In a major relief to homebuyers, the Supreme Court has said that real estate developers cannot deduct more than 10 per cent of the basic sale price of an apartment if a buyer decides to cancel the booking, relying on terms of a one-sided agreement.
By capping cancellation charges at 10% of the Basic Sale Price (BSP), the Court has provided much-needed relief to homebuyers, preventing developers from imposing arbitrary and excessive deductions. Legal experts said that the ruling strengthens the legal stance of homebuyers and sets a precedent that the courts will strike down any unfair contractual term.
A bench of Justices B R Gavai and S V N Bhatti had ruled earlier this week that contractual terms that are ex facie one-sided, unfair, and unreasonable would constitute unfair trade practice. The courts will not enforce an unfair and unreasonable contract or such a clause in a contract between parties who are unequal in bargaining power.
Earlier this week, the apex court upheld the October 25, 2022, order of the National Consumer Disputes Redressal Commission directing Godrej Projects Development Limited to refund the amount deposited by complainant Anil Karlekar and others after deducting only 10 per cent of the basic sale price.
The court was hearing an appeal filed by the real estate firm Godrej Projects Development Ltd challenging an order passed by the NCDRC that had ordered that it cannot forfeit more than 10% of the amount. The real estate company had said that it should be allowed to forfeit 20% of the amount, which was part of the agreement with the buyer, and that there was nothing wrong with enforcing it.
“The NCDRC has held, in a series of cases since 2015, that 10 per cent of the basic sale price is a reasonable amount that is liable to be forfeited as earnest money. We see no reason to upset the view consistently taken by the NCDRC," the bench said. The bench rejected the developer's contention that the NCDRC has grossly erred in interfering with the contractual terms between the parties.
The court, however, said that the NCDRC was not justified in awarding 6 per cent simple interest per annum from the date of payment to the date of realisation in the case.
Legal experts said that by capping cancellation charges at 10% of the Basic Sale Price (BSP), the Supreme Court has provided much-needed relief to home buyers and prevented developers from imposing arbitrary and excessive deductions.
This judgment reinforces the rules of fairness, equity, and reasonableness in contractual obligations, which is in line with the Indian Contract Act, 1872, and the Real Estate (Regulation and Development) Act, 2016 (RERA). The ruling hence strengthens the legal stance of home buyers and sets a precedent that the courts will strike down any unfair contractual term.
