Haryana RERA Upholds Cancellation Of Flat's Booking, Orders Ireo Grace To Refund After Deducting 10% Of Total Sales Price

Haryana Real Estate Regulatory Authority (Authority) bench, comprising Ashok Sangwan (Member), has directed M/s Ireo Grace Realtech Private Limited, the builder, to refund the amount paid by the homebuyer, after deducting 10% of the total cost of the flat as earnest money. The complaint was filed by the homebuyer after the builder forfeited homebuyer's Rs.39,42,088/-.

Background Facts

The homebuyer (Complainant) was allotted a flat with a super area of 1300 sq. ft. and one parking space in the builder's (Respondent) project named "Corridors" Situated at Sector 67A, Gurugram.

This allotment was made through an apartment buyer's agreement dated 12.05.2014 for a total sale consideration of Rs. 1,28,31,283/-, against which the homebuyer paid Rs. 39,42,088/- to the builder by April 2014.

The homebuyer regularly inquired about the project's status and found that the construction work had not even started and that the project could not be completed within the stipulated time. Due to the poor progress of work, the homebuyer sought a refund of the entire amount deposited with the builder, but the builder refused to return the money.

The homebuyer contended that despite the lack of actual construction progress, the builder continued to make illegitimate demands for further installments. Eventually, the builder cancelled the homebuyer's allotment through a cancellation letter dated 07.09.2016 and forfeited the entire amount paid without any justification.

Therefore, aggrieved by the cancellation of the allotment, the homebuyer filed a complaint before the authority seeking a refund of the entire amount of money deposited with the builder, along with interest.

Contention of Builder

The builder contended that they had sent 17 reminders to the homebuyer to pay the outstanding dues. Despite these reminders, the homebuyer failed to make the required payments.

The builder stated that a final notice was issued on 28.07.2016, urging the homebuyer to fulfil their payment obligations. Subsequently, due to the continued non-compliance, the builder cancelled the allotment of the unit through a cancellation letter dated 01.09.2016.

Observation and Direction of Authority

The authority referred Clause 13.3 of the Apartment buyer's agreement which briefly stipulated that builder will offer possession of the serviced flat to the homebuyer within 42 months from the date the building plans are approved. However, this is conditional on the homebuyer fulfilling all their obligations, including making timely payments for the sale consideration and other charges, as well as completing all required documentation.

The authority observed that the builder sent homebuyer 17 reminders to make the required payments and then finally cancelled the allotment of the homebuyer's flat on 01.09.2016.

Additionally, Authority held that under section 19(6) and section 19(7) of the Real Estate (Regulation and Development) Act 2016, the homebuyer has an obligation to make necessary payments in a timely manner. Therefore, the authority held that the cancellation of the allotment by the builder is valid.

The Authority observed that upon canceling the flat, the builder was obligated to return the homebuyer's money after deducting the earnest money. However, the deductions made by the builder were not lawful according to the Supreme Court rulings in Maula Bux vs. Union of India (1970) and Sirdar K.B. Ram Chandra Raj Urs vs. Sarah C. Urs (2015), where it was held that forfeiture of the amount in case of breach of contract must be reasonable, and if the forfeiture is in the nature of a penalty, the provisions of Section 74 of the Contract Act, 1872 apply, requiring the party to prove actual damages.

Therefore, the builder is liable to refund the paid-up amount of Rs.39,42,088/- after deducting 10% of the sale consideration of Rs.1,28,31,283/- as earnest money, with an interest at 11.10% p.a.

Case – Anuj Agrawal & anr Versus M/s Ireo Grace Realtech Private Limited

Citation - Complaint No. 5387 of 2022

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