UP-REAT (2025.04.01) in Smt. Sushma Shukla Vs. Lucknow Development Authority, [Appeal No.100 of 2019] held that.
The allottee on booking/allotment of the unit, the document would bind the promoter to the declared date of completion. In the event no date is declared, in that event three years would be taken as the tentative completion date depending on facts and circumstances of each case vide, M/s. Fortune Infrastructure. Vs. Trevor D’lima and others: (2018) 5 SCC 442.
In the event, the date of completion of the project with U.P. RERA, being at variance with the declared date of completion would have no bearing on computation of the interest component on the deposits made by the allottee. The burden of interest, on the promoter begins to run from the date declared by the promoter to the appellant till handing over possession of the unit.
In the event, promoter declares a date subsequent to the earlier date of completion, it would mean and indicate that the project is delayed. Section 18 (1) of the Act would become operative leaving it open to the allottee to either continue in the delayed project or withdraw from the project.
It, therefore, follows that the declaration of a subsequent date of completion with RERA made by the promoter does not shift the liability and obligation mandated under Section 18 (1) of the Act, 2016.
The mandate of Section 18 (1) is absolute and unconditional casting upon the promoter a positive mandatory obligation to pay interest to the allottee who has continued in the project for the delay. The liability to pay interest by the promoter would start running from the initial date declared by the promoter. The promoter cannot recile/retract from his commitment declared to the allottee.
A mandatory statutory obligation is cast upon the promoter to pay the interest to such allottees. The expression employed by the legislature is, ‘shall be paid, by the promoter,’ to the allottee. Unlike the main provision, under the proviso allottee is not required to make a demand for the interest. In the event promoter fails to comply the mandatory obligation to pay the interest, the promotee exposes itself for penal consequences under Chapter VIII of Act, 2016.
Hence, settlement cannot override the rights and obligations created by statutes in favour of a party. The proviso to Section 18 (1) of the Act, 2016 casts upon the promoter a statutory obligation to pay interest for the delayed project creates a statutory right in favour of allottee to receive the amount towards interest.
Any agreement/settlement circumventing the statutory provision (proviso to Section 18 (1) of the Act, 2016, cannot contradict or circumvent the statutory requirements and the mandatory legal obligations that govern to protect the interest of the allottee.
The compromise or the contract must align with the statutory provisions and the terms of the contract cannot be interpreted in a manner that would contradict the statutory requirement of Act, 2016.
Excerpts of the Order;
# 1. Learned counsel for the appellant submits that at no point of time, the matter was heard in part/listed for further hearing. It is submitted that the appeal can be heard by this Bench. Learned counsel for the respondent does not object to it. With the consent of parties, the appeal is being heard finally.
# 2. Heard Shri Atul Tripathi, learned counsel for the appellant and Shri Abhishek Khare, learned counsel for the respondent.
# 3. The appellant allottee, by the instant appeal, is raising challenge to the order dated 07.05.2019, passed by the learned Regulatory Authority in Complaint No.9201819142, whereby, the delay interest and compensation for lack of amenities came to be rejected on the ground that the appellant entered into a settlement with the respondent promoter.
# 4. The short question that arises for consideration is, whether the appellant allottee is entitled to interest on her deposit till handing over possession of the unit in terms of proviso to Section 18 (1) of the Act, and/or, whether the settlement entered into between the parties, would waive the statutory obligation cast upon the promoter to pay interest to the allottee in the event of delay till handing over possession of the unit in terms of proviso to Section 18 (1) of the Act, 2016.
# 5. The facts inter se parties are not in dispute.
# 6. The respondent floated a residential scheme in the name and style, ‘Srishti Apartment’, at Lucknow. The appellant came to be allotted a flat on 15.11.2011, being Flat No.G-6, at Rs.22,30,000/-. As per the terms and conditions in the brochure, the project was to be completed within 24 months i.e. on or before 15.11.2013. It appears that the project got inordinately delayed. The sale deed of the unit, however, came to be executed on 18.12.2018, after appellant had entered into a settlement with the respondent on 05.12.2018. The physical possession of the unit came to be handed over on 04.06.2019. The completion certificate (CC) of the project came to be issued by the competent authority on 29.05.2019. In the aforenoted facts, it is evident that the sale deed of the unit came to be executed much earlier and the completion certificate of the project was received thereafter on 25.9.2019. The settlement was made a condition precedent by the respondent to hand over possession of the unit.
