• Cancellation of flat booking - after agreement

The summary of the situation
1. I had booked a property in May 2014 in Kolkata and completed the agreement with 20% of the Flat value.
2. I had sent a cancellation request on 30-Nov-14 and requested for refund.

The agreement clause says, 10% of the flat value will be forfeited which I didn't pay much attention to while signing and had to accept it. Now the problem is - as per the builder, I will get back my money only when the flat will be sold to a new customer. Basic logic says, I will never come to know whether they are selling it to new customer and as obvious, I didn't get my money back till now (2-Feb-2015). Moreover, it is really difficult for me to follow up with builder as I stay in US with 12 hour time difference.

Now, I need couple of clarifications -
1. What is the best way to negotiate on this situation(P.S - I tried a lot explaining my personal reason of cancellation; it didn't work.)
2. Can I move to court on this arbitrary clause of finding new customer - which is vague and not explicit in nature.

Thanks for your advice.
Asked 2 years ago in Property Law from United States
1. You should issue a lawyer's notice through your lawyer to the builder to cancel the agreement for sale of the flat since it is only 'Agreement to Sell' and not 'Sale Deed/or Sale Agreement'. 

2. The refund of money depends on the terms of the agreement. Since the agreement provides for a forfeiture of 10% of the flat value the builder may apply this clause against you. 

3. It is not permissible for the builder to delay remitting 10% of the flat value to you till he finds a prospective buyer. The builder cannot travel outside the four walls of the agreement. If the agreement permits the builder to refuse to refund the balance amount until and unless he finds a new buyer then such clause is illegal. 

4. Issue a formal lawyer's notice to the builder to cancel the agreement and seek the refund of 10% of flat value. If builder does not refund your amount then you may file a lawsuit for recovery against builder in the court. 

5. It is recommended that you engage a competent professional lawyer who can assist you with all this.
Ashish Davessar
Advocate, Jaipur
18246 Answers
449 Consultations
5.0 on 5.0
1. As far as a forfeiture is concerned it is made to provide security to the seller so no abrupt sale is ended by way of cancellation.
2. However the amount of forfeiture is often fixed as a penal amount not an exorbitant amount which may surpas even the part payment which the buyer may have paid in the meantime.
3. In this case 10% of total value of flat to be forfeited is unconscionable term which can not be allowed to remain in the agreement.
4. To get relief against such unjustified terms you can file case in the  consumer forum where the builder would be directed to refund the money.
5. Do not waste time and proceed with this asap.
Devajyoti Barman
Advocate, Kolkata
5248 Answers
54 Consultations
4.9 on 5.0
1) since the builder has failed to refund your advance payment of 10%of flat amount (after deduction of 10%)issue legal notice to builder to refund your advance payment made . 

2) the builder cannot take the plea that refund would be made when fresh buyer found for resale of flat. 

3) move consumer forum against builder and seek refund with interest at 18%for delay in refund . also seek compensation for mental torture you have undergone
Ajay Sethi
Advocate, Mumbai
23375 Answers
1225 Consultations
5.0 on 5.0
In Delhi Development Authority v. Grihstrapana Cooperative Group Housing Society Ltd. 1995 Supp (1) SCC 751, this Court following thejudgment of the Privy Council in Har Swaroop and Shree Hanuman Cotton Mills(supra), held that the forfeiture of the earnest money was legal.

 14. In V. Lakshmanan v. B.R. Mangalgiri and others (1995) Suppl. (2) SCC33, this Court held as follows: “The question then is whether the respondents are entitled to forfeit the entire amount. It is seen that a specific covenant under the contract was that respondents are entitled to forfeit the money paid under the contract. So when the contract fell through by the default committed by the appellant, as part of the contract, they are entitled to forfeit the entire amount. - 


in your case contract provided for forfeiture of 10%^of earnest money . the clause in contract is valid and builder can refuse to refund 10%of earnest money . however you are entitled to refund of balance amount
Ajay Sethi
Advocate, Mumbai
23375 Answers
1225 Consultations
5.0 on 5.0
1) clause 2 is illegal . it does not make whole agreement null and void 

2) you can issue legal notice and move consumer forum . 

