Seldom do courts take cognizance of Section 9 of the Maharashtra Ownership Flats Act, which says that if a mortgage is created, it shall not affect the buyer’s rights
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Homebuyer left in limbo as court rulings favour insolvency process over refund claims, highlighting gaps in protection under real estate and consumer laws.
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Anshuman Sharma booked a flat with Orbit Corporation in a redevelopment project called Orbit Grand, located at Lower Parel in Mumbai. He paid ₹61,73,973 in instalments. However, the developer ran into financial problems. In 2015, Sharma approached the National Consumer Disputes Redressal Commission (National Commission) with a complaint against the builder, its director Pujit Ravikiran Aggarwal, and its marketing head Sanjay Bhutani, seeking a refund of the amount paid by him, along with interest and compensation. Subsequently, in May 2018, Sharma learnt that the builder had gone into liquidation and that the Bombay High Court had appointed the official liquidator. The liquidator was also made a party to the dispute.
After constructing merely the plinth, the builder ran into issues with the financier, LIC Housing Finance Corporation. Since the project stalled, the original tenants took the matter to court. The financier also filed proceedings under the Sarfaesi Act for recovery of dues and took possession of the plinth and the land on which the building was to come up. The financier decided to auction the property, fixing a reserve price of ₹60 crore. However, the auction failed as no bids were received.
Thereafter, Kshitija Infrastructure offered to pay ₹17.5 crore to the financier and took over the project on an “as is where is and no recourse” basis, but with the encumbrances of the original tenants.
The liquidator informed the National Commission that the creditor’s dues had been cleared and that the surplus amount of ₹61,20,000 was lying to the credit of the account of Orbit Grand, which would be utilised to clear the claims of workmen and pay provident fund dues.
The high court ruled that since Kshitija Infrastructure was taking over the project on an “as is where is, what is and no recourse” basis, it would be immune to all prior disputes and claims from tenants, flat purchasers, or any other party.
In its order dated March 25, 2026, the National Commission’s Bench of Justice A P Sahi and Bharatkumar Pandya considered the implication of the Bombay High Court’s order and ruled that Sharma’s complaint was no longer maintainable. However, it granted Sharma the liberty “to move the appropriate forum” for seeking a refund out of the assets of Orbit Corporation in accordance with the orders passed by the Bombay High Court.
Why this happens
Unfortunately, courts do not hear the pleas of aggrieved flat purchasers, who are the victims of financial fraud by builders. Seldom, if ever, do they take cognizance of Section 9 of the Maharashtra Ownership Flats Act, which provides that no promoter shall, after executing an agreement to sell a flat, mortgage or create a charge on the flat or the land without the previous consent of the persons who take or agree to take the flats. It further provides that if any such mortgage or charge is made or created without such previous consent after the agreement referred to in Section 4 is registered, it shall not affect the rights and interests of such persons. In view of this provision, no financier who advances any loan to a builder after the builder enters into an agreement with the flat purchaser would have the preferential right to recover dues. Hence, money would have to be paid to the flat purchasers first.
The writer is a consumer activist
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