Cancellation of allotment after taking 90% of the total sales consideration is unsustainable in the eyes of law

 In the Matter of Gautam Bhatla V/s Vatika limited Complaint no.1208 of 2019 decided on 17.02.2021 before Haryana Real Estate regulatory authority, Panchkula.

it was held that " The Authority is prima facia of the view that Cancellation of allotment after taking 90% of the total sales consideration and without remitting the amount payable to the allottees after deducting earnest money, is unsustainable in the eyes of law"

Only a reasonable amount can be forfeited as earnest money.

 In the Matter of DLF Ltd. v. Bhagwanti Narula, I (2015) CPJ 319(NC) the Hon’ble National Consumer Disputes Redressal Commission has clearly laid down that only a reasonable amount can be forfeited as earnest money in the event of default on the part of the purchaser and it is not permissible in law to forfeit any amount beyond a reasonable amount unless it is shown that the person forfeiting the said amount had actually suffered loss to the extent of the amount forfeited by him. Further, it was held that 20 % of the sale price cannot be said to be a reasonable amount which the petitioner company could have forfeited on account of default on the part of the complainant unless it can show it had suffered loss to the extent the amount was forfeited by it.

Only a nominal amount can be an earnest money

 In the Matter  of Bhuley Singh Vs. Khazan Singh & Ors. RFA No.422/2011 The Hon’ble Delhi High Court said  that nomenclature of a payment is not important and what is important is really the quantum of price which is paid. Only a nominal amount can be an earnest money, in as much as, the object of such a clause is to allow forfeiture of that amount to a nominal extent.

In the absence of completely formulated contract, earnest money is refundable.

In the Matter of  Commr of HR & CE Deptt v. S. Muthekrishnan AIR 2012 Mad 43, The Madras High Court observed that if the contract is not completely formulated between the parties but the earnest money is paid, the other party is not entitled to forfeit the amount and it stands refundable.

No provisions in RERA and rules there under to forfeit the earnest money.

  In the Matter of Sumit Mukherjee Versus M/s. Rajsanket Realty Limited Complaint No. CC006000000057591 THE MAHARASHTRA REAL ESTATE REGULATORY AUTHORITY, MUMBAI observed that there is no provisions in RERA and rules there under to forfeit the earnest money.