Claiming Refunds before RERA Authority: Challenges Amid the Absence of a Written Agreement between Allottees and Promoters

Introduction

The Real Estate (Regulation and Development) Act, 2016 (RERA)¹ was introduced to bring transparency, accountability, and fairness to the real estate sector, ensuring that homebuyers are protected from unfair practices by promoters. One of its key safeguards, Section 13², mandates that a promoter cannot accept more than 10% of the cost of an apartment or property without executing a formal agreement for sale. Despite this clear statutory provision, Real Estate Regulatory Authorities, Appellate Tribunals, and courts have taken varying approaches to adjudicating refund claims when promoters fail to comply with this requirement. While the fundamental conclusion in all such cases remains the same — that the allottee is entitled to a full refund of the deposit — the judicial reasoning behind these rulings varies significantly, resulting in legal ambiguities and procedural inconsistencies.

The Supreme Court’s ruling in Imperia Structures Ltd. v. Anil Patni³, has firmly established that the absence of a formal, registered builder-buyer agreement does not preclude an allottee from seeking refund. It was held that other documents, such as an allotment letter and payment receipts, are sufficient to establish a binding contractual relationship between the homebuyer and the developer, thereby allowing the invocation of protective legal provisions like Section 18⁴ of the RERA. Nevertheless, instead of uniformly relying on Section 18 as the basis for ordering refunds, adjudicating bodies have taken divergent approaches — some expanding their reliance to Section 13 read with Section 37⁵ invoking Section 37 to issue binding directions, treating a violation of Section 13 as adequate ground for refund. Certain forums have examined whether Section 18 entitles an allottee to claim a refund due to project delays where allotee himself cancelled the allotment.

Another line of reasoning involves the enforcement of penalties under Section 61⁶ instead of direct refund orders. In certain cases, authorities have even directed promoters to execute an agreement for sale rather than refunding the deposit, imposing penalties for non-compliance with Section 13. Additionally, some authorities and Appellate Tribunals have conditioned an allottee’s right to a refund on the revocation or suspension of the project’s registration under Section 7⁷, thereby restricting refunds to cases only where Section 19(4)⁸ applies i.e. if the promoter fails to comply or is unable to give possession in accordance with the terms of agreement for sale.

Simultaneously, there have been instances where courts have ruled that in the absence of an executed agreement for sale, and where the allottee themselves have cancelled the allotment, no refund can be sought under the RERA before the authority. In such circumstances, relief may only be pursued before civil courts. Furthermore, courts have examined the scope of inherent and ancillary powers within the RERA framework, suggesting that only those Real Estate Regulatory Authorities expressly empowered through statutory rules may grant such relief — particularly in cases where no explicit refund provision exists. This includes scenarios where an allottee has cancelled the allotment without a formal agreement in place.

These interpretative divergences have added further complexity to the adjudication of refund disputes under the RERA. This fragmented judicial approach has created uncertainty for homebuyers, as the same legal issue — refund in case of delay coupled with failure to execute an agreement for sale — has been adjudicated using different statutory lenses, leading to varied outcomes and procedural delays.

This article critically examines divergent judicial rulings on whether refund claims can be made before the Real Estate Regulatory Authority when a project has been delayed and no agreement for sale has been executed between promoters and allottees. It focuses on four cases — Bhavani Velivala v. Pagadala Constructions (TG RERA)⁹, Sachin Tomar & Shivaji Tomar v. Ensaara Metropark Luxora Infrastructure (P) Ltd. (MahaREAT)¹⁰, Kakad Housing Corpn. v. Rajkumari Singh (MahaREAT)¹¹, and Tejas Shoor v. Godrej Vestamark LLP (District Judge, Saket)¹² — each offering distinct judicial perspectives on how refund disputes should be resolved. By analysing these cases, this article seeks to highlight the inconsistencies in Real Estate Regulatory Authority enforcement mechanisms and advocate for a more streamlined legal interpretation that ensures homebuyers receive timely refunds without unnecessary procedural hurdles.

The four divergent rulings

Bhavani Velivala case¹³

In this case, the builder collected more than 10% of the flat’s cost without executing an agreement for sale (AFS), thereby violating Section 13 of the RERA. The Telangana Real Estate Regulatory Authority (TG RERA) ruled in favour of the homebuyer, directing M/s Pagadala Constructions to refund Rs 12.1 lakhs and imposing a penalty of Rs 2.69 lakhs on the builder. The Tribunal emphasised the importance of safeguarding homebuyers from arbitrary forfeiture and unfair trade practices, further instructing the builder to comply with RERA regulations in future transactions.

