Background

This case involves a dispute between a developer, namely Linker Shelter Private Limited, and the Respondent, Charmaine Chougule, who had entered into agreements for the purchase of flats in a project at Nashik. The core issues revolve around the developer’s delay in delivering possession, the issuance of Occupation Certificate (OC) and Completion Certificate (CC), and the respondent’s decision to withdraw from the project, leading to claims for refunds under Section 18 of the RERA, which were rejected in February 2022 on the ground that possession had already been offered. Aggrieved, the Respondents appealed. The case also touches upon the legal question of whether a purchaser can unilaterally withdraw after possession has been offered and the implications of defective land titles. The Developer challenged this direction primarily on the ground that possession had already been offered with requisite Occupation Certificate (OC) and Completion Certificate (CC), and therefore the Allottees could not later claim withdrawal and refund after an indefinite delay.

Issues Framed and Findings of the Court

1. Whether under Section 18 of the RERA Act, an allottee has an unqualified right to withdraw from the project after the developer has offered possession with a valid Occupation Certificate?

   The Court observed that the right of an allottee to withdraw under Section 18 is not absolute or unqualified. It emphasized that the core purpose of Section 18 is to provide a remedy to the allottee if the developer fails to complete or hand over possession as per the agreement or statutory obligations. Once the developer has obtained the OC and has offered possession, the right to withdraw under Section 18 diminishes significantly. The Court noted that the law does not envisage a perpetual or unlimited right to withdraw after possession is offered, especially when the developer has fulfilled the statutory requirements. The Court held that the right to withdraw is subject to the stage of project completion and whether possession has been lawfully offered.

2. Whether possession, when offered along with a valid CC and OC, can be subject to withdrawal or cancellation based on defective land titles or other issues?

   The Court observed that once the developer obtains the OC and CC, and offers possession, the project is deemed substantially complete, and further withdrawal or cancellation, based solely on defects like land titles, is not permissible. The Court emphasized that the defect in land titles, if it existed at the time of offering possession, should have been disclosed earlier, and cannot be used as a basis for withdrawal after possession is offered and certificates are issued. The Court clarified that such defects do not automatically entitle the allottee to rescind the contract or claim a refund, once possession and certificates are in place, unless the defect fundamentally breaches the contract or the statutory obligations of the developer.

3. Whether the developer’s obligation to deliver possession and documentation restricts the rights of the allottee to withdraw, and if so, within what time frame?

   The Court observed that the developer’s duty to deliver possession and necessary documentation creates a binding obligation, once fulfilled, it restricts the allottee’s right to withdraw, particularly after the project reaches a substantial stage of completion. The Court noted that the law and the agreement imply a reasonable time frame within which the allottee must exercise their right to withdraw, to prevent indefinite delays and to maintain market stability. The Court referred to the provisions of Section 19(10) of the RERA, which indicates that the allottee’s decision to withdraw must be made within a reasonable period from the issuance of OC and CC. If the allottee delays beyond this reasonable period, they cannot unilaterally claim a refund, especially when the developer has fulfilled statutory obligations and offered possession.

Judgment

The Bombay High Court reversed the Maharashtra Real Estate Appellate Tribunal’s order, firmly holding that once possession is duly offered with Occupancy and Completion Certificates, homebuyers/allottees are not entitled to a refund under Section 18(1)(a) of the RERA. The Court clarified that the right to withdraw is not absolute or perpetual and must be exercised within a reasonable time, especially when the developer has substantially completed the project and met with the legal obligations. It also held that alleged defects in land title do not justify a refund at such a stage and may only give rise to a claim for compensation under Section 18(2). The Court emphasized that once lawful possession is offered without restraint, refund rights under Section 18(1)(a) do not survive indefinitely.

MHCO Comment

This judgment provides crucial clarity on the rights and obligations of both developers and allottees and the limited scope of refund claims under Section 18(1)(a) of RERA, affirming that once lawful possession is offered with Occupancy and Completion Certificates, the allottee’s right to withdraw does not survive indefinitely. It curtails the misuse of RERA’s refund provisions by emphasizing that statutory compliance by the developer narrows refund rights, and land title defects, while relevant, may only warrant compensation under Section 18(2). The decision strikes a balance between allottee protection and developer obligations, reinforcing the need for timely action and adherence to procedure by homebuyers. The case reinforces the importance of timely communication, adherence to statutory procedures, and the need for purchasers to act within prescribed timeframes for withdrawal.