Builder Cannot Forfeit Earnest Money If Possession Not Offered Within Stipulated Time: NCDRC

The National Consumer Disputes Redressal Commission, presided by Justice Sudip Ahluwalia, held that forfeiture of earnest money cannot be done if possession is not offered within the stipulated time to the party in question. Brief Facts of the Case The builder advertised “Puram Premium Apartment,” promising high-end living. The Complainant booked a flat, paying Rs. 6,90,000 as earnest money. He won the draw of lots and received a Letter of Intent (LoI) with a tentative price of Rs. 69,00,000. The LoI included maintenance charges and a 2% contribution of the sale price as a corpus for the Society before possession. The Complainant paid 95% of the flat's price, but there was a delay of over 13 months in possession. Upon visiting, the complainant found the flat uninhabitable and significantly smaller. Citing deficiencies and unfair practices, he requested to surrender the apartment and refund the money with 18% interest. The builder cited a 10% deduction under PAPRA, 1995, for surrender. Aggrieved, the Complainant filed a complaint before the National Commission. Contentions of the Opposite Party The builder argued that the Complainant did not qualify as a 'Consumer' under the Act, alleging his participation was for investment, not residential purposes. They cited the Complainant's residence in Delhi and later in Navi Mumbai as evidence of speculative intent for future profit. They claimed that the forfeiture of earnest money was justified under Clause 7(ii) of the LoI due to the Complainant's refusal to accept the allotment within 30 days of the offer. The builder also contended that they were exempt from obtaining a Completion Certificate under Section 44 of PAPRA, 1995, as an Urban Development Authority. Observations by the Commission The Commission observed that the primary issue was whether the Complainant's letter requesting a refund was an option to withdraw from the scheme or surrender the apartment. The builder contended it was a surrender, justifying a 10% forfeiture of the earnest money. The Complainant, however, relied on Clause 3(II) of the LoI, which allowed withdrawal and full refund with 8% interest if possession was not delivered within 36 months. The Commission found no evidence that the development was completed within 36 months from the LoI date. The Commission found that the Complainant was justified in seeking to withdraw from the scheme due to the delay in possession and the uninhabitable condition of the apartment. The Commission further noted that the development works were not completed within the stipulated period of 36 months from the issuance of the Letter of Intent (LoI), and the possession was offered well beyond this period. The Commission determined that the Complainant was entitled to a refund of the money deposited, along with interest at 8% per annum compounded annually, as per Clause 3(II) of the LoI. It rejected the builder's justification for forfeiting 10% of the earnest money and ruled that the Complainant should not be subjected to this deduction. The builder was directed to refund the amount within three months, failing which the amount would entail 10% interest per annum. Case Title: Vikas Garg Vs. Estate Officer (Housing) Case Number: C. C. No. 272/2019Click Here To Read/Download Order

Builder Cannot Forfeit Earnest Money If Possession Not Offered Within Stipulated Time: NCDRC

Ayushi Rani

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