HC upholds arbitral award, orders Andheri builder to secure OC or pay ₹129 crore to society

The Bombay HC upheld arbitral award requiring a developer to regularise illegal building alterations and secure an occupancy certificate, or pay ₹128.98 crore.

MUMBAI: The Bombay High Court on Tuesday upheld an arbitral award directing a city-based developer to regularise illegal alterations in a redeveloped residential building in Andheri West and obtain an occupancy certificate (OC) from the Brihanmumbai Municipal Corporation (BMC), failing which it must pay ₹128.98 crore to the housing society to enable it to demolish and reconstruct the building.

HC upholds arbitral award, orders Andheri builder to secure OC or pay ₹129 crore to society

Justice Sandeep Marne dismissed a petition filed by Lotus Logistics and Developers Pvt. Ltd, which had challenged the arbitral award dated August 16, 2024.

The dispute pertains to the redevelopment of Evertop Apartments Co-operative Housing Society, located on JP Road in Andheri West, comprising 58 tenements. In May 2008, the society and the developer entered into a development agreement under which two buildings were to be constructed, a rehabilitation building for existing members and a free-sale component.

The society alleged that while the plans were sanctioned in September 2008, the rehabilitation building was completed belatedly and remained without an OC. It further claimed that members were compelled to occupy their allotted flats after the developer stopped paying transit rent from January 2014.

The society said that sanctioned plans obtained under the Right to Information Act revealed that the developer had reduced the built-up area of the rehabilitation building by showing “open-to-sky ducts” in bedrooms and living rooms, and diverted the area to the free-sale building. It alleged that while members were promised 52% additional area, the actual increase was reduced to 32%.

The society also accused the developer of several other breaches, including failure to provide car lifts to access podium-level parking, stack parking and other amenities. In October 2015, the society terminated the development agreement and initiated arbitration.

After the High Court appointed an arbitral tribunal, the society raised claims totalling ₹351.54 crore under multiple heads. The developer contested the claims but maintained it was willing to get the irregularities regularised and secure an OC for the rehabilitation building.

The arbitral tribunal accepted several of the society’s monetary claims and directed the developer to regularise the rehabilitation building and obtain an OC within a fixed timeframe. It further ordered that if the developer failed to do so, it must pay ₹128.98 crore to the society so it could reconstruct the building in accordance with sanctioned plans.

Upholding the award, Justice Marne observed that the society’s members had been handed over flats constructed in violation of sanctioned plans, which adversely affected the prospects of obtaining an OC. The court noted that the developer had already constructed the sale component building and sold flats there, and could not be permitted to “walk away” without securing an occupation certificate for the rehabilitation building.

“The Petitioner-Developer has acted in a blatantly deceitful manner by stealing FSI/BUA (floor space index/built-up area) meant for ‘A’ wing building and has sold the same to outsiders by loading it in sale component building,” the judge said.

In this backdrop, the court held that the tribunal had rightly directed the developer to take all necessary steps to obtain the OC for the ‘A’ wing rehabilitation building. It also found no fault with the alternative direction to pay ₹128.98 crore if the OC was not secured within the stipulated timeline.

The court said the builder would likely not take steps to obtain an OC unless consequences were imposed, and added that the arbitral award was consistent with public policy as it sought to ensure that the society’s redevelopment project received a valid occupancy certificate.