Mumbai: ‘Ex-partners’ promises to buyers must be honoured’

Under construction project at Mulund West

The Maharashtra Real Estate Appellate Tribunal recently ruled that current partners must honour contractual obligations made by former partners, even after their departure. Notably, this decision highlights the significance of cash transactions in real estate, considering cash received as a crucial component of the total sale consideration. "Establishing proof of the cash component in flat sale transactions can be challenging, putting home buyers in a difficult position in many cases, but this judgment has duly taken this part too into consideration," said Advocate Godfrey Pimenta, who represented the flat buyers in the case.

The appeal

Aditya Enterprises Pvt. Ltd and Satyendra Vishwakarma, a construction partnership in Mulund, contested a MahaRERA order from October 30, 2019, at the MahaRERA Appellate Tribunal. The appellants, involved in land development and property sales, opposed the order alongside Mrunmai and Mahesh Phadke, the allottees (Respondent 1 and 2), while Respondent 3, S D Bhalerao, an ex-partner, also had a stake in the matter. "The appellant's firm grievance was that the authority (MahaRERA) has violated the principles of natural justice by not extending an opportunity to the promoters of being heard," Adv Pimenta said.

Facts of the case

On January 1, 2021, Mrunmai and Mahesh booked a 687 sq ft flat in Shree Sandesh Heights for Rs 64.53 lakh, paying Rs 10 lakh by cheque and Rs 12 lakh in cash to S D Bhalerao, a partner of appellant no 1 firm. Despite receiving over 20 per cent of the total price, the promoters failed to execute a sale agreement. MahaRERA directed appellant no 1 to execute a registered agreement within 30 days, but they challenged this order before the MahaRERA Appellate Tribunal.

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Appellants argument

In challenging the MahaRERA order, Adv Nesarikar, representing promoters (appellant 1 and 2), argued that the Authority failed to provide adequate opportunity for the promoters to respond to the complaint and passed the order hastily based on oral submissions. He claimed the authority overlooked key aspects, including the legal notice stating the cash payment of R12 lakh to respondent no 3 (S D Bhalerao) for urgent needs. The argument emphasised discrepancies in receipts, asserting the R12 lakh receipt as sham, with no M/s Aditya Enterprises logo, incorrect spelling, different addresses, and signed by an unauthorised person. Additionally, it was highlighted that appellant no 2 became a partner after S D Bhalero's resignation as per the Deed of Retirement-cum-Admission on February 25, 2017.

Refutes claim

Adv Godfrey Pimenta, representing the allottees, countered the promoters' arguments by saying that, during the flat booking, respondent no 3 was a partner in appellant no 1 firm, a fact undisputed by the promoters. The payment of Rs 10 lakh to the firm and the issuance of a corresponding receipt was acknowledged by the promoters. While the promoters disputed the receipt dated January 22, 2014, they did not contest the payment of Rs 12 lakh in cash to respondent no 3. Pimenta noted that the allottees, before filing the complaint, issued a legal notice asserting the cash payment to respondent no 3, to which the promoters didn't provide any documented reply, creating an obligation for the promoters to address and contest the contentions.

‘MahaRERA was correct'

Adv Pimenta highlighted that the appellants, in their written submission, didn't contest the payment of Rs 12 lakh in cash to respondent no 3. He referred to Section 4 of MOFA, stressing the obligation on promoters not to accept deposits exceeding 20% without executing an agreement for sale. Despite accepting Rs 22 lakh, over 20% of the total consideration, the promoters failed to execute the agreement, violating Section 4 of MOFA. Pimenta supported MahaRERA's directive for the promoters to execute the agreement and urged the dismissal of the appeal with compensatory costs.

‘Had already left firm'

Adv Rupali Padgulekar, representing respondent no 3 (S D Bhalerao), argued that while respondent no 3 was a partner during the transaction, at the time of the complaint, he was no longer associated with appellant no 1 firm. Additionally, she pointed out that the promoters registered the project with MahaRERA, and the webpage doesn't list respondent no 3 as a promoter. Consequently, she contended that respondent no 3 is not obligated to execute any agreement for sale, as he is no longer a partner. Padgulekar urged the dismissal of the appeal with costs based on these points.

Tribunal order, observation

In their written order dated February 28, Shriram Jagtab, Member (J), and Dr. K Shivaji, Member (A), examined the pleadings, rival submissions, and documents presented. The key consideration was whether the impugned order warranted interference. The Tribunal's findings were negative, leading to the dismissal of the appeal with a cost of Rs 20,000 imposed on the appellants. Any pending miscellaneous application was also disposed of, and the order is to be communicated to MahaRERA and the respective parties in accordance with Section 44(4) of the RERA Act, 2016.