# 7. Our attention has been drawn to the settlement/affidavit dated 05.12.2018 (Annexure No.5 to the objections of the respondent to the grounds of appeal). For convenience sake, the affidavit (settlement) dated 05.12.2018 is extracted:- . . . .
# 8. On perusal of the aforenoted affidavit, respondent promoter has taken an undertaking from the appellant that there has been no delay in completion/possession of project; that the allottee is duly satisfied with the promoter; and in future he undertakes not to institute any proceedings against the respondent promoter.
# 9. Learned Regulatory Authority in the impugned order has categorically noted that the terms of the settlement was imposed by the respondent promoter as a condition precedent for handing over the physical possession of the unit. The settlement was entered on 05.12.2018, thereafter; the physical possession of the unit was handed over on 04.06.2019, though the sale deed was executed earlier to handing over possession on 29.05.2019. In this backdrop, the respondent promoter has indulged in unfair trade practice, by imposing absolutely illegal terms and conditions to waive its statutory obligation cast upon by the Legislature on the respondent promoter to pay interest to the allottee, in the event of delay. [proviso to Section 18 (1)].
# 10 Section 17 of the Act provides for transfer of title. The promoter shall execute a registered conveyance deed in favour of the allottee and hand over the physical possession of the unit to the allottees in a real estate project, and the other title documents. The conveyance deed shall be carried out by the promoter within three months from the date of issue of occupancy certificate. In absence of any local laws providing otherwise.
# 11. On conjoint reading of the provisions of Act, 2016, promoter is required to declare to the allottee the tentative date of completion of the project. The declaration can be made by the promoter in any document i.e., prospectus/ advertisement/ agreement/ allotment letter. The allottee on booking/allotment of the unit, the document would bind the promoter to the declared date of completion. In the event no date is declared, in that event three years would be taken as the tentative completion date depending on facts and circumstances of each case vide, M/s. Fortune Infrastructure. Vs. Trevor D’lima and others: (2018) 5 SCC 442. The subsequent documents executed by the parties would not waive the commitment/declaration of the date of completion, in the absence of date of completion in the subsequent documents. The promoter on registration of the project with U.P. RERA has to declare the completion date of the project. In the event, the date of completion of the project with U.P. RERA, being at variance with the declared date of completion would have no bearing on computation of the interest component on the deposits made by the allottee. The burden of interest, on the promoter begins to run from the date declared by the promoter to the appellant till handing over possession of the unit. In the given facts of the case at hand is 24 months from the date of allotment i.e. 15.11.2013.
# 12. Section 18 (1) of the Act is extracted:-
“18. Return of amount and compensation.— (1) If the promoter fails to complete or is unable to give possession of an apartment, plot or building,--
(a) in accordance with the terms of the agreement for sale or as the case may be, duly completed by the date specified therein; or
(b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act, or for any other reason, he shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate, as may be prescribed in this behalf including, compensation in the manner as provided under this Act:
Provided that, where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.”
# 13. On registration of the project with RERA as ongoing project, promoter is required to make a declaration of the date of completion of the project. In the event, promoter declares a date subsequent to the earlier date of completion, it would mean and indicate that the project is delayed. Section 18 (1) of the Act would become operative leaving it open to the allottee to either continue in the delayed project or withdraw from the project. It, therefore, follows that the declaration of a subsequent date of completion with RERA made by the promoter does not shift the liability and obligation mandated under Section 18 (1) of the Act, 2016. The mandate of Section 18 (1) is absolute and unconditional casting upon the promoter a positive mandatory obligation to pay interest to the allottee who has continued in the project for the delay. The liability to pay interest by the promoter would start running from the initial date declared by the promoter. The promoter cannot recile/retract from his commitment declared to the allottee. The appellant allottee, therefore, would be entitled to interest w.e.f. 16.11.2013 till handing over possession of the unit.
# 14. The next point for consideration that follows is whether the promoter can impose a one sided settlement upon the allottee to waive his statutory obligation to pay interest to the allottee for the delay in handing over possession of the unit under proviso to section 18 (1) of Act, 2016, to non-suit the allottee of his statutory right to receive interest on his deposit for the delayed period.
# 15. Proviso to Section 18 (1) is an exception to the main provision i.e. Section 18 (1). Section 18 (1) is confined to those class of allottees who have expressed their intention to the promoter to withdraw from the delayed project. Such allottees are entitled to refund of their deposit and interest thereon, including, compensation, whereas, proviso to Section 18 (1) carves out an exception to the main provision. The proviso governs those allottees who have continued in the delayed project. The legislative mandate insofar such allottees is that they are entitled to interest on their deposit till the handing over of possession of the unit. A mandatory statutory obligation is cast upon the promoter to pay the interest to such allottees. The expression employed by the legislature is, ‘shall be paid, by the promoter,’ to the allottee. Unlike the main provision, under the proviso allottee is not required to make a demand for the interest. In the event promoter fails to comply the mandatory obligation to pay the interest, the promotee exposes itself for penal consequences under Chapter VIII of Act, 2016.
