Introduction
[1]A division bench of the Hon’ble Bombay High Court comprising of Chief Justice Alok Aradhe and Justice Sandeep V. Marne was hearing two appeals travelled to the court concerning the issue of redevelopment under the purview of Section 37 of the Arbitration and Conciliation Act, 1996 (for short, “the Act”), challenging the judgment and order dated 16th April, 2025 passed by the Single Judge of the Court in the Petition filed by the Respondent No.1 seeking interim measures under the ambit of Section 9 of the Act.
Facts of the case
The matter revolved around a Flat No.12 situated in the building known as ‘Spectrum’ at Khar (West), (for short, “flat”), pertaining to the Haldar family which consisted of 3 (three) brothers viz. Ritesh, Rohitesh and Rajesh. The flat was claimed to have been purchased by one Ritesh, but however, at the time of applying for society membership, it is claimed that the name of mother was also included in respect of the flat. Ritesh claimed that after marriage between his brother Rohitesh with Leena, he permitted them to occupy the flat as gratuitous licensees. When the mother expired, Ritesh claimed exclusive ownership of the flat. Apparently due to some matrimonial dispute between the couple, Leena claimed that her husband-Rohitesh no longer occupied the flat and she resided in the flat along with her two children. The building in which the flat was situated was taken over for carrying out redevelopment. Ritesh asserted that Rohitesh had surrendered his share in the flat by executing a surrender deed. Ritesh was ready and willing to handover the quiet, vacant and peaceful possession of the flat to the developer for demolishing the building and commencing the redevelopment activities thereon and also for executing a Permanent Alternate Accommodation Agreement (for short, “PAAA”). However, Leena staked a claim to receive the transit compensation from the developer.
In the light of the above, the developer filed a Commercial Arbitration Petition under Section 9 seeking interim measures for appointment of Court Receiver in respect of the flat for obtaining its possession and the same was allowed.
The Single Judge permitted the Respondent No.1 to approach the Court Receiver for executing a Tripartite Agreement in respect of the flat for undertaking the redevelopment of the building. It ordered that all the amounts payable in respect of the flat i.e transit compensation, hardship compensation, brokerage shall be paid to Leena, who is in the possession of the flat along with directing the handover of the possession thereof to her upon the completion of the construction of the flat.
Dissatisfied by the same, Ritesh and Rohitesh filed appeals in the Bombay High Court.
Issues before the Single Judge
- In whose name the PAAA is to be executed ?
- Who would be entitled to receive the transit and hardship compensation along with brokerage upon handing over the possession of the flat for undertaking redevelopment?
- Who is to be put back in possession of the permanent alternate accommodation in the proposed new building?
Observations of the Bench
The bench highlighted that it is always of the perspective that the process of redevelopment cannot be used as an instrument for the purpose of evicting an occupant from the old premises and that the transit compensation must be paid to the person who is actually in possession of the old premises and he should be put back in the possession of the permanent alternate accommodation. The bench also placed reliance upon the orders passed in Vipul Fatehchand Shah vs. Nav Samir CHS[2] and Harshad Shah vs Labharti Realties & Ors. [3]
It observed that “Merely because redevelopment process requires handing over of possession of old premises to the developer, the same would not mean that the person in actual possession of old premises would lose such possession. In our view therefore redevelopment process undertaken by the Respondent No.1-Developer cannot result in dispossession of Leena, who is described as a gratuitous licensee by Ritesh.”
The Bench noted that Leena’s occupation of old premises as well as obtaining benefits under redevelopment process would be subject to the order passed in the eviction suit initiated against her by Ritesh.
The Bench observed that the Single Judge had directed the execution of the PAAA in the name of the Court Receiver, but however it opined that the PAAA needs to be executed in the name of the person whose name is mentioned in the society records i.e Ritesh, coupled with the fact that there was no pending litigation in respect of the ownership of the flat. It further asserted that the hardship compensation also needs to be paid to the Appellant – Ritesh.
Order passed by the Bench
The bench after hearing the submissions made by both the parties, passed the following order.
- It set aside the direction passed by the Single Judge for execution of the Tripartite Agreement in respect of the flat in the name of the Court Receiver. It directed the execution of the Tripartite Agreement in respect of the flat in the name of Ritesh, along with the payment of the hardship compensation to him and all amounts except transit compensation and brokerage, subject to the ownership claims in respect of the flat by any other party.
- It ordered the payment of the transit compensation and brokerage in respect of the Flat by the Respondent No 1- Developer to Ms. Leena from the date of her vacating the flat till the date of handing over the possession of the permanent alternate accommodation in the proposed new building.
- It directed the Respondent No.1 – Developer to handover the possession of the permanent alternate accommodation in the proposed new building to Ms. Leena upon the completion of the construction of the flat and it becoming ready for use and occupation, along with stating that she would be entitled to hold possession of the flat subject to the orders that may be passed in the eviction proceedings against her.
- It directed Ms. Leena to handover the quiet, vacant and peaceful possession of the flat to Respondent No 1- Developer within a period of 4 (four) weeks from the date of receipt of written notice from the Respondent No 1.
The Bench party allowed the appeal filed by Ritesh and dismissed the appeal filed by Rohitesh.
Analysis of the Judgment
The judgment presses upon the settled proposition of law that transit compensation is to be paid to the person who is in possession and hands over the possession of the old premises to the developer for carrying out redevelopment and therefore he is to be put back into possession of the permanent alternate accommodation on the completion of the redevelopment task. Such an arrangement ensures that possession of such person who hands over the possession of the old premises for the purpose of redevelopment is not disturbed. It also upholds the ‘principle of equity’ by directing the payment of the transit compensation and brokerage to the occupant for transit accommodation till she is put back in possession of the new premises. It further clarifies that a tripartite PAAA is to be executed in the name of the member of the society, the member being the person whom the society acknowledges and recognizes as its member i.e whose name is reflected in the records of the society.
It shall help to regulate the redevelopment process as it provides clarity to the developers for discharging their obligations in terms of Development Agreement with respect to the payment of transit compensation, hardship compensation, brokerage etc. to the members of the society as well as occupants, if any during the construction period.
Nirali Yash Desai authors the article, she is a real estate lawyer working with Damji Shamji Shah Group, Mumbai (in house legal department).
[1] Commercial Arbitration Appeal (L) No. 14486 of 2025 with Interim Application (L) No. 14544 of 2025 in Commercial Arbitration Appeal (L) No. 14486 of 2025 – Ritesh Haldar vs Elite Housing LLP and Ors with Commercial Arbitration Appeal (L) No. 15542 of 2025 with Interim Application (L) No. 16453 of 2025 in Commercial Arbitration Appeal (L) No. 15542 of 2025 – Rohitesh Haldar vs Elite Housing LLP and Ors.
[2] Commercial Appeal (L) No. 25162 of 2023 decided on 6th October 2023
[3] Appeal (st) No. 29617 of 2023 decided on 25th October, 2023