2021 (5) TMI 130 - AT - Indian Laws

Tribunal Deems Forfeiture Clause Unenforceable Under RERA, Orders Refund

The Tribunal found that the impugned order directing the Promoter to refund the booking amount to the Allottees was based on a non-existent document, ... Forfeiture clause in reservation form - unenforceability of unconscionable or one-sided contractual clauses - right of allottee to withdraw reservation - inapplicability of model agreement / Section 18 where no agreement for sale is executed - inherent powers of the Authority and Tribunal to meet the ends of justice - object of RERA to protect consumer / allottee interestsForfeiture clause in reservation form - unenforceability of unconscionable or one-sided contractual clauses - right of allottee to withdraw reservation - object of RERA to protect consumer / allottee interests - Validity and enforceability of clause 17 of the printed request for reservation (forfeiture on withdrawal) signed only by the Allottees. - HELD THAT: - The printed form titled 'request for reservation' was signed only by the Allottees and not by the Promoter; there is no booking form on record signed by both parties. Clause 17, which purports to bar withdrawal and permits forfeiture of amounts on withdrawal, is a one-sided condition imposed only on Allottees. Such a restraint on the right to withdraw a reservation and a provision allowing forfeiture is ex facie unfair, unreasonable and inequitable, contrary to the protective object of RERA and unenforceable as an unconscionable clause where the parties are unequal in bargaining power. Consequently the Promoter is not entitled to forfeit any amount under clause 17 and the clause is not binding on the parties. [Paras 9, 11]Clause 17 in the printed request for reservation is unreasonable and not enforceable; Promoter cannot forfeit amounts under that clause.Inapplicability of model agreement / Section 18 where no agreement for sale is executed - object of RERA to protect consumer / allottee interests - Whether the Allottees' refund claim can be sustained on the basis of clause 18 of the model agreement or Section 18 of RERA in the absence of an executed agreement for sale. - HELD THAT: - The parties had not reached the stage of a concluded agreement for sale: no confirmation letter, allotment letter or agreement for sale was executed and there was no attempt by either party to execute such agreement. Clause 18 of the model agreement and Section 18 of RERA relate to rights and refunds in the context of an executed agreement and failure to give possession or complete the project; they do not govern an initial-stage cancellation where only a reservation request was made. Thus the Allottees' claim cannot be supported on the basis of clause 18 of the model agreement or Section 18 of RERA, although the protective object of RERA supports redress of consumers in appropriate cases. [Paras 12, 13]Claim for refund is not maintainable under clause 18 of the model agreement or Section 18 of RERA because no agreement for sale was executed.Inherent powers of the Authority and Tribunal to meet the ends of justice - object of RERA to protect consumer / allottee interests - Whether the Appellate Tribunal can direct refund of amounts paid by the Allottees in exercise of its inherent powers and consistent with RERA's object. - HELD THAT: - Regulation 39 of the Authority's regulations and Regulation 25 of the Tribunal's regulations preserve inherent powers to pass orders necessary to meet the ends of justice or to prevent abuse of process. Although the refund claim did not fall squarely under the model agreement or Section 18, the Tribunal may, in exercise of these inherent powers and in furtherance of RERA's consumer-protective purpose, direct such relief. Applying those inherent powers and the statutory object, the Tribunal found it just to direct the Promoter to refund the total amount paid by the Allottees. [Paras 14, 15, 16]Tribunal validly exercised inherent powers to direct the Promoter to refund the total amount paid to the Allottees.Final Conclusion: Appeal allowed; impugned MahaRERA order set aside and, in exercise of the Tribunal's inherent powers consonant with RERA's object to protect consumers, the Promoter directed to refund the total amount paid by the Allottees; parties to bear their own costs. Issues: Challenge to impugned order directing refund of booking amount by Promoter to Allottees.Analysis:1. Proper Application of Mind and Appreciation of Facts:- The impugned order was challenged on the grounds of incorrect application of mind and factual appreciation. The Allottees had paid the booking amount and a substantial sum towards the flat price but later decided to cancel the booking due to a medical emergency. The Promoter refused to refund the amount citing a clause in the 'request for reservation' form. However, the Tribunal found that the impugned order was based on a non-existent 'booking form signed by both parties,' rendering it incorrect and unenforceable.2. Applicability of RERA Provisions:- The Tribunal noted that the project fell under the purview of RERA, and the rights and liabilities of the parties were governed by its provisions. The Allottees canceled the transaction within four months, triggering a demand for a refund. The Promoter relied on a clause in the 'request for reservation' form to justify the forfeiture of the amount. However, the Tribunal emphasized that RERA aims to protect consumers' interests, and the clause imposing forfeiture was deemed unfair and unreasonable, contrary to the objectives of RERA.3. Validity of Forfeiture Clause:- The Tribunal analyzed the clause in the 'request for reservation' form that allowed forfeiture of a portion of the amount in case of cancellation. It was observed that the Allottees had not entered into an agreement for sale, and no allotment or confirmation letters were issued. The clause restricting the Allottees from withdrawing their reservation request was deemed unfair and one-sided. The Tribunal cited a Supreme Court judgment emphasizing that unfair and unreasonable clauses in contracts cannot be enforced, especially when one party has no meaningful choice but to assent to the terms.4. Interpretation of RERA Model Agreement:- The Promoter argued that the Allottees sought relief based on a clause in the RERA model agreement, contending that there was no violation of RERA provisions. However, the Tribunal clarified that since no sale agreement was executed, the clause in the model agreement did not apply. The Tribunal held that the Allottees' claim for a refund was not governed by any specific RERA provision but highlighted that the overarching objective of RERA was to safeguard consumers' interests, warranting a refund of the amount paid by the home-buyer.5. Inherent Powers of Regulatory Authorities:- The Tribunal invoked the inherent powers vested in Regulatory Authorities and Appellate Tribunals under the RERA regulations to ensure justice and prevent abuse of process. It directed the Promoter to refund the total amount paid by the Allottees, setting aside the impugned order as incorrect, improper, and illegal. The Tribunal allowed the appeal, ordered the refund, and directed the parties to bear their respective costs.---