The Allahabad High Court (Lucknow Bench) has held that a private settlement or agreement between a promoter and an allottee cannot override the statutory obligations imposed by the Real Estate (Regulation and Development) Act, 2016 (RERA Act). Justice Prashant Kumar dismissed the appeal filed by the Lucknow Development Authority (LDA), affirming the decision of the Real Estate Appellate Tribunal which awarded interest to an allottee for delayed possession despite the execution of a settlement deed.
The Court ruled that the right of an allottee to claim interest for delay under the proviso to Section 18(1) of the RERA Act is mandatory and cannot be waived through a “one-sided” settlement signed under duress.
Background of the Case
The case pertains to a project named “Srishti Apartments” launched by the Lucknow Development Authority at Jankipuram Vistar, Lucknow. The respondent, Sushma Shukla, was allotted a flat on November 15, 2011, with a total estimated cost of Rs. 22,30,000. As per the terms, the possession was proposed to be handed over within 24 months, i.e., on or before November 15, 2013.
Due to a delay in handing over possession, the respondent filed a complaint before the U.P. Real Estate Regulatory Authority (RERA) on September 18, 2018, seeking possession, interest for a five-year delay, and relief regarding GST. Subsequently, on December 5, 2018, the parties entered into a private settlement, and the sale deed was executed on December 18, 2018.
On May 7, 2019, the Regulatory Authority rejected the claim for delay interest, citing the settlement wherein the allottee had stated she had no complaints and was satisfied with the project. The physical possession was handed over on June 4, 2019.
Aggrieved by the Regulatory Authority’s order, the allottee appealed to the U.P. Real Estate Appellate Tribunal. On April 1, 2025, the Tribunal allowed the appeal, setting aside the Regulatory Authority’s order. The Tribunal directed the LDA to pay interest at MCLR + 1% from November 16, 2013, to June 4, 2019, and imposed a litigation cost of Rs. 20,000. The LDA challenged this order before the High Court.
Submissions of the Parties
The counsel for the appellant (LDA) argued that since the parties had entered into a settlement, the Tribunal erred in granting interest. It was submitted that under Section 88 of the RERA Act, the provisions are in addition to and not in derogation of other laws, and thus would not supersede the settlement. The appellant contended that rights can be waived by a party, relying on the Supreme Court judgment in Krishna Bahadur v. Purna Theatre.
Court’s Analysis and Observations
The High Court formulated the substantial questions of law as: “Whether a private contract/settlement can override the provisions of the statute?” and “Whether agreement, which has been signed on the dotted line can be held to be valid?”
Justice Prashant Kumar analyzed Section 18 of the RERA Act, noting that the proviso creates a mandatory statutory obligation on the promoter to pay interest for every month of delay if the allottee does not withdraw from the project. The Court observed:
“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… In the event promoter fails to comply the mandatory obligation to pay the interest, the promoter exposes itself for penal consequences under Chapter VIII of the RERA Act, 2016.”
Regarding the settlement relied upon by the LDA, the Court observed it was a “cyclostyled document” where the allottee had to sign on the “dotted line.” The Court stated:
“Evidently, a person who has put his life time savings for his dream house/flat, has no strength to fight with the builder, and also has no choice but to sign on the dotted lines on an agreement drafted by the builder, wherein he creates a situation of ‘take it or leave it’, the flat owner will have no other alternative but to sign on the dotted lines. It will not be wrong to say that such settlement normally are executed under duress.”
The Court held that any agreement aimed at circumventing the statutory provisions is void ab initio under Section 23 of the Indian Contract Act, 1872. The Bench relied on the Supreme Court’s decisions in Newtech Promoters and Developers Private Ltd. v. State of U.P., which established that the right to interest is “unqualified” and “absolute,” and Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan, which held that one-sided clauses constitute an unfair trade practice.
The Court firmly held:
“In view thereof, the promoter cannot shirk/resile from the responsibility/liabilities under the RERA Act, 2016 as the contractual terms cannot override the mandatory statutory obligations/rights created by the Act in favour of the allottee.”
Decision
The High Court dismissed the appeal filed by the Lucknow Development Authority, upholding the Tribunal’s order dated April 1, 2025. The Court concluded that “no private contract/settlement can have overriding effect on the rights and obligations created by statutory provisions of law.”
Case Details:
Case Title: Lko. Development Authority Lko. Thru. Authorized Signatory Rohit Singh v. Sushma Shukla
Case No.: RERA Appeal Defective No. – 125 of 2025
Coram: Justice Prashant Kumar
