Builders and developers – What is the procedure for Recovery Advance paid to them


The idea of advance payment or deposit is part of a contract between a buyer and seller regarding property transfer. It differs from security cash, which usually signifies the buyer’s stake in the property. It is regarded as the ‘purchase money.’ The amount due is expected to be paid later, following the agreement between the parties.


Concerning the buyer’s rights under the law of property, A prospective buyer, under Section 55(6)(b) in the Transfer of Property Act, 1882, can take an injunction on this property in the case of the vendor or any other person who claims it under his in the purchase price (advance deposit) that he has paid in the course of the sale contract. Thus, if the purchaser has not violated or defaulted on any of the terms of the sale, he is entitled to the legal rights to pursue remedies to safeguard his rights against the seller, i.e., or builder/contractor to seek his funds (advance payment) back or request specific performance if this is feasible.


Furthermore, according to Section 21 under the Specific Relief Act, the victim of an unintentional breach of contract, in any manner, is entitled to the amount of any loss suffered due to the damage caused by the party at fault or has violated the agreement. This is a form of payment due to the loss or breach. Suppose the contractor or seller refuses to fulfill the contract and obligations. In that case, the buyer can also make a charge for penalties if a penalty clause is included in the contract.


The instances of fraud in payment from the perspective of developers or builders are commonplace through a variety of methods like

* Putting off the ownership of the property over a reasonable period.

* Use advance payment or a deposit for personal or new project use.

In the event of misrepresentation, the property does not comply with the promises, specifications, etc.

The law’s scope is described in the following paragraphs:


The Indian Contract Act, 1872

The primary laws governing advance deposit or earnest cash are sections 73 and 75 in the Contract Act. Following the general rules in the agreement, in case a person violates the terms of the contract in any way, the buyer has the right to terminate the contract and get an amount of money back from the advance deposit, along with the interest as well as compensation for any loss suffered. Therefore, the buyer of the property in a valid agreement is protected by this Act.

The Specific Relief Act, 1963

According to Section 20 under the Specific Relief Act, a party in default may be held accountable for performing exactly what was stipulated within the agreement. If a purchaser is mistreated by a developer/builder of a property, and the builder or developer takes advantage of unfair advantage, causing the buyer suffers extreme difficulties and is in undue hardship, the Court, in these cases, can decide on whether to grant specific the performance in relief to a buyer or defendant.

The Consumer Protection Act, 1986, and the Indian Penal Code, 1860

The courts for consumers have handed down hefty penalties in various cases and have ensured that the ownership of the property or flat will be handed over to the prospective buyer as soon as possible, or the whole amount is returned along with compensation and interest. Suppose the developer has cheated or the builder has made false claims. In that case, the buyer can file an action for a criminal violation under the Indian Penal Code, 1860, which is for fraud or breach of contract, or delivery of construction materials that are not high-quality. The buyer could also file a customer complaint concerning a service deficiency, delay in possession, or failure to deliver a flat.

The Real Estate (Regulation and Development) Act, 2016, and RERA (Real Estate Regulatory Authority)

The rights of buyers of property or homes are protected by the RERA Act concerning the protection of their rights when they make a complaint against a developer or builder. According to the RERA Act, at least 70 percent of the buyers’ money is stored in an account in escrow, ensuring that the funds collected for a specific real estate venture are not diverted to other projects undertaken by the developer or builder. Builders cannot demand more than 10 percent of the property’s worth as an advance payment before he contract for sale is executed. Additionally, claiming an amount of money back or an advance deposit is a buyer’s sole right. Suppose an architect or builder breached or cheated the contract clauses that caused any harm or inconvenience to the buyer. In that case, a buyer can get an advance payment made by him, with interest or a complete reimbursement with interest following the due date, at least 10% per month up to the time of handing over the property. The strategies you can employ as buyers to bring the legal route against the builder or seller builder are listed below.


Send an official notice.

Sending a legal notice to the builder or seller is the first action in any property dispute, whether to recover payment or for a specific performance in case a legal breach of the contractual agreement is alleged. An attorney or lawyer dealing with a dispute over property or a contract lawyer can help prepare a legal notice that describes the proper basis and the reasons. If the builder doesn’t respond or fails to respond within the time frame of sending the message, he will have to follow the next legal step.

Make an RERA complaint. RERA

The first step is determining if the builder has been registered with RERA. If it is, he may easily lodge an online complaint on the official website of RERA to file a claim against the seller to get relief and claim a refund or an advance payment.

Moving to a Consumer Forum

Buyers can also go to an individual consumer court to file complaints against the seller for breach of trust that is criminal or fraudulent. Additionally, consumer courts have imposed exemplary compensation such as 65 lakhs or 18% interest-based payment. In the case of Unitech, the Jaypee group was punished with a 12 percent per year acceptable for their NOIDA project.

Court Precedent

Videocon Properties Ltd. v. Dr. Bhalchandra Laboratories and Others [(2004) 3 SCC 711[(2004) 3 SCC 711

In this case, in this case, the Supreme Court examined the nature of the advance deposit. The Court thought that the language in the agreement was not a reliable indicator of the heart of the “earnest money,” ut the intentions of the parties and the surrounding circumstances must be taken into account to determine if an initial payment is a vital advance deposit.


If the contract includes a clause that outlines what happens by the advance deposit in the case of a breach of contract or a breach of contract, the Court is bound by the contract’s terms. Therefore, the advance deposit will be returned in the event there is a breach of the contract by the builder or seller. In addition, if the buyer invests in a project approved by RERA, the rights of the buyer are secured. RERA guarantees legal compliance and the timing of possession. Furthermore, a buyer may get an advance payment to the builder as a booking amount if his loan application is denied for any reason. The buyer must be aware that the government sets out no regulations or terms concerning the cancellation of the home or the refund of the booking amount. It’s a matter of personal knowledge of your builder or developer. Therefore, the advance payment is refundable in these circumstances. However, buyers may have the expense of a cancel charge by the developer in the agreement. If a buyer hasn’t maintained the document or recorded the purchase and the purchase, he might not be eligible to receive the reimbursement. In this instance, it is possible to seek legal advice.

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