Moneycontrol PRO
Upcoming Event : LeapToUnicorn - mentoring, networking and fundraising for startups. Register now

Booking amount can’t be forfeited if buyer cancels purchase, says Maharashtra real estate tribunal

The tribunal said RERA is silent on the point of permissible deduction if an allottee cancels a booking

Representational image.

Representational image.

The Real Estate Regulatory Act doesn’t allow a property developer to deduct money from the amount paid by a buyer if they cancel a purchase, the Maharashtra Real Estate Appellate Tribunal (MREAT) has ruled.

The Real Estate (Regulation and Development) Act, 2016 is silent on the point of permissible deduction if the buyer unilaterally cancels a booking for whatever reason, the tribunal said.

The ruling dated August 10, 2022 was delivered in cases filed homebuyers Pradip Mehta and Mrudula Mehta, both residents of south Mumbai, against Sylvanus Properties Ltd.

The buyers had purchased an apartment in Indiabulls Savroli-1 in Khalapur near Lonavala. The deal was finalised in June 2014 for Rs 1.17 crore and the buyers paid Rs 17 lakh as part payment.

According to the judgment, the developer promised to provide a 12-hole golf course and a clubhouse measuring 50,000 sq ft.

MREAT said the developer promised to hand over possession of the flat by February 2018. The developer revised the date to February 28, 2019 on MahaRERA project registration webpage.

Even after the revision, the developer failed to complete the project. The promised amenities, including the golf course and clubhouse, were not provided.

The judgment said the developer had failed to adhere to the commitments, and the allottees, by an email dated  March 6, 2019, told the developer that they had cancelled the booking and asked for a refund of the amount paid with interest.

The developer completed the project and obtained an occupation certificate (OC) on March 31, 2021.

The buyers approached MahaRERA  with a case that the developer be ordered to pay compensation of Rs 5 lakh to them for not providing the promised amenities, to refund the amount paid with interest, to pay maximum penalty as per the provisions of RERA and to pay Rs 1 lakh towards the cost of the litigation.

The developer argued that in case the buyers wanted to cancel booking, the cancellation must be guided by clause 16 of the booking form (i.e. application for provisional reservation) as no agreement of sale had been executed between the parties.

The developer contended that brochure relied on by the buyers was issued by a third party and therefore, the buyers could not claim misrepresentation.

After MahaRERA passed an order saying the refund would be guided by the terms and conditions in the booking form, the buyers approached MREAT.

The developer argued in the tribunal that the buyers were seeking an exit since they were losing out on the rental income. This conduct of buyers clearly indicates that the buyers were not genuine homebuyers but investors who were taking the advantage of the provisions of RERA to make a return on investment, the developer argued.

The developer argued that any exit by the buyers would entail a huge loss to the company as buyers had blocked the flat for the last eight years.

Buyers' unilateral exit from the project when there is no violation of provisions of RERA on the part of the developer will entail forfeiture of the amount in terms of clause 16(c) of the application, the developer said.

MREAT said it did not find any substance in the argument of the developer.

MREAT set aside MahaRERA's order and directed the developer to pay interest at State Bank of India's highest Marginal Cost of Lending Rate (MCLR) plus 2 percent of the amount paid by the buyers from  July 1, 2014 until the realisation of the entire amount.

MREAT ruled: "We have already observed that the developer has failed to hand over possession of the subject flat to buyers by the due date of 1st July 2017, mentioned in MahaRERA project registration website. There is no express provision in the RERA, 2016 by which promoter is entitled to forfeiture of the amount in the event of cancellation of booking on the part of allottees (buyers), especially when allottees are not at fault or instrumental in causing delay."

MREAT added, "Besides the Act is silent on the point of permissible deduction, if allottee suo motu/unilaterally for whatsoever reason cancels booking. It is not in dispute that allotees have paid earnest money of Rs 17,00,000 to the developer on 30th June 2014 and the  developer has utilised the said amount since 30th June 2014 till completion of the project for his commercial purposes."

Advocate Nilesh Gala, who represented the buyers, said: "The significance of the order is that the developer cannot forfeit the payment or deduct for no fault of the buyer. Though the model allotment letter issued by MahaRERA may be prescribing certain deduction for cancel of booking but at least there is no provision in the Act is what the MREAT judgment states."

A comment from the legal representatives of the developer Sylvanus Properties Ltd is awaited.
Mehul R Thakkar