The Bombay High Court has delivered a definitive ruling reinforcing that timelines for possession under the Real Estate (Regulation and Development) Act, 2016 are not discretionary but statutory obligations. This judgment clarifies that delays attributable to builders, regardless of external factors, trigger liability under RERA, setting a new benchmark for accountability in the real estate sector.
Background & Facts
The Dispute
The appellants, Runwal Constructions Registered Partnership and Omkar Esquare, are real estate developers who entered into agreements for sale with multiple purchasers for residential units across Mumbai and Navi Mumbai. The agreements stipulated specific dates for possession, ranging from 2017 to 2019. Despite repeated assurances, the appellants failed to deliver possession by the contractual deadlines, citing reasons such as labor shortages, regulatory delays, and pandemic-related disruptions.
Procedural History
The purchasers filed complaints before the Maharashtra Real Estate Regulatory Authority (MahaRERA), seeking compensation for delay under Section 18 of RERA. The MahaRERA adjudicating officers found the builders liable and awarded compensation at the rate of interest on the amount paid, calculated from the promised date of possession until actual delivery. The builders appealed to the Bombay High Court under Section 43 of RERA, challenging the quantum of compensation and the applicability of the interest formula.
- 2018-2019: Individual complaints filed by purchasers before MahaRERA
- 2020-2021: MahaRERA issued orders holding builders liable for delay
- 2022: Appeals filed before Bombay High Court under Section 43
- 2026: Final hearing concluded; judgment reserved and delivered
Relief Sought
The appellants sought to set aside the compensation orders, arguing that external factors beyond their control should excuse delay. The respondents sought continuation of the compensation awards, asserting that Section 18 imposes strict liability on promoters for non-compliance with timelines.
The Legal Issue
The central question was whether Section 18 of RERA imposes absolute liability on builders for delay in possession, even when the delay arises from circumstances such as regulatory approvals, labor strikes, or force majeure events, or whether such factors can be considered to mitigate liability.
Arguments Presented
For the Petitioner
The appellants relied on M/s. DLF Limited v. RERA and M/s. Prestige Group v. Homebuyer, arguing that the doctrine of force majeure and equitable considerations should apply. They contended that the pandemic and delays in environmental clearances were unforeseeable and beyond their control, and that the MahaRERA failed to appreciate the practical constraints faced by developers. They further argued that the interest rate applied was punitive and disproportionate.
For the Respondent
The respondents relied on the legislative intent behind RERA, emphasizing that the Act was enacted to protect homebuyers from unscrupulous promoters. They cited RERA v. M/s. Sobha Limited to argue that Section 18 is a remedial provision designed to ensure certainty and predictability. They maintained that builders are expected to account for foreseeable regulatory delays in their project timelines and that invoking external factors after the fact undermines the very purpose of the statute.
The Court's Analysis
The Court undertook a purposive interpretation of Section 18 of RERA, noting that the provision mandates compensation at the rate of interest specified in the agreement, or if none, at the State Bank of India’s lending rate plus two percent. The Court rejected the argument that force majeure or regulatory delays automatically absolve builders of liability.
"The legislature, by enacting Section 18, intended to create a regime where the promoter bears the risk of non-performance of the contractual obligation to deliver possession on time. The Act does not contemplate a balancing of equities between the promoter and the allottee in cases of delay."
The Court distinguished DLF Limited on the ground that it involved a case of complete project abandonment, not mere delay. It held that delays in obtaining approvals are inherent in the real estate business and must be factored into project planning. The Court further observed that the interest rate under Section 18 is compensatory, not punitive, and serves to restore the homebuyer to the position they would have been in had possession been delivered on time.
The Court also noted that the appellants had not demonstrated that any delay was caused by the State or its agencies in a manner that constituted an external, unavoidable impediment. Mere administrative delays, even if prolonged, do not qualify as force majeure under RERA unless formally declared as such by competent authority.
The Verdict
The petitioners’ appeals were dismissed. The Court held that builders are strictly liable for delay in possession under Section 18 of RERA, and that external factors such as regulatory delays or labor shortages do not absolve them of liability. The compensation awarded by MahaRERA, calculated at the prescribed interest rate, was upheld.
What This Means For Similar Cases
Delay Is Not Excused by Routine Regulatory Hurdles
- Practitioners must advise homebuyers that any delay beyond the agreed possession date triggers automatic liability under Section 18, regardless of whether the builder claims external causes
- Builders must now document and proactively disclose all anticipated regulatory timelines in project brochures and agreements to avoid future disputes
Interest Rate Is Compensatory, Not Penal
- The interest rate under Section 18 is not subject to judicial reduction unless the agreement itself specifies a higher rate
- Courts will not entertain arguments that the rate is "excessive" - it is a statutory default mechanism
Documentation Is Critical for Builders
- Builders must maintain contemporaneous records of all approvals sought, timelines obtained, and communications with authorities to rebut claims of avoidable delay
- Failure to maintain such records will result in adverse inference against the promoter in RERA proceedings