3) clause 1 is legal . i have cited 2 SC judgements wherein it has been held that clause for forfeiture of earnest money is binding upon parties
Ajay Sethi
Advocate, Mumbai
23375 Answers
1225 Consultations
5.0 on 5.0
1. Clause 1 is perfectly legal whereas clause 2 is illegal. 

2. You may challenge clause 2 in the court. 

3. Instead of issuing a legal notice you may directly move to court to recover the 10% of earnest money with interest.
Ashish Davessar
Advocate, Jaipur
18246 Answers
449 Consultations
5.0 on 5.0
1. You stated "I had booked a property in May 2014 in Kolkata and completed the agreement with 20% of the Flat value". What was the flat value?

2.  You also stated "The agreement clause says, 10% of the flat value will be forfeited",

3. Now, it is clear that you will get refund of 10% of the flat value i.e. 50% of the advance amount you have paid to the builder,

4. Was there any clause stating within how many days of cancellation of the agreement you will get back the refund of your advance payment after the necessary deduction? 

5. However, the builder is required to refund you your balance amount within a reasonable period & 3 months from the date of cancellation can safely be called as a reasonable period for the said purpose which will be over on 28.2.15,

6. Send a legal notice to him to refund you the said 10% of flat value within 28.2.2015 failing which file a complaint case before the local District Consumer Dispute Redressal Forum, alleging deficiency in service and unfair business practice claiming refund of the said amount, interest , damage and cost.
Krishna Kishore Ganguly
Advocate, Kolkata
12143 Answers
233 Consultations
5.0 on 5.0
if there is any clause regarding cancellation of flat then builder is bound by the caluse. if he is trying to add another sub clause then it is treated as the novation of agreement and it is not binding on you if you have disagreed with this new clause. in every commercial transaction court always strictly interpret the clause in the favour of party who has obeyed the clause. so in your case you have agreed to pay 10 % of sale amount for the cancellation of flat then according to section 73 of contract act court is bound by the terms of the agreement and builder can't modify the agreement at this stage.
Shivendra Pratap Singh
Advocate, Lucknow
2786 Answers
41 Consultations
4.9 on 5.0
the second clause of the agreement shall be treated as indefinite clause because if builder does not complete the flats or do inordinate delay in construction then what will be the remedy of the customer ? builder can't bind his customers for indefinite time, if he do so then every customer is bound to suffer loss and builder will always in win win situation so this condition is illegal and agreement is void in the eye of law.
Shivendra Pratap Singh
Advocate, Lucknow
2786 Answers
41 Consultations
4.9 on 5.0
you should give a notice or revocation of agreement to the builder in the reasonable time, if you have delayed in giving notice then you are bound to pay whole amount because construction has been carried on your acceptance of agreement so according to section 39 you are bound to pay damages caused by your default. section 7 says that every notice should be given in reasonable time or within in the time if time frame is given in the contract. after giving notice you should wait for his response if he fails give response you can file civil suit for cancellation of agreement.
Shivendra Pratap Singh
Advocate, Lucknow
2786 Answers
41 Consultations
4.9 on 5.0
you can file civil suit for cancellation of agreement and return back 50% booking amount. if he pleads that he will return the said money after selling of flat then you should plead that "builder has formed this standard form of contract in his faovur and escape himself from every loss so court should strictly interpret the cause of agreement in favour of customer because customer's bargaining power is curtailed by the builder and he has no option except to wait for resale of flat" 
In Life Insurance Corporation of India v. Consumer Education and Research Centre and others   :--- the Hon'ble Supreme Court has held that "if a contract or a clause in a contract is found unreasonable or unfair or irrational one must look to the relative bargaining power of the contracting parties. Thus courts will not enforce and will, strike down an unfair and unreasonable contact or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power.
Shivendra Pratap Singh
Advocate, Lucknow
2786 Answers
41 Consultations
4.9 on 5.0

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