Sachin Tomar & Shivaji Tomar case¹⁴

The appellants had booked a unit in the Ensaara Metropark project developed by Luxora Infrastructure Pvt. Ltd., alleging that the developer failed to deliver possession within the stipulated timeline and did not execute an agreement for sale, despite receiving substantial payments. The Tribunal found that the developer had violated its obligations under the RERA by failing to execute the agreement and delaying possession. Consequently, it directed the developer to execute the agreement for sale, as required under Section 13(1).

Although the appellants sought a refund along with interest and compensation under Section 18, the Tribunal did not grant a refund in this case. Instead, it ordered the execution of the agreement and compensation for the delay. Rather than cancelling the allotment outright, the Tribunal favoured enforcing the agreement while ensuring the appellants received compensation for the delay.

Kakad Housing Corpn. case¹⁵

The Maharashtra Real Estate Appellate Tribunal (MahaREAT) ruled that the non-execution of an agreement for sale does not prevent homebuyers from invoking Section 18 to claim a refund with interest, provided the builder fails to deliver possession within the agreed timeline. The Tribunal held that it was unlawful for the promoter to demand additional payments after collecting more than 20% of the flat’s price without executing an agreement, thereby violating Section 13(1) of the RERA and Section 4(1)¹⁶ of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA)¹⁷.

Furthermore, MahaREAT determined that the builder’s termination of the letter of intent due to non-payment of further demanded dues was invalid. As a result, it directed the builder to refund the entire amount paid by the homebuyer, along with interest. The Tribunal clarified that the absence of a formal agreement or a specified possession date cannot be exploited by the builder to evade liability under the RERA.

Tejas Shoor case¹⁸

In this case, the District Court in Saket examined the jurisdictional boundaries between RERA and the civil courts in disputes where a buyer seeks annulment of an allotment after making an advance payment, but no agreement for sale has been executed. The key issue was whether RERA had exclusive jurisdiction over the refund claim or whether the civil court could adjudicate the matter. The Court ruled that, in the absence of an executed agreement for sale, Section 79¹⁹ of the RERA, which bars civil court jurisdiction over matters covered under the RERA, did not apply, thereby allowing the District Court to hear the case.

Additionally, the Court observed that RERA does not explicitly grant allottees the right to claim a refund when the cancellation is initiated by the buyer rather than the builder. It further clarified that the presence of a contractual clause referring disputes to RERA does not automatically confer exclusive jurisdiction upon the regulatory authority if RERA itself does not contain a specific statutory provision governing buyer-initiated refund claims. Consequently, the Court held that its jurisdiction was not barred, leading to a jurisdictional conflict between civil courts and Real Estate Regulatory Authorities regarding refund claims in cases where no formal agreement for sale exists. This ruling underscores the legal complexities in determining the appropriate forum for refund disputes and highlights the potential limitations in Real Estate Regulatory Authority’s enforcement framework when adjudicating refund claims arising from buyer-initiated cancellations.

The remedies allowed

By analysing the cases discussed above, it becomes evident that various authorities, tribunals and courts have examined different provisions of the RERA while adjudicating refund-related disputes. Some focused on Section 18 while others examined Sections 13 and 37. The scrutiny of refund entitlement varied across these cases, demonstrating different judicial approaches to interpreting the RERA provisions.

In Bhavani Velivala case²⁰, the Telangana Real Estate Regulatory Authority as well as in Kakad Housing Corpn. case²¹ the MahaREAT allowed refund under Section 18. In contrast, the MahaREAT in Sachin Tomar case²² scrutinised under Section 18, whether the allottee was entitled to a refund due to project delays. But the Tribunal did not grant the refund. Instead, it directed the promoter to execute the agreement and awarded compensation for delay, not rescission or refund.

