Forfeiture of booking amount by builder amounts to unfair and unreasonable Practice

In a recent judgement passed by Maharashtra RERA Appellate tribunal[1] against the real estate builder confirmed that the arbitrary and one-sided interpretations make the contractual transaction unfair and unreasonable. According to the tribunal, forfeiture of the booking amount is improper and against the provisions of RERA Act, 2016 and for this reason, the builder was directed to refund the amount to the home-buyer.

The home-buyer booked a flat in real estate project ‘Lawns and Beyond’ Andheri Mumbai for total consideration of Rs. 1.36 crores with M/s Omkar Ventures Pvt. Ltd.-Builder. While booking the flat at an exhibition, the channel partner of the builder promised that in case the homebuyer is not eligible for housing loan, then the amount paid will be refunded. At the time of booking she paid Rs. 1 lac towards Expression of interest (EOI) and Rs. 6.95 lacs towards application fees. Parties executed Allotment letter dated 5.12.2017, and demand was initiated to further pay the amount. However, the buyer could not procure a loan from any bank and therefore she requested the Builder to cancel the flat and refund the amount she paid.  Respondent brazenly returned Rs.1 lac only and forfeited Rs.6.95 lacs. She pursued return but the builder shamelessly did not oblige. After filing of Complaint case before MahaRERA for refund, the builder used allotment terms and conditions as a cloak to forfeit the money, where it was mentioned that 10% amount of consideration will be forfeited, but the builder has forfeited only 5% amount only. The Authority disposed off the complaint by directing refund subject to terms and conditions in the Allotment letter.

The buyer did not lose hope and in the law and persuaded her case before the Appellate Tribunal.

While hearing the matter, the Appellate tribunal noted some important points that were not properly dealt by the Authorities like:

1. the terms and conditions of Allotment Letter were not only confirming to the provisions of RERA Act,2016 but they are also ambiguous, one-sided and inequitable.
2. the RERA Act, 206 is welfare legislation enacted primarily to safeguard the interest of home-buyers and the builders are not allowed to take away the spirit of the Act by devising formats that are ambiguous and inequitable.  
3. Such arbitrary and one-sided interpretations make the home-buyers position in disadvantageous and not acceptable.

Hon’ble Supreme Court also held in Pioneer Urban Land and Infrastructure Vs. Govindan Raghavan in Civil Appeal no.12238 of 2018, that court will not enforce unreasonable and unfair contract where contracting parties are not equal in bargaining position where a man has no choice but to give his consent on dotted lines in a prescribed form, no matter how unfair that clause might be. The fact that channel partner’s email agreeing to refund if loan will not be processed and the same cannot be bruised away, as he is a person appointed by the builder to take bookings.

Thus, the tribunal ordered the builder to refund the forfeited amount to the home-buyer.

This order will act as a precedent and will help the home-buyers to safe guard there money which the builder usually attracts by showing glossy prospectus and super luxurious photos which have direct impact on the home-buyers and compels them to book the flat. The object and purpose of the RERA Act is as a beneficial legislation to abate the hardships on the home-buyers. The Authority should be careful while applying the provisions and should also be vigilant that no injustice will be caused to either parties.