• Cancelling the agreement and claiming earnest money

I have paid earnest money of 30 lakhs for buying a flat. My agreement mentions this and is acknowledged by seller.

There is no forfeiture clause in my registered agreement.
 
 Case 1
Can I get my earnest money back if I want to cancel the agreement? Without giving any reason.

Case 2 Can I claim compensation if the parking is under legal issues and my agreement specified that the premise which includes parking is not subject matter of any litigation?
Asked 12 months ago in Property Law
Religion: Hindu

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14 Answers

  1. No you don't have any right to claim earnest money if you are cancelling without any valid justification  
  2. However, seems you were induced into the agreement on the basis of fraud and misrepresentation /concealment of facts. In such a scenario, you got to sue the vendor for earnest money  + compensation.  
  3. You need to visit me for exhaustive consultation regarding this. I'm based in Mumbai /NaviMumbai just as you are, so it shouldn't be much difficult for you to visit me for exhaustive consultation. 
  4. ९८२०८९७८८४. (Nine eight two zero eight nine seven eight eight four) 

Netra Mohanchandra Pant
Advocate, Navi Mumbai
1425 Answers
5 Consultations

4.4 on 5.0

You should mention reasons why you are cancelling the agreement 

 

2) you would be entitled to refund of earnest money on cancellation of agreement 

 

3) you can claim compensation from seller if parking is under legal dispute 

Ajay Sethi
Advocate, Mumbai
85547 Answers
5730 Consultations

5.0 on 5.0

1. What you seek is not valid. One cannot just terminate the agreement without giving any reason even if there is no forfeiture clause. The seller can always enforce that agreement against you by filing a suit for specific performance of contract

2. If parking is under dispute and the seller made a representation to you that there is no legal dispute touching the parking space, then this can be a valid ground to terminate the agreement for which you can claim compensation from seller for making false representation and assurances relying on which you altered your position and decided to purchase the flat

However the above is only a prima facie view. The entire agreement has to be read as a whole and in context to ascertain the actual understanding between the parties 

Yusuf Rampurawala
Advocate, Mumbai
6639 Answers
63 Consultations

5.0 on 5.0

Cancellation of agreement and penalty arising out of it depends on the terms of the agreement. 

For any deficiency in service which falls short of stipulation of the sale agreement you can file case before the consumer forum. 

Devajyoti Barman
Advocate, Kolkata
22515 Answers
373 Consultations

5.0 on 5.0

There are two ways as you mentioned one you can clean your entire amount paid from the builder as there is no forfeiture clause.

And at the same time you can send legal notice in this regard that the parking area is under dispute I think this reason you can ask for the refund of entire amount paid for the booking at the apartment you feel there is any problem in getting different from the developer you can file your complaint with the district consumer Commission for deficiency in service and refund.

Vimlesh Prasad Mishra
Advocate, Lucknow
6829 Answers
23 Consultations

4.9 on 5.0

Dear Querist

My opinion on your queries are as under: -

 

1. Yes, you may cancel the deal and claim your earnest money back.

2. yes, you may claim compensation and even you may file a criminal case against him for misrepresentation and fraud.

 

Feel Free to call

Nadeem Qureshi
Advocate, New Delhi
6177 Answers
293 Consultations

4.9 on 5.0

- There is no guidelines laid down by the government to forfeit the booking amount for the cancellation, and the deduction is done at the builder’s discretion.

- Hence, legally, the builder/seller cannot deduct any money out of the advance payment you have made for the booking till the time; a builder-buyer agreement is made and registered with the sub-registrar.

- Further, as there is no forfeiture clause , then the said seller is bond to refund the entire amount on cancelling the agreement by you. 

1. Yes , you should issue a legal demand notice for asking the refund of entire amount paid by you and for termination of contract with a valid reasons , like parking issue etc. 

2. Yes.

Mohammed Shahzad
Advocate, Delhi
8791 Answers
94 Consultations

5.0 on 5.0

The cancellation process varies from project to project and from builder to builder.

 

The key document to support your case when it comes to cancelling your booking for a home is the agreement, if you have signed one. “Builder-buyer agreements including sale agreement or property allotment documents usually contain cancellation clauses. 

From a legal perspective, the cancellation and refund clause of your agreement will dictate what you can get back and what you might have to forfeit. “The buyer has the right to demand a refund of the deposit. However, in most cases, the sale agreement provides a right to the developer to forfeit a certain amount as penalty or liquidated damages. The penalty may vary from builder to builder. We have seen penalty amounts ranging from 1% to 10% of the total sale consideration and also depending upon the stage at which the buyer walks out. Some developers also follow the practice where they levy losses or liquidated damages which is equivalent to the difference between the sale price agreed to be paid by the buyer who has walked out, vis-a-vis the sale price agreed with a new buyer,"

The Real Estate Regulation Act (RERA) will help the buyers to take an exit from the real estate world easily and anytime. So, if a buyer wants to cancel the flat booking, then the builder has to pay the payable amount to the homebuyer. If he denies paying the amount then the buyer can file a complaint against him and ask for compensation. Also, if you have not cancelled the booking and the flat has not been delivered to you, you can file a complaint against the builder at the consumer court and claim the loss caused to you by poor services.As per RERA.

