The National Consumer Disputes Redressal Commission (NCDRC) has ruled that the builder or developer can forfeit only part of booking amount or earnest money deposit (EMD) taken from a buyer at the time of booking if the buyer is not ready to take possession and wants to cancel the flat without a valid reason.
In an order issued earlier this week, the bench of Justice VK Jain says, "...the builder should be allowed to forfeit (Rs10 lakh from) the earnest money, which the buyer paid to it and it should refund the balance (principal) amount to the buyer, along with appropriate interest from the date on which first default in paying the unpaid instalment was committed. The senior counsel for the developer submits that the instalment which still remains unpaid was demanded by them on 25 May 2017 and should have been paid within 30 days meaning thereby that it could be paid by 24 June 2017. Therefore, the builder, in my opinion, should pay interest on the balance amount left after deducting the earnest money with effect from 25 June 2017."
The case is related with booking of a flat by New Delhi-based Ramesh and Renu Malhotra. In 2013, they booked residential flat worth Rs1.68 crore with Emmar MGF Land Ltd in a project namely Imperial Garden. On 26 February 2013, the senior citizens also paid a booking amount of Rs10 lakh. The builder issued them a provisional allotment letter dated 27 February 2013 followed by execution of agreement on 15 April 2013. As per clause 14(a) of the agreement the possession was to be delivered within 42 months from the start of construction though a grace period of three months was also available to the builder. The payment was to be made in installments linked with the progress of the construction.
The Malhotras obtained a loan of Rs1 crore from HDFC Bank and a tri-partite agreement was executed between the buyer, builder and lender on 30 March 2015.
On 30 October 2018, Emmar MGF offered possession of the flat to the Malhotras after paying and additional payment. However, the senior citizen couple told that they were no more interested in taking possession. They then approached the NCDRC seeking full refund from Emmar MGF.
In their plea, the Malhotras claimed that they had booked the flat for their son. However, since they did not receive the possesion in time, their son left for abroad and since he was not here, they had no need for the flat, they contended.
The NCDRC bench observed, "Though it has been pleaded in the consumer complaint that the flat in question was booked for their son and he having left for abroad, they do not require the flat any more and want only refund of the amount paid to the builder with interest. The ground taken by the complainants for refusing to take possession of the flat does not seem to be justified, considering that the possession as per the agreement could be delivered by 11 August 2017, whereas the son, according to the Malhotras, left India way back in the year 2014. Therefore, the ground given by them for refusing to take possession does not seem to be justified."
"...despite there being no justification for refusing to take possession of the allotted flat, the delay in offering possession not being unreasonable. In my opinion, in such circumstances, the builder should be allowed to forfeit the EMD... The builder, in my opinion, should deduct only a sum of Rs10 lakh out of the total amount received by it in the complainants either directly or through HDFC Bank and the balance amount be refunded along with interest with effect from 25 June 2017," the NCDRC order says.
Justice Jain also passed strictures on the agreement executed between Emmar MGF and the Malhotras. He says, "As regards the terms of the agreement executed between the complainants and the builder, such agreements being wholly one sided constitutes an unfair trade practice and, therefore, cannot be bind the flat buyer. It has to be kept in mind that the initial payment was made by the complainants on 26 February 2013. The buyer’s agreement came to be executed on 15 April 2013. The complainants had no option but to sign on the dotted lines they already having made initial payment to the builder even before the agreement came to be executed."
"The complainants have taken substantial loans from HDFC Bank. The amount with the Malhotras had raised by way of loan from HDFC Bank should be refunded by the builder along with same interest, which the Malhotras had paid to the Bank. The interest on the balance amount if any contributed by the Malhotras, considering all the facts and circumstances of the case should carry interest at the rate of 10% per annum. The bank, of course, should be paid first before making any payment to the complainants," the bench says.
The NCDRC asked HDFC Bank to intimate within four weeks to Emmar MGF the amount payable by the Malhotras and the amount to be paid to the Bank at the earliest and in any case within six months.
It also directed HDFC Bank to give to Emmar MGF, breakup of the principal amount as well as of the interest component along with rate at which interest was charged from time to time. "Since the Malhotras have also been making payments to the bank in the interregnum, for the purpose of this order, the builder shall compute the interest on the principal amount received from the bank at the rate of interest conveyed to it by the bank. On the balance amount, which the complainants had contributed from their own funds, interest would be paid at the rate of 10% per annum from 25 June 2017," the NCDRC order says.