Builder Cannot Retain Cancellation Charges For Buyer's Withdrawal Caused By Project Delay: TNRERA Citing S.18(1) RERA Act - 2025-08-18

TNRERA: Promoter Unlawfully Retained Cancellation Fee After Causing Project Delay

Chennai : The Tamil Nadu Real Estate Regulatory Authority (TNRERA), in a significant ruling for homebuyers, has held that a promoter cannot retain cancellation charges if a buyer is forced to withdraw from a project due to the promoter's failure to adhere to the promised possession date. The bench, comprising Hon’ble Members Dr. L. Subramanian and M. Krishnamoorthy, directed M/s. Alliance Group to refund the withheld amount of Rs. 50,000 to the homebuyer, K.S. Aruna Vasumathi, along with interest and costs.

Background of the Case

The complaint was filed by K.S. Aruna Vasumathi against M/s. Alliance Group (Alliance Business Parks Pvt. Ltd.) concerning a flat booking in the "Augustus Alliance Galleria’ Residences" project in Pallavaram. In March 2018, Ms. Vasumathi booked Flat No. 1210 for a total price of Rs. 42,17,100 and paid an initial amount of Rs. 2,50,000.

The dispute arose when the homebuyer discovered discrepancies between the initially promised possession date of December 2018 and the date mentioned in the draft agreements, which was July 2020. Furthermore, the draft agreement indicated that a revised plan approval from the CMDA was still pending. After her queries for clarification went unanswered satisfactorily, Ms. Vasumathi decided to cancel the booking in May 2018 and requested a full refund. The developer, however, refunded only Rs. 2,00,000, retaining Rs. 50,000 as a cancellation fee.

Arguments from Both Sides

• Complainant's Arguments: Ms. Vasumathi contended that the cancellation was a direct result of the developer's actions, specifically the change in the possession timeline and the lack of clarity on project approvals. She argued that withholding Rs. 50,000 for a "never constructed imaginary flat" was unjust, as she was forced to withdraw due to the developer's failure to stick to its initial promise.

• Respondent's Arguments: The Alliance Group denied having assured delivery by December 2018. They relied on a purported clause in the booking form, which allegedly stipulated a deduction of Rs. 50,000 as cancellation charges. However, the developer failed to produce this booking form as evidence before the Authority.

Legal Principles and Court's Reasoning

The Authority found the developer's arguments unconvincing. Although the draft agreements were not on record, the email correspondence submitted by the complainant (Ex.A1 to A26) clearly documented her repeated requests for clarification and her decision to cancel due to the shifted handover date.

The TNRERA bench placed significant emphasis on Section 18(1) of the Real Estate (Regulation and Development) Act, 2016 . The judgment highlighted the provision:

"If the promoter fails to complete or is unable to give possession of an apartment... in accordance with the terms of the agreement for sale... by the date specified therein... He shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project... to return the amount received by him... with interest..."

The Authority reasoned that since the delay and subsequent cancellation were attributable to the promoter, retaining a cancellation fee was unlawful. The judgment noted:

"...it is not lawful to retain Rs.50,000/- towards cancellation charges as the complainant was forced to cancel the booking due to shifting of the handing over date. ...In view of the above provision under Section 18 (1) of the Act the respondent has no lawful right to retain Rs.50,000/- as cancellation charges as the delay was caused by the respondent."

Final Decision and Implications

The TNRERA ruled in favor of the homebuyer. It directed the Alliance Group to: 1. Refund the Rs. 50,000 withheld as a cancellation fee. 2. Pay interest at a rate of 10.20% per annum (SBI's MCLR + 2%) on the withheld amount. 3. Pay Rs. 25,000 to the complainant towards legal costs.

The respondent was ordered to comply with the decision within 90 days. This order reinforces the protective mandate of the RERA Act, ensuring that homebuyers are not penalized for cancellations necessitated by a promoter's failure to meet their contractual obligations.