Court Holds Brochure Clause Providing for 20% Deduction Without Interest to Be Unfair

In Lucknow Development Authority Thru. Its Authorized Signatory Mr. Rohit Singh v. Shivaji Singh,¹ decided on October 6, 2026, the Allahabad High Court examined whether the Lucknow Development Authority (LDA) could rely on Clause 8.2 of its housing scheme brochure to deduct 20% of the booking amount and refund the balance without interest. The dispute arose from the substantial delay in completing a residential project and the Authority’s retention of the allottee’s money. The Court considered whether the clause could be enforced in the circumstances of the case and whether the Uttar Pradesh Real Estate Appellate Tribunal had committed an error of law in directing a refund with interest.

The dispute began when Shivaji Singh deposited ₹1,85,000 on January 31, 2012, for a flat in Sopan Enclave, Priyadarshini Yojana, Sitapur Road, Lucknow. LDA allotted Flat No. C-401 to him through an allotment letter dated July 11, 2014. The scheme was estimated to be completed within 24 months. However, the completion certificate was issued only on February 17, 2020, considerably beyond the estimated period. Before the certificate was issued, LDA had sent Mr. Singh a letter dated August 4, 2019, asking him to pay the outstanding dues and take possession of the flat, but he did not respond. Meanwhile, owing to the prolonged delay in providing the allotted flat, Singh’s wife purchased another LDA flat, No. AL/301, in Alaknanda Apartment, Gomti Nagar Extension, from an existing allottee through a registered sale deed dated September 6, 2014. The flat was part of an LDA housing scheme. The matter also involved a Panchsheel plot allotted to Mr.Singh, Plot No. PS-4/805/A-1.

Mr.Singh subsequently approached the Uttar Pradesh Real Estate Regulatory Authority (UP RERA), seeking a refund of ₹1,85,000. The Regulatory Authority dismissed his claim on February 24, 2020. He challenged that decision before the Uttar Pradesh Real Estate Appellate Tribunal. On August 12, 2026, the Tribunal allowed the appeal and directed LDA to refund the booking amount after deducting 20%, together with interest at the rate of the Marginal Cost of Funds based Lending Rate (MCLR) plus 1% until payment. The refund was directed to be made within 45 days of the order being uploaded. Aggrieved by this decision, LDA approached the High Court, contending that Clause 8.2 of its brochure expressly permitted a 20% deduction and excluded interest on the refundable balance.

Clause 8.2 provided that, after allotment, where an allottee sought withdrawal of the deposited amount, 20% of the registration amount would be deducted and the remaining amount refunded without interest. LDA sought to rely on this clause to justify its position. The central question before the High Court was whether the Authority could invoke the contractual provision to avoid paying interest despite the delay in completing the project and its continued retention of the allottee’s money.

Justice Saurabh Lavania held that Clause 8.2 was ex facie one-sided, unfair and unreasonable and was not consistent with the basic principles of contract law. The Court clarified that LDA was not entitled to claim the benefit of the clause in the present circumstances. Its reasoning was not confined to the wording of the brochure. The project had taken substantially longer than the estimated 24 months, with the completion certificate issued more than eight years after the booking amount was deposited. Further, LDA had retained and utilised 80% of the booking amount without cancelling the allotment. The Court observed that the money ought to have been returned after cancellation if the allottee had defaulted in paying installments or another legally available ground for cancellation existed. However, no such cancellation had taken place. The Tribunal also found that LDA had neither cancelled the Panchsheel plot allotment nor invoked Clause 8.2 in relation to the Sopan Enclave allotment.

The Court also relied on the principles laid down in Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan,² concerning unfair contractual terms imposed by a party with greater bargaining power. It referred to Parsvnath Developers Ltd. v. Mohit Khirbat,³ for the principles governing compensation for delay in handing over possession and the assessment of loss suffered by allottees. Further, the Court referred to Poornima Advani v. State (NCT of Delhi)⁴ in its discussion of unjust enrichment and the principle that a party should not retain benefits to which it is not entitled in law, equity and good conscience.

Accordingly, the High Court found no error of law in the Tribunal’s order and held that no substantial question of law arose warranting interference. It dismissed LDA’s appeal, thereby upholding the direction to refund 80% of the booking amount with interest at MCLR plus 1% until payment. The judgment reinforces that a housing authority cannot rely on a one-sided brochure clause to retain an allottee’s money without interest when the surrounding circumstances make such retention unfair and unreasonable. It also highlights the importance of timely project completion and equitable treatment of allottees in housing schemes. However, the judgment does not expressly explain why the 20% deduction remained applicable even after Clause 8.2 was held to be unfair and unreasonable. The Court dismissed LDA’s appeal, leaving the Tribunal’s refund order intact. The judgment concludes with the phrase “Cost made easy,” which appears to indicate that no specific order as to costs was imposed on either party.

Citations

1. Lucknow Development Authority v. Shivaji Singh RERA APPEAL No. – 118 of 2026 ↩︎
2. Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan (2019) 5 SCC 725 ↩︎
3. Parsvnath Developers Ltd. v. Mohit Khirbat (2026) 5 SCC 535 ↩︎
4. Poornima Advani v. State (NCT of Delhi) (2025) 7 SCC 269 ↩︎

Expositor(s): Adv. Gaurangi Tandon