The Delhi State Consumer Disputes Redressal Commission has clarified that failure to deliver possession of a booked plot constitutes a continuous wrong, preserving the consumer’s right to seek remedy even after years of delay. The judgment also sets a critical precedent by capping earnest money forfeiture at 10% of the total sale consideration, reinforcing consumer protection against exploitative contractual terms.
Background & Facts
The Dispute
The complainants, Mr. Mukesh Kumar Aggarwal and Ms. Suman Rani, booked a residential plot in the Suncity Rohtak project developed by Sun City Projects Pvt. Ltd. The dispute arose from the developer’s failure to hand over possession despite substantial payments made by the complainants, coupled with opaque demands for additional dues and eventual cancellation of the allotment.
Key Facts
- The complainants initially booked a 250 sq. yd. plot in Ghaziabad on 01.06.2010, paying Rs. 5,62,500/-
- The Ghaziabad project was abandoned due to lack of regulatory approvals
- On 07.06.2010, the complainants booked Plot No. B-266 (502.32 sq. yds.) in Suncity Rohtak, with the earlier payment adjusted
- An Agreement dated 26.04.2011 was executed for a total basic sale consideration of Rs. 23,88,532/-
- The developer assured possession within 12 months of the agreement date
- By 17.12.2012, the complainants had paid Rs. 26,51,998/-, yet possession was not delivered
- On 17.12.2012, the developer offered possession subject to payment of an outstanding balance of Rs. 9,98,864/-
- The complainants disputed the calculation of interest and charges in the outstanding statement but provided no documentary proof of their queries
- The developer issued multiple reminder notices: 01.06.2013, 20.08.2014, 15.01.2015, 16.04.2015, 24.06.2015, 21.10.2015, 04.04.2014, 22.07.2014, 21.08.2014, 05.09.2014, 16.10.2014, and 07.07.2015
- The plot was cancelled by notice dated 26.10.2016, offering refund of deposited amount
- The complaint was filed on 16.01.2017
Procedural History
- 07.06.2010: Booking of initial plot in Ghaziabad
- 26.04.2011: Execution of Agreement for Plot B-266, Suncity Rohtak
- 17.12.2012: Offer of possession issued by developer
- 26.10.2016: Cancellation of allotment by developer
- 16.01.2017: Complaint filed before Delhi State Consumer Disputes Redressal Commission
- 17.11.2025: Final hearing conducted
- 20.04.2026: Judgment delivered
Relief Sought
The complainants sought:
- Delivery of possession of Plot B-266
- Injunction against third-party allotment
- Compensation of Rs. 5,00,000/- for harassment, financial loss, and mental agony
- Litigation costs
- Any other relief deemed fit
The Legal Issue
The central questions were: (1) Whether the complainants qualify as ‘consumers’ under the Consumer Protection Act, 1986 when purchasing multiple plots; (2) Whether the complaint is barred by limitation given the delay in filing; and (3) Whether the developer’s forfeiture of more than 10% of the sale consideration as earnest money is lawful.
Arguments Presented
For the Petitioner
The complainants argued that they were consumers under Section 2(1)(d) of the Consumer Protection Act, 1986, as their purchase was for personal residential use, not commercial speculation. They relied on Aashish Oberai v. Emaar MGF Land Limited and Narinder Kumar Bairwal v. Ramprastha Promoters to assert that owning multiple plots does not automatically render the purchase commercial. They contended that the failure to deliver possession constituted a continuous cause of action under Mehnga Singh Khera v. Unitech Ltd., making the complaint timely even after 2012. They further argued that the developer’s demand for Rs. 9,98,864/- was arbitrary and undocumented, and that the cancellation notice of 26.10.2016 was an admission of default.
For the Respondent
The developer contended that the complainants were not consumers because they purchased the plot with intent to profit, citing their prior purchase in Ghaziabad. It argued that the complaint was barred by limitation as the cause of action arose with the offer of possession in December 2012, and the complaint was filed five years later. It submitted that it had issued multiple reminders and that the complainants’ failure to pay the outstanding dues justified cancellation under the Agreement. It relied on IREO Grace Realtech v. Abhishek Khanna to argue that the matter was contractual and beyond the jurisdiction of consumer forums.
The Court's Analysis
The Commission first addressed the definition of ‘consumer’. It held that mere ownership of multiple properties does not equate to commercial purpose. The burden lies on the developer to prove commercial intent through documentary evidence, which was absent here. The Commission relied on Aashish Oberai and Narinder Kumar Bairwal to affirm that residential purchases for family use, even if multiple, fall squarely within the ambit of consumer protection.
"A person cannot be said to have purchased a house for a commercial purpose only by proving that he owns or had purchased more than one houses or plots."
On limitation, the Commission held that failure to deliver possession is a continuous wrong. Citing Mehnga Singh Khera v. Unitech Ltd., it observed that each day of non-delivery constitutes a fresh cause of action. Since the cancellation notice was issued on 26.10.2016 and the complaint was filed on 16.01.2017, it was well within the two-year limitation period.
The Commission then examined the developer’s right to forfeit earnest money. It noted that while the Agreement permitted forfeiture of 15%, such a clause must conform to reasonableness under law. It referred to Ramesh Malhotra v. EMAAR MGF Limited, where the National Commission held that forfeiture beyond 10% of the total sale consideration is unreasonable unless actual loss is proven. The Commission emphasized that the developer failed to demonstrate any actual loss suffered due to delay, making the 15% forfeiture excessive.
"Forfeiture beyond 10% of the total sale consideration cannot be said to be reasonable in the absence of proof of actual loss suffered by the seller."
The Commission also rejected the complainants’ claim that they never received the reminder notices, noting that the addresses matched and postal receipts confirmed dispatch through the correct PIN code area.
The Verdict
The complaint was partly allowed. The developer was directed to refund Rs. 22,61,795.80, representing the total amount paid (Rs. 26,51,998/-) minus 10% of the total sale consideration (Rs. 23,88,532/- = Rs. 2,38,853.20) and service tax. Interest was ordered at 6% per annum from 17.12.2012 to 20.04.2026, provided the amount is paid by 20.06.2026. If payment is delayed beyond that date, interest shall escalate to 9% per annum from 17.12.2012 until realization. Additionally, the developer must pay Rs. 1,00,000/- as compensation for mental agony and Rs. 50,000/- as litigation costs. All other claims were dismissed.
What This Means For Similar Cases
Earnest Money Forfeiture Cannot Exceed 10%
- Practitioners must now challenge any contractual clause seeking forfeiture exceeding 10% of the sale price as unreasonable
- Developers must prove actual loss to justify higher forfeiture - mere contractual stipulation is insufficient
- Consumers can invoke Ramesh Malhotra and this judgment to contest excessive penalties in housing agreements
Continuous Cause of Action Preserves Consumer Remedies
- Failure to deliver possession is a continuing wrong, resetting the limitation clock with each passing day
- Complaints filed within two years of cancellation or final refusal of possession remain maintainable
- Consumers need not rush to file immediately after initial delay - the law recognizes prolonged non-performance
Developer’s Burden to Prove Commercial Intent
- Allegations that a buyer is a ‘commercial investor’ require concrete evidence - not mere suspicion or multiple purchases
- Consumer forums will not infer commercial purpose from ownership pattern alone
- This shields genuine residential buyers from jurisdictional challenges based on speculative claims
