High Court (India)

February 12, 2020

Mulund Plot auction by MahaRERA to repay homebuyers stalled by Bombay HC

[ by Kavita Krishnan ]


A petition was filed at the Bombay High Court by SREI Equipment Finance Limited (SREIEFL) to put a stay on the auction of a 2,600 sq. m plot by Nirmal Developers to repay 120 buyers who had bought flats in Nirmal Olympia project at Mulund suburb of Mumbai. SREIEFL claimed that the plot was mortgaged to the company.

The High Court Bench comprising of Justice Bharati Dangre and Chief Justice Pradeep Nandrajog granted the stay on February 11.

The plot belonging to the Nirmal Developers group in Mulund West was valued at Rs. 40.25 crore. The proceeds of the auction were to be used to repay 120 homebuyers of Rs. 23 crore, as per terms signed between MahaRERA and the builder.

According to SREIEFL, it had advanced credit to Nirmal Developers and the property sought to be auctioned was mortgaged to the company. Therefore, as a mortgagee, SREIEFL claimed priority of interest over dues of flat buyers.

The High Court noted that due legal process for the auction was not followed and pointed out in the order that if an immovable property is to be sold to recover dues, the proposed buyers have to be informed about the lien of a third party or the charge over the property. The Court also observed that to sell an immovable property, a notice of the sale date has to be given 30 days earlier. In this case, while the auction notice was published on January 9, 2020 it was scheduled for January 22, 2020.

Further the court noted that while SREIEFL had filed its objections before the collector on January 13, 2020, the collector had not decided on the issue and the auction was scheduled.

The Court also directed the collector to give a personal hearing to SREIEFL before deciding on with the process of auction or inform MahaRERA that the petitioner has the priority claim over the said property and the collector is prohibited by law to proceed with the sale of the property in question.

The Court observed that the outstanding dues of SREIEFL were Rs. 168 crore while the property was valued at Rs. 40.25 crore. According to the order, the dues which were stated to be of Order XXXIV of the Code of Civil Procedure (CPC), the priority of interest would require the sale proceeds to be first appropriated to clear the dues of the petitioner and if there is any surplus to be paid over as per the order passed by the competent authority under the Real Estate Regulation and Development Act, 2016 to the flat buyers.

Mumbai Collector Milind Borikar said that they would finish hearing the objections raised by SREIEFL as per the High Court directions, and then take legal advice on the next course of action.

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