The High Court of Bombay directs the Promoter/Developer to pay Rs. 5 Crore as Compensation for loss of rent after not handling over possession on time

In the case of M/s Renaissance Infrastructure through its Partners & Others Vs. Shri Parth B. Suchak & Another, the complainant had purchased six plots of land together known as ‘warehousing building’, from the respondent promoter under an agreement for sale. The possession of the suit premises was to be handed over to the complainant-allottee on or before 9 March 2010 and since the possession was not so handed over, as per Condition No.4 of the agreement, the promoter was liable to compensate the complainant for loss of rent, which was agreed at the rate of Rs.10/- per sq. ft. per month which worked out to Rs.5.04 Crores, calculated upto 30 June 2018.

The Adjudicating Officer ordered the Appellant herein to pay compensation to the complainant-allottee from 9 September 2010 and till handing over possession of the warehousing building at the rate of Rs.6,30,000/- per month in addition to the direction for handing over possession of the plots with the warehousing building and execution of conveyance in favour of the applicants. Therefore, Appellant preferred Second Appeal before the High Court.

Contentions of the Appellant:

Mr. Dani, learned Senior Counsel appearing for the Appellant, submits that the Appellant was not liable to make any pre-deposit under the proviso to Section 43 (5) based on 3 main grounds. Firstly, the Appellant is not a promoter, since the agreement between the parties, which gave rise to the complaint, was not an agreement for sale, but an agreement in lieu of the Respondent’s share in the partnership of the Appellant.

Secondly, the original claim of the Respondent was pre-mature and devoid of merit.

Thirdly, the order is in the nature of liquidated damages and the adjudicating officer had no jurisdiction to order such damages.

Observations/Findings of the Court:

The Court observed that since the agreement is “agreement for sale”, the Appellant was bound to hand over possession of the suit premises to the Respondent within an agreed period and execute a conveyance in respect of the same. Prima facie this agreement is nothing, but an agreement for sale between a promoter and an allottee.

The consideration of an agreement for sale, instead of money, may well be any valuable consideration, including satisfaction of the allottee’s share in the promoter’s partnership.

The project is very much a real estate project; it is being developed by the Appellant as a promoter; and the Respondent is an allottee, to whom plots of land together with a building have been allotted and agreed to be sold. Prima facie all ingredients of promotership of the Appellant are satisfied in the present case.

Further on the question whether the original complaint before the adjudicating officer was premature and whether damages/compensation awarded by the adjudicating officer were within his jurisdiction, are but matters of merit in the appeal. These matters, even if some of them may go to the root of the order impugned in the appeal, do not call for dispension of pre-deposit under the proviso to sub-section (5) of Section 43, which is mandatory.

The orders do not give rise to any substantial question of law for the consideration of this court. The Second Appeal is, accordingly, dismissed.

Read the full Order here.

-By Ronak Tyagi