Bombay High Court Clears Path For Redevelopment, Rejects Developer’s ₹8-Crore Claim Against Khernagar Adarsh CHS
Court Upholds Society’s Right To Terminate Delayed Developer, Orders Only Sunk-Cost Compensation — Not Speculative Profits
In a decisive push for accountability in Mumbai’s long-stalled redevelopment ecosystem, the Bombay High Court has dismissed an arbitration petition filed by Huges Real Estate Developers LLP, validating Khernagar Adarsh Co-operative Housing Society’s decision to terminate its redevelopment contract after years of chronic delays.
The ruling, delivered on 12 September 2025, brings critical clarity to disputes where developers seek hefty compensation and NOCs after failing to commence work for years — a recurring pain point across the city’s 4,000+ stalled projects.
The case concerns a 5,200 sq. m. Bandra West plot housing a 40-year-old building declared C-1 (dangerous) in a recent structural audit. The society’s 2011 agreement with Huges promised 2.5 FSI, rehab flats for 220 members, and a ₹4-crore corpus, but the project — despite being RERA-registered in 2018 — never advanced beyond planning due to CC lapses and failure to start piling work.
After delays exceeding 36 months, the society voted with 65% approval in its 2024 Special General Meeting to terminate the developer under Clause 15 and switch to a new contractor, Kumar Builders, for a self-redevelopment model. Huges retaliated with arbitration, demanding ₹8 crore in lost profits and insisting the society was still bound to obtain an NOC from them.
High Court: Safety & Statutory Rights Trump Developer’s Profit Claims
The High Court rejected Huges’ petition in full, affirming that societies have a statutory right to exit non-performing developers, especially during prolonged inaction that exposes residents to safety risks.
The Court drew upon:
- MCS Act Section 79A
- 2019 Redevelopment Rules
- Neelkamal Realtors Suburban Pvt. Ltd. vs. Union of India (2019)
- RERA Section 18
to hold that a society’s right to protect its members outweighs any claim for projected profits by defaulters. The Court emphasized that RERA caps penalties and damages — and cannot be stretched to award speculative earnings.
It further ruled that the NOC requirement becomes unenforceable after a valid termination, particularly when a developer’s 14-year delay indicates “functional abandonment.”
This distinguishes the matter from cases like Ritesh Haldar vs. Elite Housing (2025), where the project was active and interim relief linked to possession timelines.
The Court labelled such NOC-based leverage as a major contributor to exit barriers that delay self-redevelopment across Mumbai.
Court Issues Clear, Time-Bound Direction
📝 Orders Passed:
- ✔️ Termination of Huges (2024) declared valid.
- ✔️ NOC requirement waived; Kumar Builders’ tenders may proceed immediately.
- ✔️ Society directed to pay ₹2.5 crore (sunk costs + 5% interest) within 60 days.
- ✔️ If payment defaults, NOC requirements revive temporarily.
- ✔️ Huges barred from entering site; police protection ordered for society meetings. 👮♂️
- ✔️ RERA quarterly filings mandated to track self-redevelopment progress.
- ✔️ ₹1.5 lakh costs imposed on Huges for prolonging litigation, directed to the society’s temporary rehab fund.
Why This Matters: Strong Precedent For Developer Exits In Delayed Projects
🏙️ Impact Highlights:
- Reinforces societies’ autonomy to switch developers after prolonged delays.
- Sets a clear compensation formula: sunk costs only, not speculative losses.
- Protects residents’ Article 21 right to safe housing, particularly in aging buildings classified as dangerous.
- Curbs arbitration misuse by developers attempting to block new tenders.
- Affects 3,500+ Bandra-Mumbai societies dealing with similar pre-RERA legacy agreements.
The judgment also rebalances redevelopment jurisprudence by focusing on safety, timelines, and proportional remedies rather than contract technicalities exploited to stall projects.
