Promoter's Failure to Provide Promised Amenities & Non-Compliance with RERA Act Nullifies Buyer's Contractual Default: Madhya Pradesh High Court - 2025-08-07

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MP High Court Quashes Plot Allotment Termination, Cites Promoter's Own Failures

JABALPUR, MP – In a significant ruling reinforcing the obligations of real estate promoters, the Madhya Pradesh High Court has quashed the termination of a commercial plot allotment, holding that a developer cannot penalize a buyer for non-payment when the developer itself has failed to provide promised amenities and has violated mandatory statutory provisions.

The division bench of Justice Vishal Mishra and Justice Avanindra Kumar Singh allowed the petition filed by M/S Shivsaksh Enterprise Partnership Firm, setting aside the termination order issued by the Bhopal Smart City Development Corporation Limited (BSCDCL) and the preceding orders from the Real Estate Regulatory Authority (RERA).

Case Background

The case revolves around the allotment of Commercial Plot No. 82 in Bhopal's ambitious Area Based Development (ABD) project, a part of the Smart Cities Mission. M/S Shivsaksh Enterprise was the highest bidder for the plot, with an accepted bid of ₹35.11 crore. In compliance with the Letter of Intimation and Demand (LOID) issued in February 2021, the firm deposited approximately 27% of the total price, amounting to over ₹9.5 crore.

The dispute arose when the petitioner discovered that BSCDCL had failed to provide critical infrastructure promised in the tender documents. Specifically, a 45-meter wide access road (Boulevard Street) was obstructed by new constructions like jogging tracks and utility ducts, effectively land-locking the plot. Furthermore, essential amenities like a water supply, sewage treatment plant, and electrical substation were incomplete.

The petitioner filed a complaint with RERA. However, RERA, while acknowledging the lack of development in its order dated April 13, 2022, paradoxically held the firm liable for its contractual obligation to pay the remaining 75% of the sale consideration. An appeal to the RERA Appellate Authority was subsequently refused registration. During the pendency of the High Court petition, BSCDCL terminated the allotment in June 2023 and forfeited the deposited amount.

Key Arguments

Petitioner's Counsel, Senior Advocate Shri D.K. Dixit, argued: * BSCDCL violated Section 3(1) of the RERA Act, 2016, by advertising and selling the plot without first registering the entire project with RERA. * The promoter illegally accepted more than 10% of the total cost (27% in this case) without executing a registered agreement for sale, a clear breach of Section 13(1) of the RERA Act. * BSCDCL failed to deliver on its promise to provide essential infrastructure, including the crucial 45-meter access road, making it impossible for the petitioner to develop the plot. * The termination was unjust as the petitioner's inability to proceed was a direct result of the promoter's defaults.

Respondent's (BSCDCL) Counsel, Shri Bharat Singh, contended: * The petitioner defaulted by not paying the remaining 75% of the sale price within the stipulated 180-day period. * The contract provided for an arbitration clause, which the petitioner should have invoked as an alternative remedy. * The High Court should not interfere in the matter under its writ jurisdiction.

Court's Analysis and Ruling

The High Court decisively sided with the petitioner, emphasizing that a party at fault cannot take advantage of its own wrongdoing.

"Once the terms and conditions are violated by the respondents themselves then the petitioner cannot be penalised for not completing the project in time, therefore, the impugned orders terminating the contract of the petitioner and forfeiting of the amount deposited by the petitioner is per se illegal," the bench observed.

The Court highlighted several key failures by BSCDCL:

• Statutory Non-Compliance: The project was marketed and sold before its registration with RERA, a mandatory prerequisite under Section 3 of the Act.
• Contractual Breach: The demand and acceptance of 25% of the price before a registered agreement for sale was a direct violation of Section 13(1) of the RERA Act.
• Failure to Develop: The Court noted from RERA's own inspection report that BSCDCL had failed to provide the promised 45-meter wide access road and other major amenities. The judgment stated, "Thus, there is total non-compliance on the part of the respondents which is apparent. The petitioner cannot be held liable for not completing the project within the time frame as the authorities are themselves at fault."

Rejecting the argument for an alternative remedy, the Court held that since the initial actions of the authority were contrary to law, the writ petition was maintainable.

Final Decision and Implications

The High Court quashed the termination order dated June 7, 2023, as well as the RERA orders dated April 13, 2022, and June 14, 2022.

Recognizing the petitioner's willingness to complete the project, the Court directed the authorities to "reconsider the case of the petitioner and grant him another opportunity to complete the project." The Court instructed both parties to mutually decide on a new timeframe and terms for project completion based on the original tender conditions, without the imposition of any interest on the petitioner.

This judgment serves as a strong reminder to real estate promoters, including government bodies, that they must strictly adhere to the RERA Act and fulfill their developmental promises before enforcing contractual obligations on buyers.