Short Answer

Yes, a society or its members can impose a penalty or claim compensation on the developer for delays in redevelopment, provided such penalty clauses are clearly included in the registered redevelopment agreement. Under Section 73 and Section 74 of the Gujarat Cooperative Societies Act, 1961 and Section 18 of the RERA Act, 2016, the developer is legally bound to compensate the society or individual members for delay in possession.

Detailed Explanation

The Gujarat Cooperative Societies Act, 1961 and the Real Estate (Regulation and Development) Act, 2016 (RERA) together ensure that members of a cooperative housing society are protected from delays caused by the developer during redevelopment.

• Legal Basis for Imposing Penalty:

Section 73 of the Gujarat Cooperative Societies Act, 1961 empowers the society’s managing committee and general body to safeguard the interests of all members and enforce contractual obligations on the developer.

Section 74 allows the society to monitor the developer’s performance and, in case of non-compliance or delays, take appropriate action including penalty imposition or legal recovery.

Section 18(1) of the RERA Act, 2016 explicitly states that if a promoter fails to complete or hand over possession of the project on time, the allottee (in this case, the society or its members) is entitled to:

Monthly interest for every month of delay, or

Full refund with interest if the member chooses to withdraw from the project.

• Inclusion of Penalty Clauses in the Agreement:

Before signing the Development Agreement, the society must ensure the following clauses are included and registered:

A fixed per-month penalty amount (e.g., ₹15–₹25 per sq. ft.) payable to each member if possession is delayed beyond the agreed date.

Escalation clause allowing automatic extension only under specific circumstances (like force majeure).

Bank guarantee or security deposit clause requiring the developer to furnish a financial guarantee equal to 10–20% of the project value.

Right to approach RERA or civil court if the developer defaults.

• Remedies in Case of Delay:

If the developer fails to meet the agreed possession deadline:

The society can issue a legal notice demanding payment of the agreed penalty.

If unresolved, members can file a complaint before GUJRERA under Section 18 for compensation and interest.

The society may also approach the Registrar of Cooperative Societies under Section 93 for breach of contract and mismanagement.

• Practical Implementation:

Penalties or compensation are enforceable only if they are part of a registered agreement and approved by the general body. RERA also enforces these clauses strictly once proven.

Real-world Scenarios

Scenario 1: A housing society in Ahmedabad had a redevelopment agreement stating ₹20 per sq. ft. per month as delay compensation. The builder delayed possession by 8 months, and RERA ordered payment of ₹1.6 lakh per member.

Scenario 2: In Surat, the builder failed to meet the construction timeline. The society filed a complaint under Section 18 of RERA and received both compensation and monthly rent arrears.

Scenario 3: A Vadodara society inserted a bank guarantee clause before signing the redevelopment agreement, which was invoked when the builder delayed approvals, ensuring financial security for all members.

References

Section 73 & 74 of the Gujarat Cooperative Societies Act, 1961: Official PDF

Section 18 of the Real Estate (Regulation and Development) Act, 2016: Gujarat RERA Act

Gujarat RERA Rules, 2017 – Rule 20 (Recovery and Penalties): Official Rules PDF

Urban Development and Urban Housing Department Redevelopment Guidelines (2019), Government of Gujarat.