When Both Developer, Allottee Are At Fault, Neither Can Seek Specific Performance Or Earnest Money Forfeiture: Punjab RERA

The Punjab Real Estate Regulatory Authority has held that where both an allottee and a developer breach their respective obligations, neither side would ordinarily be entitled to specific performance or forfeiture of earnest money.

The Authority, headed by Chairman Rakesh Kumar Goyal, directed the Punjab Urban Planning and Development Authority (PUDA) to refund ₹21 lakh deposited by the allottee with interest. The total amount payable was ₹43.68 lakh as on August 31, 2026.

Finding defaults on both sides, the Authority observed:

“There is foundational principle of equity—that he who comes to equity must come with clean hands, that equity aids the vigilant and that equity will not suffer a wrong to be without a remedy. Here, both the allottee defaults in payments and the developer faults in timely handover. It is breach of vital terms or failed to perform on time and neither side typically qualifies for an order of specific performance or forfeiture of earnest money.”

The dispute concerned a 400-square-yard residential plot in Gateway City, Sector 118-119, SAS Nagar, Mohali.

PUDA issued a Letter of Intent to Rajesh Verma on July 10, 2015, for a tentative price of ₹84 lakh. An allotment letter followed on August 16, 2016, and Verma deposited ₹21 lakh towards the plot.

Verma subsequently defaulted on instalments due on August 17, 2017, February 17, 2018 and August 17, 2018. He maintained that the project had not been developed and therefore sought possession without interest on the outstanding amount or, alternatively, a refund with interest.

PUDA responded in February 2019, offering possession and asking Verma to clear the outstanding amount with interest. The Authority noted that Verma did not act on the offer.

Verma later approached Punjab RERA seeking possession with the requisite amenities or, alternatively, a refund with interest.

The Authority held that Verma was not justified in withholding the instalments because the payment schedule was not linked to the progress of development. It therefore found him in default of the payment terms.

At the same time, the Authority found that PUDA had failed to offer possession within a reasonable time. It noted that PUDA had specifically offered possession in February 2019, but Verma did not act upon the offer.

The Authority further noted that PUDA had the power under Section 45(3) of the Punjab Regional and Town Planning and Development Act, 1995, to cancel the allotment and forfeit the amount in case of breach. However, PUDA did not cancel the allotment and continued to retain Verma's money.

It observed that PUDA's conduct could not absolve it of its continuing responsibility to refund the money with interest.

The Authority held that Verma had failed to establish an entitlement to possession under Section 18 of the Real Estate (Regulation and Development) Act, 2016. However, considering the circumstances, it held that he was entitled to a refund of ₹21 lakh with interest.

Punjab RERA partly allowed the complaint, directing PUDA to pay ₹21 lakh with ₹22.68 lakh interest, totalling ₹43.68 lakh as on August 31, 2026. It further directed PUDA to pay ₹18,900 per month from September 1, 2026 until payment.

The amount was directed to be recovered as land revenue, with the Authority directing issuance of a Debt Recovery Certificate if PUDA failed to comply.

For Petitioner (Rajesh Verma): Advocate Vinod Verma.

For Respondent (PUDA): Advocate Ashish Grover.