Direct Contract With Homebuyers Not A Precondition For Promoter Liability: Telangana RERA

The Telangana Real Estate Regulatory Authority (RERA) on 25 August held that a promoter cannot avoid liability under the Real Estate (Regulation and Development) Act, 2016 merely because the promoter has no direct contract with homebuyers.

A Bench comprising Members Laxmi Narayana Jannu and K. Srinivasa Rao held that promoter liability can arise from participation in a project's development, control over it, receipt or use of allottee funds, or commercial benefit from the project, and does not depend on the traditional doctrine of privity of contract. They observed:

“At the outset, this Authority observes that the RE(R&D) Act is not founded upon the narrow doctrine of privity of contract as understood under traditional civil jurisprudence. The RE(R&D) Act creates statutory obligations which operate independent of private contractual arrangements. The liability of a 'promoter' under RE(R&D) flows not merely from contractual execution but from participation in development, control over the project, share of saleable area, receipt or utilisation of allottee funds, and benefit derived from the project scheme.”

The dispute arose from a pre-launch scheme for “Bharathi's Lake View Apartments” at Kompally. Homebuyers entered into Memoranda of Understanding with Bharati Builders, mostly in 2021.

Bharati Builders promised to complete the project within 24 months, with a six-month grace period. However, it never commenced construction or obtained the required statutory approvals and registration under the Real Estate (Regulation and Development) Act, 2016. The complaints stated that the project affected more than 380 allottees.

The project structure later changed. Bharati Builders approached Sunil Kumar Ahuja and Ashish Kumar Ahuja for financial assistance to acquire the project land. The two subsequently joined the project through land transactions and the formation of a new development entity. They acquired nearly five acres through Agreements of Sale-cum-General Power of Attorney and subsequent sale deeds involving them and their associated entities.

On 14 February 2024, Siva Rama Krishna, Dupati Nagaraju and Ashish Kumar Ahuja constituted Sree Bharati Builders to develop and complete the project. The entity took charge of construction, obtaining permissions, engaging contractors and dealing with customers.

Sree Bharati Builders also used its accounts to pay around Rs. 5.31 crore towards Hyderabad Metropolitan Development Authority statutory fees. Sunil Kumar Ahuja separately executed a Term Sheet dated 5 October 2024, under which he undertook obligations relating to completion of the project.

The homebuyers approached Telangana RERA under Section 31 of the Act, which allows an aggrieved person to file a complaint before the Authority, seeking refund with interest.

The Authority had to decide whether Sunil Kumar Ahuja and Ashish Kumar Ahuja qualified as promoters despite having no direct agreements for sale with the homebuyers. The two argued that they were merely subsequent purchasers of land.

The Bench rejected their defence and held that promoter liability cannot be “fragmented or diluted through layered corporate arrangements, internal agreements, or subsequent transfers of project assets.” It found that Sunil Kumar Ahuja and Ashish Kumar Ahuja had gone beyond merely purchasing land and had actively participated in the project's development. It said:

“The above facts clearly demonstrate that the involvement of Respondent Nos.3 and 4 in the project cannot be characterised as incidental or remote. On the contrary, the documentary material establishes their continuous, integrated, and participatory engagement in the financial, legal, and developmental framework of the project,”

Further, the Authority held that a statutory nexus can arise when parties use allottee funds to acquire project land and later transfer that land to entities that participate in development or derive commercial benefit from the project.

It said allowing such entities to escape liability merely because they had no direct contract with homebuyers would defeat the protective framework of the Real Estate (Regulation and Development) Act.

It also rejected the characterisation of the dispute as one involving “mere delay in completion of construction”. It held that transactions involving the project land had made completion “uncertain and practically unworkable”.

The Members noted that Bharati Builders had already incurred a declaration as a “Defaulter Promoter” under an earlier order dated 13 March 2026, which also imposed a Rs. 3.55 crore penalty for violations concerning the same project.

They also recorded that Telangana RERA had imposed a Rs. 1.18 crore penalty in separate suo motu proceedings after finding that the parties had collected money from prospective allottees under an unregistered pre-launch scheme and alienated substantial portions of the project land.

Accordingly, Telangana RERA directed Bharati Builders, Siva Rama Krishna, Dupati Nagaraju, Sunil Kumar Ahuja and Ashish Kumar Ahuja to jointly and severally refund the entire amounts paid by the complainants, along with 10.70% interest from the respective dates of payment until actual refund, within 60 days.

It stated that failure to comply may attract penalty under Section 63 of the Act for contravention of the Authority's orders.