2026 INSC 737 | 23 July 2026
What the case was about
This case arose from a dispute over a redevelopment project in Mumbai involving a cessed building that was demolished to make way for a new tower. Mrs. Mahabanoo Contractor and another appellant, the legal heirs of the original tenant Ms. Gool Peshotan Unwalla, sought enforcement of a Permanent Alternate Accommodation Agreement (PAAA) dated 17 October 2019. Under the agreement, the developer-respondent had promised them three flats totaling roughly 3,336.92 square feet in the reconstructed building in exchange for vacating Room No. 5. After the appellants handed over possession and the old building was pulled down, the developer reduced the height of the new tower from 34 to 30 floors and argued that it no longer had to provide the full agreed area. The Bombay High Court had treated the PAAA as a purely private contract, restrained the Maharashtra Housing and Area Development Authority (MHADA) from enforcing its orders, and left the parties to seek remedies in a civil suit. The appellants approached the Supreme Court to challenge that view.
The key facts
The appellants assert their status as certified “occupants” of a tenement in a cessed building governed by the Maharashtra Housing and Area Development Act, 1976 (MHAD Act). The redevelopment proceeded under a MHADA No Objection Certificate (NOC). The PAAA promised the appellants three flats in the new building. The appellants vacated the premises and gave possession to the developer for demolition.
Subsequently, the developer revised its plan and claimed that reduced fungible Floor Space Index (FSI) meant it could offer only two flats of about 2,108 square feet. MHADA intervened and issued orders on 28 May 2025 and 27 June 2025 directing the developer to execute the PAAA and hand over the promised premises, followed by a show-cause notice dated 10 July 2025 threatening action under Section 91A of the MHAD Act. The developer challenged these orders before the Bombay High Court, which restrained MHADA and held that the PAAA was not amenable to writ jurisdiction. After that judgment, the developer filed Civil Suit No. 4579 of 2026 seeking to invalidate the entire PAAA, despite an earlier undertaking before the High Court.
The questions before the Court
The Supreme Court had to decide four main issues:
1. Whether the PAAA was merely a private arrangement or part of a statutory redevelopment scheme under the MHAD Act and Development Control Regulations amenable to writ jurisdiction.
2. Whether the appellants, as certified occupants and legal heirs of the deceased original tenant, were entitled to enforcement of the PAAA and allotment of the promised premises.
3. Whether the developer could resile from the PAAA merely because fungible FSI was not fully utilised, or because of internal partner disputes later settled by Consent Terms dated 9 March 2024.
4. Whether the developer’s subsequent civil suit challenging the PAAA was bona fide.
What the Court decided and why
The Court allowed the appeal and ruled in favour of the appellants on every count.
Statutory nature of the agreement. The Court held that the PAAA was not a purely private contract. It was entered into under a statutory scheme provided by the MHAD Act and the Development Control Regulations for Greater Bombay, 1991, which facilitate redevelopment so that landlords can gain additional space while ensuring tenants “are not thrown out to the streets” (para 8). Because the agreement was regulated by the statute, MHADA had the authority to enforce it. The High Court therefore erred in characterising the arrangement as purely private and in restraining MHADA from acting (paras 8, 23).
Status of the appellants. The Court found that the first appellant had been recognised as an occupant in the certified list and in the developer’s own public notice since at least 2010 (para 13). Even without probate, the first appellant was entitled to the premises as an occupant according to MHADA records and the developer’s own documents (paras 19, 22). The Court pointed out that the definition of “occupier” under Section 2(25) of the MHAD Act is broad, and that an occupancy in this context is not a statutory tenancy continuing merely at the will of the owner, so that a person in possession may have a valid claim to reallotment when redevelopment is attempted (para 12). The Court emphasised that the developer could not, after obtaining consent and vacant possession for redevelopment, “casually after all these years … turn around and challenge the very claim raised by the 1st appellant as an occupant” (para 19).
Developer cannot escape its obligations. The Court ruled that inter-se partner disputes settled by Consent Terms in March 2024 could not absolve the developer, because the appellants were not parties to that settlement and had a clear right to seek conveyance and handover of the premises. The Court observed that “the settlement of inter se disputes between the partners without the junction of the beneficiary of the PAAA … cannot absolve the developer from his obligations” (para 20). The Court also rejected the argument that reduced fungible FSI excused non-performance, stressing that a developer cannot avoid its obligations simply because building plans changed later.
The civil suit. The Court found the developer’s civil suit misconceived, and in the interest of justice directed the High Court not to proceed with Civil Suit No. 4579 of 2026 (para 25).
Final directions. The Court set aside the Bombay High Court judgment and revived the MHADA orders dated 28 May 2025 and 27 June 2025 (para 23). It directed the first and second respondents to execute the PAAA and hand over possession of the three promised apartments within two months. If the developer fails to do so, the appellants will be entitled to damages measured by the monthly rental value of the three flats, and they may also sue for damages for delay (para 25). The Court also awarded costs of ₹50,000 each before the High Court and before the Supreme Court, payable by the first and second respondents to the appellants (para 25).
Why it matters
The judgment carries significant weight for Mumbai’s cessed-building redevelopment regime. It clarifies that a Permanent Alternate Accommodation Agreement executed under the MHAD Act and Development Control Regulations is not a purely private commercial contract, but is imbued with statutory character. This means occupants who surrender their homes for redevelopment can look to MHADA—and, where necessary, to constitutional remedies—for enforcement, rather than being relegated to protracted civil litigation.
The decision also shields occupants from after-the-fact excuses. A developer cannot unilaterally shrink its obligations because of later changes in building plans or internal partnership disputes once it has secured vacant possession on the promise of alternate premises. By holding that the post-judgment civil suit was misconceived and directing the lower court not to proceed with it, the Court signalled that it will not permit procedural stratagems designed to frustrate statutory rehabilitation rights. For tenants and housing regulators alike, the ruling reinforces that redevelopment commitments made under statutory schemes carry enforceable obligations that survive changes in project economics or corporate control.