From the inception of The Real Estate (Regulation and Development) Act, 2016, a quiet but consequential question lurked in India’s real estate regulatory landscape: when a builder challenges an order directing it to pay delay period interest to a homebuyer under Section 18 of RERA, how much must it deposit upfront before the Real Estate Appellate Tribunal will hear its appeal? The full amount? Or just thirty percent?
The difference is not trivial. Unit prices of real estate projects involve crores. The gap between thirty percent and a hundred percent can be the difference between a builder that survives to contest an order and one that is simply crushed under the weight of a pre-deposit obligation before a single argument is made on the merits.
The Karnataka High Court, in a clear and carefully reasoned judgment, has settled the matter. And the Supreme Court of India, in two separate proceedings, has upheld its validity.
The Story Behind the Orders
Two homebuyers had each contracted with a real estate promoter for an apartment. When possession was delayed beyond the promised date, they did what the law now empowers homebuyers to do: they approached the Adjudicating Officer under the Karnataka Real Estate Regulatory Authority (KRERA) and claimed compensation for the delay.
The Adjudicating Officer ruled in their favour in both cases. The orders, passed in August 2019, directed the promoter to pay delay compensation running from July 2017 until the date of actual possession, together with simple interest at 10.75% per annum and a litigation cost of Rs. 5,000/-. The orders were unambiguous. The promoter owed money. The homebuyers were entitled to it.
The promoter disagreed with the quantum and appealed to the Karnataka Real Estate Appellate Tribunal (K-REAT). In doing so, it deposited thirty percent of the awarded amount, as it understood Section 43(5) of the Real Estate (Regulation and Development) Act, 2016 (RERA Act) to require.
What happened next?
The Appellate Tribunal was not inclined to allow the appeal and hear on merits with thirty percent deposit. It granted the promoter time to deposit the total amount awarded and when the promoter failed to comply, it dismissed both appeals because the deposit made in the tribunal’s view was insufficient. In taking this position, the Tribunal relied on a Supreme Court judgment in M/s. Technimont Pvt. Ltd. v. State of Punjab a case that, as it turned out, was dealing with an entirely different statute: the Punjab Value Added Tax Act. It had nothing to do with RERA.
The Text of the Law and What It Actually Says
Section 43(5) of the RERA Act is worth reading carefully, because its structure is more nuanced than it first appears.
The provision says that where a promoter files an appeal, it shall not be entertained without the promoter first depositing “at least thirty per cent of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be.”
On the surface, this sounds like “total amount always.” But the Supreme Court of India had already provided the authoritative reading of this provision in Newtech Promoters and Developers Pvt. Ltd. v. State of UP and Others (2021 SCC Online SC 1044) — a judgment that directly interpreted RERA, unlike the Technimont case.
The Supreme Court in Newtech drew a clear and important distinction:
- Where the appeal is against an order imposing a penalty, the pre-deposit requirement is thirty percent of the penalty amount (or such higher amount as the Tribunal may direct).
- Where the appeal is against an order involving the return of an amount to the allottee such as refund of the principal, the promoter must deposit the total amount.
Delay compensation under Section 18 of the RERA Act is not a refund of the principal. It is interest, a remedy for the homebuyer’s loss of use of money and time during the period of delay. It is, in its essential character, closer to a penalty for the promoter’s failure to deliver on time than it is to an obligation to return the allottee’s money.
The Karnataka High Court applied this reasoning directly. An order awarding delay compensation is an order directing the promoter to pay interest and not to return a principal amount. The pre-deposit condition in such cases is therefore satisfied by depositing thirty percent, not the full amount.
The High Court’s Answer
The question the High Court framed for itself was precise: Were the Appellate Tribunal’s orders liable to be interfered with?
The answer was yes and for a clear reason. The Tribunal had relied on a judgment (Technimont) that interpreted a different statute, while ignoring a directly applicable Supreme Court ruling (Newtech) that had examined the very provision at issue. Where a higher court has interpreted a statute, that interpretation binds all courts and tribunals applying that statute. There was no legitimate basis for the Tribunal to depart from Newtech.
The High Court accordingly set aside both dismissal orders and remanded the appeals to the Appellate Tribunal for consideration on their merits. The promoter, having deposited thirty percent, was entitled to be heard.
No costs were awarded, signalling that this was a genuine question of law, not an attempt to abuse the process.
The Supreme Court Closes the Door on Further Challenge
The homebuyers understandably aggrieved that a favourable order had been set aside and the matter remanded challenged the Karnataka High Court’s judgment before the Supreme Court of India. Two Special Leave Petitions were filed.
In the first (SLP(C) No. 21610/2023, arising out of RERA Appeal No. 25/2021), a Bench comprising the Hon’ble Mr. Justice M.M. Sundresh and the Hon’ble Mr. Justice J.B. Pardiwala heard the matter and found no error in the High Court’s order. The Special Leave Petition was dismissed.
In the second (SLP(C) No. 22676/2023, arising out of RERA Appeal No. 22/2021), a Bench comprising the Hon’ble Mr. Justice A.S. Bopanna and the Hon’ble Mr. Justice M.M. Sundresh noted that the first petition had already been disposed of and dismissed the second petition on the same basis.
The legal position is now settled at the highest level of the Indian judiciary.
What This Means And Why It Matters
This judgment matters for several reasons that extend well beyond the two homebuyers and one promoter at the centre of these particular appeals.
For promoters, it confirms that an order under Section 18 of the RERA Act directing payment of delay interest does not require a full pre-deposit before an appeal can be heard. Depositing thirty percent or such higher amount as the Appellate Tribunal may in its discretion require — is sufficient to keep the appeal alive. A Tribunal cannot dismiss an appeal simply because a promoter declines to deposit the entirety of an awarded amount upfront.
For homebuyers, it does not diminish the power of a RERA order. It simply means that a promoter who disputes an order has the right to contest it, provided it meets the thirty percent threshold. The merits of the dispute whether the delay compensation was correctly calculated, or whether valid grounds for delay existed remain to be determined by the Tribunal after full hearing. An order in a homebuyer’s favour does not vanish; it is tested fairly.
For the Appellate Tribunal, the judgment is a reminder that the pre-deposit condition has a defined legal content. The Tribunal cannot, by insisting on full payment, convert the appellate process into a mechanism that pre-determines the outcome. The right of appeal is a valuable right; the pre-deposit condition is a safeguard against frivolous challenges, not an instrument for foreclosing meritorious ones.
For the legal landscape, the judgment clarifies that RERA tribunals must be guided by RERA-specific precedent. Where the Supreme Court has interpreted a provision of the RERA Act, that interpretation governs regardless of how other courts have read superficially similar provisions in other statutes. Importing reasoning from value added tax jurisprudence into the RERA framework, as the Appellate Tribunal attempted, was an error that the High Court was right to correct.
The Bigger Picture: Access to Justice and Pre-Deposit Conditions
Pre-deposit requirements in appellate proceedings serve a legitimate purpose. They discourage frivolous appeals. They ensure that a party who challenges an order is serious about the challenge. They protect the winning party from seeing its award become unenforceable while interminable litigation plays out.
But these purposes are served by the thirty percent threshold that Section 43(5) prescribes for cases like delay compensation. A requirement to deposit the full amount before a single argument is heard goes further than the law requires and further than justice demands. It effectively says to the promoter: “You have no right of appeal unless you can already afford to pay what we’ve ordered you to pay.” That is not access to justice. It is the denial of it, dressed in procedural clothing.
The High Court of Karnataka, affirmed by the Supreme Court, has drawn this line clearly. The right to be heard costs thirty percent. No more.