Imagine you buy a car from a used-car dealer. The car broke down three months later because the manufacturer installed a defective engine. You sue but instead of suing the manufacturer, you also drag in the person who sold you the dealer’s contact number. They never built the car. They never promised it would work. They simply made an introduction and moved on.
Absurd? Yes. But a version of this plays out in Indian real estate litigation with surprising regularity, and the consequences can be financially devastating for those caught in the crossfire.
A recent judgment of the Karnataka Real Estate Appellate Tribunal delivered on 26th March 2026 where it asked a deceptively simple question: just because a party is involved in a real estate transaction, does that make them a “promoter” under RERA? The answer, the Tribunal makes clear, is an emphatic no.
The Setup: A Company, A Flat, and a Contractual Right
In 2014, a private company bought a flat in a pre-launch of the “Century Breeze”. Buried within the Construction Agreement was a clause that would become the beating heart of years of litigation. It gave Smart Asset an unrestricted right to assign its interest in the apartment to anyone it chose, without needing the developer’s permission and crucially, it said that upon any such assignment, Smart Asset would stand fully released from its liabilities.
Five years later, in January 2019, Smart Asset exercised that right. A couple from Uttarakhand entered into an Assignment Agreement with Smart Asset to take over the apartment for Rs. 1,00,63,419/-. They verified the documents, declared themselves satisfied, and in the Assignment Agreement gave a written undertaking that they would raise no future claim against Smart Asset for any payment demanded by any party. Everything looked orderly. Then the developer failed to deliver.
When Builders Don’t Build
Project delays in Indian real estate are so common they have almost become a genre of their own. Century Breeze was supposed to be completed by December 2019. It wasn’t. The developer cited force majeure, government delays, and received a commencement certificate from BBMP only in September 2020, nine months after the promised possession date had already passed.
The allottees had been counting on a bank loan to pay the balance of the purchase price, and no bank would disburse a loan against an apartment in an incomplete project. They were stuck, they had paid advance money, they couldn’t pay the rest, and they couldn’t get a home. So they did what RERA exists to enable. They filed a complaint.
But here is where the story takes an important legal turn. The complaint was filed not just against the developer who had taken Rs. 59 lakhs and failed to build the flat but also against Smart Asset, the company that had merely assigned its contractual interest years earlier and had received only a partial advance from the allottees.
Smart Asset never received notice of the complaint. KRERA, unaware of this, proceeded ex-parte and passed an order fastening joint liability on both the developer and Smart Asset to refund Rs. 16,01,876/- with interest at SBI MCLR + 2%.
Smart Asset which had appeared in no proceedings, heard no arguments, and had no opportunity to defend itself suddenly owed sixteen lakhs.
The Question the Law Was Always Asking
When Smriti Legal LLP took up the appeal before K-REAT, the arguments cut to the core of what RERA is, and what it is not. The Act defines a promoter, lists their duties, and makes them accountable through a rigorous framework of registration, disclosure, escrow, and liability.
It is promoters who must refund amounts with interest under Section 18 when they fail to give possession. It is promoters who must make a pre-deposit before their appeal is even entertained by the Appellate Tribunal, a condition found in the proviso to Section 43(5) of the Act, which has been upheld repeatedly, including by the Supreme Court in Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. The Court noted that promoters must “show their bona fides” before seeking appellate relief, precisely because they are the custodians of allottee money.
But what about everyone else? An investor who bought a pre-launch unit? A company that exercised a contractual assignment right? A corporate entity that never collected RERA-registered project funds, never promised possession, never had any obligation to build anything?
The proviso to Section 43(5) is explicit: the pre-deposit obligation applies “where a promoter files an appeal.” Not where an allottee files an appeal. Not where a real estate agent files an appeal. And certainly not where an assignor, a company that merely transferred its contractual interest, files an appeal.
This distinction, which the legislature made deliberately and carefully, matters enormously. The moment RERA’s promoter-specific liabilities are extended to parties who are not promoters, the statute loses its precision. It becomes a blunt instrument that catches anyone tangentially connected to a real estate transaction, be it investors, financiers or agents in a net that was designed for a different quarry entirely.
What the Tribunal Found
The K-REAT examined the matter with care and issued findings that deserve to be read and understood beyond this single case.
It examined the order sheet maintained by KRERA and the physical postal envelope. There was no endorsement showing that the notice was tendered. The Authority had placed Smart Asset ex-parte without ever actually serving notice upon it. This, the Tribunal held, was a straightforward violation of the principle of audi alteram partem, the right to be heard, enshrined in Section 71(1) of the RERA Act itself. An order passed in the dark, without a party having been given the opportunity to speak, cannot stand.
