Karnataka RERA Slams Mantri Developers For Delay, Orders Rs. 2.56 Crore Refund

Post By 24law
April 3, 2025

Pranav B Prem

In a significant ruling, the Karnataka Real Estate Regulatory Authority (K-RERA) has held Mantri Developers Pvt. Ltd. liable for the prolonged delay in handing over possession of a flat and directed the builder to refund Rs. 2.56 crore to the homebuyer. The Authority also ordered the builder to foreclose the homebuyer’s loan obtained from PNB Housing Finance Limited (PNBHFL), thereby relieving the buyer from financial distress caused due to the delay.

Background of the Case

The case arose when the homebuyer purchased a flat in the builder’s project, 'Mantri Webcity 2A,' situated in Bengaluru, Karnataka. The flat was bought under a Pre-EMI scheme, where the buyer paid 20-25% of the total sale consideration, amounting to Rs. 15,56,872, while the remaining 75-80%, totaling Rs. 65,65,776, was availed through a bank loan from PNBHFL.

Also Read: Courts have authority to determine rate of interest. Appellants having suffered a delay of five decades are entitled to compensation: Supreme Court

As per the agreement dated April 24, 2014, the builder was obligated to hand over possession of the flat by March 31, 2017. However, despite a delay of more than five years, the homebuyer had not received possession. Due to the continuous delay, the homebuyer decided to withdraw from the project, a decision that was acknowledged by the builder via email on April 23, 2017.

The homebuyer alleged that despite agreeing to their withdrawal, the builder failed to provide a refund and interest as per the Pre-EMI scheme terms. Additionally, the builder did not fulfill its obligation to close the loan, as agreed upon in the Letter of Undertaking.

Aggrieved by this, the homebuyer approached the Karnataka RERA, seeking a refund of the sale consideration, foreclosure of the homebuyer’s loan, and reimbursement of the Pre-EMI payments made.

Contentions of the Builder

The builder contested the maintainability of the complaint, arguing that the delay in project completion was due to unforeseen circumstances beyond their control. The builder cited legal and licensing hurdles, heavy rainfall and flooding at the project site, demonetization, the implementation of GST, government-imposed restrictions on construction working hours, a ban on sand mining, a shortage of skilled labor and construction materials, and the impact of the COVID-19 pandemic and the subsequent lockdown. According to the builder, these factors contributed to the delay, making it impossible to meet the originally agreed-upon timeline for possession.

Observations and Directions of the Authority

After examining the facts and documents submitted, the Authority noted that the builder had already accepted the homebuyer’s withdrawal from the project. Since the builder had failed to deliver possession as per the agreed timeline, the Authority held that the homebuyer was entitled to a full refund under Section 18 of the Real Estate (Regulation and Development) Act, 2016. The Authority directed the builder to refund Rs. 2,56,47,520 to the homebuyer within 60 days from the date of the order.

Foreclosure of Homebuyer’s Loan and Pre-EMI Reimbursement

The Authority also found that the builder had failed to reimburse the homebuyer for Pre-EMI payments, despite being bound by the Pre-EMI scheme terms. Due to the delay in possession, the homebuyer had to continue paying Pre-EMIs, which would have persisted indefinitely if the homebuyer had not approached the Karnataka High Court.

Also Read: “‘Claiming Inflated Refunds and Blaming Consultant Amounts to Defrauding the State’: Karnataka High Court Dismisses Sales Tax Appeal for Lack of Legal Merit”

The Authority observed that the builder failed to discharge the homebuyer’s financial burden by closing the loan account, as per the Letter of Undertaking. The Authority noted: "The builder has failed to take necessary steps to relieve the homebuyer from paying Pre-EMIs by foreclosing the loan account, thereby causing undue financial distress." Further, it held that since the builder continued to retain both the property and the loan amount, the homebuyer was neither the beneficiary of the property nor of the loan. Consequently, the Authority directed the builder to foreclose the homebuyer’s loan with immediate effect.

Verdict

The Karnataka RERA allowed the homebuyer’s complaint and ruled in their favor. It directed Mantri Developers to refund Rs. 2.56 crore along with foreclosure of the homebuyer’s loan, thus providing relief to the complainant. The Authority also found the builder’s justifications for the delay unconvincing and held them accountable for failing to meet their obligations.