Homebuyers Seek Refund After Developer Fails to Deliver Flat; Bombay High Court Holds RERA Refund Right Absolute, Cannot Be Deferred Until Occupation Certificate
Developer Delays Possession and Seeks Time Until Occupation Certificate to Refund Buyers; Bombay High Court Says Section 18 Requires Immediate Refund With Interest
Facts
Respondent Nos. 1 and 2 booked Flat No. 702 in Building C-1 of the “Waterways” project at Nashik, developed by Sanklecha Constructions Pvt. Ltd. The total consideration was ₹43,13,200, of which the allottees paid ₹22,58,178. Under the registered Agreement for Sale dated 16 May 2016, possession was to be delivered by 31 December 2017. The project, however, was not completed within the stipulated period. SANKLECHA CONSTRUCTIONS
The allottees approached MahaRERA in 2019. MahaRERA permitted them to withdraw from the project and ordered refund of their entire payment with interest from 1 January 2018. However, considering the promoter’s alleged mitigating circumstances, project finances and interests of other purchasers, MahaRERA allowed the promoter to defer payment until it obtained the Occupation Certificate (OC). SANKLECHA CONSTRUCTIONS
The allottees challenged this condition. The Maharashtra Real Estate Appellate Tribunal removed the promoter’s option to wait until the OC and ultimately required refund of the amount with interest. The promoter therefore approached the Bombay High Court under Section 58 of RERA. SANKLECHA CONSTRUCTIONS
Issues
The High Court principally considered three questions:
- Whether a promoter’s obligation under Section 18(1) of RERA to refund the amount with interest upon the allottee’s demand is absolute and unqualified, or whether MahaRERA/Appellate Tribunal can grant relaxation based on mitigating circumstances or genuine efforts to complete the project.
- Whether the Supreme Court’s observations in Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. concerning the unconditional nature of the refund right were merely obiter dicta, or binding precedent.
- Whether MahaRERA or the Appellate Tribunal can direct that refund with interest be made only after the promoter obtains the Occupation Certificate, instead of upon the allottee’s demand under Section 18(1). SANKLECHA CONSTRUCTIONS
Petitioner’s Arguments
The promoter argued that MahaRERA had correctly exercised discretion by permitting refund after the OC was obtained. According to it, the delay resulted from circumstances beyond its control and substantial progress had already been made in the project.
The promoter submitted that two buildings were 95% complete, another was 85% complete, and Building C-1—where the respondents had booked their flat—was approximately 70% complete. Immediate refund could affect project cash flow and prejudice more than 100 other flat purchasers. SANKLECHA CONSTRUCTIONS
It further contended that the observations in Newtech Promoters describing the Section 18 refund right as absolute were merely obiter dicta. Relying upon Neelkamal Realtors, the promoter argued that RERA authorities could consider mitigating circumstances and mould the relief.
The promoter was not disputing its ultimate liability to refund the principal amount with interest; its case was essentially that payment should be permitted after obtaining the OC. SANKLECHA CONSTRUCTIONS
Respondent’s Arguments
The homebuyers argued that once they exercised their statutory right to withdraw from the project, the promoter could not retain their money until an uncertain future event such as obtaining an OC.
They submitted that Section 18 is clear and unambiguous: failure to deliver possession within the agreed period entitles the allottee, upon withdrawal, to obtain the amount paid together with prescribed interest.
They further argued that the Supreme Court’s ruling in Newtech Promoters constituted a declaration of law and was not obiter. The promoter therefore had no right to seek postponement of the statutory refund. SANKLECHA CONSTRUCTIONS
Analysis of the Law
The High Court gave Section 18(1) a strict reading. Where the promoter fails to complete the project or deliver possession within the agreed timeline and the allottee elects to withdraw, the promoter becomes liable on demand to return the amount received together with prescribed interest. SANKLECHA CONSTRUCTIONS
The Court held that Section 18 does not confer discretion regarding the time for making the refund. Once the statutory conditions are satisfied, the allottee acquires an unqualified right and the promoter must satisfy the demand for refund. SANKLECHA CONSTRUCTIONS
Importantly, the Court distinguished refund with interest from compensation. Refund and interest constitute the minimum statutory entitlement of the withdrawing allottee, whereas compensation may require separate adjudication and proof of loss.