The Assignment Agreement that the allottees had signed contained Clause 10 a clear, negotiated, written undertaking that they had verified all documents and would raise no future claim against Smart Asset. The Supreme Court has said, time and again, that parties are bound by what they freely sign. The Tribunal was not prepared to set aside this contractual commitment simply because the allottees found themselves in a difficult position due to the developer’s failures. The difficulty they faced was real, but its cause was the developer, not Smart Asset.
The Tribunal made the critical observation that Smart Asset is not a promoter under the RERA Act. It was an investor that bought a pre-launch unit, paid the full amount to the developer in 2014, exercised a contractual right of assignment in 2019, and stepped out of the transaction. Section 18 of the Act which creates the obligation to refund with interest applies to promoters. It does not apply to assignors, investors, or companies that happen to have been in the middle of a chain of contracts.
The developer had received Rs. 59,41,323/- from Smart Asset in 2014, failed to complete the project, and chose not to appeal the KRERA order against it. By not appealing, the developer implicitly accepted the findings of the Authority as far as its own liability was concerned. The Tribunal refused to let the developer escape simply by pointing fingers at Smart Asset. The money had gone to the developer. The obligation to build had rested with the developer. The liability to refund must rest with the developer.
The appeal was allowed. The joint liability fastened on Smart Asset was set aside entirely. The developer alone was directed to refund the amount with interest.
The Pre-Deposit Question: A Wider Implication
This judgment connects to a legal debate that has been percolating in Karnataka’s courts and tribunals for some time and which found expression in proceedings before the Karnataka High Court in Writ Petition No. 30968 of 2024 (Anandi Global Finance Limited v. The Real Estate Appellate Tribunal & Ors.).
The question in that petition was this: when a K-RERA order fastens liability on a non-promoter, and that non-promoter approaches K-REAT in appeal, must they also make a pre-deposit as a condition of the appeal being heard?
The statutory answer is straightforward. The proviso to Section 43(5) reads:
“Provided that where a promoter files an appeal with the Appellate Tribunal, it shall not be entertained, without the promoter first having deposited…”
The word “promoter” is doing real work in that sentence. If the legislature had intended the pre-deposit condition to apply to all appellants, it would have said so. It didn’t. Extending the pre-deposit obligation to investors, assignors, agents would require a court or tribunal to read words into the statute that the Parliament deliberately left out.
The Supreme Court’s reasoning in Newtech supports this reading. The pre-deposit condition was upheld because it targets promoters specifically entities that have collected money from allottees and owe them statutory obligations. That rationale simply does not apply to a company that acted as an assignor under a private agreement and received only a partial advance payment.
The K-REAT’s judgment in Smart Asset’s case operationalises this principle: the Tribunal entertained the appeal of a non-promoter without requiring any pre-deposit, heard it on merits, and allowed it. That is precisely how the statute is designed to function.
What This Means for the Real Estate Ecosystem
Indian real estate is not a world of simple bilateral transactions. It is a layered ecosystem of developers, landowners, investors, sub-investors, agents, assignors, assignees, and financiers. Bulk buyers purchase units in pre-launch projects. Corporate entities assign their contractual interests. Real estate funds take positions in projects years before they are completed.
RERA was designed to bring discipline and accountability to this ecosystem but primarily by targeting its most powerful actors: the promoters who collect public money and owe the public a completed home. Extending RERA’s promoter-specific liabilities to every party in the transaction chain, regardless of their actual role and statutory status, would not protect home buyers. It would create a litigation lottery in which anyone who ever touched a property deal becomes potentially liable.
The K-REAT’s judgment in Appeal No. 121/2025 is a valuable corrective. It tells us that courts and tribunals must look carefully at what a party actually is — not just at the fact that they were involved in the transaction. An investor is not a promoter. An assignor is not a promoter. And a party who was never served notice cannot be held liable for failing to appear.
For home buyers, this judgment is not a setback. The allottees in this case still have a fully enforceable order against the developer, the party that actually took their money and failed to deliver. The Tribunal’s order gives them the liberty to enforce that direction in accordance with law. They are not left without a remedy; they are pointed towards the right respondent.
For investors and intermediaries, this judgment is a reminder that their exposure under RERA is defined by what the Act actually says, not by what frustrated parties allege, and not by what a lower authority assumes.
And for the broader project of building a rational, predictable real estate legal framework in India, it is a small but meaningful contribution.