Order Name: Vikas Garg Vs. Estate Officer (Housing)
Case No.: C. C. No. 272/2019
The National Consumer Disputes Redressal Commission, under the guidance of Justice Sudip Ahluwalia, recently stated that if the property in question is not handed over within the set timeline, the earnest money cannot be forfeited.
A brief overview of the case: A builder was promoting a luxury project called “Puram Premium Apartment”. The complainant, Mr. Vikas Garg, booked a flat and paid Rs. 6,90,000 as earnest money. He won the lottery for the flat and received a Letter of Intent (LoI) stating the tentative total cost to be Rs. 69,00,000. The price included maintenance charges and a 2% contribution to society’s corpus.
However, the complainant paid 95% of the total amount, but the possession of the flat was delayed by more than 13 months. When he visited the site, he found the flat in an unlivable condition and smaller than promised. Mr. Garg decided to surrender the flat and asked for a refund with 18% interest. The builder, however, proposed a 10% deduction under PAPRA, 1995, for surrender. Unhappy with this, Mr. Garg filed a complaint with the National Commission.
The builder argued that Mr. Garg was not a ‘Consumer’ as per the Act, stating that his intent was for investment, not for residential purposes. They used Mr. Garg’s residences in Delhi and Navi Mumbai as evidence of this. They also argued that the earnest money forfeiture was justified under the LoI’s Clause 7(ii) because Mr. Garg refused to accept the allotment within 30 days of the offer. Additionally, they claimed they were exempt from obtaining a Completion Certificate as an Urban Development Authority under Section 44 of PAPRA, 1995.
After careful consideration, the Commission determined that the key issue was to ascertain whether Mr. Garg’s refund request was a withdrawal or a surrender of the apartment. While the builder claimed it was a surrender, justifying a 10% forfeiture of earnest money, Mr. Garg argued it was a withdrawal, referring to Clause 3(II) of the LoI that allows full refund with 8% interest if possession is not given within 36 months.
The Commission found no evidence showing that the project was completed within the stipulated 36 months. Due to the possession delay and the poor condition of the apartment, Mr. Garg was justified in withdrawing. The Commission further noted that the possession was offered way beyond the 36-month period from the LoI issuance. Consequently, the Commission ruled that Mr. Garg was eligible for a refund of the deposited amount with 8% compounded annual interest as per Clause 3(II) of the LoI. The builder’s claim for a 10% earnest money forfeiture was rejected.
The builder was instructed to refund the amount within three months. If they failed to do so, the amount due would attract an interest rate of 10% per annum.
In essence, this judgement reinforces the importance of delivering possession within the agreed timeframe and maintaining the promised property standards. It serves as a reminder to builders that any deviation from the agreed terms could lead to legal consequences.