# 16. The settlement being relied upon by the respondent to submit that since the appellant has executed a settlement thereby waiving his right to receive the money towards interest, hence, cannot be agitated or reopened at a later stage. The submission lacks merit. The settlement primarily provides that there has been no delay in completing the project/handing over possession of the unit by the respondent promoter. Further, allottee has not suffered any financial/mental loss/harassment and that in future the allottee undertakes not to institute any complaint/petition before any forum/court against the respondent. The settlement ensures that allottee shall withdraw all pending cases instituted against the respondent promoter. In other words, the one sided settlement principally has been thrust upon the appellant allottee by the promoter, primarily seeking waiver of its obligation to pay interest to the allottee for the delayed period. The promoter, in turn, forfeits the amount admissible and due to the allottee, thereby, leading to undue enrichment/windfall gain by the
promoter at the cost of the allottee. In the event the settlement is taken to bind the allottee, in that event, it would be against the statutory mandate of proviso to Section 18 (1) of the Act, 2016. The allottee is entitled to interest till handing over possession. The promoter has to make an offer of possession of the unit to the allottee after receiving completion certificate of the project. The accounts are required to be settled by the promoter of the unit on the date of offer/possession. It is a statutory obligation mandated by law that the promoter shall pay the interest, meaning thereby, the promoter is bound to compute and disclose the quantum of money towards interest admissible and due to the allottee on his deposit at the time of offer of possession. In the event promoter fails to comply the statutory obligation, the promoter exposes itself for penal consequences.
# 17. The obligation to pay interest does not arise from a contract between two or more parties that outlines their mutual rights and responsibilities. The parties to a contract are free to negotiate the compromise as set terms within the legal boundaries. The contract, therefore, is a private agreement between the parties, whereas, the enacted statutes or laws that establish the mandatory legal standard/obligations that must be followed by the parties. The statutes that are enacted to govern the society and are designed to protect their interest, ensure fairness, justice and establish the minimum standard of behaviour. Hence, settlement
cannot override the rights and obligations created by statutes in favour of a party. The proviso to Section 18 (1) of the Act, 2016 casts upon the promoter a statutory obligation to pay interest for the delayed project creates a statutory right in favour of allottee to receive the amount towards interest. Any agreement/settlement circumventing the statutory provision (proviso to Section 18 (1) of the Act, 2016, cannot contradict or circumvent the statutory requirements and the mandatory legal obligations that govern to protect the interest of the allottee. The compromise or the contract must align with the statutory provisions and the terms of the contract cannot be interpreted in a manner that would contradict the statutory requirement of Act, 2016.
# 18. In view thereof, the respondent promoter cannot shirk/recile from the responsibility/liabilities under the Act, 2016 as the contractual terms cannot override the mandatory statutory obligations/rights created by the Act in favour of the allottee. The respondent in the given facts, cannot take shelter behind the one sided settlement imposed upon the allottee to waive its obligations mandated and imposed upon the allottee under the proviso to Section 18 (1) of the Act, 2016. The settlement of such a nature cannot be made a
condition precedent by the promotee to handover possession of the unit to the allottee. The settlement is void ab initio.
# 19. The questions are answered accordingly.
# 20. Having due regard to the facts and circumstances of the case, the appeal is allowed by passing following orders:-
(i) The impugned order dated 07.05.2019 passed by the learned Regulatory Authority in Complaint No.9201819142, is set aside and quashed.
(ii) The appellant allottee shall be entitled to interest at MCLR +1% with effect from 16.11.2013 till the date of physical possession of the unit, i.e., 04.06.2019, and on the amount so computed allottee shall be entitled to interest at MCLR+1% till the date of payment; the amount to be paid within forty five days from uploading of the order on the portal;
(iii) The Regulatory Authority to proceed against the respondent under Chapter VIII for violating and not complying the mandatory obligation imposed upon the promoter under the Act, 2016.
(iv) The Registrar to transmit this order to the learned Regulatory Authority at Lucknow, for compliance.
(v) The cost of litigation is assessed at Rs.20,000/- to be paid to the appellant by the respondent promoter.
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