Former Director Who Received Flats As Exit Settlement Is 'Allottee' Under Real Estate Law: Rajasthan RERA

The Rajasthan Real Estate Regulatory Authority has held that a former shareholder and director of a promoter company who exited a real estate project and was subsequently allotted 20 flats in his individual capacity under agreements to sell qualifies as an “allottee” under the Real Estate (Regulation and Development) Act, 2016.

Member Sudhir Kumar Sharma held that the documents executed after his exit established an allottee-promoter relationship, despite his earlier association with the company.

The authority observed, “The factum of purchase of 20 units solely by the complainant does not categorize him as an 'investor', and he still remains an allottee within the definition of Section 2(d) of the Act.”

Section 2(d) of the RERA Act defines an “allottee” as a person to whom a plot, apartment, or building has been allotted, sold or otherwise transferred by a promoter. Section 31 enables an aggrieved person to approach the authority with a complaint under the Act.

The dispute concerned the “GKB's GRACE” project in Jaipur. Meenu Purohit, an NRI, had acquired a 10% equity stake in Govind Kripa Infratech under a shareholders agreement dated September 28, 2015.

After the project remained incomplete, Purohit entered into an MoU with the company on February 20, 2019 to exit the project and relinquish his shareholding and directorship in favour of Subhash Agarwal and Surekha Agarwal.

The company did not have sufficient funds to repay his investment of ₹3.18 crore, including interest. The parties therefore agreed that flats would instead be allotted to him in his individual capacity as a buyer. He was allotted 20 flats, with separate agreements to sell executed between March and May 2019.

The company later issued an indemnity-cum-undertaking dated July 31, 2021 concerning the flats. It subsequently offered possession on July 1, 2023, and issued reminders seeking alleged outstanding payments.

On August 29, 2024, the company cancelled all 20 allotments, alleging non-payment.

Purohit argued that he had ceased to be a shareholder and director before the agreements to sell were executed. He therefore contended that he was thereafter dealing with the company as an independent buyer.

Govind Kripa maintained that Purohit had been part of the promoter group and that the flats were allotted as part of a commercial exit arrangement against his investment. It argued that he was an investor rather than an allottee.

The authority rejected this position. It noted that Purohit was not among the four promoters or directors disclosed when the project was registered in 2017. It found that the February 2019 MoU, subsequent agreements to sell and July 2021 indemnity-cum-undertaking established a legal allottee-promoter relationship.

The authority observed, “In view of the aforesaid findings, the Authority concludes that although the complainant was initially associated with the respondent-company as a shareholder and director, the subsequent MoU dated 20.02.2019, agreements to sale executed during March 2019 to May 2019 for the allotment of 20 flats in complainant's individual capacity and indemnity cum undertaking dated 31.07.2021 given by the respondent demonstrate a subsequent undisputed legal allottee-builder/promoter relationship between the complainant and respondent. Therefore, for adjudication of the present dispute arising out of the said agreements to sell, the complainant is definitely is an allottee within the definition of section 2(d) of the Act and he is not a promoter or investor.”

On the alleged payment default, the authority found that Purohit had paid between 94.77% and 97.76% of the basic sale consideration for 18 flats. For two flats, the payments stood at 100.24% and 100.70%.

It also noted that the promoter had produced the payment reminders but no proof of their receipt. The authority held that the remaining dues, ranging from 2% to 5%, did not justify cancellation of all 20 units.

The authority further relied on the promoter's own position that Purohit could not cancel the flats or demand a refund. If the cancellation were upheld, he would be left with neither possession nor a refund, while the promoter would retain the money.

It observed, “Thus, the respondent has curated a 'win-win' situation for himself, which is impermissible under the law, wherein he is evading his both statutory obligations to give either possession or refund under the Act.”

The authority also held that Purohit was not liable for additional charges covered by the July 2021 undertaking, including charges arising from changes in area, amenities or common-area facilities.

On delayed possession, it found that the extended due date was June 30, 2022, while the occupancy certificate was obtained on June 11, 2024. Purohit was therefore entitled to interest for the delay from July 1, 2022 to June 11, 2024 on the entire amount deposited.

The authority quashed and set aside the August 29, 2024 cancellation letters for all 20 units and directed the promoter to execute sale deeds in Purohit's favour upon payment of the balance charges.

It also awarded 10.80% annual interest on the entire deposited amount for the delay period, with the interest to be adjusted against the balance consideration and any remainder paid to Purohit.

The promoter was barred from demanding additional payments for increases in carpet area, built-up area or saleable super built-up area, or changes in amenities or common-area facilities. The directions are to be complied with within 45 days of uploading the order on the authority's official webpage.

For Petitioner (Meenu Purohit): Advocates Aditya Bohra, Gunjan Pathak, Kunal Agarwal.

For Respondent (Govind Kripa Infratech Pvt. Ltd. & Ors.): Advocates Parshant Daga, Yashwant Suwalka.