Even a single default in payment can be a ground for cancelling the allotment of a property in a case where the developer is a private company

National Consumer Disputes Redressal Commission (NCDRC): A Single Member Bench of V.K. Jain, J., allowed an appeal filed against the order of the State Commission.

The respondent was allotted a flat in a project which was to be developed by the appellant company. The respondent paid more than 50% of the cost of the flat to the appellant on different occasions, however, he defaulted in paying one installment to the appellant. On account of failure to pay the installment after 2 reminders, the appellant cancelled respondent’s allotment and forfeited the money already received.

The main issue that arose before the Commission, in this case, was whether the appellant was justified in canceling the allotment on account of one default.

The Commission observed that the respondent had undoubtedly defaulted in making payment of an installment even though two reminders were sent to him. The respondents had not even cited any reason for their failure to make the payment or that the payment was not made for reasons beyond their control. The Commission further observed that the respondent had raised a false plea about the discount of 5% to be offered by the appellant. The appellant being a private builder required money to complete construction within time limit agreed between the parties.

The Commission held that in the facts and circumstances of the case, the appellant was justified in cancelling the allotment of the respondent and forfeiting the earnest money. However, the Commission also held that the appellant cannot deduct more than the earnest money out of the amount paid to it by the complainants. The tribunal referred to the case of DLF Ltd. v. Bhagwanti Narula, I (2015) CPJ 319(NC) and held that an amount exceeding 10% of the total price cannot be forfeited by the seller, since forfeiture beyond 10% of the sale price would be unreasonable and only the amount, which is paid at the time of concluding the contract can be said to be the earnest money. Hence the Commission allowed the appeal but it also directed the appellant to refund the money above the earnest money forfeited by it. [Prateek Realtors (P) Ltd. v. Vivek Kumar Gupta,2018 SCC OnLine NCDRC 378, order dated 08-10-2018]

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