In a significant ruling impacting redevelopment projects, the Bombay High Court has held that developers are not entitled to recover costs incurred on partially constructed buildings if a housing society terminates the agreement due to delays or contractual breaches. Justice Sandeep Marne clarified that a builder can seek reimbursement only when the redeveloped structure is fully completed and fit for use by society members.
The judgment was delivered while hearing a petition filed by SSD Escatics Pvt Ltd, which challenged an arbitral award dated June 24, 2023. The award upheld the termination of its redevelopment agreement by Goregaon Pearl Cooperative Housing Society and directed the developer to pay Rs 7.17 crore to the society.
The society had appointed the developer in September 2007 to redevelop its three buildings. Following delays, both parties entered into consent terms, requiring completion by October 30, 2018. However, the agreement was terminated on June 3, 2018, after the developer failed to meet deadlines. The dispute was referred to arbitration, which ruled in favour of the society.
Upholding the arbitrator’s decision, the court noted that the developer had breached multiple contractual conditions and failed to complete the project within the stipulated timeline. It also rejected the builder’s claim for a refund of Rs 18.09 crore spent on partially constructed structures, stating that incomplete construction does not constitute a usable “benefit” under Section 64 of the Contract Act.
The court further dismissed the developer’s demand for a refund of Rs 20.43 crore paid as transit rent, corpus, and brokerage. “If the [transit] rent is directed to be refunded to the developer whose DA (development agreement) is terminated due to defaults committed by him, it would tantamount to rewarding the developer for the breaches while putting already troubled society members into further difficulties, which is not the objective behind section 64 of the Contract Act,” the court said.
The ruling reinforces that only tangible, usable benefits can be claimed, setting a precedent for redevelopment disputes across Mumbai.
Source: Hindustan Times