Consequently, neither the promoter nor MahaRERA nor the Appellate Tribunal has discretion to defer the refund until an OC is obtained. SANKLECHA CONSTRUCTIONS
Precedent Analysis
Newtech Promoters and Developers Pvt. Ltd. v. State of U.P.
This was the central precedent. The Supreme Court had characterised the allottee’s Section 18(1) right to refund as unconditional and not dependent upon contingencies where possession was not delivered within the contractual timeline. SANKLECHA CONSTRUCTIONS
The promoter attempted to characterize those observations as obiter dicta. The Bombay High Court rejected that argument.
It held that the Supreme Court’s observations must be read together with its wider analysis of Section 18, including the distinction between refund and compensation. The interpretation was directly connected with the legal questions before the Supreme Court and therefore constituted ratio decidendi and binding precedent, rather than an incidental observation.
Neelkamal Realtors Suburban Pvt. Ltd. v. Union of India
The promoter relied upon Neelkamal Realtors to argue that genuine efforts and mitigating circumstances could justify moulding relief.
The High Court held that Neelkamal could not be interpreted as conferring discretion upon MahaRERA or the Appellate Tribunal to dilute the unconditional refund obligation subsequently recognised in Newtech Promoters.
Accordingly, mitigating circumstances cannot be used to alter the period of interest, rate of interest or date by which the statutory refund must be made. The Court expressly held that the relevant observations in Newtech Promoters constituted binding precedent.
Court’s Reasoning
The Court found the statutory scheme straightforward: the promoter promised possession by 31 December 2017 but failed to deliver it. Once the homebuyers elected to withdraw, their entitlement under Section 18 crystallised.
The financial condition of the project, genuine efforts of the developer, interests of remaining purchasers or potential consequences of an immediate outflow of funds could not convert an unconditional statutory entitlement into a conditional one.
The Court therefore answered the substantial questions of law against the promoter:
- the Section 18(1) refund obligation is absolute and unqualified;
- RERA authorities cannot relax the refund obligation because of mitigating circumstances or genuine completion efforts;
- Newtech Promoters constitutes binding ratio on this issue; and
- it is impermissible to make refund dependent upon the promoter first securing an Occupation Certificate.
The High Court consequently found no reason to interfere with the ultimate direction requiring the promoter to refund the entire amount with prescribed interest from 1 January 2018.
Conclusion
The Bombay High Court upheld the homebuyers’ right to obtain refund with interest without waiting for completion of the project or issuance of an Occupation Certificate.
The judgment establishes that once the conditions of Section 18(1) RERA are satisfied and the allottee elects to withdraw, the refund right cannot be postponed by considering the promoter’s financial difficulties, genuine efforts, project progress, interests of other purchasers, or other mitigating circumstances.
The Court upheld the direction requiring Sanklecha Constructions to refund the entire amount received from the allottees together with interest at the rate prescribed under Rule 18 of the 2017 Rules from 1 January 2018, finding no ground for interference.
Case Details
Case: Sanklecha Constructions Pvt. Ltd. & Ors. v. Nitin Madhukar Shewale & Ors.
Court: High Court of Judicature at Bombay, Civil Appellate Jurisdiction
Case Number: Second Appeal (Stamp) No. 8825 of 2025 with Interim Application No. 7869 of 2025 SANKLECHA CONSTRUCTIONS
Judge: Justice Sandeep V. Marne
Date: 28 September 2026 SANKLECHA CONSTRUCTIONS
Result: Promoter’s Second Appeal dismissed; direction to refund the entire amount to the allottees with prescribed interest from 1 January 2018 upheld.
