In a significant ruling differentiating genuine buyers from financial investors, the Maharashtra Real Estate Regulatory Authority (MahaRERA) held that investors entering commercial funding arrangements disguised as flat bookings cannot invoke the provisions of the Real Estate (Regulation and Development) Act, 2016, to seek a refund from a developer.
The order was passed by MahaRERA chairperson Manoj Saunik on a complaint filed by an individual against the project’s current developer in Panvel, near Mumbai, as well as the former developer. The complainant sought a refund of over ₹2 crore, claiming the deceased (buyer) had booked eight flats in the project under memoranda of understanding (MoUs) executed in September 2018 and had paid the entire sale consideration.
The complainant alleged that the former developer of the project failed to execute registered agreements, complete the project or hand over possession, entitling her to withdraw from the project and seek a refund with interest.
The case
The complainant, under MOUs executed in September 2018, had paid the entire consideration amount of over ₹1.42 crore. The complainant alleged that despite receiving full payment, the promoter allegedly failed to execute registered sale agreements, provide sanctioned plans and approvals, or complete the project within the promised timeline. After repeated follow-ups went unanswered, the complainant terminated the bookings in August 2021 and sought a refund with interest. Notably, a partner of the developer had issued refund cheques, acknowledging liability to repay the amounts.
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Developer’s defence
The new developer informed MahaRERA that the complaints were not maintainable, arguing that it is a separate and independent partnership firm with no connection to the erstwhile developer.
The developer stated that it acquired the project land in December 2022 through a registered conveyance deed after conducting extensive due diligence, including title verification and inquiries with the secured lender, none of which revealed any claim by the complainant. The new developer disputed the validity of the 2018 Memorandum of Understanding, alleging it was unregistered, inadequately stamped, unsigned by the complainant and witnesses, and contained several discrepancies, rendering it incapable of creating enforceable rights.
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MahaRERA’s verdict
MahaRERA, in its order said the complainant did not satisfy the statutory definition of an “allottee” under Section 2(d) of the RERA Act.
“Section 2(d) of the RERA Act defines an allottee (buyer) specifically as a person to whom a plot, apartment, or building has been allotted, sold, or otherwise transferred by the promoter (developer). This statutory protection does not extend to pure financial investors who enter into commercial funding arrangements under the guise of real estate bookings. In the present case, a close scrutiny of the transaction reveals that the relationship between the late complainant and the erstwhile promoter was purely financial,” the MahaRERA said in its order.
“Although the disputed MOUs mention broad flat numbers, the payment structure demonstrates that a lump sum amount was paid for an aggregate bulk area, rather than standard payments made by a regular home buyer as construction progressed. This investment characteristic is further established by the critical fact that the substantial consideration of ₹1.25 crore was advanced on March 11, 2016 as recorded in the MOU, which heavily predates the project’s Commencement Certificate (CC) dated September 30, 20216,” the said.
According to the MahaRERA order, at the time the funds were deployed by the complainant, there was no valid legal sanction or building permission in place to support the physical allocation of any real estate inventory.
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“A specific residential unit cannot be legally or physically allotted to a genuine home buyer when foundational regulatory permissions like the Commencement Certificate are not in existence. This proves the transaction was an investment risk taken on a floating area calculation, placing the complainant squarely outside the purview of Section 2(d) of the Act,” the MahaRERA order reads.
in its order that the dispute fundamentally transformed into a civil money recovery dispute against the partners of the former developer, falling entirely outside the Authority’s purview.
“MahaRERA rejected the claim of investors trying to portray herself as Allottee (buyer). Authority evaluated unproved payment of around 1.25 crore much prior to issue CC, unstamped, unregistered and unsigned MOU and voluntary termination prior to change of promoter. Looking at the conduct of the complainant , MahaRERA concluded that the dispute is of civil nature against the old developer, and outside RERA’s jurisdiction,” said CA Ashwin Shah, who represented the new developer in the case.