised three flats in the redeveloped project. On the other hand, the developer contended that the agreement was invalid and argued that the appellants were not entitled to the entire area promised under the PAAA.
It also maintained that reduced permissible construction due to changes in the sanctioned building height left insufficient area to honour the agreement. Rejecting the developer's stand, the Justice Pardiwala-led Bench said the PAAA could not be treated as a mere private arrangement, observing that it was executed under a statutory redevelopment framework supervised by MHADA.
"The developer cannot casually, after all these years having obtained a consent, leading to vacation of premises and possession being handed over for the purpose of redevelopment, on the promise of allotment of premises as specified in the PAAA, turn around and challenge the very claim raised by the 1st appellant as an occupant," the apex court said.
It further held that internal disputes among the developer's partners could not defeat the rights of beneficiaries under a validly executed redevelopment agreement.
"The settlement of inter se disputes between the partners... cannot absolve the developer from his obligations as per the validly executed agreement based on which vacant possession of the premises was obtained, the old premises demolished and the new building constructed," the Supreme Court held.
It also rejected the developer's contention that the reduced utilisation of fungible Floor Space Index (FSI) entitled it to withdraw from the agreement. "The mere fact that fungible area was not fully utilised cannot be a ground to allow the developer to resile from its agreement to redevelop and allot alternate premises to the occupants of the old building as agreed upon," the judgment said.
Holding that the Bombay High Court had erred, the apex court said it was not justified in preventing MHADA from proceeding against the developer for non-compliance with its statutory directions.
"We are satisfied that the impugned judgment erred in restraining MHADA from taking further proceedings... We set aside the impugned judgment of the High Court," the Justice Pardiwala-led Bench said.
It directed the developer to execute the PAAA and hand over possession of the three apartments within two months.
The Supreme Court ruled that if the deadline is not met, the appellants would be entitled to recover damages equivalent to the monthly rental value of all three flats and would also be free to seek additional compensation for the delay in delivery.
The apex court further described as "misconceived and mala fide" the civil suit subsequently instituted by the developer challenging the PAAA after giving an undertaking before the High Court and directed that the Bombay High Court should not proceed with that suit.
The appeal was allowed with costs of Rs 50,000 each before the High Court and the Supreme Court, payable by the developer to the appellants.