In a landmark judgment that strengthens homebuyer rights, the Bombay High Court has decided that buyers can withdraw the money deposited by builders while waiting for the appeals under the Real Estate (Regulation and Development) Act (RERA) to be decided. The court pointed out that such a relief is very much needed, particularly where homebuyers have been subjected to long delays in the project and have hit financial hardships.
According to this decision, it is the RERA Appellate Tribunal that can permit, at its discretion, the withdrawal of deposited amounts on proper grounds. The court explained that the exercise of this discretion should be done in relation to the facts of the case at hand so as to be fair and just to both sides, taking into consideration the fact that homebuyers may be at a disadvantage.
Background of the Case
Dispute between the owner of the house and the builder about the delay in handing over the residential units in Mumbai led to the case. In 2015, the buyer had purchased two flats worth over 3 crore in the project developed by Rare Townships Private Limited and had paid almost 2 crore. The possession was to be given at the end of Dec 2018. However, the dependence on the project was brought to a halt and further delayed beyond the definite time.
After having waited for so many years, the buyer made a demand for a refund according to Section 18 of RERA to MahaRERA and also asked for interest and compensation. In March 2021, MahaRERA ordered the builder to return the amount along with the interest. The builder then filed a case before the appellate tribunal against this order.
Tribunal’s Decision and Legal Challenge
The builder had to pre-deposit funds under RERA rules, before the appeal could even begin. Plus, the appellate tribunal let the buyer take back the money during the appeal, keeping it in the system for now. Withdrawing funds during legal review - In particular without court order - isn't allowed, the builder claims. Moving to the Bombay High Court, he argues that the tribunal acted beyond its power and broke procedure.
- Builder challenged withdrawal of pre-deposited amount
- Claimed tribunal’s action was beyond its legal powers
High Court’s Observations
Rejecting the builder’s arguments, the High Court held that RERA does not restrict the tribunal’s authority to allow such withdrawals. Instead, it affirmed that tribunals can exercise discretion in appropriate cases to ensure that justice is not delayed in practical terms.
The court also stressed that merely securing the refund amount in a deposit does not provide meaningful relief to the buyer, who continues to face financial and emotional hardship due to delayed possession.
“It is no solace to an allottee that the amount ordered to be refunded is secured and kept in a deposit. The release of the amount ameliorates the situation of the allottee by relieving him of the financial constraints and also the mental anguish caused by the breach of obligations.”
Buyer vs Developer: Unequal Position
A key aspect of the judgment is the court’s recognition that homebuyers and developers cannot be treated on equal footing in such disputes. The court noted that buyers often invest their life savings into purchasing homes, while developers generally have greater financial capacity to absorb risks.
- Buyers face financial stress due to EMIs and delays
- Developers have higher capacity to withstand financial pressure
- The court further observed that a developer who has retained a buyer’s funds for several years cannot later argue that allowing withdrawal would create difficulties in recovery if the appeal succeeds.
Legal Framework Under RERA
The verdict also explains the purpose that was kept in mind when the lawmakers came up with this idea. Section 18 requires that in the event of delay, developers are to be held responsible for returning the amount along with the applicable interest, whereas Section 43(5) should be read as a requirement of payment in advance towards the cost of the appeal for the appeal to be allowed.
On the one hand, the tribunal made it clear that these provisions are there to enhance the integrity of the homebuying process and widen the scope of relief in case of non-compliance of the orders whereas on the other hand, allowing withdrawal of deposits, in suitable cases, would be in keeping with the main purpose of the statute.
This decision will probably have a major impact on homebuyers and developers to a different extent. Homebuyers get an opportunity to get their money back quickly if the project is delayed. Besides, developers need to be more careful and punctual in the completion of their projects. It will certainly be a shot in the arm for RERA as it emphasizes that legal solutions should not only be formal but also produce real results for those who have been affected. Declaring that builder deposits can be withdrawn during the pendency of an appeal, the Bombay High Court has taken a giant leap in protecting the rights of homebuyers under RERA.
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