Developer Share Flats: What the Bombay HC's Maruthi Society Ruling Means for Buyers

In the summer of 2014, all 22 members of a Chembur housing society moved out of their 1967 building so a developer could rebuild it. The new building was due by January 2018. Twelve years after they moved out, the members had a bare concrete frame up to the 10th floor, permission only up to the 8th, and transit rent arrears of Rs 7,35,07,670 by the developer's own count. Somewhere in that frame were flats the developer had already agreed to sell to outside buyers.

On October 16, 2026, the Bombay High Court let the society replace the developer. Its order in Maruthi Co-operative Housing Society v. Tridhaatu Maruthi Developers LLP also restated a point that matters to anyone buying a developer's share flat in a project built on someone else's land: under the line of Bombay High Court rulings it followed, the landowner is not liable for the developer's RERA obligations to those buyers merely because the developer sold flats.

The short answer. The Bombay High Court granted interim measures allowing the society to take back the stalled redevelopment and appoint a new developer, after the developer abandoned the RERA registered project for about eight years. It said none of the provisions of RERA makes a landowner who signs a development agreement liable for the developer's RERA obligations merely because the developer later sold flats to third parties, whose rights are subject to and cannot exceed the developer's own. The trade-off for buyers: RERA registration gives you a regulator to approach against the developer, but it does not give you a claim against the landowner's property.

What happened at the Chembur redevelopment?

According to the order, the society owned a building called Shobha, built in 1967 on about 1,353 square yards, or 1,131.28 square metres, at Pestom Sagar in Chembur. It signed a development agreement on July 10, 2013 and a power of attorney on July 15, 2013. The 22 members vacated in May or June 2014, from when transit rent was payable. The project was to be completed in 24 months with a six month grace period, and the stipulated period expired on January 21, 2018.

The developer built the external bare structure up to the 10th floor, though permission had been obtained only up to the 8th, and then abandoned the project. It stopped paying transit rent or paid it intermittently. Its own email of March 31, 2026 put the transit rent arrears at Rs 7,35,07,670 as of April 7, 2026. After a show cause notice on March 23, 2026 drew no substantive reply, the society terminated the agreement and power of attorney on April 7, 2026 and published a public notice on April 9, 2026. The developer did not appear in court despite service of notice, so the court appointed an amicus curiae to assist it. The society told the court that most of its members are super senior citizens paying for alternate accommodation from their own resources.

What did the court say about flats sold to outside buyers?

That those buyers' rights depend on the developer's. The order recorded that the project is registered under RERA and that the developer had created third party rights through agreements of sale. Relying on earlier Bombay High Court decisions, beginning with Vaidehi Akash under the state's flat ownership law and continued after RERA in Goregaon Pearl, it said the purchasers' rights were subject to, and could not exceed, the rights of the developer, so they had no contractual case against the society.

It then said that none of the provisions of RERA renders the owner of the land who enters into a development agreement liable for discharging the developer's obligations under RERA merely because the developer later enters into agreements for sale with third party flat purchasers. It described a Division Bench ruling as holding that third party flat purchasers have no rights, claims or equities in respect of the society's assets, including additional FSI and free sale components, that there is no privity of contract between them and the society, and that no different view can be taken by any authority, including MahaRERA.

Why does RERA registration not change the position?

Because, as the court read it, RERA regulates the developer's dealings with buyers rather than rewriting the landowner's contract. The order noted that after RERA was enacted, the High Court in Goregaon Pearl had observed that the new law does not make any difference to the legal position settled in Vaidehi Akash. It described RERA as enacted to establish a regulatory authority, to ensure sale of real estate projects in an efficient and transparent manner, and to protect consumers, and said the grievances of purchasers under RERA are addressed by the Regulatory Authority established under the Act.

In practical terms, that means a buyer in a project like this one is not without a forum. The buyer's complaint about delay, refund or interest lies against the developer before the regulator. What the buyer cannot do, on this reasoning, is use the developer's agreement of sale to claim the landowner's building or its future FSI.

What relief did the society get?

Broad interim measures, pending arbitration. The court granted interim measures in terms of all the prayers in the petition, which, as set out in the order, included appointing a court receiver with powers to access the property, appoint a new builder and supervise construction until members get possession, directing the developer to hand over all keys and access, requiring it to disclose on affidavit its financial arrangements, encumbrances and third party rights, and restraining it from selling or encumbering its unsold flats and other inventory elsewhere.

The relief comes with a deadline. The society must invoke arbitration by notice within 30 days, and if the developer does not agree to an arbitrator, apply to the court within a further 60 days. If it fails to do either, the order automatically stands vacated. All rights and contentions were kept open.

Why does the court favour the society here?

Because the developer was in default first. Drawing on the amicus curiae's submissions and earlier rulings, the court said a developer may pursue profit and may create third party rights, but those cannot create equities against the society or be used to escape the developer's own obligations. The developer takes the risk of satisfying third party claims, because those are principal to principal arrangements between it and the buyers. It also noted earlier rulings holding that a defaulting developer cannot restrain a society from proceeding with redevelopment through another developer.

The amicus curiae also took the court through Rajawadi Arunodaya, a Bombay High Court ruling that sorted such disputes into categories. For the category where a builder defaults on transit rent or statutory dues or abandons the project, the order records, the court may direct termination of the builder's rights, eject it from the site and fix its liability for all accumulated financial liabilities up to the date of default, through an enforceable court order. The court applied those principles, along with the usual tests of a prima facie case, balance of convenience and irreparable harm.

What should Bengaluru buyers of developer share flats check?

Look at the developer's rights before you look at the flat. Many Bengaluru projects are built under joint development agreements, where the developer sells its share of flats on the landowner's land. This is a Bombay High Court ruling in a redevelopment case, and the position in Karnataka can differ, as our earlier guide to landowner share flats and who counts as promoter explains. But the risk it describes is real wherever a developer can be removed.

If the developer defaults and the landowner terminates, your claim against the developer may be all you have. Our explainer on joint development agreements covers the documents to ask for.

1. Ask for the development agreement and power of attorney, and read the landowner's termination rights.
2. Check the project's RERA registration and whose name it is in.
3. Confirm the sanctioned plan covers the floor your flat is on.
4. Check the developer's record of finishing projects on time and paying landowners.
5. Ask whether the landowner has issued any notice of default to the developer.
6. Prefer payment plans linked to verified construction stages.
7. If the developer is removed, file promptly against the developer before the RERA authority.

Frequently asked questions

Is a landowner liable for a developer's RERA obligations to flat buyers?

Not according to the Bombay High Court's October 16, 2026 order in the Maruthi Co-operative Housing Society case. It said none of RERA's provisions makes a landowner who signs a development agreement liable for the developer's RERA obligations merely because the developer sold flats to third party purchasers.

Can a housing society replace a developer who abandoned a RERA registered project?

In this case, yes. The court granted interim measures letting the society redevelop itself or through a new developer, with a court receiver to help, after the developer abandoned the RERA registered Chembur project for about eight years and stopped paying transit rent.

What rights do buyers of the developer's flats have?

The order said third party purchasers' rights are subject to, and cannot exceed, the developer's rights, that they have no privity of contract with the society, and that they have no claims on its assets, including additional FSI. Their remedy lies against the developer, including before the RERA authority.

Does this ruling apply to Bengaluru joint development projects?

It is a Bombay High Court order in a Mumbai redevelopment dispute, relying on Bombay High Court precedent. Bengaluru buyers should treat it as a warning about developer risk rather than a statement of Karnataka law, and check their own agreements and RERA registration details with a lawyer.

Last updated 2026-10-29. PropNewz Team.