Finally, in Tejas Shoor case²³, the Saket District Court ruled that Section 18 did not apply, as the allottee had voluntarily cancelled the allotment rather than seeking relief due to promoter default. The Court clarified that RERA does not explicitly provide refund relief when cancellation is initiated by the allottee, leading to a jurisdictional determination that reinforced the civil court’s authority in such disputes. The Court made it a jurisdictional issue and proceeded to discuss whether the Real Estate Regulatory Authority had jurisdiction to entertain the suit for refund of earnest money when the plaintiff (allottee) cancelled the booking, or whether such disputes were exclusively within the jurisdiction of the Real Estate Regulatory Authority under Section 79 of the RERA.

The Court held that only those RERA Authorities and Appellate Tribunals possessing inherent and ancillary powers may grant refunds in cases where an allottee seeks reimbursement of a deposited amount despite the absence of an executed agreement for sale. Such claims for refund cannot be made to the RERA Authority.

However, in cases Bhavani Velivala²⁴ and Kakad Housing Corpn.²⁵, neither the TG RERA nor the MahaREAT invoked their inherent or ancillary powers to order or refuse a refund. Instead, they ruled that a violation of Section 13 of the RERA — where the promoter accepted more than 10% of the total cost without executing an agreement for sale — is sufficient grounds for granting a refund, even when the allottee cancels the allotment voluntarily. Even in Sachin Tomar case²⁶, the Tribunal though exercised discretionary relief, opting for specific performance and compensation instead of refund but it did held that Section 18 provides an absolute and unqualified right to refund, and that non-execution of the agreement does not debar the allottee from claiming refund.

All these cases share the common fact pattern where: (1) the promoter accepted more than 10% of the cost of the unit without executing an agreement for sale; and (2) the allottee later cancelled the allotment and sought a refund of the deposited amount. Therefore, for the purposes of refund the legal reasoning should ideally center around Section 18 of the RERA.

If all these cases involve the same factual matrix, judicial uniformity should dictate that Section 13 violations alone warrant a refund order under Section 18 from the Real Estate Regulatory Authority, without requiring allottee-initiated claims under Section 13 read with Section 37 or unnecessary scrutiny of cancellation motives, jurisdiction of authority, suspension or revocation of project, etc.

Different approach same result

Examining the facts of the aforementioned four cases and the decisions rendered by various authorities, Appellate Tribunals and courts, it becomes evident that three distinct approaches have been adopted to arrive at the same conclusion — namely, that the buyer/allottee is entitled to a full refund, and no part of the deposit can be retained by the promoter if the allottee cancels the allotment on their own initiative, provided that no agreement for sale has been executed, even if all other procedural compliances have been fulfilled by the promoter.

The first approach adopts a structured legal analysis beginning with Section 13, which prohibits a promoter from accepting any deposit or advance without first executing an agreement for sale. Upon identifying a breach of this provision, the Real Estate Regulatory Authorities invoke Section 37 to issue binding directions requiring the promoter to refund the amount received. Complementarily, Section 38 is sometimes applied to impose penalties or interest for statutory violations, reinforcing accountability under the RERA.

The second approach centers around Section 18(b), with authorities, tribunals and courts assessing whether an allottee is entitled to a refund or compensation. In scenarios where Section 18 does not explicitly authorise such relief, questions arise regarding the authority’s jurisdiction, often resulting in directions for the allottee to seek redress through civil proceedings in District Courts. Within this framework, courts have also explored the extent to which Real Estate Regulatory Authorities and Appellate Tribunals can exercise inherent and ancillary powers under the rules to grant equitable relief. While some rulings affirm the use of such powers to ensure complete justice in the absence of an express refund mechanism, others hold that without statutory empowerment, the allottee must approach civil courts.

The third approach involves a two-tiered inquiry that first examines whether the promoter complied with Section 13 by executing an agreement for sale prior to accepting deposits. If this condition is unmet, the authority or Appellate Tribunal may pursue one of two remedies: impose a penalty under Section 61 and direct execution of the agreement, or order revocation or suspension of the project registration under Section 7. The latter measure activates the allottee’s right under Section 19(4) to seek a refund, positioning the entitlement as a consequence of regulatory enforcement rather than a standalone statutory right. Where authority revokes or suspends the project’s registration under Section 7 the regulatory action then triggers the allottee’s right under Section 19(4) to withdraw from the project and seek a refund. In this framework, the right to refund is not immediate but contingent upon a sequence of procedural steps — penal action, regulatory intervention, and allottee-initiated withdrawal — illustrating RERA’s use of layered enforcement to both secure compliance and protect consumer rights.

