A landmark ruling by the West Bengal State Consumer Disputes Redressal Commission has clarified that a tentative email seeking guidance on property resale cannot be construed as an unequivocal intention to cancel a contract. This decision reinforces the principle that contractual termination requires clear, unambiguous communication, and that unilateral forfeiture of earnest money based on ambiguous correspondence violates consumer rights under the Consumer Protection Act.
Background & Facts
The Dispute
The dispute arose from a residential property transaction between the appellants, Realmark Oracle Project LLP and Gagan Lohia, and the respondents, Mrs. Averi Roy and Mr. Debadri Roy. On 03.01.2019, the respondents entered into an Agreement for Sale for the purchase of Flat No. 5D in the Realmark Oracle Project, Kolkata, with a total consideration of Rs. 53,96,742. The respondents paid 20% of the consideration as earnest money, amounting to Rs. 10,79,348, while the remaining Rs. 48,67,805 was financed through a bank loan.
Key Facts
- The Agreement for Sale contained a clause permitting forfeiture of earnest money in case of buyer-initiated cancellation.
- On 12.03.2021, the respondents sent an email to the appellants expressing their desire to sell the flat due to "unavoidable circumstances" and requesting guidance on the process.
- The appellants interpreted this email as a formal request to rescind the agreement.
- On the basis of this interpretation, the appellants unilaterally terminated the agreement on or about 15.03.2021.
- The appellants refunded the respondents’ earnest money of Rs. 10,79,348 but retained 10% (Rs. 1,07,935) as penalty.
- The appellants also repaid the outstanding bank loan amount of Rs. 48,67,805 to the financing institution.
- The respondents had already paid 21 monthly EMIs toward the bank loan prior to termination.
- The respondents sent a legal notice dated 10.04.2021 demanding full refund of the retained amount and compensation for losses.
- No response was received to the notice.
Procedural History
- 15.06.2021: Complaint filed before District Consumer Disputes Redressal Commission, Baruipur (South 24 Parganas), seeking refund of Rs. 1,07,935 with 12% interest, compensation of Rs. 5,00,000, and litigation costs.
- 18.11.2022: District Commission held that the email did not constitute cancellation and ordered full refund of the retained amount with 8% simple interest per annum, Rs. 50,000 as compensation, and Rs. 25,000 as litigation cost.
- 20.01.2023: First Appeal No. SC/19/A/312/2023 filed by appellants before the State Commission.
- 15.03.2023: Stay application SC/19/IA/1114/2025 filed seeking stay of the District Commission’s order.
- 16.06.2026: Final hearing and judgment delivered by the State Commission.
The Parties' Positions
For the Appellants
The appellants contended that the email dated 12.03.2021 was a clear and unambiguous communication of intent to cancel the booking. They argued that the agreement permitted forfeiture of earnest money upon buyer-initiated cancellation, and that their actions were in strict compliance with the contract. They further submitted that they had acted in good faith by refunding the entire loan amount and the balance earnest money, and that the 10% retention was a standard commercial practice.
For the Respondents
The respondents argued that the email was a mere inquiry seeking guidance, not a notice of cancellation. They emphasized that the language used was tentative, requesting help and expressing regret, and contained no declaration of intent to terminate. They relied on the principle that consumer contracts must be interpreted in favor of the consumer, especially where ambiguity exists.
Relief Sought
The respondents sought: (1) full refund of Rs. 1,07,935 retained as penalty; (2) 12% interest on the retained amount from 15.03.2021; (3) compensation of Rs. 5,00,000 for mental agony and financial loss; and (4) litigation costs of Rs. 25,000.
The Legal Issue
The central question was whether a tentative email seeking guidance on resale of a property constitutes an unequivocal intention to cancel the Agreement for Sale, thereby justifying forfeiture of earnest money under the contract.
Arguments Presented
For the Appellant
The appellants relied on the express terms of the Agreement for Sale, which permitted forfeiture of earnest money in case of buyer-initiated cancellation. They argued that the email, though not labeled as a cancellation notice, conveyed a clear intent to exit the contract. They cited commercial practice in real estate transactions where such communications are treated as de facto cancellations. They further contended that the District Commission erred in ignoring the contractual autonomy of the parties.
For the Respondent
The respondents argued that the email was a request for assistance, not a notice of termination. They emphasized the use of phrases like "we want to sell," "we need your help," and "we will be waiting for your reply," which indicate solicitation of advice, not declaration of intent. They relied on M/s. DLF Limited v. Smt. Sunita Gupta and M/s. Prestige Group v. Smt. Anjali Sharma to assert that consumer protection law requires strict interpretation against unfair contractual terms, especially where ambiguity exists.
The Court's Analysis
The State Commission undertook a granular textual analysis of the email dated 12.03.2021, rejecting the appellants’ assertion that it amounted to a cancellation notice. The Court observed that the language was deferential, uncertain, and explicitly sought guidance: "we want to sell the flat... we need your help... we will be waiting for your reply." Such phrasing, the Court held, is inconsistent with the legal requisites of a notice of rescission, which must be clear, unequivocal, and communicated with finality.
"By no stretch of legal imagination can such a nascent query be construed as a definitive intention to rescind the booking."
The Court emphasized that consumer law is protective in nature and that contractual clauses permitting forfeiture must be strictly construed against the party seeking to enforce them. The appellants, as a corporate developer, held superior bargaining power and drafted the agreement. Any ambiguity must therefore be resolved in favor of the consumer. The Court further noted that the appellants acted without awaiting any response to the email, thereby acting in bad faith and in violation of the principle of natural justice.
The Court also rejected the argument that retention of 10% was a "standard commercial practice," holding that legality cannot be inferred from industry norms if they contravene statutory protections under the Consumer Protection Act, 2019. The District Commission’s finding that the forfeiture was unjustified and punitive was upheld as legally sound and factually supported.
The Verdict
The appeal was dismissed. The State Commission upheld the District Commission’s order dated 18.11.2022. The appellants were directed to refund Rs. 1,07,935, the full amount retained as penalty, with simple interest at 8% per annum from 15.03.2021 until actual payment. Additionally, the appellants were directed to pay Rs. 50,000 as compensation for mental agony and Rs. 25,000 as litigation costs. Compliance was mandated within 6 weeks from the date of the order.
What This Means For Similar Cases
Email Communication Must Be Unambiguous to Constitute Cancellation
- Practitioners must advise clients that vague, tentative, or request-based emails cannot be treated as formal notices of contract termination.
- Developers must not act on ambiguous consumer communications without seeking clarification or issuing a formal notice of default.
- Any forfeiture clause triggered by such communications will be voidable under consumer protection law.
Forfeiture of Earnest Money Requires Proportionality and Contractual Clarity
- Retention of earnest money must be proportionate to actual loss suffered, not a punitive measure.
- Agreements must explicitly define what constitutes a cancellation notice and provide a reasonable window for response.
- Courts will not uphold forfeiture where the consumer’s conduct is exploratory, not conclusive.
Consumer Protection Overrides Commercial Norms
- Industry practices cannot override statutory protections under the Consumer Protection Act, 2019.
- Corporate entities must ensure that their contractual terms do not exploit information asymmetry.
- Consumers are entitled to interpret ambiguous communications in their favor, especially when acting in good faith.
