MahaREAT – Builder Cannot Forfeit Homebuyer's Money Without Establishing Loss Due to Cancellation of Flat
While setting aside the order of the Maharashtra Real Estate Regulatory Authority (Authority), the bench of the Maharashtra Real Estate Appellate Tribunal (Tribunal), comprising Justice Shriram R. Jagtap (Judicial Member) and Dr. K. Shivaji (Technical Member), has held that the builder cannot forfeit the money of the homebuyer when the booking is canceled by either the homebuyer or...
While setting aside the order of the Maharashtra Real Estate Regulatory Authority (Authority), the bench of the Maharashtra Real Estate Appellate Tribunal (Tribunal), comprising Justice Shriram R. Jagtap (Judicial Member) and Dr. K. Shivaji (Technical Member), has held that the builder cannot forfeit the money of the homebuyer when the booking is canceled by either the homebuyer or the builder without establishing damage or loss incurred due to the cancellation of the flat.
Background Facts
The homebuyers (appellants) jointly booked a flat, having a carpet area of 417 sq. ft., in the builder's (respondent) project named "Avant Heritage," situated at Jogeshwari (East), Mumbai, for a total price of Rs. 1,15,00,110/-. They paid Rs. 13,50,000/- to the builder, who issued an allotment letter on 28th May 2019.
Further, in order to finance their purchase, the homebuyers looked for a home loan from HDFC Bank, but the bank denied it due to a missing signature of one homebuyer on the allotment letter. Although the homeowners jointly booked the flat, the builder issued the allotment letter solely in the name of one homeowner, causing administrative issues.
Because of these reasons, the homebuyers informed the builder that they wouldn't be able to continue with the project and thus requested a refund of their money. However, the builder failed to refund the Homebuyers amount.
Therefore, being aggrieved by the builder's conduct, the homebuyers filed a complaint before the authority seeking a refund of their money (i.e., Rs. 13,50,000/-) with interest as per Section 18(1) of RERA, 2016.
In its order dated 12.01.2021, the authority directed the parties to execute a registered agreement for sale within one month. Consequently, aggrieved by the authority's order, the homebuyers filed an appeal before the Tribunal seeking to set aside the authority's order.
Observation and Direction by Tribunal
The Tribunal observed that Builder'sfailure to execute an agreement for sale after receiving more than 10% of the Total consideration and further demanding Rs.6,50,000/- from the homebuyers is sheer violation of Section 13 of RERA, 2016.
The Tribunal observed that the RERA, 2016 does not explicitly allow builders to forfeit the earnest money when a booking is cancelled by either the homebuyer or the builder.
The Tribunal further observed that there must be a reasonable justification for forfeiting the amount deposited by the homebuyers. Since there is no evidence showing that the builder suffered any damages or losses due to the cancellation, forfeiting the entire amount without a valid reason goes against the purpose of the RERA, 2016.
Therefore, the Tribunal set aside the Authority's order dated 12.01.2021 and directed the builder to refund the amount paid by the homebuyers (i.e., Rs. 13,50,000/-) with interest.
Case – Rajeshwari Ramesh Pillai & anr Versus Aishwarya Avant Builders LLp
Citation - Appeal No. AT00600000053392/21