MUMBAI: In a landmark ruling reinforcing homebuyer protections under the Real Estate (Regulation and Development) Act, 2016 (RERA), the Bombay High Court has held that real estate developers cannot shield themselves behind contractual force majeure clauses, standard one-sided terms, or self-induced delays to escape payment of monthly interest for delayed possession under Section 18 of RERA.
A Single Bench of Justice Madhav J. Jamdar dismissed a batch of 10 Second Appeals preferred by Mumbai-based real estate developer Runwal Constructions. The Court upheld the orders passed by the Designated Real Estate Appellate Tribunal (Maharashtra Revenue Tribunal) directing the builder to pay interest at 10.05% per annum for delayed possession to flat allottees in its ‘Runwal Infinity’ (now ‘Runwal Sanctuary’) project at Nahur, Mulund.
“The buyer borrows money to pay for a house and simultaneously plays the role of a financer as building projects collect money upfront, putting the buyer in a very vulnerable position — the weakest stakeholder with a high financial exposure… Section 18 gives an unqualified statutory right to allottees. Unilateral terms in standard-form agreements dehors statutory obligations cannot prevail,” the Court observed, relying on key precedents from the Supreme Court.
Key Highlights of the Ruling
The Bench reiterated that Section 18 confers an absolute, unconditional right upon an allottee who chooses to stay with a delayed project to receive monthly interest from the developer until actual possession is delivered. Contractual extension clauses or litigations that do not completely stall work cannot wipe out this statutory liability.
The Court rejected the builder’s attempt to claim frustration under Section 56 of the Indian Contract Act, 1872 regarding ‘Tower C’. The builder had demolished the partly constructed tower citing structural constraints and changes under DCPR 2034, only to re-plan the structure from 22 floors to 48 floors. Holding that commercial onerousness or an intentional strategy to maximize floor space does not constitute frustration, the Court imposed exemplary costs of ₹1,00,000 each in the appeals concerning Tower C.
The Court also clarified that under Section 43(4) of RERA, a designated temporary tribunal (such as the Maharashtra Revenue Tribunal) continues to hold lawful jurisdiction to hear and decide appeals until the permanent Real Estate Appellate Tribunal becomes fully functional through its appointed members subscribing to their official oath of office.
Brief Facts and Background
The disputes trace back to 2005–2007, when the allottees booked flats in Towers B1, B2, and C of Runwal Infinity in Mulund, paying between 36% and 100% of the total purchase price. The agreed possession dates stipulated in the registered agreements and allotment letters fell between December 2008 and December 2010.
Despite receiving substantial life savings from the purchasers over fifteen years ago, the promoter failed to hand over possession. The allottees filed complaints before the Real Estate Regulatory Authority (MahaRERA). The Regulatory Authority disposed of the complaints by merely directing the builder to expedite construction and refrain from unilateral cancellations.
Aggrieved, the flat buyers appealed to the Designated Appellate Tribunal (presided over by the President of the Maharashtra Revenue Tribunal). On November 1, 2018, the Appellate Tribunal granted relief by directing Runwal Constructions to pay interest at 10.05% per annum effective from February 1, 2014 until actual possession, while granting an extension of 18 months to complete Towers B1 and B2.
The developer challenged this directive before the Bombay High Court in a series of Second Appeals.
The Legal Contention on Jurisdiction: ‘Established’ vs ‘Functional’
The developer contended that the Maharashtra Revenue Tribunal lacked jurisdiction to pass the November 1, 2018 order. Runwal’s counsel argued that since the State Government notified the constitution of the permanent Maharashtra Real Estate Appellate Tribunal on May 8, 2018 under Section 43(1), all pending appeals had automatically stood transferred under the second proviso to Section 43(4).
Justice Jamdar rejected this argument, distinguishing an administrative appointment resolution from a functioning tribunal. The Court observed that while appointments were made in May 2018 under Section 46, the Chairperson and Members took their mandatory oath of office and secrecy under Rule 8 only on December 24, 2018.
Interpreting the statute purposively, the High Court held that “establishment” under Section 43 read with Section 43(4) means a functional tribunal ready to hear litigants, not an entity on paper. Consequently, the Maharashtra Revenue Tribunal retained complete jurisdiction up to December 23, 2018, rendering the November 1, 2018 order valid and operative.
One-Sided Force Majeure Clauses Cannot Dilute Statutory Rights
On merits, Runwal Constructions placed reliance on Clause 14 and Clause 15 of its agreements, which contained force majeure exclusions, including government/court stay orders and forest land litigation. The developer contended that RERA authorities cannot rewrite contracts to fix new possession dates or override agreed force majeure extensions.
The High Court firmly rejected this defense. Relying on the Apex Court’s ruling in Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan, the Court noted that standardized, one-sided clauses signed on the dotted line are unconscionable and amount to unfair trade practices. Following Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. and Imperia Structures Ltd. v. Anil Patni, the Bench underscored that where an allottee does not withdraw from the project, the promoter must be paid interest for every month of delay until the handing over of possession. The Court observed that while the agreed possession dates were between 2008 and 2010, the Appellate Tribunal had already given the builder significant leeway by awarding interest only from February 1, 2014. The builder could not seek to postpone this liability indefinitely while holding buyers’ capital.
Plea of Frustration on Tower C Called Out as Fraud on Authorities
Addressing Second Appeal Nos. 253 and 257 of 2022, where purchasers in Tower C had paid around 40% of their flat costs, Runwal claimed that the contract was frustrated under Section 56 of the Contract Act. The builder contended that because new development rules (DCPR 2034) mandated a second staircase, retrofitting was commercially unviable, compelling demolition.
The High Court came down heavily on this argument, citing Energy Watchdog v. CERC to emphasize that an increase in expense or onerousness never discharges a contract.
Justice Jamdar specifically observed that in the exact same layout, Towers B1 and B2 were retrofitted and completed without being demolished. Runwal had obtained MCGM’s demolition permission after furnishing an express undertaking on February 19, 2019 declaring that the rights of existing purchasers in Building No. C would be safeguarded. After demolishing the building and securing approvals to raise the height from 22 floors to 48 floors (expanding the layout to over 1,000 units), the developer turned around to deny the buyers their rights on the plea of frustration.
Labeling the plea an afterthought designed to deprive buyers of their flats and exploit regulatory changes for windfall profits, the Bench dismissed both appeals with exemplary costs of ₹1,00,000 each payable to the respective respondents. The remaining eight appeals were dismissed with costs of ₹10,000 each. The Court also refused Runwal’s oral plea to stay the judgment.
Case Details
Case Title: Runwal Constructions Registered Partnership Firm v. Bharat Shah (along with connected Second Appeals)
Citation: 2026:BHC-AS:22794
Court: High Court of Judicature at Bombay (Civil Appellate Jurisdiction)
Coram: Justice Madhav J. Jamdar
Date of Pronouncement: June 8, 2026
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