Bombay High Court: Homebuyer’s Right to Refund with Interest Under Section 18(1) RERA Is Absolute; Promoter Cannot Defer Payment Until Occupation Certificate

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 29.09.2026

Bombay High Court: Homebuyer’s Right to Refund with Interest Under Section 18(1) RERA Is Absolute; Promoter Cannot Defer Payment Until Occupation Certificate

In an important ruling strengthening the statutory remedy available to homebuyers under the Real Estate (Regulation and Development) Act, 2016 (RERA), the Bombay High Court has held that where a promoter fails to complete a project or deliver possession within the agreed timeline and the allottee chooses to withdraw, the promoter’s obligation to refund the amount received with prescribed interest under Section 18(1) is absolute and unqualified.

Justice held that neither the Real Estate Regulatory Authority nor the Appellate Tribunal has discretion to postpone such refund on account of mitigating circumstances, genuine efforts made by the promoter, project-financing concerns or the promoter’s intention to first obtain an Occupation Certificate (OC).

The Court consequently dismissed the second appeal filed by Sanklecha Constructions Pvt. Ltd. and its directors and upheld the ultimate direction requiring refund of the amount received from the allottees with interest under Rule 18 of the Maharashtra RERA Rules, 2017, with effect from 1 January 2018.

The dispute: delayed possession in the ‘Waterways’ project

• The dispute concerned Flat No. 702 in Building C-1 of the “Waterways” project at Anusaya Nagar, Tapovan Road, Dwarka, Nashik. Sanklecha Constructions Pvt. Ltd. was the developer/promoter, while the other appellants were its directors.
• The flat was agreed to be sold for ₹43,13,200, of which the allottees had paid ₹22,58,178. An Agreement for Sale dated 16 May 2016 required possession to be delivered on or before 31 December 2017, subject to reasonable extension based on specified force-majeure events.
• The promoter failed to deliver possession within the agreed period. The allottees eventually approached MahaRERA seeking relief.
• Significantly, the High Court recorded that the project had still not been completed by the date of its judgment, even though possession was contractually due by the end of 2017.

MahaRERA allowed withdrawal—but linked refund to Occupation Certificate

• By its order dated 24 August 2021, MahaRERA permitted the allottees to withdraw from the project and held them entitled to refund of the entire amount paid, together with interest from 1 January 2018 at the rate prescribed under Rule 18 of the Maharashtra Real Estate (Regulation and Development) Rules, 2017.
• However, MahaRERA also considered mitigating circumstances stated to be beyond the promoter’s control. Concerned that an immediate financial outflow could jeopardise the project and affect other purchasers, it permitted the promoter to make the refund after obtaining the Occupation Certificate.
• The promoter nevertheless remained free to refund the amount earlier.
• This effectively meant that while the allottees were permitted to exit the project, the timing of the actual refund could depend upon the promoter obtaining the OC.
• That qualification ultimately became the central legal issue before the High Court.

Appellate Tribunal removes the OC-linked refund option

• The allottees challenged MahaRERA’s order before the Maharashtra Real Estate Appellate Tribunal.
• By its judgment dated 7 November 2023, the Appellate Tribunal removed the portion of MahaRERA’s order that allowed the promoter to defer the refund until obtaining the OC. It initially directed the promoter to refund the entire amount within 23 days together with interest from the dates of receipt of payments.
• The promoter then sought review.
• On 28 November 2024, the Appellate Tribunal partly allowed the review and deleted its additional direction concerning interest from the date of receipt of payments. The final effective position was therefore that the promoter was required to refund the amount with interest from 1 January 2018, without the earlier option of waiting until the OC was obtained.
• The promoter then approached the Bombay High Court under Section 58 RERA.

High Court criticises confusing appellate directions

• Before addressing the substantive legal issue, the High Court expressed dissatisfaction with the manner in which the Appellate Tribunal had framed its operative directions.
• Justice Marne observed that the orders were unclear and required the Court to repeatedly compare the MahaRERA order, the Appellate Tribunal’s original judgment and its review order merely to understand what the promoter was ultimately required to do.
• The Court stated that clearer and unambiguous directions could have avoided this exercise.
• After reconciling the orders, the High Court concluded that the surviving direction required the promoter to refund the entire amount paid by the allottees with interest from 1 January 2018 at the prescribed rate.

