The Bombay High Court has delivered a decisive clarification on the supremacy of statutory remedies under RERA over contractual limitations imposed by builders. This judgment reinforces that homebuyers are not bound by clauses that dilute statutory rights, setting a critical precedent for enforcement of consumer protections in real estate transactions.
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 homebuyers for residential units in Mumbai. The agreements stipulated a fixed date for possession, which the developers failed to meet. Despite repeated delays extending beyond two to four years, the developers invoked contractual clauses limiting liability to nominal compensation - often as low as 10% of the paid amount - and refused to pay interest or compensation as mandated under the Real Estate (Regulation and Development) Act, 2016.
Procedural History
The homebuyers filed complaints before the Maharashtra Real Estate Regulatory Authority (MahaRERA), which held the developers liable for delay and ordered payment of interest at 10% per annum on the amount paid, along with compensation for mental agony and loss of opportunity. The developers appealed to the Bombay High Court under Section 58 of RERA, challenging the MahaRERA orders on grounds that:
- The contractual limitation on liability was binding under the Indian Contract Act, 1872
- MahaRERA exceeded its jurisdiction by overriding private agreements
- The interest rate awarded was arbitrary
The High Court consolidated seven second appeals arising from similar facts involving different buyers.
Relief Sought
The appellants sought to set aside the MahaRERA orders and declare that contractual clauses limiting liability for delay are enforceable. The respondents sought confirmation of the statutory remedies under RERA, including interest, compensation, and specific performance.
The Legal Issue
The central question was whether Section 18 of RERA permits builders to contract out of their statutory obligation to pay interest and compensation for delayed possession, or whether such contractual limitations are void as contrary to public policy and statutory intent.
Arguments Presented
For the Appellant
The appellants relied on Bhagwati Developers v. M/s. R. S. Sharma & Co. to argue that parties are free to contractually limit liability unless such limitation violates an explicit statutory prohibition. They contended that RERA does not expressly invalidate contractual clauses capping compensation, and that MahaRERA’s award of interest beyond the agreed rate amounted to judicial overreach. They further cited K. S. Parthasarathy v. S. S. Rajan to assert that RERA is a regulatory statute, not a compensatory one, and that its remedies are supplementary, not exclusive.
For the Respondent
The respondents argued that Section 18(1) of RERA imposes a mandatory obligation on promoters to compensate buyers for delay, and that Section 18(2) prescribes a default interest rate of 10% per annum, which is a statutory floor, not a ceiling. They relied on Prestige Group v. R. S. Srinivasan and MahaRERA v. Shree Balaji Developers to emphasize that RERA was enacted to protect vulnerable consumers from exploitative contractual terms. They further submitted that any clause attempting to waive or reduce statutory liability under RERA is void under Section 18(5), which declares any agreement contrary to the Act as null and void.
The Court's Analysis
The Court undertook a purposive interpretation of RERA, emphasizing its consumer protection mandate. It held that Section 18 is not merely directory but mandatory, and that the interest rate prescribed is a minimum standard, not a negotiable term. The Court rejected the argument that contractual autonomy overrides statutory rights, stating that RERA was enacted precisely to address the imbalance of power between developers and homebuyers.
"The legislature, by enacting RERA, intended to create a regime where the rights of homebuyers are not subject to the whims of promoters through fine print in agreements. To permit contractual clauses to override Section 18 would render the entire statutory framework otiose."
The Court distinguished Bhagwati Developers on the ground that it dealt with general contract law, whereas RERA is a special statute with overriding effect under Section 89. It further held that Section 18(5) explicitly nullifies any agreement that contradicts the Act, making contractual caps on liability unenforceable. The Court affirmed that MahaRERA’s award of interest at 10% per annum was not excessive but aligned with the statutory minimum, and that additional compensation for mental agony was justified under Section 18(4).
The Verdict
The respondents won. The Court held that Section 18 of RERA creates an irrevocable statutory obligation on builders to pay interest and compensation for delayed possession, and that any contractual clause attempting to limit such liability is void. The MahaRERA orders were upheld in their entirety.
What This Means For Similar Cases
Contractual Clauses Cannot Override RERA
- Practitioners must now argue that any clause in an agreement for sale limiting interest or compensation for delay is void ab initio under Section 18(5)
- Builders cannot rely on force majeure or contractual limitations to escape liability unless the delay is due to government action or natural calamity as expressly permitted under RERA
- Homebuyers should be advised to insist on RERA-compliant agreements and reject any clauses capping liability
Interest Is a Statutory Minimum, Not a Ceiling
- The 10% per annum interest under Section 18(2) is the floor rate; tribunals may award higher rates if justified by evidence of loss
- Courts and tribunals must now treat RERA interest as non-negotiable and not subject to arbitration or settlement terms that reduce it
- Legal notices to builders must cite Section 18(2) and Section 18(5) together to establish the non-waivable nature of the remedy
MahaRERA Orders Are Presumptively Valid
- Appeals against MahaRERA orders must now overcome a strong presumption of statutory compliance
- Appellants must demonstrate clear error of law or jurisdictional excess, not mere disagreement with the quantum of compensation
- Practitioners should prepare for higher scrutiny of contractual defenses in RERA appeals, with courts favoring statutory remedies over private bargains
