Whenever you book a flat or a plot, one of the first things you are told is that if you cancel the booking, you will lose a certain percentage of the money deposited by you.

Now, that condition may hold good if you just changed your mind and cancelled the contract. Of course, even here, the amount to be deducted as penalty has to be reasonable and the conditions pertaining to cancellation, fair. Or else, it can well be challenged, but that is an issue I will not go into now.

On the other hand, there could be situations where the builder does not fulfil his part of the contract (or keep to the promises made). For example, he may not hand over the flat within the stipulated time. Or, the quality or even the location of the flat may not be what was promised. In such situations, suppose the consumer decides to cancel the contract and asks for a refund, the builder cannot point to the terms of the contract and say that he is not bound to pay back the entire amount.

In a recent order, the highest consumer court in the country has drawn this clear distinction and held that a builder cannot refuse to pay interest on the refund, if such a refund is being sought on account of the deficient service rendered by the builder or on account of an unfair trade practice perpetrated by him. And this principle is applicable not only to real estate developers in the private and public sectors, but also to co-operative housing societies.

In this case, the South Western Railway House Building Co-operative Society refunded the entire sum to the complainant, but refused to pay any interest on the ground that there was no such agreement with the members of the society. Besides, the society worked on a “no profit, no loss” basis and there was no provision for payment of interest on advance deposits made by members.

The National Consumer Disputes Redress Commission rejected these contentions and upheld the verdict of the lower consumer courts awarding an interest of 10 per cent on the amount. While doing so, it pointed out that the demand for a refund arose out of the deficiency in the service provided by the society in that it had failed to develop the land, carve out the layouts and allot the plots as promised (The Secretary, South-western Railway House Building Cooperative society vs K.Velayudhan, RP No 454 of 2011, decided on 24-2-2011).