What legal principles and facts set apart the rulings in the case of Pooja Constructions vs The Secretary, 2024 and Wadhwa Group Holding Private Limited vs Vijay Choksi, 2024?

Introduction

The interpretation of the term “promoter” under the Real Estate Regulation Act, 2016 (RERA) has emerged as a critical issue in judicial decisions involving real estate development and disputes between developers, landowners, and homebuyers. Two significant High Court decisions Pooja Constructions vs The Secretary (Kerala High Court, August 2024) and Wadhwa Group Holding Pvt. Ltd. vs Vijay Choksi (Bombay High Court, February 2024) offer contrasting approaches to this question, particularly in the context of liability of landowners, joint venture partners, and co-promoters under RERA.

While both cases engage with Section 2(zk) of the Act, which defines “promoter,” the courts have diverged in applying these provisions depending on the facts and roles of the parties. This comparison seeks to examine the major legal distinctions between the two judgments, highlighting their implications on promoter liability and project registration under RERA.

Pooja Constructions vs The Secretary on 30^th August 2024

Facts

1. Pooja Constructions (Appellant) entered into a Development Agreement dated 16.01.2014 with landowners (Respondents) to construct a residential project, “Pooja Arcade” on their land.
2. The agreement provided that the landowners would receive specific completed apartments and a fixed monetary consideration. The builder had exclusive rights to sell other apartments and was responsible for construction at his own cost and risk.
3. The Kerala Real Estate Regulatory Authority (K-RERA) acting suo motu issued a notice for non-registration of the project under Section 3 of RERA.
4. The builder claimed the project was completed before The Real Estate (Regulation and Development) Act, 2016 was enforced, and that the landowners were the real promoters, while the builder was only a contractor.
5. K-RERA rejected this argument, holding the builder is solely liable as promoter. The Appellate Tribunal confirmed the finding. The builder appealed to the Kerala High Court under Section 58 of The Real Estate (Regulation and Development) Act, 2016.

The issues which arose for the court’s consideration were two-fold, firstly, whether the term “promoter” under Section 2(zk) of the 2016 enactment includes landowners who enter into development agreements with a builder and secondly, whether landowners are liable as co-promoters for the purpose of project registration under Section 3 of the Act?

The Court while examining that the Development Agreement entered into between the Promoter and the Landowner noted that the landowners did not share profits or losses arising out of the development of the project “Pooja Arcade” but that they are parting their lands for a fixed consideration in the form of possession of certain constructed flats. They had no role in construction, marketing, sales, or project risk. They accept a part of their consideration in kind as completed apartments in the constructed project. Their consideration is clearly specified and limited irrespective of the profit or loss of the project. Acceptance of consideration in kind, cannot be termed as participation in the construction and development of the Project. They remain only as landowners and do not promote or develop the Project in any way and further, that acceptance of consideration in kind, cannot be termed as participation in the construction and development of the Project. So, on the facts of the case, it could not be said that they are also promoters of the project.

In conclusion, the Kerala High Court held that the Appellant alone qualified as the Promoter under the RERA regime for the purpose of project registration and compliance obligations, as he was solely responsible for the development and sale of the apartments. The landowners were not considered co-promoters since they neither participated in the construction or marketing of the project nor shared in its profits or risks. Citing Section 2(zk) of RERA, the Court observed that only the appellant constructed the buildings for the purpose of sale, whereas the landowners received apartments merely as consideration—not with any intent to sell. Accordingly, the appeal was dismissed.

Wadhwa Group Holding Pvt. Ltd. vs Vijay Choksi on 26^th February 2024

Facts

1. ‘The Nest’ project was jointly developed by Wadhwa Group (Appellant) and M/s. SSS Escatics Pvt. Ltd. (Co-promoter).
   1. Flat booked by the Allottee-Respondent, Mr. Vijay Choksi in 2013; he paid ₹1.2 Cr to SSS Escatics only.
   1. Project was later registered under RERA as an ongoing project with both parties listed as promoters.
   1. MahaRERA initially rejected buyer’s refund claim. Appellate Tribunal reversed that decision, ordering both promoters to refund the amount with interest.

The issues that arose for the court’s consideration were as follows; Can a promoter who has not received payment be held liable under Section 18 of RERA, is it necessary for the promoter to have privity of contract with the allottee to be liable, can joint liability be imposed based on registration and role as “promoter”?

By placing reliance on Section 2(zk) of the 2016 enactment which defines the term “promoter” inclusively, covering anyone who constructs, causes to construct, or sells, the court held that in casedifferent persons construct and sell, both are deemed promoters and jointly liable, Section 18(1)(b) which states that a promoter who fails to give possession must refund the amount with interest, regardless of receipt and the Maha-RERA Circular dated 04.12..2017, the court proceeded to hold that all promoters, including investors/landowners, are jointly liable once named in the registration details of the project.

The court in view of the facts that Wadhwa Group was registered as promoter under Maha-RERA and although they didn’t receive money, they were part of a joint development agreement, and had a share in saleable flats, the Court held that under RERA, joint liability flows from being named as a promoter, not from who received the money and thatthe Appellant is a promoter under Section 2(zk) and jointly liable under Section 18. It concluded that no privity or direct receipt of money is required to trigger liability as long as they fall under the definition of a ‘promotor’ which they did as they had a share of the saleable flats. The appeal was dismissed and the Appellate Tribunal’s order for joint refund with interest was upheld.

Key differences which resulted in contrasting judgements in Pooja Constructions and Wadhwa Group:

The interpretation of Section 2(zk) of the RERA Act has been applied in its true spirit, emphasizing the definition of a ‘promoter’ as any person who constructs or causes the construction of buildings for sale. In Pooja Constructions, the landowners were not held liable as they neither participated in the development process nor had any share in the sale of the apartments and did not hold a share in the saleable units. Conversely, in the Wadhwa Group case, the landowners were actively involved as joint developers and also held a share in the saleable / sold units. As a result, they were rightly deemed promoters and held jointly liable under the Act.

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