RERA| Brochure Clause Allowing 20% Deduction On Refund Without Interest Is Unfair: Allahabad High Court
The Allahabad High Court at Lucknow has recently held that a clause in a development authority's brochure permitting it to deduct 20% of the registration amount and return the balance without interest where an allottee withdraws after allotment is a one-sided, unfair, and unreasonable term of the contract.
It held that the Lucknow Development Authority was not entitled to the benefit of such a clause.
Clause 8.2 of the brochure of the Lucknow Development Authority provided that where the money is withdrawn after allotment of the property, 20% of the registration amount would be deducted and the remaining amount refunded without interest.
Justice Saurabh Lavania held
“The Clause 8.2 is not in consonance with the basic principles of the law of Contract as to the view of this Court the same is ex-facie one sided, unfair and unreasonable term of the Contract. Therefore, the Applicant - L.D.A. is not entitled to the benefit based upon Clause 8.2, as prayed.”
The allottee, Shivaji Singh, deposited Rs. 1,85,000/- as booking amount on 31.01.2012 for a flat in Sopan Enclave, Priyadarshini Yojana, Sitapur Road, Lucknow. Flat No. C-401 was allotted to him by allotment letter dated 11.07.2014. The scheme was estimated to be completed within 24 months. The completion certificate was issued on 17.02.2020. Before that, by letter dated 04.08.2019, the L.D.A. called upon the allottee to pay the pending dues and take possession of the flat, which he did not reply to.
The allottee moved the Regulatory Authority under the U.P. Real Estate (Regulation and Development) Act, 2016 seeking refund of Rs. 1,85,000/-. The claim was dismissed on 24.02.2020. In appeal, the U.P. Real Estate Appellate Tribunal, Lucknow allowed Appeal No. 911 of 2021 by order dated 12.08.2026 and directed the L.D.A. to refund the booking amount after deducting 20%, with interest at MCLR+1 percent till the date of payment, to be paid within 45 days of the order being uploaded.
The Tribunal had found that the L.D.A. never cancelled the allotment and did not invoke Clause 8.2 though no further amount was deposited for the Sopan Enclave unit, and that it refunded nothing to the allottee and used the booking money for commercial purposes.
The allottee's wife, the allotted flat not having been made available within a reasonable period, purchased Flat No. AL/301 in Alaknanda Apartment, Gomti Nagar Extension, Lucknow from the allottee of that flat by registered sale deed dated 06.09.2014.
The L.D.A. challenged the order of the Tribunal before the High Court, resting its case on Clause 8.2.
The Court held that the project had not been completed within a reasonable period, that is, the estimated period of 24 months, noting that the booking amount was paid on 31.01.2012 while the completion certificate was issued only on 17.02.2020.
On the retention of the money, the Court held
“80% of the booking amount i.e. Rs. 1,85,000/- was utilized by the Appellant-L.D.A., which should have been returned to the Allottee after cancellation of allotment on the ground of default in paying the installment or any other ground available. It is to be noted that the Appellant-L.D.A. did not cancel the allotment. It is also apt to indicate that Unjust enrichment occurs when a person retains money or benefits which in justice, equity and good conscience, belong to someone else.”
Finding that the Tribunal had committed no error of law and that no substantial question of law arose, the Court dismissed the appeal.
For Appellant: Abhishek Khare
For Respondent: Anurag Singh, Utkarsh Kumar