NCDRC Upholds ₹1 Lakh Compensation Against Builder for Failing to Execute Sale Agreement After Taking Advance
Pranav B Prem
The National Consumer Disputes Redressal Commission (NCDRC), New Delhi, comprising Presiding Member Binoy Kumar and Member Saroj Yadav, has upheld the findings of the Maharashtra State Consumer Disputes Redressal Commission, holding Kingston Properties Pvt. Ltd. liable for deficiency in service and unfair trade practice. The NCDRC confirmed that the builder violated Section 4 of the Maharashtra Ownership Flats Act, 1963 (MOFA) by failing to execute a written agreement for sale after receiving earnest money. The imposition of cancellation charges without any contractual agreement was also found to be arbitrary and unfair.
Background
The dispute arose when the complainants, Narayan Prasad Goenka and Meena Devi Goenka, booked a flat in the ‘Oberoi Woods’ project developed by Kingston Properties Pvt. Ltd., situated at Goregaon East, Mumbai. The agreed total consideration was ₹38,32,000, and the complainants paid ₹1,91,600 on 02.04.2004 as earnest money.
Despite receiving the advance, the builder failed to issue a receipt or execute a written agreement for sale as required under Section 4 of MOFA. While possession was promised within eight months and the balance was to be paid at that time, repeated written requests for execution of the agreement went unheeded.
Subsequently, Kingston Properties issued a cheque for ₹1,14,960 on 03.08.2004—after deducting 2% of the flat’s cost as cancellation charges—citing non-payment of 20% of the sale price within 30 days as the basis for cancellation. The complainants clarified, through correspondence, that they accepted the cheque “without prejudice” to their rights and raised objections to the deduction and the cancellation.
Having received no satisfactory resolution, the complainants filed Consumer Complaint No. 328 of 2014 before the State Commission, which partly allowed the complaint. The State Commission directed the complainants to deposit ₹1,14,960, after which Kingston Properties was to execute the sale agreement, and the remaining balance of ₹37,17,040 was to be paid with 9% interest from 01.10.2004. The builder was also directed to hand over possession of the flat along with all necessary amenities and documents. Compensation of ₹1,00,000 was also awarded for mental agony. The builder challenged this decision before the NCDRC.
Builder's Contentions Before NCDRC
The builder argued that:
An agreement was to be executed only upon payment of 20% of the sale price, which the complainants never fulfilled, having paid only 5%.
The complainants had encashed the refund cheque, thereby accepting the cancellation.
The complaint filed in 2014 was barred by limitation, as the cancellation occurred in 2004 and the earlier complaint filed in 2005 was withdrawn.
Without a finalized agreement, directing execution and possession would amount to enforcing a non-existent contract.
Reliance was placed on various judgments to argue that the complainants had waived their rights by encashing the cheque and that specific performance cannot be claimed without a challenge to the cancellation.
Complainants’ Response
The complainants argued that:
They were never informed about any requirement to pay 20% within 30 days.
The builder failed to execute an agreement despite repeated requests, thereby violating Section 4 of MOFA.
Acceptance of the refund cheque was clearly marked “without prejudice,” preserving their legal rights.
The earlier complaint was withdrawn due to lack of pecuniary jurisdiction and the current complaint was filed bona fide. Thus, the delay was covered under Section 14 of the Limitation Act.
They contended that the builder's unilateral cancellation without any notice or contractual backing, and the deduction of cancellation charges, amounted to unfair trade practices.
NCDRC’s Observations and Findings
The Commission noted the following:
Limitation: The complaint filed in 2014 was not barred by limitation. The earlier 2005 complaint was withdrawn due to jurisdictional issues. As per Section 14 of the Limitation Act, the time spent in pursuing that complaint bona fide is excludable.
Violation of MOFA: Section 4 of the MOFA mandates that no promoter can accept advance payment or deposit (even below 20%) without first executing a registered agreement for sale. The builder's argument that an agreement was only needed after receiving 20% was termed a misreading of the law. The failure to execute the agreement after accepting money constituted a clear deficiency in service.
Arbitrary Cancellation and Charges: There was no evidence that the complainants had agreed to pay 20% within 30 days or that such a condition existed. The deduction of 2% and the issuance of a cheque without notice or contractual basis was held to be arbitrary and an unfair trade practice.
Encashment Not Waiver: The complainants’ acceptance of the refund cheque “without prejudice” did not amount to waiver of rights. The NCDRC referred to Section 8 of MOFA, which provides that even a refund does not extinguish the right to seek other remedies.
Right to Possession: The complainants remained willing to pay the balance consideration with interest. The builder’s claim that the flat had been sold to a third party was unsupported by evidence. Thus, the State Commission’s direction to deliver possession on payment of balance dues was upheld.
Final Judgment
The NCDRC dismissed the appeal, upholding the State Commission’s order in full. It confirmed:
₹25,000 as costs;
₹1,00,000 as compensation for mental agony;
Builder to execute and register the agreement upon deposit of ₹1,14,960 by the complainants;
Complainants to pay the balance consideration of ₹37,17,040 with 9% p.a. interest from 01.10.2004;
Builder to hand over possession of the flat with all amenities and statutory documents thereafter.
Appearance
Advocate for Appellant: Sukumar Pattjoshi, Sanjoy Kumar Ghosh, Aditi Kumari
Advocate for Respondent: Rohit Gupta
Cause Title: Kingston Properties pvt ltd & Anr vs Narayan Prasad Goenka & Anr.
Case No: First Appeal 252/2019
Coram: Binoy Kumar [Presiding Member], J Saroj Yadav [Member]
[Read/Download order]
