The Supreme Court of India, in a bench comprising Justice J. B. Pardiwala and Justice K. Vinod Chandran, held that a developer who obtains consent and possession of premises from an occupant under a statutory redevelopment scheme cannot subsequently turn around and repudiate its obligations under a Permanent Alternate Accommodation Agreement (PAAA). Overturning a Bombay High Court order that had restrained the Maharashtra Housing and Area Development Authority (MHADA) from enforcing its directions against the developer, the apex court ruled that agreements executed under the Maharashtra Housing and Area Development Act, 1976 (MHAD Act) and Development Control Regulations for Greater Bombay, 1991 (DC Regulations) are statutory in nature and directly enforceable by regulatory authorities.
Background of the Case
The dispute arose from the redevelopment of a cessed building known as “Wimbridge Compound” located at Grant Road (West), Mumbai. The first appellant, Mrs. Mahabanoo Contractor, was a joint occupant of Room No. 5 on the third floor of the old building alongside Ms. Gool Peshotan Unwalla. In 2010, the developer, M/s. Kalikund Developers (Respondent No. 1), issued a public notice initiating the process to obtain a No Objection Certificate (NOC) from MHADA for redevelopment under Rule 33(7) of the DC Regulations. The public notice and the subsequent list certified by the Mumbai Repairs and Reconstruction Board (MBRR Board) explicitly listed Ms. Unwalla as the tenant and both Ms. Unwalla and the first appellant as occupants.
Following the death of Ms. Unwalla on March 21, 2012, the appellants succeeded to her estate as legal heirs. On October 17, 2019, the developer executed a PAAA with the first appellant, agreeing to allot a total area of 309.98 sq. mtrs. (3,336.50 sq. ft)—comprising one flat of 1,227.42 sq. ft and two flats of 1,054.75 sq. ft each, along with three podium parking spaces—in the reconstructed building. On the same date, peaceful possession of the old tenement was handed over by the first appellant to the developer, leading to the demolition of the old structure.
However, after constructing the new building, the developer failed to register the PAAA and refused to hand over vacant possession of the flats. The first appellant approached the MBRR Board, prompting MHADA to issue orders on May 28, 2025, and June 27, 2025, directing the developer to execute and register the PAAA and hand over the promised premises. When the developer failed to comply, MHADA issued a Show Cause Notice on July 10, 2025, threatening action under Section 91A of the MHAD Act.
The developer challenged MHADA’s orders before the Bombay High Court. A Division Bench of the High Court ruled in favor of the developer, holding that MHADA suffered from “non-application of mind” because the building’s height had been restricted to 30 floors instead of 34, resulting in non-utilization of full fungible Floor Space Index (FSI). The High Court further held that the PAAA was a private arrangement not amenable to writ jurisdiction, leaving the parties to resolve their disputes before a civil court while recording the developer’s undertaking to keep two flats encumbrance-free. Subsequently, the developer filed Civil Suit No. 4579 of 2026 before the Bombay High Court, challenging the PAAA in its entirety and denying the appellants’ status as occupants.
Arguments of the Parties
Appearing for the appellants, Senior Counsel Shyam Divan argued that the term “occupant” under Section 2(25) of the MHAD Act and Rule 33(7) of the DC Regulations governs eligibility for re-allotment in cessed building redevelopment schemes. He submitted that the High Court erred in characterizing the PAAA as a purely private contract, as it was executed pursuant to a statutory scheme supervised by MHADA.
On behalf of the developer, Senior Counsel Vinay Navare contended that the PAAA was non-est and concocted by an expelled partner without proper authority. He argued that the original tenant was sole tenant Ms. Unwalla, whose tenancy extinguished upon her death, and that the first appellant was listed as an occupant merely by mistake. He further submitted that the area agreed upon in the PAAA exceeded the original tenement size and that, following inter se partner settlement terms dated March 9, 2024, previous commitments were not binding on the firm.
Counsel Chirag M. Shroff, representing MHADA, submitted that MHADA is the statutory regulatory authority tasked with ensuring the rehabilitation of occupants. He emphasized that under Clause 15 of the NOC, a developer cannot obtain a full Occupation Certificate for the free-sale component until all original certified occupants are fully housed in the redeveloped structure.
Court’s Analysis and Findings
The Supreme Court rejected the developer’s contentions and held that the High Court had misconstrued the statutory framework governing the redevelopment of cessed buildings.
Examining the definition of “occupier” under Section 2(25) of the MHAD Act, the Court observed that occupancy rights are distinct from statutory tenancy and protect individuals in actual physical occupation. The Court noted that the developer’s own public notice in 2010, the MBRR Board’s certified list, and the possession receipt of 2019 unequivocally established the first appellant’s status as an occupant.
Addressing the developer’s attempt to repudiate the agreement after obtaining possession, the Court made key observations:
“The developer cannot casually after all these years having obtained a consent, leading to vacation of premises and possession being handed over for the purpose of redevelopment, on the promise of allotment of premises as specified in the PAAA, turn around and challenge the very claim raised by the 1st appellant as an occupant.”
Regarding the developer’s argument concerning reduced building height and underutilized FSI, the Court observed:
“The mere fact that fungible area was not fully utilised cannot be a ground to allow the developer to resile from its agreement to redevelop and allot alternate premises to the occupants of the old building as agreed upon.”
The Court also rejected the argument that internal partner settlements could nullify commitments made to occupants:
“The settlement of inter se disputes between the partners without the junction of the beneficiary of the PAAA, who has the right to seek a validly executed conveyance and handover of the premises, cannot absolve the developer from his obligations as per the validly executed agreement…”
Critiquing the civil suit instituted by the developer despite its earlier undertaking to the High Court, the Court remarked:
“We are of the opinion that the Civil Suit itself is misconceived and mala fide in the context of the undertaking given before the High Court which is sought to be resiled from, which more than reflects the conduct of the developer/landlord.”
Decision
The Supreme Court allowed the appeal and set aside the judgment of the Bombay High Court. The Court revived MHADA’s order and issued the following directives:
- Respondent Nos. 1 and 2 (the developer) are directed to execute the PAAA and hand over peaceful possession of the three apartments in the new building to the appellants within two months.
- If the developer fails to hand over possession within two months, the appellants will be entitled to recover damages equivalent to the monthly rental value of the three flats in that locality, alongside their right to sue for delay damages.
- The Bombay High Court is directed not to proceed with Civil Suit No. 4579 of 2026.
- Costs of Rs. 50,000 each in the High Court and the Supreme Court (totaling Rs. 1,000,000) are imposed on Respondent Nos. 1 and 2, payable to the appellants.
Case Title: Mrs. Mahabanoo Contractor and Anr. v. M/s. Kalikund Developers and Ors.
Case No.: Civil Appeal No. 9342 of 2026 (@ Special Leave Petition (C) No. 4498 of 2026)
Bench: Justice J. B. Pardiwala, Justice K. Vinod Chandran
Date: July 23, 2026