Three substantial questions of law before Bombay High Court

• The appeal raised three important questions concerning the scope of Section 18(1) RERA.
• First, whether the promoter’s obligation to refund the amount received with interest upon an allottee’s demand is absolute and unqualified, or whether MahaRERA or the Appellate Tribunal can consider mitigating circumstances and genuine efforts made by the promoter to grant relaxation regarding the period of interest, rate of interest or timing of refund.
• Second, whether the Supreme Court’s observations in Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. concerning the allottee’s unconditional right to refund were merely obiter dicta, and how those observations interact with the Bombay High Court’s earlier decision in Neelkamal Realtors Suburban Pvt. Ltd. v. Union of India.
• Third, whether RERA authorities can direct that the refund with interest be made only after the promoter secures an Occupation Certificate, rather than upon the allottee’s demand under Section 18(1).
• These questions enabled the High Court to directly address the extent to which RERA authorities can “mould” refund relief in favour of a promoter facing genuine project difficulties.

Promoter relied on mitigating circumstances and interests of other homebuyers

• The promoter did not dispute its obligation to eventually refund the money with interest.
• Its principal contention was about when the refund had to be made.
• It argued that MahaRERA had correctly taken into account circumstances allegedly beyond the promoter’s control and should have been permitted to defer repayment until the project obtained its OC.
• The promoter further submitted that two of the five buildings in the project were approximately 95% complete, another was 85% complete, while Building C-1—where the concerned flat was located—was approximately 70% complete.
• According to the promoter, compelling an immediate refund with interest could seriously affect project cash flow and prejudice more than one hundred other flat purchasers.
• The promoter also relied upon Neelkamal Realtors to argue that genuine efforts and mitigating circumstances could be considered while moulding relief.

Bombay HC: Section 18(1) creates an unqualified right to refund

• The High Court rejected the promoter’s interpretation.
• Justice Marne held that a plain reading of Section 18(1) RERA shows that once the promoter fails to complete the project or give 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.
• The Court found that Section 18(1) does not leave any discretion regarding when that refund should be made.

It held:

• “In that sense, there is an unqualified right created in favour of the allottee to seek the refund under Section 18(1) of RERA.”
• Thus, once the statutory conditions are satisfied and the allottee elects to withdraw, the refund cannot ordinarily be deferred until a future project milestone selected for the promoter’s convenience.

Refund and compensation are two distinct remedies

• One of the most important aspects of the judgment is the Court’s distinction between refund with interest and compensation.

The High Court held that Section 18 contemplates two different components:

1. return of the amount received from the allottee together with interest; and
2. compensation for additional loss suffered by the allottee.

According to the Court, refund of the principal amount with interest represents the “bare minimum” that the allottee must receive.

A claim for additional compensation may require adjudication and proof of loss. But the refund of the amount received by the promoter together with statutory interest cannot be postponed while compensation is being adjudicated.

The Court therefore concluded:

“the right to seek return of amount with interest is absolute and unqualified.”

No discretion even for RERA Authority, Tribunal or High Court

The judgment goes further than merely restricting the promoter’s discretion.

The High Court held that the statutory right cannot be diluted by:

• the Regulatory Authority;
• the Appellate Tribunal; or
• even the High Court

by granting the promoter a concession to refund the money only after securing the project’s Occupation Certificate.

This is a particularly significant aspect of the ruling because it limits the scope for equitable restructuring of an allottee’s Section 18(1) refund entitlement once the statutory right has crystallised.

Supreme Court’s Newtech Promoters ruling is binding—not obiter dicta

• The promoter sought to distinguish the Supreme Court’s decision in Newtech Promoters and Developers Pvt. Ltd., contending that the observations concerning an allottee’s absolute right to refund were merely obiter dicta.
• The Bombay High Court rejected that argument.
• It referred to the Supreme Court’s interpretation of Section 18, including the proposition that an allottee’s right to seek refund is not dependent upon contingencies or stipulations where the promoter has failed to deliver possession within the agreed period.
• The High Court further relied on the Supreme Court’s discussion of the expression “on demand”, which emphasised the priority, immediacy and expediency attached to the refund remedy.
• Justice Marne therefore held that the relevant observations in Newtech Promoters, read with the Supreme Court’s wider reasoning, were not mere obiter.
• They constituted binding law concerning the interpretation of Section 18 RERA.

‘On demand’ means priority, immediacy and expediency

• The phrase “on demand” assumes considerable importance in the judgment.
• The High Court accepted the Supreme Court’s interpretation that this expression reflects the legislature’s intention to accord priority, immediacy and expediency to an allottee’s right to refund.
• This means that a refund remedy cannot be transformed into an indefinite future entitlement dependent on project completion or receipt of an OC.
• The purpose of separating refund from compensation is also to ensure that the relatively straightforward refund remedy does not become entangled in a more elaborate adjudication concerning damages or additional losses.

What about genuine efforts by the promoter?

