The Bombay High Court on Monday held that under the Real Estate (Regulation and Development) Act (RERA), buyers possess an unqualified right to receive interest every month for delayed possession of their properties. Justice Madhav Jamdar ruled that the legislation was enacted to alleviate the difficulties faced by homebuyers and to regulate construction activities to prevent delays. Developers cannot delay possession for years while expecting to escape the statutory consequences under RERA, the court emphasized.
Case Background
The ruling came in response to a plea by ten buyers who had booked flats in a Mulund project between 2005 and 2007. In 2018, an appellate tribunal under RERA directed the builder to pay interest from February 2014 until possession is granted. The builder, Runwal Constructions, later filed a second appeal in the High Court, raising substantial questions of law.
Court's Observations
Citing Supreme Court precedents, the High Court noted that a buyer often borrows money to pay for a house and simultaneously acts as a financier for the builder, as construction projects collect funds upfront. This places the buyer in a highly vulnerable position. Under Section 18 of RERA, which allows for compensation or cancellation of booking, the allottee has an absolute right either to continue with the project or to withdraw from it.
The court stated, "RERA was enacted with an object to ensure greater accountability towards consumers, to significantly reduce frauds and delays and the high transaction costs, and to balance the interests of consumers and promoters by imposing certain responsibilities on both, and to bring transparency of the contractual conditions, set minimum standards of accountability and a fast-track dispute resolution mechanism."
Builder's Defense
The builder argued that the delay was caused by reasons beyond its control, including large tracts of Mulund coming under forest reservation in 2006, which were released only in 2016. Subsequently, permissions were sought in 2019, after which work began. The builder's spokesperson stated that of 250 buyers, 230 received possession of their flats last year and have settled in. The company also claimed to have refunded those who withdrew from the project at 12% interest from the date of booking.
Court's Decision on Legal Issues
The High Court addressed two key legal issues raised by the builder. First, it upheld the validity of the Maharashtra revenue tribunal acting as an appellate body under RERA at the time of the order. Second, regarding the tribunal's authority to set a date for imposing interest and fixing a possession date when delays are beyond the builder's control, Justice Jamdar agreed that mitigating circumstances must be considered, as held by a division bench earlier.
Anjani Kumar Singh, counsel for the ten buyers, argued that the law was enacted to protect homebuyers from delays, that delays cannot be indefinite, and builders have a civil liability to pay interest for delays. The builder plans to appeal the High Court judgment, stating that it involves substantial questions of law.
