The court mandates refund with interest, ruling that coercive acceptance of a settlement does not nullify original claims.
In a significant ruling, the Delhi High Court has deemed the forfeiture of earnest money by M/s R. C. Sood & Co. Developers Pvt. Ltd. (Eros Group) as illegal and ordered a refund with interest to the plaintiff, Shri Sharad Maheshwari. The judgment, delivered by Justice Neena Bansal Krishna, underscores the illegitimacy of the developer's actions in cancelling a villa allotment without valid grounds and retaining the earnest money unjustifiably.
The case, which revolved around a breached agreement to sell for a villa in the "Rosewood City" project, highlights the developer's failure to prove any actual financial loss due to the supposed breach by the plaintiff. The court found that the forfeiture of Rs. 18 lakhs was impermissible under Section 74 of the Indian Contract Act, 1872, which requires proof of loss for retention of money.
Justice Krishna's ruling also addressed the coercive tactics employed by the developer, noting that the acceptance of a reduced settlement amount of Rs. 44 lakhs under duress did not extinguish the plaintiff's original claims. The court emphasized that the developer's dominant position and unfair bargaining practices vitiated the settlement agreement.
In examining the obligations under the agreement, the court determined that payment obligations were construction-linked, contrary to the developer's demands for time-linked instalments. The absence of valid demand letters further invalidated the developer's claims for instalments and justified the court's decision to deem the cancellation of the villa allotment as illegal.
The judgment reinforces the legal principle that settlement agreements must be entered into voluntarily and without coercion. The court's decision mandates the refund of the wrongfully forfeited amount along with interest, thereby upholding the plaintiff's entitlement to a fair resolution.
Bottom line:-
Real estate developer's forfeiture of earnest money and cancellation of allotment held illegal; refund ordered with interest. Acceptance of reduced settlement amount under coercion does not constitute a binding accord.
Statutory provision(s): Indian Contract Act, 1872 Section 74
