The National Consumer Disputes Redressal Commission has capped forfeiture at 10% of the basic sale price in housing allotment disputes, affirming the Supreme Court's ruling in Godrej Projects Development Ltd v. Anil Karlekar, and refused to direct specific performance where the property had been re-allotted to third parties not before the forum. The Commission set aside the State Commission's order directing possession of an LIG house, holding that consumer fora cannot compel delivery when third-party rights have intervened, and modified the District Forum's refund award from Rs.1,76,363 to Rs.2,11,833 with 9% interest from the complaint date.
Background & Facts
The Dispute
The petitioner, Gorakhpur Development Authority (GDA), challenged the State Consumer Disputes Redressal Commission, Uttar Pradesh's order dated 10.12.2024 in Appeal No. 2650 of 2014. The State Commission had set aside the District Forum's order granting a monetary refund and instead directed GDA to deliver physical possession of LIG House No. B-291, Buddh Vihar Residential Scheme (Part-C), Gorakhpur, and execute a registered sale deed in favour of the respondent, Smt. Prem Lata Devi. GDA contended that the allotment was lawfully cancelled in 2009 after persistent defaults, the property was re-allotted to a third party, and specific performance was no longer feasible.
Key Facts
- 05.03.2004: Respondent registered under Buddh Vihar Residential Scheme (Part-C) for an LIG tenement admeasuring 60 sq. meters at an estimated tentative cost of Rs.2,33,178/-, depositing a registration sum of Rs.23,318/-
- Allotment on "first come, first served" basis; House No. B-291 allocated
- Payment schedule: Rs.58,249/- initial allotment; balance in monthly instalments of Rs.2,445/-
- 2004-2006: GDA issued multiple demand letters (Letter Nos. 53 dated 17.03.2004, 72 dated 19.03.2004, 400 dated 21.09.2004, 547 dated 01.03.2005, 778 dated 30.06.2005, 1175 dated 01.07.2006)
- 05.10.2007: Final notice issued by GDA
- 28.01.2009: Notice requiring payment of outstanding Rs.1,74,894/- by 16.02.2009
- 07.03.2009: Allotment cancelled; intimation communicated; refund Cheque No.11952926 dated 05.03.2010 for Rs.93,492/- dispatched by registered post after deducting administrative charges
- Property re-advertised and re-allotted to Smt. Maya Singh (W/o Kashinath Singh); registered sale deed executed; possession handed over; subsequently transferred to Bahoti Jaiswal
- 13.04.2010: Respondent filed Consumer Complaint No. 131 of 2010 before District Forum, Gorakhpur
- Respondent claimed deposit of Rs.58,249/- on 24.12.2008; husband's critical illness requiring treatment at AIIMS, New Delhi; representation to GDA dated 22.04.2009; deposit of Rs.1,25,000/- on 12.04.2010 under Receipt No.11700
- 31.07.2010: GDA filed Written Statement stating "Until the defendant is paid in full, the defendant will not execute a registered sale deed"
- 12.11.2014: District Forum order noting total deposit of Rs.2,35,151/- (per GDA's statement of account dated 16.07.2012); cancellation effected 07.03.2009 prior to complaint; property re-allotted; refund cheque not proven encashed; sanctioned 25% administrative deduction; directed refund of Rs.1,76,363/- with 9% simple interest from complaint date
- 10.12.2024: State Commission order in Appeal No. 2650/2014 set aside District Forum order; directed possession delivery within three months and sale deed registration
Procedural History
- 13.04.2010: Consumer Complaint No. 131/2010 filed before District Consumer Disputes Redressal Forum, Gorakhpur
- 12.11.2014: District Forum allowed complaint in part, directed refund of Rs.1,76,363/- with 9% interest
- 2014: Respondent filed Appeal No. 2650/2014 before State Consumer Disputes Redressal Commission, Uttar Pradesh
- 10.12.2024: State Commission allowed appeal, set aside District Forum order, directed specific performance
- 2025: GDA filed Revision Petition No. NC/RP/919/2025 before NCDRC with IA/7871/2025 (condonation of 85 days delay)
- 18.07.2025: NCDRC conditional stay order directing GDA to pay Rs.20,000/- within six weeks
- 06.11.2026: NCDRC judgment
Relief Sought
GDA sought setting aside of the State Commission's order dated 10.12.2024, contending that specific performance was impossible due to third-party rights, and that the District Forum's refund order (with 25% deduction) was correct. The respondent sought dismissal of the revision petition and confirmation of the possession decree.
The Legal Issue
The central questions were: (1) Whether the State Commission committed jurisdictional error by directing specific performance of an immovable property that had been re-allotted to third parties not impleaded in the proceedings; (2) Whether the District Forum's sanction of 25% forfeiture from the deposited amount was permissible in law; (3) Whether the alleged refund cheque of Rs.93,492/- dispatched in 2010 could be adjusted without proof of encashment.
Arguments Presented
For the Petitioner (GDA)
Learned counsel submitted that the State Commission passed the impugned order perfunctorily without considering that the allotment was lawfully cancelled on 07.03.2009 after persistent defaults evidenced by multiple demand notices. The cancellation was never specifically challenged in the prayers before the lower fora. The property was re-advertised, allotted to Smt. Maya Singh, a sale deed executed, and possession delivered, with subsequent transfer to Bahoti Jaiswal. Third-party rights had crystallised, and consumer fora cannot compel specific delivery of property vested in non-parties. Reliance was placed on Rajasthan Housing Board & Anr. v. Ratan Devi, (2020) 14 SCC 797, where the Supreme Court held that when an allottee commits protracted default and the tenement passes to third parties, consumer fora cannot compel possession; the only equitable relief is refund with interest.
