The builder cancelled Garg’s booking for default in making payment, but restored it upon Garg’s request and his promise to make payments on time. He paid ₹95,43,807 in instalments till October 19, 2012. Later, he defaulted once again. Despite reminders sent in 2013, he failed to pay the outstanding amount of ₹28,47,000. Consequently, on May 4, 2016, the builder intimated Garg that it had cancelled his booking and refunded ₹58,93,727 after deducting ₹36,50,080.
Garg corresponded with the builder to restore his booking. He offered to pay the entire balance amount at the time of possession. He also pointed out that the forfeiture was higher than the booking deposit of ₹14,25,000, calculated at 10 per cent of the total consideration of ₹1,42,50,000. However, the builder did not respond. Garg had a legal notice issued, which too the developer ignored. So, he filed a complaint before the National Consumer Disputes Redressal Commission (National Commission).
The builder contested the case, arguing that timely payment was the essence of the contract, but Garg had defaulted in making payments according to the construction-linked schedule. It pointed out that it had cancelled the booking in January 2012 for the same reason, but had restored it upon Garg’s request and his promise to make payments on time. Yet, Garg defaulted once again despite reminders and failed to pay the outstanding amount of ₹28,47,000.
The builder pointed out that it had received the completion certificate on February 13, 2014, and had offered physical possession in August 2014, subject to payment of the balance amount of ₹51,51,637, but Garg still failed to pay. Hence, it finally cancelled the allotment on September 2, 2015, and forfeited the earnest money along with interest on the outstanding dues. The builder stated that the action was justified under these circumstances.
During the pendency of the complaint, Garg stated that he was no longer interested in taking possession and limited the dispute to the forfeiture of the amount.
The National Commission noted that the crux of the dispute was whether interest on delayed payment or default in payment would be in addition to the forfeiture of the earnest money.
The Commission observed that the agreement stated that the earnest money was 15 per cent of the total agreed consideration of ₹1,42,50,000, and that this would be forfeited in case of cancellation, while the balance amount would be refunded without interest.
The Commission concluded that Garg had defaulted in making payments, and hence the cancellation was justified. It noted the Supreme Court’s observation in Bharathi Knitting v DHL that, in appropriate cases, the consumer forum had the authority to decide upon the validity of the terms of a contract. The builder claimed that it had sold the flat at a lower rate and had incurred a loss due to a drop in real estate prices. The Commission held that Garg could not be held responsible for this.
In its order of March 17, 2026, the National Commission held that forfeiture cannot exceed 10 per cent of the total price. It ordered the refund of the balance amount along with 6 per cent interest from the date of payment.
The writer is a consumer activist
 "Real estate")