Homebuyers Who Withdraw From Delayed Project Cannot Be Made To Wait For Refund Until Occupation Certificate: Bombay HC

The Bombay High Court has recently held that homebuyers who withdraw from a delayed housing project cannot be made to wait for a refund until the developer obtains an Occupation Certificate (OC).

Justice Sandeep V. Marne held that the right of such homebuyers to receive their money back with interest is “absolute and unqualified”.

“Thus, on plain reading of Section 18 of RERA, in my view, the right to seek return of amount with interest is absolute and unqualified. The right cannot be diluted by the Regulatory Authority or by the Appellate Authority or even by the High Court by giving any concession to the promoter to return the amount only after securing OC for the project,” the court held.

The ruling came in a second appeal filed by Sanklecha Constructions Pvt. Ltd. and its directors against orders directing them to refund money paid by Nitin Madhukar Shewale and another homebuyer for the Waterways project in Nashik.

The homebuyers had booked Flat No. 702 in Building C-1 for ₹43.13 lakh and paid ₹22.58 lakh to the promoter. Their Agreement for Sale was executed on May 16, 2016, with possession due by December 31, 2017, subject to reasonable extensions for force majeure events.

As the project was not completed within the agreed timeline, the homebuyers approached the Maharashtra Real Estate Regulatory Authority (MahaRERA) in 2019 and sought to withdraw from the project and receive a refund.

MahaRERA allowed them to withdraw and directed the promoter to refund the amount paid, with interest from January 1, 2018, at the rate prescribed under Rule 18 of the Maharashtra RERA Rules, 2017. However, it allowed the promoter to make the payment after obtaining the OC. The promoter could also pay earlier if it chose to do so.

MahaRERA had taken into account circumstances cited by the promoter, including the need to preserve funds for completing the project and the interests of other homebuyers.

The homebuyers challenged the deferment before the Maharashtra Real Estate Appellate Tribunal. The tribunal removed the concession allowing the promoter to wait for the OC and directed a refund.

The promoter then approached the High Court under Section 58 of RERA. It argued that it had made genuine efforts to complete the project and that an immediate refund could affect the project's cash flow and other buyers. Its counsel also submitted that several buildings were substantially complete.

The homebuyers argued that once they had exercised their right to withdraw, the promoter could not postpone the refund.

The High Court agreed. It held that Section 18(1) of RERA requires a promoter to return the amount paid by an allottee, along with interest, once the allottee demands a refund after choosing to withdraw from a delayed project. The provision does not give the promoter or the regulatory authorities discretion to postpone that payment.

The court also distinguished between a refund and a claim for compensation. It held that the refund of the amount paid with interest is the “bare minimum” that a promoter must provide. Whether the promoter made genuine efforts to complete the project may be relevant when deciding a separate claim for compensation but cannot be used to postpone the refund.

The court accordingly upheld the direction requiring Sanklecha Constructions to refund ₹22.58 lakh to the homebuyers with interest from January 1, 2018, at the rate prescribed under Rule 18 of the Maharashtra RERA Rules, 2017, and dismissed the second

For Appellants: Advocate Abhishek Pungaliya.

For Respondent Nos. 1 and 2: Advocate Akshay R. Kapadia.