Refund of flat booking amount: Homebuyer fights Godrej Properties and wins the case; Know your rights under RERA

Buying a home is an aspirational event for most people, however, buying one costs lakhs of rupees if not crores. So, when Ajit Dabhade decided to purchase a home worth Rs 92 lakh (92,17,797) near Mumbai, he made the booking on June 22, 2019, and paid Rs 5 lakh as earnest money. However, when he got the allotment letter from Godrej Properties on August 6, 2019, Dabhade decided to cancel the flat booking on August 8, 2019. Godrej Properties accepted his request for cancellation of the flat booking and told him that the entire earnest money of Rs 5 lakh was to be forfeited by the builder.

Despite Dabhade requesting the builder to refund the booking amount, the builder refused. Hence Dabhade lodged his case against Godrej Properties in the Maharashtra RERA tribunal. Dabhade complained that he was trapped by the builder and the company violated multiple RERA (Real Estate Regulatory Authority) laws.

According to the court order, Dabhade alleged that the builder just portrayed special offers that were used to trap the buyers by taking advantage of blind faith of potential buyers in the brand name Godrej, but forfeiture obligation is thrust on to the buyer.

Did Godrej violate RERA laws by forfeiting the flat booking amount?

Dabhade made several allegations against Godrej Properties. He said that employees of Godrej Properties made him a promise that the company's finance partners would give him a loan of Rs 6,75,000 to finance stamp duty and registration charges. "However, the said promise was never fulfilled and only Rs 3,60,000 was given by the said finance partners," said Dabdhade during a hearing at the Maharashtra RERA tribunal. He also alleged that this incident violated sections 7 and 12 of the Maharashtra RERA Act.

It is also alleged that Godrej Properties illegally obtained the consent of Dabhade by fraudulent means. He said, "It was illegal on part of the respondent (Godrej Properties) to obtain consent by fraudulent means on the pretext of and by the implied notice of 'application form' of any agreement containing adverse and forfeiting terms towards the buyer and with no obligations towards the respondent."

Hence as per Dabhade, the entire booking form is fraudulent so it's not valid. "As there was no valid consent for terms of the fraudulent booking form, there was no valid agreement between the parties. Hence, the said forfeiture was also in violation of section 11(5) of the RERA," he said.

Builder's counter: Buyer signed the contract knowing everything

As per Godrej Properties, the complainant (Dabhade) approached the MahaRERA with malafide intention and unclean hands. "The concocted story of taking signatures on blank form under the complaint has been raised by the complainant for the first time in many years of communication and correspondence. The complainant had entered into the said contract in his sound mind and out of his free will and thus the said contract and its terms will be binding upon the complainant," said Godrej Properties in one of the hearings of the case.

In its defence Godrej Properties said, as per clause d read with clause h and clause iii read with clause v of the said 'allotment letter', the company was legally well within its right to forfeit the earnest money of Rs 5 lakh if the homebuyer cancels the booking.

MahaRERA deems Godrej's action as not legal and orders to refund the booking amount

Maharashtra RERA tribunal said that Dabhade had paid Rs 5 lakh for purchasing the flat which is worth a little over Rs 92 lakh (92,17,797). This means that Dabhade paid more than 5% of the total consideration of the flat as earnest money. "Such forfeiture by the respondent- Godrej Properties (which is more than 5% of the total consideration of the said flat) is not legal and proper as per the provisions f the RERA. The respondent is directed to refund the money paid without any interest, after deducting 2% of the total consideration of the said flat," said MahaRERA in its order dated March 11, 2024.

Justifying the order, MahaRERA said that as per its circular dated August 12, 2022, a promoter can forfeit a maximum of 2% in case of any cancellation done by the allottee of the housing unit. However, Godrej forfeited the entire booking amount of Rs 5 lakh in 2019. "Since this project is registered with the MahaRERA, the said MahaRERA Order can be made applicable while deciding such cases on merits," said MahaRERA in its order.

According to Shweta Bharti, Managing Partner, Hammurabi & Solomon Partners, "The Hon'ble Supreme Court had categorically held that a beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively. As the above-mentioned circular (August 2022) by MahaRERA was to protect the miseries and for the benefit of the homebuyers, the circular was applied retrospectively.".

The table below shows the timeline to be followed for refund of the booking amount in MahaRERA registered projects:

According to an official spokesperson from Godrej Properties, "The authority in its detailed order has disregarded the allegations made by the complainant and has ruled in our favour by holding that there is no wrongdoing on part of the Developer, yet authority directed us to refund the amounts to complainant after forfeiture of amount equivalent to 2% of the sale consideration. We have sought advice from our counsels on legality of the said direction issued by the authority and have accordingly filed an appeal before the Hon'ble Maharashtra Real Estate Appellate Tribunal against this aspect of the order and are confident on merits of the matter."

Can property developers legally forfeit your entire booking amount if the deal is cancelled?

The question of legality on the part of a property developer to forfeit the booking amount when a homebuyer cancels the deal depends upon the respective state's RERA Act and RERA circular where this incident has happened.

In the case cited above the only reason why the complainant got a refund of the booking amount is because of the 2022 MahaRERA circular which was applied retrospectively. "It is pertinent to note here that under the Model Agreement for Sale as prescribed by MahaRERA, there is no clause categorically providing for the consequence when a buyer wishes to cancel the booking," says Chheda.

"There could have been instances of disputes regarding booking amount refunds before the August 2022 circular. By making the circular retrospective, MahaRERA might be aimed to provide a solution for those cases as well," says Bharti.

Legal experts, however, say that the RERA Act has provided protection to the buyer if the promoter fails to fulfil its obligations.

"Section 18 provides that in the event the promoter fails to complete or is unable to give possession of an apartment, plot or building and the allottee wishes to withdraw from the project, then without prejudice to any other remedy available to the allottee, the promoter shall refund to the allottee amount received by the promoter with interest at such rate as may be prescribed," says Chheda.

www.economictimes.indiatimes.com dt. 22.04.2024