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Can Exercise Writ Jurisdiction Against Private Party That Wrongly Benefits From Inaction Of Public Authorities In Discharge Of Public Duty: Bombay HC

LIVELAW NEWS NETWORK
29 March 2022 1:31 PM GMT
Can Exercise Writ Jurisdiction Against Private Party That Wrongly Benefits From Inaction Of Public Authorities In Discharge Of Public Duty: Bombay HC
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The Bombay High court recently came to the rescue of flat purchasers and allowed interim reliefs against private developers in writ petitions. A bench of Justices S.J. Kathawalla and Milind N. Jadhav regarded that inaction of government bodies against private developers is affecting the rights of innocent individuals. Hence, the court can exercise writ jurisdiction to protect...

The Bombay High court recently came to the rescue of flat purchasers and allowed interim reliefs against private developers in writ petitions. A bench of Justices S.J. Kathawalla and Milind N. Jadhav regarded that inaction of government bodies against private developers is affecting the rights of innocent individuals. Hence, the court can exercise writ jurisdiction to protect their interests.

The bench noted that the Developers, despite collecting an approximate amount of Rs.178 Crores from the innocent flat purchasers, have not provided to them a single flat. The tenants have obtained Recovery Certificates from the Maharashtra Real Estate Regulatory Authority, Mumbai ('RERA') for refund of the sale consideration, due to delay of several years in constructing their flats. Since the Developer failed to comply with the Orders passed by RERA, the Petitioners were constrained to file execution proceedings before RERA.

The execution proceedings were allowed and RERA issued a Recovery Certificate under Section 40(1) of the said Act read with Rule 3 of the Maharashtra Real Estate (Regulation and Development) (Recovery of Interest, Penalty, Compensation, Fine Payable, Forms of Complaints and Appeal, etc.), Rules, 2016 ("RERA Rules") in favour of the Petitioners and against the Developer. RERA then forwarded these Recovery Certificates to the Collector and Tahsildar directing them to execute the same and recover the decreetal amounts as mentioned therein (which were payable to the Petitioners), as arrears of land revenue.

However, the Petitioners state that despite repeated reminders, the Collector and Tahsildar, have failed to execute or take any effective steps to execute the said Recovery Certificates till date.

The bench said that it was prima facie satisfied that despite the directions from RERA, the Collector and Tahsildar have failed to exercise their powers under Section 263 to 267 of the Maharashtra Land Revenue Code, 1966 read with Rule 17 of the Maharashtra Realization of Land Revenue Rules, 1967 to secure the recovery of the decretal amounts mentioned under the Recovery Certificates, which are payable to the Petitioners.

In Rustam Mehta v. State of Maharashtra & Ors, 2021 SCC OnLine Bom 1090, which arose out of similar set of facts, it was held that in exercise of its inherent and wide powers under Article 226 of the Constitution of India, the High Court has the jurisdiction to pass orders and/or directions against a private party Respondent, that has wrongly benefitted from the inaction on the part of the public authorities in discharge of their public duty.

In the instant case, the Court noted that the only person who has wrongly benefitted from such inaction of the Collector and Tahsildar are the Developer herein (being a private party), who have till date failed to comply with the Orders passed by RERA and failed to pay the decreetal amount to the Petitioners, which amounts are admittedly due and payable by the Developer to the Petitioners.

As per the documents produced by the Developer themselves, they have collected approximately Rs. 178 crores from flat purchasers of the 'Hill View' Project.

"Despite having received such huge amounts from the flat purchasers, the Developers have till date not completed construction of the 'Hill View' Project and has in fact abandoned the same for the last one year. Further, from the material on record, it also appears that out of the monies collected from the flat purchasers, huge amounts have been transferred by the partners of the Developers to themselves, their family members and even related entities while the innocent flat purchasers still await their dream homes or the refund of their hard-earned money," the Court noted.

In fact, in teeth of the order of injunction passed by the Court in the Writ Petitions, the Developer has transferred monies to the tune of Rs. 56 lakhs inter alia to itself and related parties, in complete disregard to the orders passed by the Court, it added.

Considering the aforesaid conduct of the Developers, the Court was of the view that the Developer has no intention of voluntarily repaying the admitted dues of the Petitioners and that the Petitioners are justified in their apprehension that if interim reliefs to protect the decreetal amounts of the Petitioners are not granted, it is very likely that the Developer shall deal with or further encumber all their assets and nothing will be left to the hands of the Petitioners despite having a decree in their favour.

Accordingly, the Court was of the view that the Petitioners have made out a case for grant of interim reliefs and the balance of convenience is in favour of the Petitioners and against the Developer.

The bench noted that it is also clear that not only has the Developer failed to comply with the Orders passed by RERA but has also brazenly violated various orders of disclosure passed by the High Court.

"Despite the Court having given a long rope to the Developer to provide a true and complete disclosure of its assets in terms of the Order dated 2nd and 3rd December 2021, which were clear and ambiguous, the Developer has till date not fully complied with the said Order."

The bench observed that at each hearing false and insufficient disclosures were made by the Developer, with an intent to mislead the Court. Further, the modus operandi of the Developer was to suppress material information and only disclose the same if and when such non-compliance was pointed out by the Advocates for the Petitioners. Such conduct is unacceptable, it said.

As held by in Rustam Mehta (supra), the Court said that the determination of whether a disclosure is sufficient or not, is not to be made by the party who is ordered to make such disclosures by the Court – when the terms of the Order seeking disclosure are clear and ambiguous.

The bench said that on multiple occasions undertakings were given by the Developer that the affidavits of disclosure filed by it are in full compliance of the Orders dated 2nd and 3rd December 2021, which undertakings were accepted by the Court. However, we hold that the Developer has willfully and deliberately breached these undertakings which shows that the Developer has no regards for the orders passed by the Court.

The bench further took exception as in addition to the breach of the Orders of disclosure, the Developer has also breached the undertaking given by the Developer that the Developer and its family members shall not operate their bank accounts till further orders of the Court, as contained in the Order dated 3rd December 2021. The Developer in breach of this Order transferred approximately Rs. 56 lakhs to itself, its related entities and other third parties without seeking any permission from the Court. The only explanation provided by Shri Hemendra Mapara on behalf of the Developer for not seeking such permission is that it "…skipped my mind..."

The bench concluded an Order of injunction alone would not be sufficient in the facts and circumstances of the present case where the Petitioners have Recovery Certificates and the statutory authorities are unable or unwilling to proceed towards making any recovery.

"As we have noticed in Rustam Mehta (supra) developers such as this Developer carry on businesses through special purpose vehicles all forming part of the same group or economic unit. Even though innocent flat purchasers are left stranded with no sight of the monies admittedly due to them, the developer or the group continue to engage in high value real estate projects with there being no impact on their lives or business. This shakes the confidence of the ordinary citizens especially when there is no recovery being made by the statutory authorities who are supposed to act for their benefit. In these circumstances the Courts will have to in exercise of their extraordinary writ jurisdiction attempt to pass effective interim orders. Keeping this in mind and having already directed the Developer to open a separate bank account with a nationalised bank for all receivables and revenues, some provision will have to be made for the actual recoveries to be realised by the Petitioners. In the peculiar facts and circumstances of the present case such orders are entirely justified and would alone further the interest of justice."

Case Title: Sabhajit Ramyash Yadav and ors v State of Maharashtra

Citation: 2022 LiveLaw (Bom) 108

Click Here To Read/Download Order

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