Interest For Delayed Possession Under RERA Can't Be Waived Through Private Settlement: Allahabad High Court

The Allahabad High Court has recently held that a private settlement between a promoter and a homebuyer cannot override mandatory statutory obligations under the Real Estate (Regulation and Development) Act, 2016.

Dismissing an appeal filed by the Lucknow Development Authority, a single bench of Justice Prashant Kumar upheld an order directing payment of statutory interest to a buyer for delay in handing over possession of a flat.

The court said the law leaves no scope for promoters to avoid this obligation through private agreements. It underlined that an allottee who continues with a delayed project is entitled to interest till possession is handed over, and that the duty to pay such interest is cast on the promoter by statute.

“The legislative mandate insofar such allottees is that they are entitled to interest on their deposit till the handing over of possession of the unit. A mandatory statutory obligation is cast upon the promoter to pay the interest to such allottees,” the court observed.

It added that promoters cannot rely on one-sided settlements to escape this obligation.

"The promoter, in the given facts, cannot take shelter behind the one-sided settlement imposed upon the allottee to waive its obligations mandated and imposed upon the allottee under the proviso to Section 18 (1) of the Act, 2016," the court ruled.

The case involved Sushma Shukla, who applied in 2011 for a flat in the 'Srishti Apartments' project in Lucknow, developed by the Lucknow Development Authority. Possession was proposed to be handed over by November 15, 2013. The project was delayed for several years. In 2018, Shukla approached the real estate regulator seeking interest for the delay.

Before her complaint was decided, the parties entered into a private settlement on December 5, 2018. The sale deed was executed shortly thereafter. Relying on the settlement, the regulatory authority rejected her claim for interest.

Shukla did not stop there. She carried the matter in appeal to the Real Estate Appellate Tribunal. On April 1, 2025, the tribunal overturned the regulator's decision and directed the LDA to pay interest at MCLR + 1% for the delay.

Unhappy with that outcome, the authority went to the High Court. It argued that the buyer had given up her right to interest by signing the settlement and that a private agreement between the parties could not be overridden by the statute.

The High Court rejected this argument. It said a bare perusal of the settlement showed it to be a cyclostyled document, requiring the allottee to sign on the dotted line. It noted that such settlements are imposed at the stage of handing over possession, leaving the buyer with little real choice.

“A person who has put his life time savings for his dream house/flat, has no strength to fight with the builder, and also has no choice but to sign on the dotted lines on an agreement drafted by the builder, wherein he creates a situation of “take it or leave it”, the flat owner will have no other alternative but to sign on the dotted lines. It will not be wrong to say that such settlement normally are executed under duress,” the Court observed.

It held that even if such a settlement is treated as binding, it would still be contrary to the proviso to Section 18(1) of the RERA Act. The Court held that any one-sided settlement that seeks to circumvent the statutory obligation to pay interest for delayed possession is void ab initio and amounts to an unfair trade practice under the Consumer Protection Act, 1986

Finding no illegality or irregularity in the tribunal's order, the High Court dismissed the LDA's appeal at the admission stage and affirmed the direction granting the buyer statutory interest at MCLR + 1% for the period of delay.

For LDA : Advocates Abhishek Khare and Aahuti Agarwal