Maharashtra REAT Says No Jurisdiction Over Banks Lending To Homebuyers; Refuses Stay On SARFAESI Recovery

Holding that it has no jurisdiction to hear complaints by allottees against lending banks, the Maharashtra Real Estate Appellate Tribunal (REAT) refused to stay recovery proceedings initiated against homebuyers, while restraining the promoter from creating third-party rights in the flats.

The tribunal clarified that RERA authorities can examine claims against banks in cases such as where loans are extended to a promoter and, upon default, the lender steps into the shoes of the promoter.

In the present case, however, the loans were extended directly to individual homebuyers, and therefore the Tribunal held it had no jurisdiction to entertain claims against the lending bank.

The Bench comprising Chairperson S. S. Shinde and Member Shrikant M. Deshpande observed, “we are of the view that the Tribunal has no jurisdiction to hear any complaint by allottees against the lending bank, who has lent loan to the allottees, and pass any order against the bank, who has initiated action under the SARFAESI Act against the allottees"

The dispute arose from a series of appeals filed by homebuyers including Kamlesh Valji Balsara, Mitesh Krishnakant Dave, Hema Malav Shah and others against Shree Siddhivinayak Infrastructure and Realty and associated financial entities.

The buyers had booked flats in the developer's project under a subvention scheme, under which the promoter was to bear pre-Equated Monthly Instalment (pre-EMI) obligations until possession.

To facilitate this, the homebuyers availed themselves of loans from a non-banking financial company, which were later assigned to an asset reconstruction company.

When the project was delayed and the promoter failed to meet its obligations, recovery action was initiated against the homebuyers under Section 13(2) of the SARFAESI Act, 2002.

The homebuyers had approached the Maharashtra Real Estate Regulatory Authority alleging delay in possession and seeking refund or interest. By a common order dated July 31, 2025, the Authority allowed their complaints, directing the promoter to either refund the amounts with interest or pay interest for the delay.

The matter then reached the Appellate Tribunal after the homebuyers challenged the order, along with interim pleas seeking to restrain the promoter from creating third-party rights in the flats and to halt the recovery action initiated by lenders.

Before the Tribunal, the homebuyers alleged fraud in loan documentation and violation of National Housing Bank circulars dated November 18, 2013 and July 1, 2016 mandating stage-wise disbursal of housing loans linked to construction progress.

They also relied on the Supreme Court's decision in Union Bank of India v. Rajasthan Real Estate Regulatory Authority & Ors. to contend that RERA could exercise jurisdiction over banks.

On the other hand, the promoter maintained that payments were received strictly in line with construction milestones and opposed any injunction in the absence of evidence of any intended third-party transfer.

The financial institutions argued that the loans were independent contractual arrangements with the buyers and that recovery action was a lawful consequence of default.

Holding the Supreme Court ruling inapplicable to the facts of the present case, the tribunal observed, "In the present case the loan is given to the allottees and notto the promoter. Hence, said judgment is not relevant in the present case. Further, the tripartite agreement between the allottees, promoter and the bank has provided contractual arrangement which cannot be enforced under the provisions of RERA Act, 2016. The applicants in that case may file appropriate remedy under the law"

While declining to interfere with the recovery action initiated by the financial institutions, the tribunal restrained the promoter from alienating or creating any third-party rights in the subject flats until final disposal of the appeals.

For Petitioner (Kamlesh Valji Balsara & Ors.): Advocate Vinay Kate.

For Respondent (M/s Shree Siddhivinayak Infrastructure and Realty & Ors.): Advocates Jashweta Jagtap, Kaizin Irani, Dipali Jadhav.