Promoter's Liability To Pay Interest For Delayed Possession Absolute And Unqualified: Bombay HC

The Bombay High Court has delivered a stern warning to real estate developers, ruling that the obligation to pay interest on delayed possession is an absolute statutory and contractual liability that cannot be diluted by family reconstructions or vague pleas of force majeure. 

In a significant commercial suit, Justice Sandeep V. Marne adjudicated an application for summary judgment involving a decade-long delay in a luxury project near Bandra-Kurla Complex. The Bench was called upon to decide if a developer could escape the liability to pay interest for an 11-year delay by citing internal family trust arrangements and planning authority hurdles.

Court Rationale on Interest and Delay

The Bombay High Court observed that while specific performance regarding amenities might require an evidentiary trial, the payment of interest on the consideration paid during the delay period is a distinct legal obligation. The Bench noted that interest is not a penalty but a normal accretion on capital, relying on the principle established in Alok Shanker Pandey Versus. Union of India and others ( "(2007) 3 SCC 545": 2007 CaseBase(SC) 1264).

In its reasoning, the Bombay High Court observed that "The obligation of a promoter to return to the allottee the amount received by him with interest on demand made by the allottee under Section 18(1) of RERA is absolute and unqualified. The Regulatory Authority and/or the Appellate Tribunal does not have discretion to take into consideration any mitigating circumstances or genuine efforts made by the promoter in completing the project in time..."

Background

The dispute arose from a 2008 Agreement for Sale for two units in the 'Pittie Chamber' building. Despite the full consideration of Rs.5.51 Crore being paid, the developer failed to deliver possession by the promised date of March 31, 2008. Possession was eventually handed over only in February 2020, resulting in a delay of nearly 12 years. The Plaintiff, acting as a trustee for the Lalwani Family Trust, sought summary judgment for interest and amenities.

The Defendant developer contended that the Plaintiff lacked locus standi due to the transfer of the units to a trust and further argued that the delay was due to force majeure events, including plan rejections by the MCGM. However, the Court followed the precedents in Newtech Promoters & Developers (P.) Ltd. Versus. State of Uttar Pradesh and others and Sanklecha Constructions Pvt. Ltd. and others Versus. Nitin Madhukar Shewale and others ( "2026 : BHC-AS: 39337": 2026 CaseBase(BOM) 6497), holding that the statutory right to interest is unconditional. The Court also cited Mohammed Zain Khan Versus. Emnoy Properties India & Ors. to clarify that RERA obligations apply even to unregistered projects that are liable for registration.

Ultimately, the Bombay High Court partially allowed the interim application, granting a summary decree for interest at the contractually agreed rate of 9% per annum for the period of delay, while leaving the issues of common amenities for trial.

Case Details:
Case No.: INTERIM APPLICATION (L) NO. 2956 OF 2026 IN COMMERCIAL SUIT NO. 39 OF 2015
Case Title: DNM Trustee Services Private Limited Versus Victoria Enterprises Limited & Ors.
Appearances:
For the Petitioner(s): Mr. Viraj Parikh with Mr. Parag Kabadi, Ms. Anshita Sethi and Mr. Vishal Tiwari i/b. DSK Legal
For the Respondent(s): Mr. Manish N. Jain i/b. S.M. Jain Associates

Source: 2026 CaseBase(BOM) 7123