Balancing Developer Rights and Resident Needs: Bombay High Court's Ruling
The Bombay High Court's recent ruling in the case of Huges Real Estate Developers LLP vs. Khernagar Adarsh Co-operative Housing Society Limited highlights the delicate balance between the rights of developers and the fundamental needs of residents. The court prioritized the residents' right to safe housing over the developers' profit motives, setting a significant precedent in real estate redevelopment.
Real EstateRedevelopmentBombay High CourtHousing SocietyLegal RightsReal Estate NewsOct 03, 2025
The case of Huges Real Estate Developers LLP (the “erstwhile developer”) versus Khernagar Adarsh Co-operative Housing Society Limited (the “society”) & Anr is a prime example where the Hon’ble Bombay High Court was tasked with balancing the contractual rights of the erstwhile developer against the fundamental right of society members to timely and safe housing.
Factual Background:
- In or around 2011, a development agreement was executed between the society and the erstwhile developer for the redevelopment of building no. 23 situated at Khernagar, Bandra (East), Mumbai, under the then-prevailing Development Control Regulations (DCR 1991).
- Following the execution of the development agreement, proposals were submitted to the Maharashtra Housing and Area Development Authority. However, these were stalled due to the introduction of the Development Control and Promotion Regulations, 2034, which replaced the DCR 1991.
- Between 2020 to 2022, various offers and proposals were floated by the erstwhile developer to the society. One such proposal was accepted by the society in its special general meeting held on November 27, 2022. However, the society, via its letter dated December 3, 2022, imposed certain conditions to be complied with by the erstwhile developer within the specified timelines.
- Since the erstwhile developer failed to fulfill the conditions contained in the December 3, 2022 letter, the society resolved to terminate the development agreement in its special general meeting held on January 1, 2023. A termination notice dated January 31, 2023, was issued to the erstwhile developer.
- Subsequently, a tender document dated February 28, 2023, was floated by the society inviting bids from various developers for the redevelopment of the property. The society, in its special general meeting held on September 17, 2023, unanimously resolved to appoint Kumar Vibe Properties Private Limited (Kumar) as the developer for the redevelopment of the property. A letter dated October 10, 2023, was issued by the Deputy Registrar of Co-operative Societies confirming this resolution. One of the conditions mentioned in the tender was that the new developer should obtain a no objection certificate from the erstwhile developer for the redevelopment.
Suit Filed Before the Hon’ble Bombay High Court:
- The erstwhile developer, aggrieved by the appointment of Kumar, filed a commercial suit (L) No. 28114 of 2023 before the Hon’ble Bombay High Court against the society and Kumar. The suit sought, among other things, a declaration that there exists a valid, binding, and subsisting contract between the erstwhile developer and the society for the redevelopment of the property, and that the termination notice is illegal, arbitrary, and void ab initio. The suit also prayed for specific performance of the development agreement.
- Subsequently, an interim application (L) No. 28499 of 2023 was filed by the erstwhile developer in the suit, seeking a temporary injunction in its favor.
- By an order dated October 24, 2024, the Hon’ble Bombay High Court did not grant the relief sought by the erstwhile developer. However, to protect the rights of the erstwhile developer, the court directed Kumar to obtain a no objection certificate from the erstwhile developer in terms of the tender.
Appeal Filed Before the Bombay High Court:
- The erstwhile developer, aggrieved by the 2024 order, preferred a commercial appeal No. 45 of 2025 before the Hon’ble Bombay High Court, challenging the 2024 order.
- A cross-appeal, commercial appeal (L) No. 17320 of 2025, was also filed by the society, challenging the imposition of the condition of obtaining a no objection certificate from the erstwhile developer.
Submissions Made by the Erstwhile Developer:
- The 2024 order failed to consider that a valid contract existed between the erstwhile developer and the society regarding the redevelopment of the property. The subsequent offers and communications were not a case of novation but only dealt with amendments to the commercial terms contained in the original development agreement.
- The 2024 order acknowledged that the termination of the development agreement based on the erstwhile developer's delay in carrying out the redevelopment was flawed. Despite this, the court did not grant a temporary injunction in favor of the erstwhile developer.
Submissions Made by the Society and Kumar:
- The erstwhile developer had failed to honor the conditions imposed by the society in its December 3, 2022 letter. Therefore, terminating the erstwhile developer's rights to redevelop the property was valid, legal, and in the best interest of the society members.
- The imposition of the condition to obtain a no objection certificate from the erstwhile developer would frustrate the entire redevelopment project, as the erstwhile developer, despite not securing an injunction, would continue to create obstacles.
- Kumar had offered a cheque of ₹2,60,00,000 to the erstwhile developer, showing its willingness to compensate. However, the erstwhile developer denied accepting the cheque and made unreasonable demands.
Observations Made by the Hon’ble Bombay High Court:
- The refusal to grant a temporary injunction in favor of the erstwhile developer was justified. The court emphasized that the rights of developers to earn profits through redevelopment contracts must yield to the rights of residents to have their buildings reconstructed safely. When the residents' right to safe housing is pitted against the developer's right to profit, the latter must yield to the former.
- The court observed that the potential loss to the erstwhile developer could be compensated monetarily. The erstwhile developer's claim for ₹8,09,51,502 as expenditure incurred, along with interest at 18% p.a., was found to be unreasonable. The court ordered that interest at 8% p.a. be applicable, and a lump sum amount of ₹5,00,00,000 would be a reasonable compensation.
- The condition of obtaining a no objection certificate from the erstwhile developer would indefinitely delay the redevelopment. Given the court's directions regarding compensation, this condition was set aside. However, if the society and Kumar fail to deposit the stipulated amount within the timeline, the condition would be revived.
Final Order:
- The 2024 order was upheld.
- The society and Kumar were directed to deposit ₹5,00,00,000 with the Hon’ble Bombay High Court within six weeks as compensation to the erstwhile developer.
- The condition of obtaining a no objection certificate from the erstwhile developer was set aside, but would be revived if the stipulated amount was not deposited on time.
Conclusion:
The 2025 order carries significant practical implications for redevelopment projects taken over by other developers. By prioritizing the rights of residents to safe housing over developers' profit motives, the court has reinforced that delays and disputes cannot indefinitely stall projects where buildings are in dilapidated condition and residents' lives are at stake. The court's approach of allowing Kumar to undertake redevelopment while safeguarding the erstwhile developer against potential loss sets a landmark precedent, potentially reducing prolonged litigations and ensuring the timely completion of redevelopment projects.
Frequently Asked Questions
What was the main issue in the case of Huges Real Estate Developers LLP vs. Khernagar Adarsh Co-operative Housing Society Limited?
The main issue was the balance between the contractual rights of the erstwhile developer to undertake redevelopment and the fundamental right of the society members to timely and safe housing.
Why did the society terminate the development agreement with the erstwhile developer?
The society terminated the agreement because the erstwhile developer failed to comply with the conditions imposed by the society in its letter dated December 3, 2022.
What was the Bombay High Court's decision regarding the temporary injunction sought by the erstwhile developer?
The court did not grant the temporary injunction but directed Kumar to obtain a no objection certificate from the erstwhile developer as a condition for redevelopment.
How did the court address the erstwhile developer's potential loss due to the termination of the development agreement?
The court ordered the society and Kumar to deposit ₹5,00,00,000 with the court as compensation for the erstwhile developer's potential loss.
What is the significance of the 2025 order in the context of real estate redevelopment?
The 2025 order sets a precedent by prioritizing the residents' right to safe housing over developers' profit motives, potentially reducing prolonged litigations and ensuring timely completion of redevelopment projects.
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