A developer brought in through a court-approved process to complete a stalled redevelopment cannot automatically be made to discharge the former developer’s crystallised refund debt, the Bombay High Court has held. It quashed recovery measures against H. Rishabraj Developers while keeping the flat buyers’ remedies against the original developer open.
Mumbai: The Bombay High Court has set aside a MahaRERA order requiring H. Rishabraj Developers to pay interest on ₹37 lakh received by an earlier developer from two flat buyers, holding that neither its later entry into the project nor the RERA definition of promoter automatically transferred that liability to it [H. Rishabraj Developers v. State of Maharashtra and Others].
A Bench of Justices Suman Shyam and Gautam A. Ankhad allowed two connected writ petitions on November 5, 2026. The judgment also removed the basis for attaching and freezing the replacement developer’s bank accounts. The relief was expressly confined to recovery against that developer; it did not release the original developer from its repayment obligations.
How the refund dispute reached the new developer
The dispute arose from the Samaj Darshan redevelopment project on property belonging to the Khambhati Modh Vanik Samaj charitable trust. Jayant Mehta, the sole proprietor of Bhakti Enterprises and the earlier developer, had allotted a flat to Kinjal and Mahesh Karia. The buyers sought a refund of ₹37 lakh before MahaRERA.
In May 2018, MahaRERA disposed of their complaint on the earlier developer’s undertaking to refund the principal amount under an agreed schedule. The buyers had agreed to accept repayment without interest. Repeated defaults followed, leading to review and execution proceedings and an appeal.
Separately, the trust terminated the earlier development agreement. Following High Court proceedings involving a Court Receiver, it entered into a fresh development agreement with Rishabraj in July 2021. The judgment records that Rishabraj subsequently completed the redevelopment.
On remand from the appellate tribunal, MahaRERA’s March 21, 2022 order directed both the earlier developer and Rishabraj to pay interest on the buyers’ ₹37 lakh from May 17, 2018 until realisation. Recovery proceedings led to attachment of Rishabraj’s bank accounts. The High Court examined both the liability order and the consequential recovery action.
Appearance at a hearing did not cure non-joinder
The Bench found that Rishabraj had never been made a party to the original complaint, the review-cum-execution application, the appeal or the remanded proceedings. MahaRERA had called it to a hearing, where its advocate appeared and written submissions were filed.
That was insufficient, the Court held in paragraph 28. No amended pleading sought relief against Rishabraj or explained the alleged basis of its liability under RERA. Merely appearing through counsel could not replace formally joining it as a party and setting out the case it had to answer. This defect alone made the order unsustainable against it.
RERA does not automatically transfer every earlier debt
The buyers argued that the new developer had stepped into the project with knowledge of its liabilities and was answerable under Sections 2(zk), 15 and 18 of the Real Estate (Regulation and Development) Act, 2016. The earlier developer also argued that the replacement developer and the trust could not retain the benefit of construction while rejecting the associated liabilities.
The Court rejected those arguments on the facts before it. In paragraph 32, it distinguished the joint responsibilities of co-promoters from the position of a developer appointed through a court process after termination of the earlier development agreement. The statutory definition could not be read as transferring every financial liability to anyone who subsequently developed the same property.
Section 15 ordinarily regulates a promoter’s transfer or assignment of majority rights and liabilities in a project, including the incoming promoter’s compliance with pending obligations. Here, the Bench found that Rishabraj derived its rights through a fresh, court-sanctioned arrangement with the trust, rather than a transfer from the former developer. There was no contractual relationship between the two developers.
The Bench further held that the refund obligation already fixed against the earlier developer on its own undertaking was its debt, rather than a pending project obligation that passed to whoever completed the building. MahaRERA’s separate registration order had also expressly excluded past liabilities in Rishabraj’s case.
As to Section 18, the Court noted that the money remained with the earlier developer, while Rishabraj had received none of it. The impugned interest direction extended to a period more than three years before Rishabraj entered the project. Section 18 could not be applied against it in these circumstances.
In paragraph 35, the Bench put the distinction succinctly: “Knowledge of another person’s liability does not amount to taking over of that liability.”
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Buyers’ recovery rights remain open
The Court quashed the liability and recovery measures only insofar as they operated against Rishabraj, and directed removal of the attachment and consequent action against its bank accounts. It expressly preserved the buyers’ remedies against the earlier developer, and against the trust if maintainable, for their dues including interest.
The judgment does not create a blanket exemption for replacement developers. Its reasoning turns on the court-approved appointment, the earlier refund undertaking, the registration orders and the absence of a contractual or statutory basis for transferring that debt in this case.
The Bench also declined to decide the validity of Regulation 36 governing MahaRERA review proceedings because the necessary pleadings and prayer were absent. Questions concerning the validity of the allotment and the trust’s status as a co-promoter were left open for appropriate proceedings.
Case: H. Rishabraj Developers v. State of Maharashtra and Others
Case numbers: Writ Petition No. 894 of 2024 with Writ Petition No. 7618 of 2022 and Interim Application No. 10986 of 2024
Court: Bombay High Court
Bench: Justices Suman Shyam and Gautam A. Ankhad
Judgment: November 5, 2026; reserved October 7, 2026
Outcome: Writ petitions allowed; impugned liability and recovery measures set aside against the petitioner. Buyers’ remedies against the earlier developer and, if maintainable, the trust preserved.
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