The order—passed in the long-running Ashish Sea View dispute—clarifies that financial institutions cannot enforce security interests under the SARFAESI Act if the property is already burdened with registered agreements for sale or third-party claims from homebuyers.

The ruling is expected to have wide implications for banks, NBFCs, and developers operating in Maharashtra’s residential property market.

Why This Case Matters

The Ashish Sea View matter involved a situation where:

• Homebuyers had registered agreements for sale.
• The developer defaulted on loans.
• The bank attempted to take possession under SARFAESI.
• Homebuyers objected, claiming their rights were prior and protected under RERA.

MahaRERA has now sided firmly with homebuyers, calling them the “lifeline of the real estate sector,” and stating that banks must not override homebuyer rights merely because a project is mortgaged.

Homebuyer Rights Override SARFAESI: MahaRERA’s Key Finding

MahaRERA ruled that:

1. Registered homebuyers’ rights are superior to the mortgage rights of banks.
2. Banks must exercise due diligence before granting loans.
3. A lender’s failure to check existing agreements cannot prejudice homebuyers.
4. RERA, being a special social-welfare legislation, supersedes SARFAESI where homebuyers’ rights are concerned.
5. Banks are considered “financial creditors” only for the developer—not for the homebuyers.

This means banks cannot auction flats allotted or sold to homebuyers if agreements were executed before the mortgage or even if executed afterward but disclosed in RERA records.

Banks Must Check Third-Party Rights Before Lending

MahaRERA strongly criticised lenders for granting loans “mechanically” without proper checks.

The order notes that:

• RERA records are public and accessible.
• Project details clearly show registered homebuyers’ names.
• Banks have a duty to verify title, encumbrances, and buyer allotments.

The ruling emphasises:

“Financial institutions must conduct thorough due diligence before creating a charge or mortgage on project properties. Failure to do so cannot harm legitimate homebuyers.”

This sets a new compliance benchmark for lenders.

Developers Cannot Use Mortgages to Evict or Ignore Allottees

The authority also made it clear that:

• Developers cannot hide behind SARFAESI actions to delay or deny possession.
• Mortgage disputes between builders and banks cannot cancel homebuyers’ rights.
• RERA’s primary objective is timely delivery and protection of allottees.

The ruling promotes accountability in developer-banker dealings.

Direct Impact on Homebuyers

Your registered agreement is your strongest protection

Banks cannot evict you even if the project is mortgaged

SARFAESI cannot override RERA where allottee rights are established

You can challenge bank possession notices before RERA authorities

What This Means for the Market

For Homebuyers:

• Greater confidence in buying under-construction flats
• Assurance that their investment is protected even if developers default

For Banks:

• More rigorous due diligence required
• Need to check RERA records before issuing loans
• Higher compliance costs

For Developers:

• Pressure to maintain clean titles
• Increased transparency expected

Also Read: MahaRERA fines 12 developers Rs 5.85 lakh for printing advertisements without MahaRERA number

The post Homebuyers Come Before Banks: MahaRERA Pulls Bank For Ignoring Homebuyers While Lending Money to Builder appeared first on Square Feat India.

The Division Bench of Justices M.S. Sonak and Advait M. Sethna dismissed two appeals filed by the BMC and the Empire Building Occupants Welfare Association, thereby upholding a 2019 single-judge order that granted interim protection to Mahendra Builders against dispossession from the iconic Mahendra Chambers (formerly Empire Building) at Dr D.N. Road, Fort.

What Was the Case About?

The dispute revolves around a prime 1,298 sq. yard plot in South Mumbai whose 99-year lease from the erstwhile Bombay Improvement Trust expired on 13 December 2000.

• In 1974, the Parsi Panchayat agreed to sell the building and assign the remaining lease to Mahendra Builders.
• In 1986, the BMC itself issued licences recognising the transfer and continued accepting payments from the builders for years.
• After the lease expired in 2000, the BMC suddenly claimed the land reverted to it and, in 2003, tried to take possession by merely pasting a notice and conducting a panchnama – without any court decree.
• Mahendra Builders rushed to court in 2004 and obtained interim protection in 2019. The BMC and tenants’ association challenged that protection – and lost today.

The Big Legal Principle Reaffirmed by the Court

The Bombay High Court relied on a long line of Supreme Court judgments and crystallised the law in crystal-clear terms:

“Even a person in settled possession (peaceful, continuous occupation) is entitled to retain possession against the entire world except someone who proves a better title through due process of law. The rightful owner – or even the State – cannot take the law into its own hands.”

In plain language:

• Possession is 9/10ths of the law.
• Even a trespasser who has been in peaceful possession for some time (called “settled possession”) cannot be thrown out by force.
• Breaking locks, sealing premises, or bulldozing without a court order is illegal – full stop.

Key Takeaways from Today’s 37-Page Judgment

1. BMC’s “re-entry” in 2003 was illegal

The court held that merely putting up a notice and doing a panchnama after lease expiry does not amount to lawful resumption of possession. The BMC had to file a suit and get a decree.

2. Prima facie case, balance of convenience and irreparable injury – all in favour of the occupant

The builders had documents from 1974–1986 showing BMC itself treated them as assignees. Throwing them out after decades would cause irreparable harm.

3. “Due process” is non-negotiable

Citing Supreme Court decisions like Rame Gowda v. Varadappa Naidu, Maria Margarida Sequeira Fernandes, and Krishna Ram Mahale, the Bench repeated: “A rightful owner cannot dispossess even a trespasser by force. The remedy is to approach the court.”

4. No interference with discretionary interim orders unless “perverse”

The Division Bench followed the famous Wander Ltd. v. Antox India principle: appellate courts rarely disturb interim protection unless the order is arbitrary. The 2019 order was found to be perfectly reasoned.

5. Tenants remain fully protected

The court clarified that nothing in the order affects the rights of existing tenants. They can only be asked to vacate through proper legal procedure if rent is unpaid or for bona fide redevelopment.

6. Final findings only after full trial

All observations are prima facie. The main suit filed in 2004 will now proceed to trial where the BMC can still prove its full ownership – but it cannot use muscle power in the meantime.

Why This Judgment Matters to Every Common Citizen

This ruling is a powerful shield in everyday situations:

• Landlords who change locks when tenants are away
• Builders who try to forcibly vacate old buildings for redevelopment
• Municipal corporations sealing shops or homes citing “encroachment” without court orders
• Family disputes where one relative tries to throw another out of an ancestral house
• Street vendors facing sudden bulldozer action

The message from the Bombay High Court is loud and clear: If someone tries to throw you out without a court decree, rush to the nearest civil court. You will almost certainly get immediate protection.

As Justice M.S. Sonak observed, “No one can be permitted to take the law into their own hands – not even public authorities.”

The post Even BMC Can’t Throw You Out Without Court Order: Bombay HC’s Big Message to Every Indian appeared first on Square Feat India.