These three judicial pathways highlight the varied interpretations and applications of RERA provisions, demonstrating that while the ultimate conclusion remains consistent — that the allottee is entitled to a full refund — the legal basis and procedural reasoning differ across authorities, tribunals and courts. A uniform approach centered strictly on Section 18 could have streamlined decisions and eliminated the unnecessary complexities arising from alternative interpretations.

This judicial divergence led to cases where some allottees had to prove delays under Section 18, even when a refund should have been granted purely because of the promoter’s failure to execute an agreement under Section 13. Ideally, all cases should have adhered to the same legal basis for refunds, ensuring uniformity and avoiding unnecessary complexity in adjudication. Where a promoter has violated Section 13, the approach should be straightforward: establish the violation and invoke Section 18 to grant a refund.

Absolute right to refund

Recently, the Supreme Court, in an appeal against an order of the National Consumer Disputes Redressal Commission (NCDRC) in Greater Mohali Area Development Authority v. Anupam Garg²⁷, considered the rights of allottees to seek a refund, interest, and compensation in cases of delayed or failed delivery of property. The case did not specifically address the scenario where absolutely no agreement to sale or other formal document had been executed between the parties. Instead, the Court examined the contractual relationship established through the letter of intent (LOI) and the payment history, and clarified that a formal agreement to sale was not strictly necessary for the allottee to be entitled to a refund.

The Supreme Court held that the right to a refund is absolute when the promoter fails to deliver possession as per the agreed terms. However, the right to interest, compensation, or damages is not automatic; it depends on the terms agreed upon in any relevant document, such as the LOI or a formal agreement to sale.

The Court relied on the earlier decision in BDA v. Syndicate Bank²⁸, which established that allottees are entitled to a refund of their deposited amounts in cases of delayed delivery, either before the Consumer Commission or under the relevant law. This principle is also reflected in Section 88²⁹ of the RERA, which allows allottees to approach the Real Estate Regulatory Authority or any other appropriate forum for relief.

It is important to note that neither Greater Mohali Area Development Authority case³⁰ nor BDA case³¹ specifically addressed the jurisdiction of the Real Estate Regulatory Authority in situations where absolutely no agreement to sale or other document had been entered between the parties. Both the judgments did not clarify whether the Real Estate Regulatory Authority can order a refund in the complete absence of any contractual document in cases where the allottee himself cancels the allotment. The Court’s reasoning is focused on the rights of homebuyers to seek refund and compensation for delay under consumer law, based on the contractual terms (such as the Letter of Intent) and the remedies available before the consumer fora.

The right to seek a refund in cases of promoter default was established as absolute in BDA case³² and subsequently reaffirmed in Greater Mohali Area Development Authority case³³. While BDA case³⁴ upheld the principle of an absolute right to a refund upon default, Greater Mohali Area Development Authority case³⁵ further examined the implications of this right in scenarios where formal agreements were absent, thereby refining the scope of consumer protection under the RERA.

Interpreting refund claims: When courts and tribunals go beyond Section 18’s overlooked authority in Real Estate Regulatory Authority refund directives

Instead of applying Section 18 uniformly, in many cases, courts and tribunals expanded their analysis beyond the violation of Section 13, considering factors such as whether the allottee cancelled the booking voluntarily under Section 18, whether delays in project completion justified refunds under Section 18, where Real Estate Regulatory Authority has powers to order refund, and whether civil court jurisdiction was barred under Section 79, etc.

Despite its significance, authorities, Appellate Tribunals and courts have often overlooked Section 18, failing to apply it when promoters violates Section 13. Instead, they subjected refund claims to unnecessary scrutiny as discussed above. Many authorities, Appellate Tribunals and courts have even refrained from identifying the right of the allottees under Section 18 to seek refunds from the RERA Authority, leading to fragmented rulings. A more uniform approach centered strictly on Section 18 could have streamlined decisions and eliminated unnecessary complexities arising from alternative interpretations.

In Bhavani Velivala case³⁶ and Kakad Housing Corpn. case³⁷, the respective authority and Appellate Tribunal in a sense held that Section 18 granted allottees a ”perfect right” under the RERA to seek a refund when promoters violated Section 13. These rulings affirmed that the allottee’s claim for reimbursement was a statutory entitlement as opposed to a discretionary remedy.

