Signed a Settlement Deed at Handover? Later Defect Claims May Still Survive

Vinaya and Rajkumar waited years for their apartment in AlanoVille, a Bengaluru project by Goyal Hariyana Realty. On 17 January 2020, on the way to possession, they signed two documents on the same day: a sale deed, and a settlement deed giving up "any and all" claims then subsisting against the builder. After moving in, they say, construction defects came to light. The builder argued the settlement had already closed the door. The Karnataka Real Estate Appellate Tribunal disagreed.

The short answer. In its judgment of 1 September 2026 in Appeal No. (K-REAT) 42/2025, the tribunal held that a settlement confined to claims "subsisting" on the date it was signed cannot, merely through its general language, be read as giving up claims for defects discovered later, and confirmed Rs 6 lakh in compensation plus Rs 5,000 in costs. The trade-off: the same settlement deed still blocked the couple's separate claim for delay compensation, so what you sign at handover can cost you one claim even if it preserves another.

What did the Karnataka appellate tribunal decide in the AlanoVille case?

It dismissed the builder's appeal and confirmed the compensation order. As reported by LiveLaw, a bench of Chairperson Justice J.M. Khazi and Judicial Member Santhosh Kumar Shetty N. upheld an order directing the builder and the landowner to jointly pay Rs 6 lakh to the two homebuyers for alleged construction defects, besides Rs 5,000 in litigation costs.

The judgment records that the Adjudicating Officer of K-RERA passed that order on 4 February 2023 in Complaint No. CMP/220416/0009364, directing payment within 45 days, failing which the amount would carry interest at 6% per annum until realisation. The tribunal directed its Registry to release the amount to the allottees, including accrued interest, after the appeal period and following due procedure.

The judgment records the background. The couple booked Flat No. 61 in J Block on 29 October 2015 and signed an Agreement to Sell and a Construction Agreement on 17 August 2016. They said possession was promised in August 2017; the builder said the date was February 2018, including a six-month grace period, and that it obtained the Occupancy Certificate on 16 January 2019.

Why did the settlement deed not cover the defect claim?

Because, in the tribunal's reading, it only covered disputes that existed when it was signed. Clause 5 of the deed said the buyers agreed that "any and all Disputes / Claims which may have been subsisting between the parties are mutually terminated and unconditionally relinquished", and that they had no further claims against the builder for the property.

The tribunal held that the way the clause was worded made it clear the settlement was confined to disputes and claims subsisting on the date it was executed. The alleged defects were noticed only after the buyers took possession and occupied the flat, so the cause of action had not arisen when the deed was signed. In the judgment's words, "the settlement of the then subsisting disputes cannot, merely by virtue of the general language employed therein, be construed as an unconditional relinquishment of claims arising from defects which were discovered subsequently".

The tribunal also stressed timing. The sale deed and settlement deed were executed on the same day, and it was only much later that the buyers noticed the defects, took an interior designer's help to assess the loss and filed their complaint. The relief granted for defects was, it said, distinct from the claim that was the subject of the settlement.

What did the settlement deed still block?

The couple's claim for delay compensation. The judgment records that in an earlier complaint, CMP/201029/0006975, the buyers sought compensation for delay. K-RERA dismissed it after taking note of the settlement, and the tribunal dismissed their appeal, No. 71/2022, essentially on the principle of estoppel arising from the settlement.

According to the builder's case, as recorded in the judgment, the buyers agreed under the settlement to settle their claims, including for GST input credit and delay, by accepting Rs 7,50,000. The builder said that at the time of possession the buyers had paid Rs 1,86,48,457 towards a total consideration of Rs 2,47,93,807.

That split is the real lesson. A settlement deed signed to get the keys can extinguish the very claims you were negotiating over, such as delay interest, while leaving open problems you could not have known about yet. Before you sign one, be clear about which of your claims you are trading away and what you are getting for them.

How does the RERA Act's five-year defect liability apply?

It gives buyers a statutory window for defects after possession. Under Section 14(3) of the Real Estate (Regulation and Development) Act, 2016, if any structural defect, or any other defect in workmanship, quality or provision of services, is brought to the promoter's notice within five years of handing over possession, the promoter has a duty to rectify it without further charge within thirty days. If the promoter fails to do so, the aggrieved allottees are entitled to appropriate compensation under the Act.

