Can the promoter terminate the agreement for sale in the event of a default by the allottee?

U/S. 11 of the RERA Act, 2016 states the functions and duties of the promoter-

?(5) The promoter may cancel the allotment only in terms of the agreement for sale:

?Provided that the allottee may approach the Authority for relief if he is aggrieved by such cancellation and such cancellation is not in accordance with the terms of the agreement for sale, unilateral and without any sufficient cause.

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U/S. 19 of the RERA Act, 2016 states the rights and duties of allottees -

(6) Every allottee who has entered into an agreement for sale to take an apartment, plot or building, as the case may be, under section 13, shall be responsible to make necessary payments in the manner and within the time as specified in the said agreement for sale and shall pay at the proper time and place, the share of the registration charges, municipal taxes, water and electricity charges, maintenance charges, ground rent, and other charges, if any.

(7) The allottee shall be liable to pay interest, at such rate as may be prescribed, for any delay in payment towards any amount or charges to be paid under sub-section (6).

(8) The obligations of the allottee under sub-section (6) and the liability towards interest under sub-section (7) may be reduced when mutually agreed to between the promoter and such allottee

Interpretation

In the event that the Allottee defaults on the payment due date of any amount owed to the Promoter under this Agreement, including taxes and other expenses, or commits three defaults in payment of installments, the Promoter may choose to terminate this Agreement.

o?? The Promoter must provide written notice of fifteen days to the Allottee via Registered Post AD and email,

o?? specifying the breach of terms and conditions.

The Promoter is entitled to terminate the Agreement if the Allottee does not rectify the breach within the notice period. Upon termination, the Promoter must refund any paid installments to the Allottee within thirty days, subject to adjustments for liquidated damages or other amounts owed.

The Supreme Court in the cases of Maula Bux Vs. Union of India (1973) 1 SCR 928 and Sirdar K.B Ram Chandra Raj Urs Vs. Sarah C. Urs, (2015) 4 SCC 136, and followed by the National Consumer Dispute Redressal Commission, New Delhi in consumer case no. 2766/2017 titled as Jayant Singhal and Anr. Vs. M/s M3M India Ltd.

Decided on 26.07.2022, took the view that forfeiture of the amount in case of breach of contract must be reasonable, and if forfeiture is in nature of penalty, then provisions of Section 74 of Contract Act, 1872 are attracted, and the party so forfeiting must prove actual damages. After cancellation of the allotment, the flat remains with the builder. As such, there is hardly any actual damage. So, it was held that 10% of the basic sale price is a reasonable amount to be forfeited in the name of earnest money. Keeping in view the principles laid down by the Hon'ble Apex court in the above-mentioned two cases, rules with regard to forfeiture of earnest money were framed and known as Haryana Real Estate Regulatory Authority Gurugram (Forfeiture of earnest money by the builder) Regulations, 2018, which provides as under-

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5. AMOUNT OF EARNEST MONEY

Scenario prior to the Real Estate (Regulations and Development) Act, 2016 was different. Frauds were carried out without any fear as there was no law for the same but now, in view of the above facts and taking into consideration the judgements of Hon'ble National Consumer Disputes Redressal Commission and the Hon'ble Supreme Court of India, the authority is of the view that the forfeiture amount of the earnest money shall not exceed more than 10% of the consideration amount of the real estate i.e. apartment /plot /building as the case may be in all cases where the cancellation of the flat/unit/plot is made by the builder in a unilateral manner or the buyer intends to withdraw from the project and any agreement containing any clause contrary to the aforesaid regulations shall be void and not binding on the?buyer.?

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To Summarize and conclude:

RERA Act Provisions: The document outlines the functions and duties of the promoter under Section 11 of the RERA Act, 2016, which allows cancellation of allotment only as per the agreement for sale. It also details the rights and duties of allottees under Section 19.

·???????? Default and Termination: If an allottee defaults on payments or commits three defaults in installment payments, the promoter may terminate the agreement after giving a 15-day written notice.

·???????? Refund and Forfeiture: Upon termination, the promoter must refund any paid installments within 30 days, subject to adjustments. However, the forfeiture of earnest money must be reasonable, not exceeding 10% of the consideration amount.