The District Consumer Disputes Redressal Commission, Kolkata-I (North), has held that a real estate developer’s failure to refund money paid by homebuyers after cancellation of a flat allotment amounts to an unfair trade practice, particularly where the agreement itself requires the developer to refund the amount after making the prescribed deduction.
## Background Of The Case
The complainants, Bikash Agarwal and others, had entered into an Agreement for Sale with M/s Ideal Real Estate Private Limited for purchase of an apartment in the project Ideal Enclave, along with a servant quarter and car parking space.
The purchasers had paid a substantial portion of the sale consideration. However, possession was not handed over within the time stipulated under the agreement. The contractual deadline for possession was 30 December 2012, whereas the developer issued the Notice of Possession only on 26 May 2014.
The purchasers did not pay the remaining balance consideration thereafter. The developer subsequently cancelled the allotment through a notice dated 5 July 2019. The homebuyers sought either possession of the property or refund of the amount already paid, but the developer did not refund the amount, leading them to approach the Consumer Commission.
## Developer’s Defence
The developer argued that the purchasers themselves had defaulted in making payments despite repeated reminders. It contended that the cancellation of the allotment was therefore justified.
The developer also relied upon the fact that the project had obtained its Completion Certificate on 31 March 2014, and argued that there was no deficiency in service on its part.
The Commission, however, examined the contractual obligations of both parties and the circumstances leading to the cancellation.
## Commission Examines Possession Delay
The Commission noted that the Agreement for Sale required the developer to complete the project and hand over possession by 30 December 2012. However, the Notice of Possession was issued only on 26 May 2014, resulting in a substantial delay.
At the same time, the Commission also took note of the purchasers’ conduct. It observed that they had not cleared the outstanding balance even after receiving the possession notice and had remained inactive for a considerable period.
Thus, the Commission did not accept the purchasers’ claim in its entirety. However, it separately examined whether the developer was entitled to retain the amount already received after cancelling the allotment.
## Agreement Required Refund After Cancellation
A significant factor in the decision was Clause 11.1 of the Agreement for Sale.
Under this clause, after cancellation of the allotment, the developer was required to refund the amount received from the purchasers within three months, after deducting 10% of the amount paid as liquidated damages.
The Commission found no evidence showing that the developer had complied with this contractual obligation.
Therefore, even though the purchasers had failed to pay the remaining consideration, the developer could not simply retain the amount already received when the agreement itself provided for a refund following cancellation. The Commission held that failure to honour this refund obligation amounted to an unfair trade practice.
Refund Of ₹32.50 Lakh Ordered
The complainants had paid a total of **₹36,11,270** towards the property.
Applying the contractual deduction of 10%, amounting to **₹3,61,127**, the Commission directed the developer to refund **₹32,50,143** to the purchasers.
The Commission further directed the developer to pay **simple interest at 8% per annum** on the refundable amount from 5 July 2019, the date of cancellation notice.
The payment was required to be made within 60 days from the date of the order. In case of failure to comply within that period, the amount would carry enhanced interest at 12% per annum until realization. The developer was also directed to pay ₹15,000 towards litigation costs.
## Key Legal Takeaway
The decision highlights that cancellation of a flat allotment does not automatically permit a developer to retain all amounts paid by the purchaser.
Where the Agreement for Sale specifically provides for refund after cancellation, the developer is required to comply with that contractual obligation. Even where the purchaser has committed a payment default, the developer must follow the agreed mechanism for dealing with the money already received.
The ruling therefore reinforces the importance of contractual refund clauses in real-estate transactions and provides a remedy to homebuyers where developers retain their money without complying with the agreed terms.
## Conclusion
The Kolkata Consumer Commission’s decision makes it clear that a developer cannot indefinitely retain a homebuyer’s money after cancelling an allotment when the agreement expressly requires a refund.
While the Commission acknowledged that the purchasers had failed to pay the outstanding consideration, it nevertheless held the developer responsible for failing to fulfil its independent contractual obligation to refund the amount after cancellation.
The decision serves as an important reminder that contractual obligations relating to refund, consumer protection rights and unfair trade practices continue to operate even in disputes involving cancellation of flat allotments
