Can HRERA Forfeit a Developer’s Security Deposit for a Minor Delay Caused by Government Approvals? The ruling emphasizes that RERA penalty challenged under the Real Estate (Regulation and Development) Act, 2016 (RERA) must be fair, proportionate, and based on a proper consideration of facts rather than being imposed mechanically.

When a RERA penalty challenged, promoters or developers appeal to the Real Estate Appellate Tribunal (REAT) within 60 days of the order. The law mandates a pre-deposit (typically 30% of the penalty or 50% of the total liability) before the appeal can be heard.

In an important decision balancing regulatory compliance with practical realities of project development, the Haryana Real Estate Appellate Tribunal (HREAT) held that forfeiture of a developer’s security deposit for a minor delay in obtaining statutory approval was unjustified where the delay occurred due to circumstances beyond the promoter’s control. Thus, the RERA penalty challenged was allowed.

Background of RERA Penalty Challenged Dispute

The promoter had obtained conditional registration for a real estate project from the Regulatory Authority.

As part of the registration process, the promoter deposited a security amount in lieu of submitting certain statutory approvals within the stipulated timeline. One of those approvals related to the fire scheme clearance required for the project.

Although the promoter applied for the approval well before the deadline, the final approval was issued by the competent authority two days after the prescribed date. Consequently, the Regulatory Authority forfeited a security deposit of ₹25 lakh on the ground that the condition of registration had not been fulfilled within time.

Promoter’s Explanation

The promoter contended that the delay was neither intentional nor attributable to them.

The promoter pointed out that the application for approval had been submitted several months before the deadline and that the delay occurred because of circumstances within the government approval process.

It was argued that the concerned officer remained unavailable for a period due to a personal tragedy and that additional delays occurred because of government holidays and administrative procedures. The promoter further emphasized that all other compliances required under the conditional registration had been completed within the stipulated time.

Authority’s Decision

The Regulatory Authority took the view that the conditional registration certificate clearly stipulated that the security deposit could be forfeited if the prescribed conditions were not fulfilled within the specified timeline.

Since the fire scheme approval was obtained two days after the deadline, the Authority ordered forfeiture of the security amount.

Tribunal’s Findings

The Appellate Tribunal disagreed with the Authority’s approach and found substantial merit in the promoter’s appeal.

One of the key observations made by the Tribunal was that the impugned order failed to adequately consider the promoter’s explanation regarding the reasons for delay. The Tribunal noted that quasi-judicial authorities are expected to pass reasoned and speaking orders addressing the material contentions raised by the parties.

According to the Tribunal, failure to consider relevant explanations may violate principles of natural justice.

Principle of Proportionality

A significant aspect of the ruling is the Tribunal’s application of the doctrine of proportionality.

The Tribunal observed that:

• The promoter had applied for approval well before the deadline.
• The delay was only two days.
• The delay arose from circumstances beyond the promoter’s control.
• No prejudice was shown to have been caused to any homebuyer.
• Other statutory compliances had been completed within time.

In these circumstances, forfeiture of ₹25 lakh was considered grossly disproportionate to the nature of the alleged default.

RERA Is Not Meant for Mechanical Penalties

The Tribunal emphasized that the objective of RERA is to regulate the real estate sector in a fair and transparent manner.

While compliance with statutory requirements remains essential, the Act does not contemplate mechanical penalties that ignore surrounding circumstances and genuine efforts made by promoters to comply with regulatory obligations.

The Tribunal observed that regulatory powers must be exercised in a manner that balances consumer protection with bona fide project development.

Refund of Security Deposit Ordered

After examining the facts, the Tribunal concluded that the forfeiture could not be sustained.

The impugned order was set aside and the Authority was directed to refund the entire security deposit of ₹25 lakh to the promoter within the stipulated period.

Key Takeaways

• Regulatory penalties must satisfy the test of proportionality.
• Minor procedural delays caused by factors beyond a party’s control should be evaluated fairly.
• Quasi-judicial authorities must pass reasoned and speaking orders.
• RERA aims to ensure compliance, but not through arbitrary or mechanical punishment.
• Absence of prejudice to homebuyers may be a relevant consideration while assessing penalties.

Conclusion

The Haryana Real Estate Appellate Tribunal’s decision highlights an important principle of regulatory law: compliance requirements must be enforced with fairness and reasonableness. While developers are expected to strictly adhere to statutory obligations, penalties should reflect the nature and gravity of the default.

By setting aside the forfeiture for a mere two-day delay caused by circumstances beyond the promoter’s control, the Tribunal reaffirmed that regulatory action under RERA must remain proportionate, equitable, and consistent with principles of natural justice.

By Satish Mishra Advocate, More on 99888-17966

Source: Haryana Real Estate Appellate Tribunal Order dated 03.02.2026 concerning forfeiture of security deposit under conditional project registration and the principle of proportionality under RERA.