Order Complaint No. 1184 of 2023

BEFORE TELANGANA REAL ESTATE REGULATORY AUTHORITY
[Under the Real Estate (Regulation and Development) Act, 2016]
COMPLAINT NO.1184 OF 2023
15th October, 2024
Corum:

Dr. N. Satyanarayana, IAS (Retd.), Hon’ble Chairperson
Sri Laxmi Narayana Jannu, Hon’ble Member
Sri K. Srinivasa Rao, Hon’ble Member

Sri Bhavani Velivala

…Complainant

Versus
M/s Pagadala Constructions

…Respondent

The present matter filed by the Complainant herein came up for final
hearing on 05.06.2024 before this Authority in the presence of Complainant
present in person and Respondent learned counsel Jasmin Kaur and upon
hearing the arguments of the party, this Authority passes the following
ORDER:
2.

The present Complaint has been filed under Section 31 of the Real

Estate (Regulation and Development) Act, 2016 (hereinafter referred to as the
“RE(R&D) Act” read with Rule 34(1) of the Telangana Real Estate (Regulation
and Development) Rules, 2017 (hereinafter referred to as the “Rules”) seeking
directions from this Authority to take action against the Respondent.
A. Brief Facts on behalf of the complainant:
3.

The complainant purchased a unit in the Pagadala’s Anya project of

M/s Pagadala Constructions in Bowrampet location.
4.

For the unit, the complainant paid Rs. 12 lakhs and later cancelled the

purchase due to personal reasons. Upon requesting the Respondents to
refund the amount, they asked the complainant to wait until the unit was
resold.

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5.

Subsequently,

the

Respondents

sold

the

unit

and

made

the

complainant wait for 3 months before returning 5 lakhs. They stated that the
remaining 3 lakhs would be transferred later. Upon questioning them about
the outstanding amount of Rs. 4 lakhs, they claimed they were deducting it
due to the cancellation.
6.

Further that there was no sale agreement signed or memorandum of

understanding (MOU). Only two receipts of payment were provided to the
complainant. It has been 5 months and no clear response has been given by
the Respondents.
B. Relief sought:
7.

To direct the Respondents to refund the paid amount to the Respondent

for the concerned unit.
C. Respondent Reply:
8.

The Respondent argues that the complaint is not maintainable as the

Complainant suppressed material facts and the application lacks cause of
action against the Respondent. They allege that the complaint is misconceived
and based on false facts.
9.

That the Respondent is a reputable construction company having its

registered office at H.No. 8-10, Fortune Chambers, 5th floor, Image Gardens
lane, Madhapur Hi-Tech city, Hyderabad, Telangana- 500081.
10.

That Smt. Bhavani Velivala W/o Ramu (Complainant) had shown

interest in purchasing a residential flat i.e., Flat No.105 a 2BHK size of 1100
SFT in Block D in a residential project namely 'PAGDALA SANYA' Located at
Survey No.441, Plot No. Of Site: B- 181, B-182, B-183 and B-184, at Dundigal
Bowrampet, Gandimaisamma, Medchal- Malkajgiri, Hyderabad, Telangana500043 ('Flat') for a total sale consideration of 61,20,000 (Sixty-One Lakh
Twenty Thousand Rupees) and the token amount for the same is 6,12,000
(Six Lakh Twelve Thousand). This Project has been registered vide project
registration number: P02200004027.

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11.

It is submitted that after the issuance of the Confirmation Letter dated

11.04.23, the Complainant defaulted to make payments as per the payment
timelines agreed between the parties. After repeated follow-ups by the
Respondent, the Complainant has assured the Respondent that he will make
payment to the Respondent by securing a Home Loan. Relying on the
Complainant's assurances and request, the Respondent had granted them
time. However, the Complainant failed to secure a loan for the same. It is
pertinent to mention the Complainant has suppressed this material fact that
he failed to secure the home loan amount.
12.

