Godrej Skyline Developers Pvt. Ltd. v. Joy Salve
Appeal No.: AT005000000134212 of 2022
Forum: Maharashtra Real Estate Appellate Tribunal (MahaREAT), Mumbai
Impugned Order: MahaRERA, dated 27 October 2022
MahaRERA Complaint: CC005000000085250
Decision: 3 September 2026
Coram: Justice S. S. Shinde, Chairperson, and Dr. Rajagopal Devara, Member (A)
1. Facts of the Case
The dispute concerned Flat No. 903, Tower B5, Godrej Park Greens, Mamurdi, Pune, developed by Godrej Skyline Developers Pvt. Ltd.
The allottee, Joy Salve, submitted an application for booking of the flat on 16 March 2019. An allotment letter was subsequently issued on 30 April 2019.
The total agreed consideration was approximately ₹40.88 lakh. The allottee paid ₹4,27,173.50, representing approximately 9.67% of the consideration, including GST.
Importantly, no Agreement for Sale was executed or registered between the parties.
The promoter subsequently issued a pre-termination notice on 18 November 2019, followed by termination on 12 December 2019. The promoter thereafter refused to refund the amount paid by the allottee.
2. Main Issue
The principal issue before MahaREAT was:
Whether an amount paid by a prospective allottee pursuant to an application form and allotment letter, but before execution and registration of an Agreement for Sale, could be treated as “earnest money” and forfeited by the promoter.
A related question was whether a contractual forfeiture clause could justify retention of the entire amount paid when the promoter had not demonstrated corresponding loss.
3. Promoter's Case
The promoter sought to justify retention of the amount on the basis that it constituted earnest money and was liable to forfeiture following termination of the booking.
Reliance was placed upon the contractual terms governing cancellation/termination and upon principles concerning forfeiture of earnest money.
The promoter's position, in substance, was that the allottee's failure to proceed with the transaction entitled the promoter to retain the amount already paid.
4. Findings of MahaREAT
A. Amount paid was part of consideration
MahaREAT rejected the characterization of the payment as an independent earnest-money deposit.
The Tribunal found that the amount was paid towards the consideration of the identified flat and constituted part of the agreed consideration.
The Tribunal emphasised the distinction between an earnest deposit and an amount paid towards the purchase consideration.
B. RERA focuses on consideration
The Tribunal observed that the RERA framework refers to the consideration payable for the apartment and does not support automatically treating every amount paid at the booking stage as earnest money capable of complete forfeiture.
Thus, merely describing a payment as “earnest money” does not determine its legal character.
5. No Registered Agreement for Sale
A particularly important factor was that no Agreement for Sale had been executed or registered.
The Tribunal held that the promoter could not mechanically invoke a forfeiture clause in these circumstances.
The absence of a registered Agreement for Sale was therefore significant in assessing the promoter's entitlement to retain the booking amount.
6. Loss Must Be Established
MahaREAT also considered whether the promoter had established an actual loss corresponding to the amount sought to be forfeited.
The Tribunal found that the promoter had not demonstrated loss equivalent to the entire amount paid by Joy Salve.
Consequently, the promoter could not retain the entire payment simply by relying upon the forfeiture clause.
7. Earnest Money vs. Consideration
The decision is particularly useful because it distinguishes between:
| Earnest Money | Part of Sale Consideration |
|---|---|
| Intended to secure performance of the contract | Paid towards the price of the apartment |
| Its forfeiture depends upon the contractual and legal circumstances | Cannot automatically be forfeited merely because booking is cancelled |
| Legal characterization depends upon the terms and surrounding circumstances | Payment towards identified apartment consideration is treated differently |
| Forfeiture cannot be assumed merely from the label used | Promoter must establish entitlement to retain the amount |
The Tribunal held that the amount paid in this case was part of the agreed consideration, rather than an earnest deposit that could simply be forfeited.
8. Precedents on Earnest Money
The promoter relied upon judgments dealing with forfeiture of earnest money.
MahaREAT distinguished those authorities on the ground that they concerned genuine earnest-money transactions and were not applicable to a payment constituting part of the consideration in a RERA-regulated real-estate transaction.
Thus, precedents concerning conventional earnest-money forfeiture cannot automatically be applied to every booking payment received by a real-estate promoter.
9. Final Decision
MahaREAT dismissed Appeal No. AT005000000134212 of 2022 filed by Godrej Skyline Developers Pvt. Ltd.
The Tribunal:
declined to permit forfeiture of the amount paid by Joy Salve;
rejected the promoter's characterization of the payment as earnest money;
directed that the amount deposited with the Tribunal registry be released to the allottee; and
awarded ₹25,000 as costs to the allottee.
10. Ratio Decidendi
The decision can be summarised as follows:
A payment made by an allottee towards the consideration of an identified apartment cannot automatically be characterized as “earnest money” merely because the promoter describes it as such. Where no registered Agreement for Sale has been executed, a forfeiture clause cannot be mechanically enforced, particularly when the promoter has failed to establish actual loss corresponding to the amount sought to be forfeited.
11. Relevant RERA Provisions
The decision is particularly relevant to the statutory framework concerning:
Section 13, RERA Act, 2016 – restriction on accepting more than 10% of the cost of the apartment without first entering into a written and registered Agreement for Sale.
Section 18 – rights and remedies of an allottee in specified circumstances.
Section 19 – rights and duties of allottees.
Section 11 – obligations of the promoter.
Section 13 is especially relevant because the case involved a booking/payment transaction where no registered Agreement for Sale had been executed.
12. Practical Impact
This decision is significant for disputes involving:
Booking Application → Allotment Letter → Part Payment → Cancellation → Forfeiture
The ruling indicates that promoters cannot necessarily retain booking amounts by simply labelling them “earnest money.”
The Tribunal will examine:
What was actually agreed?
What was the purpose of the payment?
Was an Agreement for Sale executed and registered?
Was the amount genuinely earnest money or part of consideration?
What actual loss was suffered by the promoter?
Does the forfeiture clause have a lawful and enforceable basis?
Key Takeaway
A forfeiture clause is not a licence for a promoter to automatically retain the entire booking amount. The substance and purpose of the payment matter, and a promoter seeking forfeiture must establish a legally sustainable basis for retaining the amount.
