The builder admitted receiving a booking deposit of Rs 860,000, but contended that several persons who had booked flats, including Anand, had not paid the subsequent instalments due to a fall in realty prices. It resulted in a financial crunch due to which the project could not be constructed in time. He claimed that since there had been a default in payment, he had a right to forfeit the deposit amount.
The State Commission upheld the builder's contention and dismissed Anand's complaint on the ground that he had failed to pay instalments on time. Anand appealed against this order. He explained that he had raised a bank loan and had made arrangements for payment, but had deliberately withheld payments as construction had not commenced.
The National Commission issued a notice to the builder who did not appear. The Commission observed that the builder had admittedly failed to carry out construction according to the agreement. Hence, the Commission concluded that Anand was justified in withholding payment.
The National Commission concluded that the State Commission had acted mechanically and passed a perverse judgement by faulting Anand for non payment and dismissing the complaint, overlooking the fact that the refusal to make payment was due to the builder's default in commencing construction work. It further observed that the builder has the right to forfeit a certain amount only when the flat purchaser is at fault. However, even in such a situation, the forfeiture cannot exceed 10 per cent of the earnest money.
Accordingly, by its order of April 9, 2018, delivered by B C Gupta for the Bench along with S M Kantikar, the National Commission allowed Anand's appeal and held the builder liable to refund the entire Rs 860,000 along with 18 per cent interest a year from the date of payment till refund.
A builder cannot capitalise on his own default. Forfeiture is permissible only when the flat purchaser defaults, and even then the amount can only be 10 per cent of the earnest money. Any clause in the agreement contrary to these principles will not be binding.
(The author is a consumer activist)