It is pertinent to mention that the Complainant had requested the

Respondent via a written letter dated 19.04.23 (Annexure VII) that they will
make payment of Rs 30, 00,000 (Rupees Thirty Lakhs) by 30.04.23 and the
balance amount on or before 20.05.2023 to which the Respondent agreed via
sending the Updated Payment Schedule, and the same was shared with the
Complainant. However, the Complainant failed to honour his commitment
and again defaulted in making any payment to the Respondent even after
agreeing to the new payment schedule as requested by the Complainant itself.
13.

It is pertinent to mention that despite granting multiple opportunities to

clear the pending due amount, the Complainant kept promising to make
payment and requested to grant more time for payment. However, the
Complainant failed to make any payments.
14.

It is pertinent to mention that despite several follow-ups and sending

Project Status updates & Payment Demand Notices sent to the Complainant,
the Complainant defaulted in making payment which caused significant
financial loss to the Respondent. Furthermore, it is pertinent to mention that
the Complainant has suppressed this material fact of his default of nonpayment of all milestone payments and his failure to secure the loan for the
said Flat.
15.

. It is submitted that the Complainant defaulted around 167 days upon

the booking of the Flat and the expenditure incurred for the resale of the Flat
costing around Rs.3,88,459 (Rupees three lakh, eighty-eight thousand and

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four hundred and fifty-nine only) (Annexure X). This calculation has arrived
as per Section 10 & 13 of the Confirmation Letter of Sale which reads as
follows;
Section 10: "Timely payment of instalments as per the work progress is
mandatory. In case of delay in making payments for the first 30 days, an
interest of 1.5% per month will be levied on the due amounts, and beyond
30 days will attract an interest of 2.0% per month. Company reserves the
right to cancel the booking in case of delay of such payments exceeds 3
months and resell/allot the flat 2 and alternate buyer without any further
notice to the Customer.
Section 13: "In case of any cancellation request made by the customer for
whatever reason after confirmation of the booking and substantial
construction progress is made in the project, the company is entitled to
forfeit certain amount paid by the Customer to cover the additional
expenditure required to resell the flat. The Company shall refund the
balance amount only after the said flat is resold and the amount from the
re-sale is realized by the Company."
16.

Further, to our shock and surprise the Complainant has sent us an

email for cancellation of the booking after making repeated promises &
assurance to clear the pending dues. It is pertinent to mention that on July
18, 2023, the Complainant abruptly notified the Respondent to cancel the
booking of the Flat without providing any stated reason.
17.

It is pertinent to mention that as per the Confirmation Letter dated

11.04.23 as per Section 12, in case of cancellation, an amount of Rs. 5,00,000
(5 lakhs) or 10% of the total sale consideration, whichever is less will be
forfeited from the buyer towards cancellation charges.
18.

As per Section 13, Such cancellation is subjected to the additional

expenditure required to resale the premises, (more particularly described in
Confirmation Letter of sale .
The cancellation charges as per the terms are detailed fully in this table
below:
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sn
1.

Description

amount

Cancellation charge ( Rs.5,00,000/-) or 10% 5,00,000/of total sale consideration)

2.

Financial loss due to delay in payments and Rs. 3,88,459/additional expenditure

3.

Total cancellation charges + expenditure

(5,00,000 + 3,88,459)

4.

Total sale consideration

Rs. 8,88,459/-

19.

It is pertinent to mention that despite the loss borne by the Respondent,

upon confirmation of the cancellation request made by the Complainant, the
Respondent promptly acknowledged the notification and proceeded to issue a
refund amounting to Rs. 5,00,000 (Rupees five lakh) on 28.07.23 (Annexure
XII pg. 1-3). The Respondent had initiated and made a refund to the
Complainant of Rupees 5, 00,000 (Rupees five lakhs) and the remaining
balance has been adjusted towards cancellation charges as per the terms.
20.

In light of the foregoing submissions, we humbly request the Hon'ble

authority to dismiss the complaint on the grounds of suppression of material
facts and the Complainant's default in making payment and for not securing
the loan for the same despite the grant of the grace period and even after
issuing demand notice. Therefore, it is humbly submitted that this Hon'ble
Authority to pass orders in favour of the Respondent and against the
Complainant and pass any such order that the court deems fit in the interest
of justice and equality.
E. Rejoinder:
21.