• The promoter relied heavily upon the Bombay High Court’s earlier decision in Neelkamal Realtors, where the Division Bench had observed that authorities may consider genuine cases and mould relief where a promoter, despite genuine efforts, fails to complete a project.
• The High Court clarified the scope of that proposition.
• Justice Marne held that Neelkamal Realtors cannot be interpreted to mean that the promoter’s statutory liability to return the amount received with interest can be relaxed.
• The Court recognised that genuine efforts and absence of fault may become relevant when considering a claim for additional compensation.
• But they cannot dilute the basic refund obligation.
• The Court explained that even where the promoter is not responsible for the delay, the minimum obligation remains to return the allottee’s money together with interest.
• It further held that even a promoter who has made genuine efforts to complete the project must perform this bare-minimum obligation.

Project cash-flow concerns cannot postpone an allottee’s refund

• The promoter’s argument raised a practical concern frequently encountered in delayed real-estate projects: an immediate outflow of refunds may reduce the funds available to complete construction for remaining purchasers.
• Indeed, MahaRERA’s original order had attempted to address precisely this concern by linking payment to the OC.
• The High Court nevertheless held that Section 18(1) does not confer discretion to postpone the statutory refund on that basis.
• Accordingly, considerations relating to project financing, completion percentages, interests of remaining purchasers or genuine efforts cannot override an allottee’s crystallised statutory right to receive the amount with interest after electing to withdraw.

Occupation Certificate cannot be made a precondition for refund

The High Court’s answer to the third substantial question of law was categorical.

It held that:

• “It is impermissible for the Regulatory Authority and/or the Appellate Tribunal to direct that return of amount with interest shall only be after securing Occupation Certificate of the project…”
• This directly invalidated the legal basis of MahaRERA’s original attempt to defer payment until the project received an OC.
• For homebuyers, the practical implication is significant: once Section 18(1) applies and the allottee elects to withdraw, the promoter cannot insist that the buyer remain financially tied to the project until its eventual completion or certification.

Significant distinction: refund with interest vs damages

• The judgment should not be read as holding that mitigating circumstances are irrelevant for every conceivable relief under RERA.
• The Court drew a clear distinction.
• Where an allottee claims additional damages or compensation for losses—such as rental expenses, housing-loan interest or other financial consequences—the circumstances surrounding the promoter’s delay may be examined in adjudicating that compensation claim.
• But the amount actually received by the promoter, together with prescribed interest, stands on a different footing.
• According to the Court, that is the statutory minimum that must be returned once the allottee validly exercises the right to withdraw under Section 18(1).

Why the judgment matters for homebuyers and developers

• The ruling provides substantial clarity on an important recurring RERA issue.
• For homebuyers, it reinforces that the Section 18(1) withdrawal remedy is not merely a future promise to repay whenever the delayed project eventually reaches completion.
• For developers and promoters, the judgment highlights the financial consequences of missing contractual possession timelines. Genuine efforts, circumstances outside the promoter’s control or concerns about project cash flow may not be sufficient to postpone a refund once the allottee exercises the statutory withdrawal right.
• For MahaRERA and the Appellate Tribunal, the decision places a clear limitation on the power to mould relief: equitable considerations cannot be used to restructure an unconditional statutory refund into a payment contingent upon obtaining an OC.

Bombay HC upholds refund with interest from 1 January 2018

• Applying these principles to the case before it, the High Court upheld the ultimate direction requiring the promoter 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.
• The Court found no ground to interfere with that direction.
• The Second Appeal was accordingly dismissed, with no order as to costs. The connected interim application for stay was also disposed of.

Conclusion

The Bombay High Court’s ruling in Sanklecha Constructions Pvt. Ltd. v. Nitin Madhukar Shewale provides an emphatic interpretation of the homebuyer’s refund remedy under Section 18(1) RERA.

The Court has clarified three important propositions.

First, once possession is not delivered within the agreed timeline and the allottee chooses to withdraw, the right to recover the amount paid with prescribed interest is absolute and unqualified.

Second, neither genuine efforts by the promoter nor mitigating circumstances permit the Regulatory Authority or Appellate Tribunal to postpone that refund, alter the applicable interest entitlement on that basis, or make repayment contingent upon securing an Occupation Certificate.

Third, the Supreme Court’s pronouncement in Newtech Promoters concerning the unconditional nature and immediacy of the Section 18 refund remedy is binding law and not merely an obiter observation.

The ruling therefore draws a sharp distinction between refund with interest—the statutory minimum owed to a withdrawing allottee—and additional compensation, where questions of loss and surrounding circumstances may require separate adjudication.

For the real-estate sector, the message of the judgment is clear: project difficulties may be relevant to compensation, but they cannot ordinarily be used to hold back a homebuyer’s own money once the statutory right to refund under Section 18(1) has arisen.

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Source: Bombay High Court

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