The judgment records that the buyers' counsel relied on this five-year liability and on defect liability clauses in the sale deed, arguing the claim was well within the statutory period. Our explainer on the five-year defect liability under Section 14 covers how to use this protection after handover.

The practical point is to put defects in writing to the builder as soon as you find them, with dates and photographs. The five-year clock runs from handover, and the thirty-day rectification duty is tied to the defect being brought to the promoter's notice.

Why did the tribunal call the builder's appeal an abuse of process?

Because of how the builder conducted itself in the earlier proceedings. After the Adjudicating Officer's order, the buyers appealed for more compensation, and the builder filed a counter claim challenging the same order. The tribunal found the builder did not make the statutory pre-deposit for that challenge.

Under the proviso to Section 43(5) of the Act, a promoter's appeal is not to be entertained without the promoter first depositing at least thirty per cent of the penalty, or such higher percentage as the tribunal decides, or the total amount payable to the allottee including interest and compensation, or both, before the appeal is heard. The tribunal described this as a mandatory statutory condition, citing the Supreme Court's decision in Newtech Promoters and Developers.

When the buyers withdrew their appeal through a memo on 10 December 2024, the builder did not tell the tribunal its own challenge was pending. About five months later, it filed a fresh appeal against the same order, delayed by about 831 days. The tribunal condoned the delay but held the appeal was "an afterthought and an abuse of the process" and dismissed it.

What should buyers check before signing a settlement deed at handover?

Read exactly which claims it covers and keep your post-possession rights clearly outside it. The checklist below follows the issues that decided this case.

1. Read every clause that uses words such as relinquish, abandon, quit claim, waive or full and final settlement.
2. List the claims you are settling, such as delay interest or GST credit, and the amount you are receiving for each.
3. Ask for a written statement that defect liability under Section 14(3) of the RERA Act is not affected.
4. Do a full snag inspection before signing, and attach the snag list to the handover papers.
5. Keep copies of the agreement, sale deed, settlement deed and all handover correspondence together.
6. Report defects found after moving in to the builder in writing, with dates and photographs.
7. If a defect is not fixed, get a written assessment of the loss before filing a complaint.

For a step-by-step inspection list, see our flat possession handover checklist.

What evidence helps a defect compensation claim?

A documented assessment of the defects and their cost. In this case the Adjudicating Officer relied on a certificate from an interior designer to award compensation. Before the tribunal, the builder argued the designer was not an expert and that the certificate rested on assumptions.

The tribunal noted the buyers' argument that this objection had never been raised before the Authority. It held that the compensation was "just, fair and reasonable" given the nature of the defects, the material on record and the expert opinion. It also found that the Supreme Court decision the builder relied on, Ramesh Chandra Agarwal v Regency Hospital, in fact reinforced the need to give due consideration to an expert opinion when deciding a claim based on it.

For buyers, the takeaway is to build your evidence early. A professional report that lists each defect, explains its likely cause and estimates the repair cost gives the Adjudicating Officer something concrete to assess, and it is harder for a builder to dismiss than a general complaint.

Frequently asked questions

Does a settlement deed signed at handover waive later defect claims?

Not in this case. The Karnataka Real Estate Appellate Tribunal held that a settlement confined to claims subsisting when it was signed cannot, merely through general language, be read as giving up claims for defects discovered later and not within the parties' contemplation, and confirmed Rs 6 lakh compensation.

What compensation did the AlanoVille buyers get?

The Adjudicating Officer's order of 4 February 2023 directed the builder and the landowner to jointly pay Rs 6 lakh within 45 days, with 6% annual interest if unpaid, plus Rs 5,000 in litigation costs. The tribunal confirmed it on 1 September 2026 and directed release of the amount with accrued interest.

Did the settlement deed block any of the buyers' claims?

Yes. The buyers' earlier complaint seeking delay compensation was dismissed by K-RERA after taking note of the settlement, and the tribunal dismissed their appeal, No. 71/2022, essentially on the principle of estoppel arising from the settlement. Only the later defect claim was treated as a distinct cause of action.

How long is a builder liable for defects under RERA?

Under Section 14(3) of the RERA Act, defects brought to the promoter's notice within five years of handing over possession must be rectified without further charge within thirty days. If the promoter fails to do so, the aggrieved allottees are entitled to appropriate compensation under the Act.

Last updated 2026-10-22. PropNewz Team.