Despite the Complainants having made approximately 20% of the total

sale value of the property (Rs. 12.10 Lakhs out of Rs. 61,20,00,000) within a
month, why did the Respondent fail to execute the Agreement of Sale, despite
multiple requests? How were the Complainants expected to pay the remaining
amount
22.

without

knowing

the

contents

of

the

Agreement

of

Sale?

In point 7 of the confirmation letter referenced in the Respondent's

counter, it is stated that the "Sale Agreement would be executed only after
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payment of 30% of the total flat cost or the bank loan margin money,
whichever is higher." On what basis was this 30% condition introduced? The
RERA rules clearly stipulate that the Agreement of Sale should be executed
after
23.

payment

of

10%

of

the

total

property

cost.

In point 3 of brief facts in the Respondent's counter, it is claimed that a

Confirmation Letter was sent via email, containing rules framed unilaterally
by the Respondent without the Complainants' signatures. Why did the
Respondent not obtain the Complainants' signatures on the Confirmation
Letter if the rules required their agreement? Additionally, the Complainants
were unaware of when this Confirmation Letter was sent, as it was merely
attached
24.

to

an

email.

The Respondent, in points 3-8 of brief facts, asserts that the

Complainants provided a payment confirmation letter after the Respondent's
accountant, Sudhakar, promised to execute the Agreement of Sale. However,
after receiving the payment confirmation, the Respondent demanded payment
of Rs. 47, 00,000, corresponding to the completion of six slabs, as a
precondition for executing the Agreement of Sale. Upon realizing the
Respondent's dubious conduct, the Complainants decided not to proceed
without the Agreement of Sale and canceled the booking on 30th April 2022,
with the Respondent agreeing to refund the amount after resale of the flat.
Why did the Respondent request a cancellation email from the Complainants
on 18th July 2023, disregarding the earlier communication on 30th April
2022 and misrepresenting the delay period as 167 days instead of 70 days?
25.

In point 9 of brief facts, the Respondent refers to the Confirmation

Letter as a basis for withholding 10% of the total property value or Rs.
5,00,000, whichever is lesser. How can the Respondent rely on a Confirmation
Letter that lacks the Complainants' signatures? Furthermore, is this
Confirmation Letter aligned with RERA documents, or was it arbitrarily
framedbythe
26.

Respondent?

In point 10 of brief facts, the Respondent mentions deductions of Rs.

8,88,459.00 (Rs. 5,00,000 + Rs. 3,88,459) as cancellation charges. Are these
deductions in accordance with RERA norms, or were they independently
determined by the Respondent? Detailed explanations of these deductions are
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required.
27.

In point 10 of the confirmation letter, the Respondent has imposed

timelines and interest rates (1.5% within 30 days and 2% thereafter) on the
Complainants. On what grounds were these timelines and interest rates
established? Moreover, why did the Respondent fail to mention similar
timelines and interest rates for delays in handing over the property? Are these
conditions supported by any RERA provisions? If so, please provide the
relevantdetails.
28.

In point 14 of the confirmation letter, the Respondent includes the cost

of amenities in the total property value in the event of cancellation and resale.
Does this not suggest intent to deduct a higher amount from the first
customer? Is this practice addressed under RERA provisions? If it is legitimate
to include amenities in the total cost, kindly provide a copy of the relevant
section.
29.

In point 22 of the confirmation letter, the Respondent mentions that the

property PAGADALA ANYA (P02200004027 - RERA number) is residential
(supporting document attached - Doc 1). How can a customer be compelled to
agree to the commercial use of another customer's residential property?
30.

According to the Respondent’s approved plan, the ground floor is

designated for double-bed flats, but these have been sold for commercial use,
as confirmed by the pagadala constructions marketing team (chat attached Doc 2). This constitutes a violation of the sanctioned plan and misleads
customers. RERA is requested to take action against the Respondent for these
violations

and

notify

all

customers

of

the

pagadala

anya

project

(P02200004027 - RERA number) that commercial activities are prohibited in
the said property, and there is no obligation to comply with point 22 of the
confirmation
30.

letter

issued

by

the

Respondent.

