Allottees Cannot Postpone Refund Claims Indefinitely After Possession With Occupation Certificate Is Offered: Bombay High Court Clarifies Scope of Section 18 of RERA

“Defective Title Grievances Are Distinct and Must Be Pursued Separately Under Section 18(2); Right to Refund Under Section 18(1) Ends Within Two Months After Offer of Possession”, In a significant judgment delivered on 18th July 2025, the Bombay High Court pronounced a crucial clarification on the ambit of refund rights under the Real Estate (Regulation and Development) Act, 2016 (RERA). Justice M.M. Sathaye held that an allottee’s right to claim refund due to delay in possession under Section 18(1) of RERA is not an unending privilege. The Court ruled,

“Where possession is offered along with a valid Occupation Certificate (OC), an allottee cannot indefinitely postpone the decision to withdraw from the project; such a decision must be taken within two months of the offer.”

The judgment provides a vital precedent for balancing rights of allottees and promoters, emphasizing that indefinite delay in decision-making by homebuyers causes undue financial burden on developers and contradicts the principle of fairness embedded within RERA.

Flat Buyers Claimed Refund Years After Possession Was Offered

The appeals before the High Court arose from four refund orders passed by the Maharashtra Real Estate Appellate Tribunal in favour of allottees of four flats in the Aaryavarta project in Nashik. The appellant developer, Linker Shelter Pvt. Ltd., had agreed to hand over possession by December 2017 but obtained an Occupation Certificate (OC) only in July 2018.

Despite being offered possession via letters in December 2018 and September 2019, the allottees did not respond until February 2020 when they demanded a full refund, alleging defective land title. The MahaRERA dismissed their complaints, but the Appellate Tribunal directed the developer to refund the entire amount with prolonged interest. Challenging this decision, the developer approached the High Court arguing that such belated claims defeat the objectives of RERA.

 “Right to Refund Is Not a Perpetual Right After OC”

Justice Sathaye, after an extensive review of RERA provisions, Supreme Court precedents including Newtech Promoters (2021) and Imperia Structures (2020, 2022), and the legislative scheme of RERA, held:

“While Section 18(1) confers an unqualified right on an allottee to withdraw in case of delay, it cannot be stretched beyond the statutory framework… Once possession with Occupation Certificate is offered, Section 19(10) comes into play and the allottee must take a decision within two months.”

The Court further observed that allowing open-ended refund claims, even after valid possession is offered,

“would amount to an absurd interpretation and result in frustration of the balance and standardisation that the RERA Act intends to achieve.”

Justice Sathaye reasoned that such prolonged claims not only create liability for developers for an undefined period but also deprive them of the opportunity to sell the unsold units in a rising market.

“Defective Title Grievance Cannot Be Mixed With Delay in Possession”: Court Differentiates Between Section 18(1) and 18(2)

The Court made a crucial distinction between two different remedies under RERA: “Grievances about defective title of land squarely fall under Section 18(2), which provides for compensation without limitation… They cannot be invoked to prolong the right to refund under Section 18(1) related to delay in possession.”

Justice Sathaye emphasized: “Once possession is offered with OC and there is no injunction preventing such possession, objections regarding title defects cannot be used to indefinitely postpone possession or claim continued interest on refunds.”

The Court clarified that aggrieved allottees are free to pursue compensation for defective title separately under Section 18(2), without conflating it with Section 18(1) withdrawal rights.

“Offer of Possession Remains Valid Despite Litigation if OC Is Obtained”: Court Interprets RERA’s Scheme on Pending Land Disputes

A key contention from the allottees was that pending litigation over title invalidated the offer of possession. The Court, however, firmly rejected this notion by holding:“Possession offer remains valid if the developer obtains Occupation Certificate (OC) and there is no subsisting court injunction. Mere pendency of title litigation does not vitiate the possession offer.”

Referring to Section 4(2) of RERA and MahaRERA’s Circular No. 28 of 2021, Justice Sathaye highlighted: “RERA obliges disclosure of litigations but does not prohibit possession merely due to litigation pendency.”

Refund Allowed Only with Limited Interest Period

Summing up the legal conclusions, Justice Sathaye ordered: “Allottees are entitled to withdraw from the project and obtain a refund, but interest is limited to two months from the date of the valid possession offer along with OC… beyond this, no interest shall accrue.”

The Court set aside the Appellate Tribunal’s direction to grant prolonged interest and instead confined interest liability to the period ending two months after the first offer of possession (i.e., up to 21 February 2019).

Moreover, it granted liberty to allottees to initiate separate proceedings for compensation under Section 18(2) regarding title defects, thus preserving their right to compensation without permitting double advantage through prolonged interest.

Judgment Establishes Balanced Approach Under RERA Between Developers and Allottees

The Bombay High Court’s judgment in Linker Shelter Pvt. Ltd. v. Charmaine Chougule & Ors. provides an important precedent in real estate litigation, drawing a clear line between delay-related refund rights and title-related compensation claims under RERA. By affirming that refund rights under Section 18(1) must be exercised within two months of a valid OC offer, the Court has strengthened legal certainty and prevented misuse of RERA’s protective mechanisms.

As Justice Sathaye rightly summed up: “Standardisation under RERA is achieved when rights are exercised timely, and developers are not subjected to indefinite uncertainty. The balance must be preserved, ensuring justice both to homebuyers and promoters.”

Date of Decision: 18 July 2025