Marketing Entity Not A 'Promoter': Tamil Nadu RERA Refuses to Hold It Liable In Chennai Housing Project Delay

In a delayed possession dispute involving a housing project in Chennai, the Tamil Nadu Real Estate Regulatory Authority has held that the marketing entity is not a “promoter” and cannot be held liable, while also declining to fasten liability on the landowner and directing the developer to pay compensation.

Dismissing the complaint against Anugraha Real Value Services (Chennai) Pvt. Ltd. and Shriram Properties Ltd., the Authority held that neither entity had any privity of contract with the complainant.

It held that the landowner had divested its role in the project by vesting development and sale rights in the developer through a power of attorney, and in the absence of any contractual nexus with the homebuyer, no liability could be fastened upon it.

Adjudicating Officer N. Uma Maheswari, however, held Cybercity Mangadu Project Pvt. Ltd., the developer, liable for the delay and directed it to pay Rs 3,00,000 as compensation along with Rs 50,000 towards litigation costs.

Clarifying the scope of liability, the authority observed, 

“it does not come under the definition of promoter as per Section 2(zk). It did not construct or convert or sell any of the building or apartments. Similarly it did not develop any land into a project for the purpose of selling to other persons. It had acted as a Marketing Person for the project of the 1st Respondent. Exhibits A1 & A2 do not expose this 3rd Respondent as a party to the agreements. There is no other privity of contract in between the complainant and the 3rd Respondent and so it is not liable to pay for any reliefs to the complainant.”

On the role of the landowner, the authority held:

"There is no other privity of contract in between this complainant and the 2nd Respondent. As it has relinquished its dealings with the 1st Respondent and as such no amount was deposited in the escrow account, the 2nd Respondent is not liable to pay any compensation or costs to the complainant.”

The case arose from a flat booked in the 'Cybercity Mangadu' project under agreements executed on July 1, 2019. Possession was contractually due by September 30, 2021, but has not been handed over till date.

While the developer attributed the delay to disruptions caused by the COVID-19 pandemic, the Authority found that even after accounting for the force majeure period, the delay remained unexplained.

“The complainant had been waiting from the assured date of handing over i.e. 30.09.2021 till date. As she had made payments upto 15.10.2022, the contract in between herself and the 1st Respondent has been operative saving the limitation. Thereby she is entitled for her claim of compensation.”

Accordingly, the authority partly allowed the complaint, awarding compensation and costs against the developer, while rejecting claims against the landowner and the marketing entity for want of privity of contract.

For Complainant (Mugundhine): Advocate K. Thilageswaran.

For Respondent (M/s Cybercity Mangadu Project Pvt. Ltd. & Ors.): Advocates Ananda Gomathy, S. Namasivayam, Leela & Co.