Allottee 'Very Vulnerable', Can Withdraw Deposited Funds Despite Pre-Deposit Requirement: Bombay High Court

On 30 March, the Bombay High Court held that an allottee can withdraw amounts deposited by a developer during an appeal despite the statutory pre-deposit requirement under Section 43(5) of the Real Estate (Regulation and Development) Act, 2016 (RERA).

Justice N.J. Jamadar dismissed Rare Township's (developer) appeals and upheld the Maharashtra Real Estate Appellate Tribunal's order allowing allottee Mitul Gada to withdraw Rs. 3,26,37,193 deposited by the developer.

The Court observed:

“The release of the amount ameliorates the situation of the allottee by relieving him of the financial constraints and also the mental anguish caused by the breach of obligations by the promoter for over a decade. The promoter and allottee cannot be placed on an equal footing. The capacity to withstand the deprivation of the legitimate amount vastly differs and the position of the allottee is generally very vulnerable.”

Gada entered into agreements on 2 November 2015 to purchase two flats in the “North Sea Heights (A1)” project from Rare Townships for a total consideration exceeding Rs. 3 crore.

He paid Rs. 98,92,960 for Flat No. 1504 and Rs. 69,66,437 for Flat No. 1503, bringing the total payment to Rs. 1,68,59,397. Possession was originally promised by 31 December 2018, but the developer's revised disclosure to RERA extended the delivery date to 30 December 2025.

When the project stalled and the developer failed to deliver, Gada sought a refund under Section 18 of RERA. On 9 September 2025, Maharashtra RERA directed the developer to refund the full amount paid along with interest at SBI's highest marginal cost of lending rate plus 2 per cent.

After receiving no response despite legal notices, Gada approached the Regulatory Authority seeking refund with interest and compensation under Section 18 of RERA.

During earlier proceedings, the developer had deposited Rs. 1,76,28,138 in Writ Petition No. 7636/2021 and Rs. 1,50,09,055 in Writ Petition No. 7637/2021 in the High Court in March 2025. On 22 April 2025, the High Court directed that these funds be transferred to the account of the Regulatory Authority to abide by the final outcome of the complaints.

Rare Townships challenged the RERA order before the Maharashtra Real Estate Appellate Tribunal and sought a stay. The Tribunal granted partial relief to the developer but allowed Gada to withdraw the deposited amounts, noting that he was bearing the burden at both ends—continuing to pay EMIs while the amounts paid to the promoter remained blocked.

The Tribunal emphasised that its discretion to release funds is not an inviolable rule but may be exercised in deserving cases, considering factors such as the lapse of time, the stage of project development, and whether the allottee's refusal to accept possession was justifiable.

The developer filed second appeals before the High Court, arguing that the statutory pre-deposit only safeguards the allottee and does not authorise release of funds during the pendency of an appeal. Gada contended that the withdrawal was adequately protected by the undertaking and aligned with RERA's protective object.

The Court relied on Newtech Promoters and Developers Pvt. Ltd. vs. State of UP to underscore that the avowed object of pre-deposit is to safeguard the allottee and avoid unscrupulous litigation. It also relied on Godrej Sara Lee Ltd. vs. Excise and Taxation Officer to highlight the distinction between maintainability and entertainability of proceedings.

The Bench rejected the developer's contentions, emphasizing that more than 11 years had passed since the buyers parted with their money. Justice Jamadar held that the Tribunal retains discretion to release funds and may exercise it in deserving cases where facts justify the decision. He also clarified that compliance with pre-deposit makes the appeal hearable but does not freeze the relief granted to the allottee.

Accordingly, the Court dismissed the appeals with costs and upheld the relief granted to Mitul Gada.

Appearances for appellant (Rare Townships Private Limited): Advocates Rubin Vakil, Sonam Mhatre, Amit Mishra, Soham Salunkhe.

Appearances for respondent (Mitul Gada): Advocate Mithil Sampat.