Delhi HC Upholds ₹18 Lakh Refund To Homebuyers, Says Builder Coerced Buyers Into Full And Final Settlement

The Delhi High Court has upheld a trial court decree directing R. C. Sood & Co. Developers Pvt. Ltd. to refund ₹18 lakh to Sharad Maheshwari and Vandana Maheshwari. The court found that the developer had illegally cancelled their villa allotment and effectively coerced them into accepting a purported “full and final settlement.”

Justice Neena Bansal Krishna dismissed the developer's appeal. She observed that settlements extracted without free consent cannot extinguish a buyer's claim.

“It is well-settled that a plea of full and final settlement, must be founded on free consent. Where the acceptance of a lesser amount occurs under protest or coercive circumstances, it does not constitute a binding accord and satisfaction and, consequently, does not extinguish the original claim.”, the court observed.

“The Plaintiff, thus occupied a vulnerable position and was left with no viable alternative but to accept whatever amount was offered. The learned District Judge correctly observed that the Plaintiff, when pitted against a large developer with superior bargaining power, was effectively coerced into accepting the Rs. 44 lakhs offered by the Defendant,” the court added.

The dispute arose from an Agreement to Sell dated February 27, 2008. Under it, the Maheshwaris booked Villa No. C-01 in the “Grand Mansions” project within the developer's “Rosewood City” township in Gurgaon for ₹2.5 crore. They paid ₹62 lakh towards the purchase.

According to the buyers, construction was progressing slowly and sub-standard materials were being used. They also said the developer failed to provide the construction schedule and related documents after the originals were reportedly lost in transit.

The developer cancelled the allotment on March 9, 2009, alleging default in payment of instalments.

After the buyers sought withdrawal of the cancellation and later demanded a refund, the parties entered negotiations over a possible settlement. This included a proposal for allotment of an alternative villa.

However, the negotiations failed. The developer then refunded ₹44 lakh while retaining ₹18 lakh under what it described as a full and final settlement. The buyers said they accepted the amount under protest.

They subsequently filed a recovery suit seeking refund of the retained amount with interest.

By judgment dated September 30, 2019, the trial court decreed the suit in their favour. It directed refund of ₹18 lakh with 6% interest from the date of institution of the suit until realization. The developer then filed the appeal.

The developer argued that the payment plan was time-linked, that the buyers had defaulted despite repeated reminders, and that the settlement was voluntary.

The buyers argued that instalment payments were linked to construction progress, that no valid demand notices had been served, and that they accepted the settlement after the developer asserted a right to forfeit the amount already paid.

The High Court found that the developer had failed to prove service of demand notices. It also held that the developer failed to establish actual construction progress justifying the instalment demands.

Agreeing with the trial court, it held that the cancellation was illegal, arbitrary, and unjustified.

The court also held that the developer failed to establish any actual loss that justified retaining ₹18 lakh.

Holding that the settlement lacked free consent and was the result of coercive bargaining arising from unequal bargaining power, the High Court dismissed the appeal.

For Appellant (R. C. Sood & Co. Developers Pvt. Ltd.): Advocates Vikas Mishra, Kartik Magar Karti, Sanchit Gawri, Krishna Dev Yadav.

For Respondents (Sharad Maheshwari and Vandana Maheshwari): Advocates Manish Kaushik, Mishal Johari.