For the Respondent (Prem Lata Devi)
Learned counsel contended that the revision petition disclosed no jurisdictional error under Section 58(1)(b) of the Consumer Protection Act, 2019. The narrative of cancellation, refund cheque dispatch, and third-party transfer lacked cogent proof of delivery or bank debit. GDA accepted substantial consideration of Rs.2,35,151/- and kept the allotment alive as admitted in its Written Statement and statement of accounts. Acceptance of belated payments constituted a deemed extension of time per R.K. Saxena v. Delhi Development Authority, I (2001) CPJ 23 (SC). Additional reliance was placed on Bharati Knitting Company v. DHL Worldwide Express Courier Division of Airfreight Ltd., II (1996) CPJ 25 (SC), and Jasraj Inder Singh v. Hemraj Multanchand, (1977) 2 SCC 155.
The Court's Analysis
The Commission delineated its revisional jurisdiction under Section 58(1)(b) of the Consumer Protection Act, 2019, which is confined to examining whether the State Commission exercised jurisdiction not vested in law, failed to exercise vested jurisdiction, or acted illegally or with material irregularity. It does not empower re-examination of facts unless findings are perverse or demonstrably contrary to the record.
On the possession directive, the Commission held that the State Commission fell into patent jurisdictional error. While it correctly noted the respondent's deposit of Rs.2,35,151/-, it failed to examine property availability or third-party rights. In Rajasthan Housing Board & Anr. v. Ratan Devi, the Supreme Court held that where an allottee defaults and the tenement passes to third parties, consumer fora cannot issue directions compelling handover after a long lapse of time; the only equitable relief is refund with reasonable interest. Here, GDA established that House No. B-291 was re-allotted to Smt. Maya Singh, a conveyance deed executed, possession parted with, and the property subsequently passed to Bahoti Jaiswal. Neither subsequent purchaser was impleaded. Directing specific delivery under summary consumer jurisdiction without impleading subsequent purchasers in whose favour registered titles stand is legally and practically impermissible.
On forfeiture, the Commission held the District Forum's 25% deduction completely unsustainable in law and contrary to settled jurisprudence. The legal position is that in the absence of evidence of actual loss, forfeiture exceeding 10% of the sale price cannot be regarded as reasonable. This principle was authoritatively reaffirmed by the Supreme Court in Godrej Projects Development Limited v. Anil Karlekar & Ors., Civil Appeal No. 3334 of 2023, decided 03.02.2025 (2025 INSC 143), where a contractual stipulation permitting 20% forfeiture was examined and the consistent view limiting forfeiture to 10% of Basic Sale Price (BSP) was upheld.
Applying this binding mandate: BSP = Rs.2,33,178/-; 10% forfeiture = Rs.23,318/-. Total deposit = Rs.2,35,151/-. Refundable principal = Rs.2,11,833/-. The respondent is entitled to this sum with simple interest @ 9% per annum from the date of filing the complaint (13.04.2010).
Regarding the alleged refund cheque of Rs.93,492/-, GDA failed to produce any bank debit certificate or statement establishing encashment. If GDA proves actual receipt and encashment through official bank records, the amount shall be adjusted; otherwise, no deduction is permitted.
The Commission also noted GDA's non-compliance with its interim order dated 18.07.2025 directing payment of Rs.20,000/- within six weeks, and directed compliance within four weeks.
The Verdict
The Revision Petition was partly allowed. The State Commission's order dated 10.12.2024 was set aside. The District Forum's order dated 12.11.2014 was modified with the following operative directions: (i) GDA to refund Rs.2,11,833/- (total deposit Rs.2,35,151/- less 10% BSP forfeiture Rs.23,318/-) with simple interest @ 9% per annum from 13.04.2010 until actual payment; (ii) Any amount proven through official bank records to have been encashed under Cheque No.11952926 shall be adjusted; (iii) GDA to pay Rs.20,000/- towards travel and incidental expenses within four weeks, independent of the refund; (iv) Entire outstanding payment to be disbursed within eight weeks, failing which unpaid sum attracts enhanced simple interest @ 12% per annum from expiry of eight-week period; (v) Residual balance of Rs.6,984.42 deposited before District Forum to be refunded with accrued interest. No order as to costs.
What This Means For Similar Cases
Forfeiture Capped At 10% Of Basic Sale Price
The judgment reinforces the Supreme Court's binding precedent in Godrej Projects that forfeiture in residential allotment disputes cannot exceed 10% of the Basic Sale Price absent proof of actual loss. Practitioners must:
- Challenge any forfeiture clause exceeding 10% BSP as unreasonable and unenforceable
- Demand refund calculations based on 10% cap regardless of contractual stipulations
- Note that the 10% limit applies to the Basic Sale Price, not the total amount deposited
Specific Performance Impossible Where Third-Party Rights Have Vested
Consumer fora cannot direct specific performance of immovable property that has been re-allotted and conveyed to third parties not before the forum. Key takeaways:
- Implead subsequent purchasers at the earliest stage if specific performance is sought
- Where property has passed to bona fide third parties, the only equitable remedy is refund with interest
- The summary jurisdiction of consumer fora does not extend to adjudicating title disputes involving non-parties
Proof Of Refund Encashment Mandatory For Adjustment
Authorities cannot claim adjustment of alleged refund amounts without producing bank debit certificates or statements proving actual encashment by the allottee. Mere dispatch of a cheque by registered post is insufficient. Practitioners should:
- Demand bank records as a condition precedent to any set-off
- Argue that the burden of proving payment lies with the authority asserting it
Enhanced Interest As Compliance Enforcement Tool
The Commission's imposition of 12% enhanced interest for non-payment within eight weeks signals a stricter approach to enforcement of consumer forum orders. This provides a powerful lever for complainants to ensure timely compliance.
