Gurgaon-based realty firm halts ₹30K monthly payments to customer over sandalwood deal: court slaps ₹55.8 lakh penalty

The Hyderabad consumer commission has directed a real estate company to pay ₹55.8 lakh to a customer after finding that it failed to follow the terms of a lease agreement for a white sandalwood plantation investment, according to a Times of India report. The commission also ordered the company to pay ₹25,000 as compensation for mental agony and ₹5,000 towards legal costs.

According to the report, Suresh Kumar Chinta invested ₹17.5 lakh with a Gurgaon-based real estate firm, Square and Yards Infra Pvt. Ltd, in 2023. Under the deal, the firm offered Chinta agricultural land for growing white sandalwood trees, while the company would pay him ₹30,000 per month from April to September 2023. The value of the investment was also expected to increase after 12 years as the trees grew and were sold.

The land was registered in his name on 31 March 2023, and a memorandum of understanding was signed with the real estate firm, TOI reported. A lease deed for planting and maintaining the sandalwood trees was also signed.

The company stopped making payments to Chinta in October 2023, despite his several meetings and reminders to the firm. He even met Byra Chandra Sekhar, the company's director, on several occasions, but each time he was assured that the money would be paid. However, the payments never came.

Chinta then approached the Consumer Commission seeking his money.

The commission noted that the company and the other parties did not appear before it despite being served notices. The case against them was therefore heard ex parte, meaning the commission proceeded without their participation.

The bench, comprising President Vakkanti Narasimha Rao and members PVTR Jawahar Babu and Suma Vala, found that the lease agreement between Chinta and Square and Yards Infra was still valid, TOI reported.

The commission also noted that Chinta had become the legal owner of the agricultural land and that a separate agreement had been signed for planting and maintaining white sandalwood trees.

It held that the company was still bound by the terms of the lease agreement, including its obligation to make the agreed monthly payments.

Commission calls company’s actions unfair

The commission said the company’s failure to follow the lease terms amounted to deficiency in service and an unfair trade practice.

The bench said the lease deed clearly required the company to comply with its terms and conditions until it was legally cancelled or became invalid.

It also criticised the company’s failure to make the payments promised under the agreement, calling it gross negligence and a serious deficiency in service.

Company ordered to pay ₹60,000 every month

The commission directed Square and Yards Infra to pay Chinta ₹60,000 per month from 10 October 2023 to 10 June 2031, as provided under the lease agreement.

This works out to 93 monthly payments, or ₹55.8 lakh in total.

In addition, the company has been ordered to pay:

• ₹25,000 for mental agony and physical trauma
• ₹5,000 towards litigation costs
• 9% annual interest on each delayed monthly payment, calculated from its respective due date until the amount is paid.