Statutory Supremacy in Real Estate: Bombay High Court Rules RERA Section 18 Interest is Unqualified and Rejects Promoter’s Plea of "Frustration" Following Profit-Driven Demolition of Allotted Flats.
Case: RUNWAL CONSTRUCTIONS REGISTERED PARTNERSHIP FIRM v. BHARAT SHAH
Court: Bombay High Court
Date: 08-06-2026
Law: Real Estate (Regulation and Development) Act, Indian Contract Act, Maharashtra Ownership Flats (Regulation of the promotion of Construction Sale Management and transfer) Act.
For decades, the Indian real estate sector resembled the Wild West—largely unregulated, opaque, and heavily tilted in favor of developers. Homebuyers often found themselves as the "weakest stakeholders", investing their life savings into projects that remained unfinished for years. The enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA) was intended to bridge this power gap. A recent landmark judgment by the Bombay High Court in the case of Runwal Constructions vs. Bharat Shah serves as a masterclass in how the judiciary is now prioritizing statutory consumer protection over clever contractual maneuvering.
The "Functionality" Test: When is a Tribunal Truly Established?One of the most technical yet impactful aspects of this judgment concerns the transition of power from temporary authorities to permanent RERA Tribunals. The Appellants argued that once a permanent Tribunal is notified on paper, the temporary "designated" authority (in this case, the Maharashtra Revenue Tribunal) immediately loses its jurisdiction. The High Court rejected this "paper-only" approach.
The Court held that "establishment" under Section 43 of RERA implies a functional body. A Tribunal is not established until its Chairperson and members have taken their mandatory oaths of office.
"What is contemplated under Section 43 read with Rule 8... is a functioning Appellate Tribunal and not merely an Appellate Tribunal existing only on paper."This ensures that legal proceedings do not fall into a vacuum during administrative transitions, protecting the continuity of justice for allottees. The Unqualified Right to Interest: Statutory Might vs. Contractual Might
Perhaps the most significant takeaway for homebuyers is the Court’s interpretation of Section 18 of RERA. Developers often point to "Force Majeure" (Act of God) clauses or environmental litigation delays in their original Sale Agreements to avoid paying interest for late possession. The High Court has now drawn a firm line: the right to interest under Section 18 is "unqualified" and "indefeasible".
The Court emphasized that RERA is a beneficial legislation designed to protect vulnerable buyers. Therefore, contractual clauses that attempt to dilute or waive the promoter’s liability for delay are contrary to the statutory scheme. Even if a buyer chooses to stay in a project rather than withdraw, their right to monthly interest for every month of delay remains absolute, regardless of what the fine print in their 2006 agreement might say.
Commercial Expediency is Not "Frustration of Contract"In a startling turn of events involving "Tower C" of the project, the promoter demolished a partially constructed building, claiming the contract was "frustrated" due to new development regulations (DCPR 2034) requiring additional staircases. They argued that performance had become impossible under Section 56 of the Indian Contract Act.
The Court saw through this as a "calculated business choice" rather than a legal impossibility. The promoter demolished the building not because they were forced to, but to exploit new regulations that allowed them to build 48 floors instead of the original 22.
"The doctrine of frustration... does not apply where performance remains possible and only commercial expediency is altered. The deliberate demolition... to exploit DCPR 2034 benefits was a calculated business choice, not a supervening impossibility."Exemplary Costs for Fraudulent Conduct
The judgment took a stern view of the promoter’s conduct, noting that they had obtained permission to demolish the building by giving a "false undertaking" to the municipal authorities that the existing purchasers' interests would be safeguarded. To then turn around in court and claim the contracts were frustrated was deemed malafide.
As a result, the Court dismissed the appeals with exemplary costs of Rs. 1,00,000 per respondent in the specific cases involving the demolished tower. This sends a powerful message to the real estate industry: the courts will not permit the use of legal doctrines like "frustration" to mask profit-driven breaches of trust.
Ultimately, this judgment reinforces that RERA is not just a set of guidelines but a mandatory statutory regime that overrides one-sided contracts. For the residents of "Runwal Infinity" who have waited nearly 20 years for their homes, it is a long-overdue affirmation that their patience does not grant the promoter immunity from accountability.