In a significant ruling on redevelopment disputes, the Supreme Court has held that a developer cannot avoid its obligations under a Permanent Alternate Accommodation Agreement (PAAA) after obtaining possession of an old building for redevelopment. The Court restored MHADA's directions requiring execution of the agreement and ordered the developer to hand over three flats to the occupants within two months.
Background of the Case
The dispute arose from the redevelopment of a cessed building in Mumbai under the Maharashtra Housing and Area Development Act (MHADA). The appellants claimed that they were entitled to permanent alternate accommodation under a PAAA executed in 2019 after vacating the old premises for redevelopment.
MHADA had directed the developer to execute the agreement, register it and hand over possession of the promised flats. When the developer failed to comply, the authority issued a show-cause notice. However, the Bombay High Court held that the agreement was essentially a private arrangement and observed that the dispute should be resolved before a civil court, restraining MHADA from taking coercive action.
The occupants challenged that decision before the Supreme Court.
Court's Observations
A Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran found that the High Court had wrongly treated the Permanent Alternate Accommodation Agreement as a purely private contract.
The Court noted that redevelopment of cessed buildings under the MHADA framework is governed by a statutory scheme designed to protect existing occupants. It observed that the agreement was executed within that legal framework and was closely linked to MHADA's regulatory powers.
Referring to the official records, the Bench found that the first appellant had consistently been recognised as an occupant in several documents, including the public notice issued by the developer, the certified list approved by MHADA and the redevelopment records. The Court said these contemporaneous records could not later be ignored by the developer.
The Bench also rejected the developer's attempt to dispute the agreement on the basis of internal disputes among its partners.
The Court observed,
"The developer cannot casually after all these years having obtained a consent, leading to vacation of premises and possession being handed over for the purpose of redevelopment, on the promise of allotment of premises as specified in the PAAA, turn around and challenge the very claim raised by the 1st appellant as an occupant."
The Court further stated that even if the entire fungible Floor Space Index (FSI) was not utilised during construction, that could not become a reason for the developer to back out of its contractual obligations.
Civil Suit Also Criticised
The Supreme Court also examined the civil suit filed by the developer after proceedings before the High Court.
The Bench found that the suit sought to challenge the very agreement under which the occupants had surrendered possession of the old premises. It held that the suit was inconsistent with the undertaking earlier given before the High Court and described it as "misconceived and mala fide."
Decision
Allowing the appeal, the Supreme Court set aside the Bombay High Court's judgment and restored MHADA's directions requiring execution of the Permanent Alternate Accommodation Agreement.
The Court directed the developer to execute the agreement and hand over possession of all three apartments to the appellants within two months. It further held that if possession is not delivered within the stipulated period, the appellants will be entitled to recover damages calculated on the monthly rental value of the three flats.
The Court also directed that the High Court should not proceed with the pending civil suit and awarded costs of ₹50,000 each before the High Court and the Supreme Court, payable by the developer to the appellants.
Case Details
Case Title: Mrs. Mahabanoo Contractor & Another v. M/s. Kalikund Developers & Others
Case Number: Civil Appeal No. 9342 of 2026 (arising out of SLP (C) No. 4498 of 2026)
Judges: Justice J.B. Pardiwala and Justice K. Vinod Chandran
Decision Date: 23 July 2026
