Madras HC Sets Aside ₹5 Lakh Award, Says RERA Allottee Who Doesn’t Withdraw From Delayed Project Can Claim Interest, Not Compensation

The allottee entered into sale and construction agreements with the promoter in August 2019 for a commercial unit in the “Market of India” project.

She paid approximately 90% of the consideration.

Although possession was due by June 2022, with a six-month grace period, the promoter failed to complete construction and hand over the unit.

The allottee complained under Sections 31 and 71 of the Real Estate (Regulation and Development) Act, 2016 (“RERA”), seeking compensation for mental agony and costs.

The Adjudicating Officer awarded ₹5,00,000 as compensation and ₹50,000 as costs.

The promoter challenged that order under Article 227, contending that the allottee, who had not withdrawn from the project, could claim interest for delay but not compensation under Section 18(1).

The allottee objected that the revision was not maintainable because RERA provided an appeal remedy.

Whether the High Court could entertain a petition under Article 227 despite the statutory appeal remedy under RERA, where the challenge alleged that the Adjudicating Officer had acted beyond its jurisdiction.

Whether an allottee who does not withdraw from the project may receive compensation under Section 18(1), in addition to interest for the delay in handing over possession.

Section 18(1) of RERA provides for return of the amount paid, interest and compensation where an allottee withdraws from a project because the promoter has failed to deliver possession; its proviso provides an allottee who does not withdraw with interest for each month of delay until possession is handed over.

The Court read Sections 12, 14 and 19 as addressing distinct grounds for compensation, including false statements, specified defects or obligations, and certain failures involving discontinuance of the developer’s business; it found those provisions inapplicable to the claim before it.

Section 71 confers on the Adjudicating Officer authority to determine compensation claims under Sections 12, 14, 18 and 19, but does not independently expand the circumstances in which compensation is payable.

The Court also referred to the statutory appeal under Section 33 and the principles in Geeta Bai v. K. Arjun Singh and Nandi Infrastructure Corridor Enterprises Ltd. v. B. Gurappa Naidu concerning Article 227 review for jurisdictional error or patent error of law.

The promoter admitted that possession had not been delivered by the agreed date, but the allottee remained willing to continue with the project.

The Court therefore treated the case as falling under the proviso to Section 18(1), which, in its view, entitled the allottee to delay interest but not compensation.

It rejected reliance on Sections 12, 14 and 19 because the claim did not concern false advertising, defects covered by Section 14, or discontinuance of the developer’s business.

Since Section 71 did not create a separate entitlement to compensation, the Adjudicating Officer had exceeded its statutory authority by awarding compensation.

The Court considered that jurisdictional error sufficient to entertain the Article 227 petition despite the available appeal remedy.

It allowed the revision, set aside the compensation award of ₹5,00,000 and the related costs award of ₹50,000, and left the parties to pursue their respective positions on delay interest in the pending proceeding.

No costs were ordered in the revision.