Order Name: Macrotech Developers Ltd. Vs. A. Syamala Reddy
Case No.: F.A. No. 422/2023
The National Consumer Disputes Redressal Commission, led by Mr. Subhash Chandra and Dr. Sadhna Shanker, has issued a significant ruling regarding the forfeiture of deposits by builders. The Commission emphasized that any forfeiture must be reasonable and should not exceed 10% of the total deposit amount.
Details of the Case
The case involved a complainant who had booked a 4 BHK villa in the Bellezza Benicia project by Macrotech Developers. She initially paid Rs. 4,50,000 as earnest money, followed by a total of Rs. 54,50,000. However, the builder did not commence the project on time and proposed a draft agreement with problematic terms. After her requests for changes were ignored, the complainant decided to withdraw from the purchase, seeking a refund. The builder deducted Rs. 29,72,000 from her payments, returning only Rs. 24,78,388. Feeling wronged, she approached the State Commission in Telangana, demanding a full refund, punitive damages, and compensation for mental distress. The State Commission ruled in her favor, awarding her Rs. 29,71,612, along with Rs. 5,00,000 as punitive damages, Rs. 5,00,000 for mental agony, and Rs. 25,000 for legal costs. Dissatisfied, the builder appealed to the National Commission.
Builder’s Arguments
The builder argued that the State Commission lacked jurisdiction due to the property’s valuation at Rs. 2,28,38,517. They cited the case of Ambrish Kumar Shukla v. In Ferrous Infrastructure Pvt. Ltd., which states that the transaction amount, including compensation, determines the Consumer Forum’s jurisdiction. They also referred to Renu Singh v. In Experion Developers (P) Ltd, which upheld the principles from the Ambrish Kumar Shukla case.
National Commission’s Observations
The National Commission focused on whether the builder provided deficient service. It noted that the builder hadn’t previously raised the jurisdiction issue before the State Commission. Drawing on the Supreme Court’s ruling in Maula Bux v. Union of India, the Commission reiterated that forfeiture should not surpass 10% of the deposit. Consequently, it permitted the builder to forfeit only Rs. 10,00,000 of the earnest money, with the remainder to be refunded with 6% interest per annum from the termination notice date, increasing to 9% if delayed. The Commission criticized the excessive forfeiture and service tax deduction as unfair practices, referencing DLF Homes Panchkula Pvt Ltd vs D.S Dhanda, which opposes multiple compensations for a single deficiency. Therefore, it dismissed the Rs. 50,000 mental anguish compensation.
The Commission adjusted the State Commission’s order, allowing the builder to deduct the Rs. 4,50,000 earnest money, while instructing a refund of Rs. 25,66,136 (comprising Rs. 22,83,852 plus Rs. 2,82,284), with 9% annual interest.
Takeaway
This ruling underscores the principle that any deposit forfeiture by builders must be fair and limited to 10%. It is a reminder for consumers to know their rights and for builders to adhere to fair trade practices.