T Kalaiselvan
Advocate, Vellore
75676 Answers
1313 Consultations

5.0 on 5.0

Dear sir/ma'am,

Yes you can get your money back, you have to make a cancellation deed for it.

you can claim compensation in case of any default.

Anik Miu
Advocate, Bangalore
3311 Answers
34 Consultations

4.9 on 5.0

Dear Querist, in relation to your question my advice to you is as follows:-

1. Every contract has its own terms and conditions, through which it can be enforced.

2. In your case, as there is no mention or whisper of forfeiture of earnest money, so he can't forfeit it.

3. Yes, you can get your money back without giving any cause or reason.

4. To get your money back, you can contact the opposite party and ask for your money. In case he returns your money, it's good but if he refuses to return it, than you can claim it by claiming it through specific relief act.

5. In case, you chose to cancel your agreement, the other party can ask for damages as well.

6. As per your case, the other party told you that the premises is not subject matter of any litigation, but with time, you get to know about it, so it amounts to fraud as per Section 17 of the Indian Contract Act and misrepresentation as per Section 18 of the Indian Contract Act on the part of other party. 

7. In this case, you can definitely claim for compensation and can go for criminal proceedings under Section 420/417/406 of the Indian Penal Code as well.

Puvali Singh
Advocate, Delhi
33 Answers

5.0 on 5.0

Allotment letter indicates seller has on,y being allotted car parking slot 

 

2) flat owner cannot sell car parking slot 

 

3) you ha e good case on merits 

 

4) seller cannot forfeit earnest money if there is no forfeiture clause 

 

5) ask society for details of arbitration proceedings 

Ajay Sethi
Advocate, Mumbai
85547 Answers
5730 Consultations

5.0 on 5.0

1. Given the concealment regarding the pending arbitration matter between society and builder for the parking space dispute, this gives the buyer a ground for termination. Cant say if it's a strong case!

2. Forfeiture has to be as per contract. If there is no penalty clause then it cant be said that the buyer would forfeit his earnest money

3. On the high court website using the case number 

Yusuf Rampurawala
Advocate, Mumbai
6639 Answers
63 Consultations

5.0 on 5.0

Dear Sir/Ma'am,

Firstly,

It is suggested for you to file a suit along with the other society members. The Receipt of the allotment letters from the builder to the sellers can be used as a proof. Since you have been subjected to such fraud through concealment of facts, you can a file a suit under section 415 of IPC. It states that-

Cheating.—Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any proper­ty to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”. Explanation.—A dishonest concealment of facts is a deception within the meaning of this section. 

Secondly,

Earnest money is a deposit made to a seller that represents a buyer's good faith to buy a home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing.

Earnest money paid by a purchaser of an immovable property can be forfeited by the seller if the former fails to pay the remaining sum, the Supreme Court has held.

A bench of justices K S Radhakrishnan and Dipak Misra said the earnest money is given to bind the contract and the seller is entitled to forfeit it if the sale of an immovable property falls through due to the fault of the purchaser.
"Earnest money is paid or given at the time when the contract is entered into and as a pledge for its due performance by the depositor and it is to be forfeited in case of non-performance by the depositor," the bench said.
The bench gave the ruling setting aside a Delhi High Court order which had held that the seller is entitled to forfeit only a nominal amount and not the entire sum. 

It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money, then the forfeiture clause will not apply," the bench said.

In Contract law, it is generally used to indicate that, with former consensus between the parties, the amount which is clearly indicated in terms of the contract to be given as earnest is not given back to the purchaser who has given his money, if due to his fault or failure, the contract is broken in nearby future.

Thirdly, 

In India, the proceedings of arbitration are governed by the Arbitration and Conciliation Act. As per proposed Section 42A, an obligation of confidentiality shall be imposed on the parties to the Arbitration Agreement, the arbitrator and the Arbitral Institution. It is evident from the stipulations of this provision that this is a non-derogable provision with only one exception. Under this exception, the award may be disclosed for the purpose of enforcement or setting aside proceedings. 

 

  • .
  • or visit my account and check the details to contact me.

 

Anik Miu
Advocate, Bangalore
3311 Answers
34 Consultations

4.9 on 5.0

1. The parking space cannot be sold by the builder.

The parking space becomes part of the association/society hence your vendor cannot sell the same to the buyer.

In no manner the allotment letter will become a title document for parking space so that you can claim rights over it.

 

2.  The earnest money means the amount you are required to deposit, if there is no forfeiture clause then the  vendor cannot forfeit any money on his own for cancellation of the booking 

 

3. You can contact any advocate, provide him the details of the arbitration case, he would provide you the current status as well as the other desired details of the case.  

T Kalaiselvan
Advocate, Vellore
75676 Answers
1313 Consultations

5.0 on 5.0

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