• Client demanding complete refund of advance after cancellation of order after 6 months

We area small company engaged in supply & installation of floorings. 

The Background: A client had approached us for his requirement of flooring in Feb/March 2021. He was given a quotation for the same. With paucity of wood flooring supplies, he was appraised of possible price fluctuations and a possibility to block material with payment of an advance. An advance was received on 28th March. A tax invoice for the advance received was raised and shared with the client Via email on 3rd April, 2021. GST against the same was duly remitted to the tax authorities.

As the client site wasn't ready we were asked to await instructions to start work. 
He insisted that our estimated measurements didn't match his CAD drawings. We had the measurements redone, assuring that we could also do joint measurements for his satisfaction.

Towards the end of September, the client indicated telephonically the intent to reduce the area claiming he didn't have the money.
Early october, he has demanded a cancellation of the order, and a refund of the entire advance amount.

We have procured a special material based on his advance payment.
We have paid GST in March, 2021. It is now past 6 months and our CA advised that we cannot file for a credit after this time period.
We offered to return the advance amount minus the GST paid OR do work limited to the extent of the advance amount paid. 
The client is demanding an immediate return of the entire advance without any deduction claiming that the advance cannot be considered as an order placed. He is threatening to go to consumer court and bad mouth the organisation if not done.
We would like to do what is right and legally correct. Please advise.
Asked 8 days ago in Business Law

2 answers received in 1 hour.

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9 Answers

You have so far honoured your commitment according to the contract by keeping the material ready. Your client only delayed your work unduly. In the circumstances, you need not fear facing any legal challenge. You have to be ready with all supporting evidence to produce before the consumer forum. In your own interest, as a pre-emptive measure, send out a lawyer's notice demanding fulfilment of your client's part of the contract without any excuse or delay and threatening to go to court to enforce your rights in case of default.

Swaminathan Neelakantan
Advocate, Coimbatore
1018 Answers
17 Consultations

4.9 on 5.0

Once the client pays the advance, it means he has confirmed the order 

on basis of the advance only, the company could have procured the required materials so that any possibility of increased cost of the work due to price fluctuations (particularly the price going north) is prevented

the company has also raised a tax invoice and levied GST and deposited that GST with the authority

so the company is absolutely right in either completing the work as per the order already given or to refund the advance amount minus the GST 

in my view the company is not liable to even refund the entire advance amount. it can handover the material which it purchased using the said advance to the client plus any excess that remained with the company from that advance amount, after purchasing the material 

the client's threats are entirely baseless and nothing short of a blackmail

you can write to the client that he is at liberty to launch any legal action as would be advised to him and the company will see to it that if the client fails in such legal action then the company will launch a legal proceeding against the client for initiating malicious prosecution against the company including a defamation suit for tarnishing the reputation of the company and would in such suit seek exemplary damages and compensation from the client 


Yusuf Rampurawala
Advocate, Mumbai
6500 Answers
55 Consultations

5.0 on 5.0

Express your inability to refund entire amount 


explain reasons why complete refund is not possible 


if he takes legal proceedings engage a lawyer and file detailed reply denying allegations against you 

Ajay Sethi
Advocate, Mumbai
84384 Answers
5530 Consultations

5.0 on 5.0

Dear client, 

It is necessary to know the agreement between you and them at the time of accepting the contract and their awareness. Keep the evidence of them paying advance and later cancelling it when they file a complaint in the consumer court. You are not wrong by denying to pay the whole amount legally. 

Thank you 

Anik Miu
Advocate, Bangalore
2729 Answers
27 Consultations

4.9 on 5.0


  1. Send him a refund minus the GST that was already paid. Intimate in writing explaining the reason for deduction of the amount. Also repeat your offer to do work limited to the extent of the advance amount paid.
  2. His argument that advance cannot be treated as order placed won't stand as you had already started the work by placing order for material for flooring as required.

S J Mathew
Advocate, Mumbai
3348 Answers
159 Consultations

5.0 on 5.0

If you have an agreement reduced to writing with the terms and conditions properly incorporated in the agreement in connection with the task, payment terms, refund of advance amount in case of termination of the contract, then you may proceed as per the terms and the conditions mentioned therein the agreement. 

You may have to rely upon your conditions alone and should not be frightened over the threats that he poses. 

If he is going to consumer court against you, it would be better that you secure the evidences in your favor and challenge his false case properly through your own advocate. 

T Kalaiselvan
Advocate, Vellore
74484 Answers
1226 Consultations

5.0 on 5.0

- As per Section 10 of the Indian Contract Act, 1872 , An oral agreement is as equally valid, as a written one , and the legality of an oral agreement, cannot be questioned. 

- Since you have entered into a contract with the said client for flooring after further after accepting the questions and further payment confirmed the contract to proceed for the work.

- Further , as you have purchased the materials for the said assigned work then the client cannot go beyond the contract on the ground of insufficiency of fund for taking the services and the said work..

- Further, the said client having no ground for claiming the refund of the paid amount on the ground of deficiency of services as the work of flooring not completed. 

-  Hence , you are not liable to refund the full amount of advance payment , and he cannot get the full amount even after filing a compliant before the consumer forum . 

Mohammed Shahzad
Advocate, Delhi
8182 Answers
86 Consultations

5.0 on 5.0

You can only return the amount incurred by you less gst to client. You can reply to his allegations through lawyer. If you need any further assistance then you can approach me through kaanoon or LinkedIn.

Prashant Nayak
Advocate, Mumbai
24476 Answers
52 Consultations

4.4 on 5.0

Dear Sir,

You are offer is very genuine and if your client not agreeing just ask him to approach any civil Court and there you have every option to get his suit dismissed.

Kishan Dutt Kalaskar
Advocate, Bangalore
6010 Answers
321 Consultations

4.8 on 5.0

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