Landowner Who Transfers Development Rights Is Jointly Liable To Homebuyers: Uttarakhand High Court

The Uttarakhand High Court has recently reiterated that a landowner who hands over land and extensive development rights to a builder cannot avoid responsibility towards homebuyers and can be subjected to recovery proceedings even if the flats were sold by the developer.

A Division Bench of Chief Justice Manoj Kumar Gupta and Justice Ashish Naithani said liability towards homebuyers does not rest on the builder alone.

“The liability, as against the allottees, from whom money was realized by the developer solely on the basis of the rights flowing under the development agreement would be joint and several, and the petitioner cannot be permitted to defeat the lawful claim of the allottees on the technical grounds, which have been raised before us.", it said.

The case relates to a group housing project in Haridwar. In October 2011, landowner Raj Kumar Saini entered into a development agreement with a private developer. Under the agreement, Saini handed over possession of the land and transferred wide-ranging rights. The developer was permitted to construct apartments, sell them, collect money from buyers, and even mortgage the land.

Acting on these rights, the developer sold flats. The buyers in this case paid about 83% of the flat price. The project was never completed, and possession was never handed over.

The buyers approached the Real Estate Regulatory Authority. In August 2019, RERA directed the developer to refund R19.53 lakh with interest at 10.45% per annum and also imposed a penalty. The developer did not comply. Recovery proceedings followed, which led to attachment and auction proceedings against a portion of the land originally owned by Saini.

The landowner then moved the High Court. He argued that he was not a party to the RERA complaint, that legal title to the land continued to vest with him, and that any liability towards buyers lay solely with the developer.

The State and RERA authorities opposed this, pointing out that the landowner had received nearly 90% of the land value, had handed over possession, and had enabled the developer to sell flats and collect money from buyers.

After examining the development agreement, the High Court found that the landowner had, in effect, transferred almost all rights in the property. “The petitioner has purportedly transferred all his rights in the property in favour of the developer,” the court said.

It noted that nearly 90% of the land cost had been realised upfront and that the landowner was also entitled to a share in the project's net profits. While the landowner's right to seek indemnity from the developer was preserved, the court clarified that this did not prevent recovery proceedings against him.

The court declined to quash the recovery. Taking note of the landowner's willingness to pay, the court granted conditional relief. It directed him to deposit 25% of the recoverable amount before the auction date, with the remaining amount to be paid in installments.

The court also ordered that any amount recovered be immediately released to the homebuyers and made it clear that the auction proceedings would revive in the event of any default.

For Petitioner: Advocate Pankaj Kumar Sharma

For Respondent: Advocate Gajendra Tripathi & Mr. Y.C. Tiwari

For Respondent 5: Advocate Ms. Monika Pant