📚 Legal Learning – Excessive Forfeiture by Builders is Unfair & Legally Unsustainable
🧾 Key Legal Principles:
🔹 Consumer Contracts Are Subject to Judicial Scrutiny
Courts have repeatedly held that consumer contracts, especially in builder-buyer agreements, are not sacrosanct if they are one-sided or entered under unequal bargaining power.
✅ Judicial scrutiny applies to protect consumers from exploitative or unfair contract terms.
🔹 No Unjustified Forfeiture
If the builder fails to provide mandatory documents like a No Objection Certificate (NOC) or Tripartite Agreement, and the buyer is unable to make payments due to such fault, then cancellation of booking is unjustified.
🔹 Forfeiture Must Be Reasonable
Refund must be made after deducting a fair amount only.
✔️ Deduction limited to 10% of the total sale consideration to prevent excessive penalty.
🔹 Section 74, Indian Contract Act, 1872
Even where penalty clauses exist, courts can moderate or strike down unreasonable deductions, especially in contracts arising out of non-equal bargaining positions.
🔹 Interest on Refund
Interest @ 9% p.a. is to be awarded from the date of deposit till refund.
In case of delay, enhanced interest @ 12% p.a. becomes applicable.
🧠 Legal Insight:
Builders cannot unilaterally impose harsh penalties. Judicial review ensures fairness in consumer contracts, and refunds must be made without arbitrary or punitive deductions.
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