In point 23 of the confirmation letter, the Respondent states that

customers can use certain properties for commercial purposes but are
prohibited from displaying signboards or advertising materials. How can the
Respondent impose commercial rates on customers while restricting their
ability to display signage? This appears to be an arbitrary rule devised by the
Respondent.
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31.

In point 9 of the "Declaration in FORM B" (attached Doc 3), it is stated

that the promoter shall not discriminate against any allottee. However, the
Respondent has created a separate set of rules through the confirmation
letter, as evidenced by the points mentioned above. This practice is in clear
violation of the principles laid out in RERA.
F. Points framed for consideration:

32.

Now, the points that arise for consideration, based on the pleadings

submitted by both parties, are as follows:
1. Whether the complainant is entitled for the relief sought?
2. Whether the Respondent has violated Section 13 of the Real Estate
(Regulation and Development) Act, 2016 (RE(R&D) Act)?
32.

Point 1: The Complainant submitted that he booked Flat No. 105 in the

“Anya” project developed by the Respondent and paid a total sum of
₹12,10,000/- towards the purchase of the unit. These payments include an
initial booking advance of ₹50,000/- on 09.02.2023, ₹5,60,000/- via cheque
no. 129815 on 23.02.2023, and ₹6,00,000/- via cheque no. 129817 on
03.04.2023. The Respondent issued a confirmation letter dated 11.04.2023
confirming the booking.
33.

Due to unforeseen personal reasons, the Complainant sought to

withdraw from the project and requested the cancellation of the booking on
18.07.2023, seeking a full refund of the amount paid. In response, the
Respondent refunded ₹5,00,000/- on 28.07.2023 but withheld the remaining
balance.
34.

The Respondent contends that the deduction of the remaining amount

was made due to the Complainant’s default, which occurred 167 days after
the booking. The Respondent also claims that they incurred expenses
amounting to ₹3,88,459/- for the resale of the flat. The Respondent relied on
clauses 10 and 13 of the confirmation letter, which purportedly permit the
deduction of interest at 1.5% per month for the first 30 days and 2.0% per

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month thereafter for delayed payments, as well as the forfeiture of certain
amounts upon cancellation.
35.

It is admitted that no formal agreement for the purchase of the flat was

entered into between the Complainant and the Respondent. The only
document provided to the Complainant was the confirmation letter, which
was issued after 20% of the total amount was paid, and the letter was signed
solely by the Respondent.
36.

A reading of the terms and conditions in the confirmation letter reveals

that, in the event of cancellation by the customer after confirmation of
booking and significant progress in construction, the Respondent is entitled to
forfeit a portion of the paid amount to cover expenses incurred for the resale
of the flat. Furthermore, it is stated that the remaining balance shall only be
refunded after the flat is resold and the resale proceeds are realized.
37.

The Respondent, in its defense, stated that 10% of the total sale

consideration was forfeited as cancellation charges and that the remaining
balance was withheld to offset the alleged losses due to delayed payments and
resale expenses, amounting to ₹8,88,459/- in total, as per the terms of the
confirmation letter.
38.

The Authority observes that Section 13 of the Real Estate (Regulation

and Development) Act, 2016 (RE(R&D) Act) explicitly prohibits the promoter
from accepting any deposit or advance without first entering into an
agreement for sale. In the present case, the Respondent collected 20% of the
total sale consideration and issued only a confirmation letter, without
entering into any formal agreement, thereby violating Section 13 of the Act.
The confirmation letter, provided after receiving a substantial sum from the
Complainant, contains terms that are heavily skewed in favor of the
Respondent, constituting an unfair trade practice.
39.

Forfeiture implies the imposition of a penalty, which is only applicable

in cases where a formal agreement, containing a forfeiture clause, has been
executed between the parties. Since no such agreement was executed in this

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case, the Respondent’s attempt to forfeit the booking amount is baseless and
unjustifiable under the law.
40.