In contrast, in cases like Sachin Tomar³⁸ and Tejas Shoor³⁹ took a more restrictive view, treating the right to a refund under Section 18 of the RERA as ”imperfect” and subject to judicial discretion. These decisions emphasised that RERA does not explicitly grant allottees the right to cancel their booking and seek a refund unless the promoter is in default, implying that refund claims should not be automatic when the cancellation is initiated voluntarily.

Conclusion: The need for uniformity in refund orders

The divergence in these rulings underscores the broader debate on whether refund rights should be treated as absolute, discretionary, or subject to alternative adjudication outside RERA. The lack of uniformity has contributed to legal uncertainty, making it challenging for allottees to predict the outcomes of refund claims. A more structured application of Section 18, rather than inconsistent reliance on other provision and issues, could potentially streamline refund determinations and reduce unnecessary complexities in adjudication.

Imposing rigid limitations on refund claims could undermine consumer protection and the intent of RERA, which aims to ensure fairness and accountability in real estate transactions. By upholding the allottee’s right to reimbursement without imposing undue constraints or procedural complexities, adjudicating authorities can strengthen compliance and protect homebuyers from the financial and legal disadvantages arising from promoter violations. These inconsistencies highlight the need for a more uniform approach in adjudicating refund disputes, ensuring that violations of Section 13 directly lead to refunds without unnecessary complications.

Ensuring uniformity in refund orders across different adjudicating authorities is essential for upholding legal certainty, protecting consumer rights, and maintaining the integrity of RERA’s enforcement framework. The existing inconsistencies in rulings create uncertainty for allottees and promoters alike, leading to unpredictable outcomes that weaken confidence in the regulatory mechanism. A standardised approach to interpreting refund provisions, particularly under Section 18 in cases of promoter default, would enhance fairness and prevent arbitrary judicial discretion from undermining statutory entitlements. Establishing clear guidelines or precedents that reconcile differing interpretations among State Real Estate Regulatory Authorities and tribunals will not only promote legal coherence but also reinforce the principle of equitable consumer protection. By addressing these discrepancies, authorities can ensure a transparent, predictable, and effective resolution of refund claims, thereby fostering a more robust regulatory environment that aligns with RERA’s overarching objectives.

Recommendations for achieving greater consistency

While the landscape of refund adjudication under RERA is complex and continues to evolve, the following are illustrative recommendations that may contribute to more consistent enforcement of refund provisions — not as an exhaustive or definitive list.

(1) Uniform application of Section 18: Adjudicating bodies should prioritise the application of Section 18 as the primary legal basis for all refund claims involving violations of Section 13. This would streamline the process and reduce unnecessary complexities.

(2) Guidelines for adjudicating bodies: Establish comprehensive guidelines that provide a clear framework for interpreting refund provisions. These guidelines should emphasise the importance of adhering to RERA’s statutory provisions without drawing in extraneous factors that complicate the process.

(3) Training and capacity building: Conduct training sessions for officials and Judges involved in the adjudication of real estate disputes to ensure they understand RERA’s provisions and the implications of their rulings. This could help mitigate discrepancies in interpretation.

(4) Standardised refund procedures: Implement standardised procedures across all Real Estate Regulatory Authorities for processing refund claims, ensuring that allottees receive timely and consistent responses to their applications.

(5) Monitoring and reporting: Establish a monitoring and reporting mechanism to track the outcomes of refund claims and the reasoning behind decisions made by different bodies. This data can help identify patterns of inconsistency and inform future policy adjustments.

(6) Legal reforms: Consider legislative reforms to clarify the rights of allottees in cases of refund claims, particularly where no agreement for sale exists. This reform can help eliminate reliance on civil courts and streamline processes back to the Real Estate Regulatory Authorities.

(7) Public awareness campaigns: Increase public awareness regarding the rights of allottees under RERA, ensuring that homebuyers are informed about their entitlements and the processes available for seeking refunds.

(8) Inter-agency collaboration: Foster collaboration among various regulatory bodies involved in real estate transactions to align interpretations of RERA provisions, thus creating a cohesive approach to consumer protection.

By implementing these recommendations, greater consistency in the interpretation of refund provisions under RERA can be achieved, ultimately protecting consumer rights and enhancing the efficiency of the real estate regulatory framework.