Broad Settlement Deed Wording Does Not Bar Claims for Subsequently Discovered Defects: Karnataka REAT

The Karnataka Real Estate Appellate Tribunal has ruled that a settlement deed covering disputes existing when it was signed cannot be treated as an unconditional waiver of claims over construction defects discovered after the homebuyers took possession.

The tribunal observed that the settlement was confined to claims “subsisting” between the parties when the deed was executed. Its broad language could not be construed as giving up claims arising from defects discovered later and which were not within the parties' contemplation at the time of settlement.

A bench of Chairperson Justice J.M. Khazi and Judicial Member Santhosh Kumar Shetty N. delivered the judgment on September 1, 2026.

The tribunal dismissed an appeal by Goyal Hariyana Realty and upheld an order directing the builder and the landowner to jointly pay ₹6 lakh as compensation to two homebuyers for alleged construction defects, besides ₹5,000 as litigation costs.

The tribunal observed,

“Consequently, the settlement of the then subsisting disputes cannot, merely by virtue of the general language employed therein, be construed as an unconditional relinquishment of claims arising from defects which were discovered subsequently and which were not within the contemplation of the parties at the time of entering into the settlement.”

Vinaya and Rajkumar had booked an apartment in the AlanoVille project. They later entered into an Agreement to Sell and a Construction Agreement with the builder. Possession was handed over after the parties executed a settlement deed on January 17, 2020.

Before taking possession, the homebuyers had raised claims over delayed possession and GST input credit, which were covered by the settlement.

After moving into the apartment, they alleged that construction defects came to light and sought compensation based on an interior designer's assessment. The Adjudicating Officer awarded ₹6 lakh compensation and ₹5,000 in costs.

The builder relied on the settlement deed and challenged the assessment. The homebuyers maintained that the defects were discovered only after possession.

The tribunal held that this was a separate claim not barred by the settlement and found the compensation just and reasonable. It also noted the builder's earlier failure to meet the mandatory pre-deposit requirement.

When the homebuyers' appeal was dismissed on the basis of their withdrawal memo in December 2024, the builder did not seek a decision on its own challenge. About five months later, it filed the present appeal.

Holding that the appeal was an “afterthought” and an abuse of the tribunal's process, the Bench dismissed it and confirmed the compensation order. The Registry was directed to release the amount, including accrued interest, to the homebuyers after expiry of the appeal period and after following due procedure

For appellant (Goyal Hariyana Realty): Advocate E. Suhail Ahmed.

For respondents (Vinaya and Rajkumar): Advocates Shafeer A.A., Derick Anil.

For respondent (Karnataka RERA): Advocate K.V. Girish.

For respondent (Value and Assets Holding Pvt. Ltd.): Advocate U.C. Sunil.