Furthermore, the Respondent's claim that the deduction of more than

the booking amount was made to cover losses due to cancellation is
unsubstantiated, as the Respondent has failed to provide any evidence of
actual loss. The email correspondence dated 28.07.2023 between the parties
also indicates that the flat had not been resold at that time. The Respondent
initially refunded ₹5,00,000/-, with a suggestion that the balance would be
refunded after the resale of the flat. However, the Respondent later claimed
deductions amounting to ₹7,10,000/-, which is found to be unreasonable by
the Authority.
41.

The Authority finds that the Respondent's act of collecting 20% of the

sale consideration without entering into a sale agreement, followed by issuing
a mere confirmation letter with one-sided terms favoring the Respondent,
amounts to a violation of the RE(R&D) Act. The forfeiture of any amount
based on these confirmation letter terms and not agreement of sale is unjust
and without merit. The inclusion of such one-sided and arbitrary clauses in
the confirmation letter, which contradict the model agreement of sale as
prescribed under the TG RERA Rules, is unacceptable. The RE(R&D) Act is
welfare legislation designed to protect homebuyers, and it mandates that
promoters should not incorporate terms that undermine the interests of
buyers.
42.

In light of the above, the Authority finds no legal basis for the

Respondent’s actions in forfeiting the booking amount and making further
deductions for alleged expenses. Therefore, the Complainant is entitled to a
full refund of the entire amount paid. Accordingly, the Respondent is directed
to refund the full amount of ₹12,10,000/- to the Complainant without any
further delay. It is noted that the Complainant has already received a partial
refund following the initiation of the cancellation. The Respondent is,
therefore, directed to immediately refund the remaining balance to the
Complainant.

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43.

The point is answered in favor of the Complainant.

44.

Point 2: Upon examination of the records, it is evident that the

Respondent collected more than 10% of the total sale consideration without
executing a formal agreement for sale, constituting a violation of Section 13 of
the RE(R&D) Act. This provision explicitly prohibits promoters from accepting
a sum exceeding 10% of the cost of the apartment as an advance or
application fee without a written agreement for sale. The Respondent’s actions
in demanding and collecting more than the permissible amount without
adhering to the statutory requirements are in clear violation of the law.
46.

This point is answered in the affirmative.

G. Directions of the Authority:

47.

In light of the findings of the Authority as recorded above, the following

directions under section 37 of the RE(R&D) Act to ensure compliance with
obligations imposed upon the under the RE(R&D) Act are issued:
1. The Respondent is directed to refund the remaining amount of
₹7,10,000/-

(Rupees

Seven

Lakhs

Ten

Thousand

only)

to

the

Complainant within 15 days from the date of this order.
2. The Respondent is further directed to ensure full compliance with the
provisions of the Real Estate (Regulation and Development) Act, 2016,
and the Telangana Real Estate (Regulation and Development) Rules,
2017, in all future dealings.
3. Additionally, the Respondent is hereby instructed to refrain from
incorporating any clauses in future agreements or communications that
contradict or violate the statutory provisions of the aforementioned Act
and Rules.
4. Parties to bear their own costs.
5. For contravening Section 13 of the RE(R&D) Act, the Authority,
exercising its powers under Section 61 of the RE(R&D) Act, imposes a
penalty of Rs. 2,69,874/-( Two Lakhs Sixty-Nine Thousand Eight
Hundred and Seventy-Four Rupees Only.). This penalty is imposed for
collecting a sum of more than 10% of the cost of the concerned
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apartment without entering into a written agreement for sale. The
amount is payable in favor of TGRERA FUND through a Demand Draft
or online payment to A/c No. 50100595798191, HDFC Bank, IFSC
Code: HDFC0007036, within 30 days of receipt of this Order by the
Respondents/Promoter.
6. The parties are hereby informed that failure to comply with this Order
shall attract Section 63 of the Act.
7. If aggrieved by this Order, the parties may approach the TG Real Estate
Appellate Tribunal as per Section 44 of the Act, 2016.

Sd/-

Sri. K. Srinivas Rao,
Hon’ble Member
TG RERA

Sd/-

Sri. Laxmi NaryanaJannu,
Hon’ble Member
TG RERA

Sd/-

Dr. N. Satyanarayana, IAS (Retd.),
Hon’ble Chairperson
TG RERA

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