Bombay High Court upholds homebuyers’ right to interest for every month of project delay

The petitioners claimed that BLO duties are primarily restricted to government and semi-government employees. (File Photo)

Homebuyers who choose to stay in delayed housing projects are entitled to interest for every month of delay until actual possession is handed over under the Real Estate Regulation Act (RERA), the Bombay High Court ruled in its June 8 verdict.

The court also dismissed the petitions of Runwal Constructions in a case involving Mulund flats whose possession remained pending for nearly 16 years after the promised handover date.

It added that such a right was “absolute” and it was not contingent upon “force majeure” claims or contractual clauses or terms with the developer.

What is force majeure

Force majeure is a legal principle or a remedy available to an affected party under the contract to seek relief in case of unforeseen events, including war, conflict, and major disruptions, making it impossible to fulfil contractual obligations.

“Under Section 18(1) and its proviso, the respondents (flatbuyers), who chose not to withdraw from the project, are unconditionally entitled to interest for every month of delay until possession is actually delivered,” a single-judge bench of Justice Madhav Jamdar observed.

The judge added that the Supreme Court, in its judgments in Imperia Structures Ltd and Newtech Promoters and Developers cases, “has affirmed that such right is absolute and not contingent upon contractual clauses or force majeure claims.”

The appeals arose from orders of the RERA Appellate Tribunal in relation to a Mulund housing project called ‘Runwal Infinity (Runwal Sanctuary)’, where buyers had booked flats between 2005 and 2007 and paid substantial amounts.

High Court upholds Tribunal order

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The Tribunal had directed Runwal Constructions to pay interest to buyers/allottees at the rate of 10.05 per cent from February 1, 2014, until actual possession was handed over. Upholding the order, the HC also retained directions requiring completion of the buildings within fixed timelines.

The court, in two of the appeals, observed that the developer fraudulently attempted to invoke the “doctrine of frustration of contract”, which applies when an unforeseen and unavoidable event makes performance of a contract impossible.

The court, in the appeals involving Tower C in the project, ordered Rs 1 lakh each as costs to be paid to the flat buyers, within four weeks.

HC ‘shocked’ over developer’s false undertaking

The High Court also observed it was “shocking” that the developer obtained permission from the Brihanmumbai Municipal Corporation (BMC) for demolition of Tower C, which was partly constructed, “by playing fraud”, as a false undertaking was given stating that the appellants would safeguard the rights of flat purchasers in that building, which is now being reconstructed.

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“The appellant is taking a fraudulent, concocted, and afterthought submission only to avail the doctrine of frustration of contract, as per Section 56 of the Contract Act,” the High Court noted.

Relying on previous Supreme Court judgments, Justice Jamdar stated that “escalation in price cannot be a reason for the frustration of contract” and the contentions by the developer do not apply in the present case.

Runwal Constructions, through Senior Advocate Atul Damle, argued that clauses in its agreements allowed extension of the possession date due to force majeure events and litigation affecting the project.

However, the court rejected the contention, observing that authorities under RERA cannot rewrite or revise the date of handover of the possession.

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In the present case, the High Court observed that “even after a period of almost 20 years of execution of the agreement, and after lapse of about 16 years from the agreed date of handing over possession, the possession has not been handed over.”