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  • Commercial Law Advisors

TNRERA: New promoters must fulfil obligations owed to home buyers under original agreement to sale

The Tamil Nadu Real Estate Regulatory Authority (TNRERA) has ruled that new builders of an ongoing project will be bound to fulfil the obligations that were present between the previous promoters and the home buyers. Under section 15(2) of the RERA Act, 2016 (“Act”), the intending promoters are required to independently comply with all pending obligations under the Act as well those set out in the original agreement of sale signed by the erstwhile promoters and the allottees. Further, the transfer does not result in any extension of time for the intending promoter to complete the project. In fact, the intending promoter becomes liable for the consequences of breach or delay under the Act.

In the dispute before the TNRERA, the new promoters alleged that there did not exist any ‘privity of contract’ between them and the home buyers and hence they were not liable for any delay in handing over possession of the flats. The complaint was raised by Mr. Bhoomijha Murali and Mr. K.V. Murali, who had entered into an agreement in 2011 relating to the purchase of a flat in Kancheepuram District with Hiranandani Palace Gardens Private Limited, the developer, and Green Habitats Private Limited. The flat’s possession, originally priced at ₹74.4 lakh, was supposed to be handed over to the allottees in 2013, upon which the home buyers were to pay the last instalment amounting to ₹5.8 lakh towards amenities. However, the possession was not transferred to the home buyers. In 2014, the project was acquired by Lucifer Constructions through an auction sale held by HDFC Bank and Evita Constructions was appointed as the new developer. They refused to give possession until the home buyers agreed to pay ₹11.20 lakh pursuant to a supplementary agreement to be signed between the three parties viz., the new owner, developer and the allottees. Reviewing section 15 of the Act, the TNRERA dismissed the new promoters’ arguments and directed them to hand over possession of all completed apartments to the home buyers by September 30, 2020 and also collect dues as per these agreements. It stated that the obligations and liabilities set out under the agreement of sale entered between the complainants and the previous promoters was applicable to the new promoters. The new promoters could not escape fulfilling obligations under the agreement or the Act, but instead could be held liable for any breaches or delays.

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