Landowners Not Always Promoters: Supreme Court Adopts ‘Control Test’ in Real Estate Projects

INTRODUCTION

The Supreme Court’s decision in Sriganesh Chandrasekaran & Ors. v. M/s Unishire Homes LLP & Ors. (2026 INSC 172) marks a significant development in determining the liability of landowners in real estate projects. The judgment clarifies when landowners can be treated as promoters or principals, particularly in cases involving delay in possession and deficiency in service.

The ruling reinforces a key principle: liability in real estate projects follows actual control and contractual responsibility, not mere ownership of land.

FACTUAL MATRIX

The dispute arose from a Joint Development Agreement (JDA) between landowners and a developer, under which the developer undertook construction and sale of residential units. The developer failed to deliver possession within the stipulated timeline, leading to consumer complaints alleging deficiency in service. The National Consumer Disputes Redressal Commission (NCDRC) initially imposed liability solely on the developer.

CORE LEGAL ISSUE

The central issue was “Whether landowners, by virtue of executing a JDA and granting a General Power of Attorney (GPA), can be treated as promoters or principals so as to attract liability for delay in possession”.

ANALYSIS OF THE SUPREME COURT

The Court examined the Joint Development Agreement (JDA) and General Power of Attorney (GPA) in detail. The JDA allocated responsibility for construction, sale, and delivery exclusively to the developer, while the landowners contributed land and title rights. The agreement also contained indemnity clauses protecting the landowners from liabilities arising out of the developer’s acts.

Although the GPA authorised the developer to execute sale agreements, receive consideration, and complete registration, the Court held that such authorisation did not, by itself, create a principal–agent relationship imposing liability on the landowners.

Importantly, there was no allegation that the delay was attributable to any act or omission of the landowners.

SUPREME COURT’S REASONING

The Court categorically held that execution of a General Power of Attorney (GPA) or authorization of a developer does not, by itself, fasten liability on landowners. Liability cannot be inferred merely from formal or agency-based arrangements; it must arise from substantive obligations undertaken by the parties. Adopting a substance-over-form approach, the Court applied a functional “control test” to determine liability. Since the developer exercised exclusive control over construction, project execution, and timelines, the delay was attributable solely to the developer. In the absence of any evidence of interference, participation, or default by the landowners, they were held not liable for deficiency in service.

The Court drew a clear distinction between:

• Title-related obligations, where both landowners and developers may be necessary parties; and

• Construction and delivery obligations, where liability rests solely with the developer.

This bifurcation ensures that liability is aligned with the nature of the obligation undertaken rather than the formal designation of parties. The Court gave significant weight to the indemnity clause in the Joint Development Agreement (JDA), which expressly insulated the landowners from liabilities arising out of the developer’s acts or omissions. Upholding party autonomy, the Court enforced this contractual allocation of risk, reinforcing that such clauses are determinative unless contrary to law.

PROMOTER LIABILITY: A BROADER PERSPECTIVE

Although the Court did not directly invoke the Real Estate (Regulation and Development) Act, 2016 (RERA), the judgment has implications for the concept of “promoter”. Under RERA, landowners can sometimes be treated as co-promoters. However, this judgment signals that classification as a “promoter” is not determinative of liability, rather liability will depend on the factual and contractual allocation of responsibilities in each case.

ANHAD LAW’S PERSPECTIVE

This judgment strikes a careful balance between protecting landowners from unjust liability and preserving consumer remedies against the party responsible for project execution. However, it may raise concerns in scenarios where developers become insolvent, potentially limiting recovery options for homebuyers. A stricter interpretation (as sometimes seen under RERA) might better protect consumers, but the Court has preferred freedom of contract and factual liability attribution.

The Supreme Court’s ruling provides much-needed clarity on the liability of landowners in real estate development projects. The decision reinforces party autonomy and contractual allocation of risk, but also underscores the importance of robust due diligence and drafting in JDAs. Developers, investors, and financial stakeholders should therefore undertake more rigorous legal and operational assessments, given that liability will be strictly aligned with actual control and defined obligations under the contract.

© Anhad Law

Dhruv Gandhi, Partner and Ravi Kumar, Senior Associate