Builder’s One-Sided Agreement Can’t Override RERA: Allahabad High Court Rules Interest for Delay in Possession is a Statutory Right

“No Private Settlement Can Defeat a Mandatory Obligation Under RERA”, In a landmark judgment with far-reaching implications for homebuyers, the Allahabad High Court on 21st January 2026, dismissed a RERA appeal filed by the Lucknow Development Authority (LDA) and held that any private settlement seeking to waive the allottee’s statutory right to interest for delayed possession under Section 18 of the RERA Act is void and unenforceable.

Justice Prashant Kumar held that “no private agreement or dotted-line settlement can override the statutory obligations imposed upon the promoter by the Real Estate (Regulation and Development) Act, 2016.” The Court upheld the Appellate Tribunal’s order granting the allottee interest at MCLR + 1% for every month of delay from November 16, 2013 to June 4, 2019, and further directed the promoter to pay litigation costs of ₹20,000.

“The Right to Interest is Absolute, Unqualified and Independent of Any Demand by the Allottee”: Court Rejects Builder’s Argument Based on Waiver Agreement

The LDA had argued that a private settlement agreement dated 05.12.2018 — signed before executing the sale deed — contained a waiver of all claims, including delay interest. However, the Court refused to give legal sanctity to the document, calling it “a cyclostyled, builder-drafted, one-sided format”, which the allottee was compelled to sign under economic duress.

Justice Prashant Kumar observed: “The proviso to Section 18(1) casts a mandatory statutory obligation upon the promoter to pay interest for every month of delay till the handing over of possession. The expression used is ‘shall be paid by the promoter’. The obligation is not contingent upon a demand by the allottee.”

The Court noted that the “take it or leave it” nature of the settlement rendered it contrary to public policy and void under Section 23 of the Indian Contract Act, 1872, which prohibits agreements that defeat statutory law.

“Such settlements, where a homebuyer is made to sign on dotted lines just to receive delayed possession, are inherently unfair and amount to an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act, 1986.”

“Promoter Cannot Shirk Liability by Hiding Behind One-Sided Settlements”: Court Warns Against Bypassing RERA Statute Through Private Deals

The respondent, Smt. Sushma Shukla, had booked a flat in the LDA’s “Srishti Apartments” project in 2011, with promised possession by November 2013. However, possession was handed over five years late, in June 2019, and that too only after she signed a settlement agreement giving up her legal claims. The U.P. RERA had initially dismissed her complaint citing the settlement, but the Real Estate Appellate Tribunal reversed the decision, recognizing her right to statutory interest.

Upholding the Tribunal’s decision, the High Court noted: “The so-called ‘settlement’ sought to waive not just interest but even any complaint about delay or deficiency in services — and required the buyer to declare she had no mental or financial loss. This is nothing short of economic coercion.”

“One-sided agreements, where the allottee signs out of helplessness, cannot be made the foundation to defeat consumer protection laws enacted by Parliament.”

The Court also took note of the Supreme Court’s decision in Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan where it was held that flat purchasers forced to sign builder-dictated terms have no real choice, and such contracts are neither fair nor voluntary.

“Statute Prevails Over Contract — Especially in Consumer Welfare Laws”: Court Finds No Legal Error in Tribunal’s Order

Dismissing the LDA’s appeal under Section 58 of the RERA Act, the Court held that the Tribunal had correctly applied the law and found no “illegality, perversity or misreading of record” in its conclusion.

Relying on the Supreme Court’s ruling in Newtech Promoters v. State of U.P., the Court reiterated that: “The right to interest under Section 18(1) and Section 19(4) is absolute and unqualified. It is not contingent on unforeseen events or contractual stipulations. The promoter is under a non-negotiable statutory obligation to pay.”

Even more categorically, the Court declared: “A contract or settlement cannot override the rights and obligations created by statutes. A builder cannot defeat consumer protection laws by using one-sided documents as shields.”

LDA’s Attempt to Evade RERA Liability Fails — Allottee’s Right to Interest Upheld

The Allahabad High Court’s ruling sends a strong message to real estate promoters across the country: legal liability under RERA cannot be diluted by private settlements or unfair agreements. Builders must adhere to statutory commitments, and allottees cannot be denied their rights through cleverly worded contracts that seek to circumvent the law.

The Court not only upheld the interest payable to the allottee but also validated the initiation of proceedings against the promoter under Chapter VIII of the RERA Act for failing to comply with its obligations.

“The law is clear. Delay attracts interest. No agreement, howsoever cleverly drafted, can rewrite the statute.”

Date of Decision: 21 January 2026