2025 INSC 143

1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3334 OF 2023

GODREJ PROJECTS DEVELOPMENT

LIMITED …APPELLANT(S)

VERSUS

ANIL KARLEKAR & ORS . …RESPONDENT(S)

J U D G M E N T

B.R. GAVAI, J.

1. The present appeal takes exception to the final judgment

and order dated 25

th October, 2022 passed in Consumer

Complaint No. 262 of 2018, whereby the National Consumer

Disputes Redressal Commission (hereinafter, “NCDRC”)

disposed of the Consumer Complaint filed by the Respondents

No. 1 and 2 (hereinafter referred to as, “Complainants” or

“Respondents”) thereby directing the Appellant to deduct only

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10% of the Basic Sale Price (“BSP” for short) towards

cancellation of the Complainants’ Apartment and refund the

balance amount along with simple interest @ 6% per annum

from the date of each payment till the date of refund. Aggrieved

thereby, the present appeal has been filed under Section 23 of

Consumer Protection Act, 1986.

2. The facts, in brief, giving rise to the present appeal are as

given below.

2.1 On 10

th January, 2014 the Complainants had booked an

Apartment with the Appellant in the project by the name

“Godrej Summit” situated at Sector 104, Gurgaon, Haryana by

an Application Form and submitted Rs. 10,00,000/ - as

application money.

2.2 On 20

th June, 2014 by an allotment letter, the Appellant

allotted an Apartment being Apartment No. C-1501 on the 14

th

floor in Tower ‘C’ to the Complainants in the above-mentioned

project, pursuant to which an Apartment Buyer Agreement

(hereafter referred to as “the Agreement”) was entered into

between the Parties.

3

2.3 On 20

th June, 2017 the Appellant upon completion of

construction applied to and subsequently received the

Occupation Certificate from the Director, Town & Country

Planning Department, Haryana.

2.4 On 28

th June, 2017 the Appellant offered possession to

the Complainants. The Complainants, however, sought

cancellation of the allotment and further sought full refund of

the amount paid.

2.5 On 29

th September, 2017, the Complainants served a

legal notice to the Appellant for refund of the amount paid

totaling Rs. 51,12,310/-.

2.6 Thereafter, on 14

th November, 2017, the Complainants

filed a Consumer Complaint (No. 262 of 2018) before the

NCDRC inter-alia praying that Appellant be directed to refund

the sum totaling Rs. 51,12,310/- paid by the Complainants so

far, with interest @ 18% per annum, calculated from the date

of making each payment till the date of realization of the sum.

2.7 Vide impugned order dated 25

th October, 2022, the

NCDRC disposed of the Consumer Complaint by directing the

Appellant to deduct only 10% of the BSP i.e. Rs. 17,08,140/-

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only towards cancellation of the Complainants’ Apartment and

refund the balance amount Rs.34,04,170/ - (i.e. Rs.

51,12,310/- minus Rs. 17,08,140/-) along with simple interest

@ 6% per annum from the date of each payment till the date of

refund within three months.

2.8 On 5

th December, 2022, the NCDRC also dismissed the

Review Application filed by the Appellant challenging the

impugned order.

2.9 Aggrieved thereby, on 10

th January 2023 the Appellant

filed the present appeal challenging only the order dated 25

th

October, 2022.

2.10 By an order dated 24

th April, 2023, this Court while

issuing notice had granted stay of the impugned order on the

condition that the Appellant refunds the amount deposited by

the Complainants after deducting 20% (earnest money deposit)

along with interest @ 6% per annum from the date of

cancellation of the contract.

3. We have heard Shri Dhruv Mehta, learned Senior Counsel

appearing on behalf of the Appellant and Shri Ashwarya Sinha,

learned Counsel appearing on behalf of the Respondents.

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4. Shri Dhruv Mehta submits that the NCDRC has grossly

erred in interfering with the contractual terms as entered into

between the Parties. It is submitted that the Agreement

between the parties specifically provided for a forfeiture clause.

The Agreement provided that the Appellant was entitled to

forfeit the entire earnest money and any other due payable by

the buyer including interest on delayed payment.

5. He further submits that the NCDRC has specifically come

to a conclusion that the Appellant was entitled to cancel the

Apartment and forfeit the amount as per the terms and

conditions of the Application Form and/or the Agreement

between the parties. He submits that having arrived at such a

finding, the NCDRC could not have come to a conclusion that

the condition of forfeiture of 20% of BSP, being the earnest

money liable for forfeiture in case of cancellation, was

unreasonable and interfered with the same by reducing it to

10% of the BSP.

6. He further submits that, from the perusal of the email

addressed by the Respondents to the Appellant, it was clear

that though the Appellant had called upon the Respondents to

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take possession of the Apartment, they had opted out of the

deal only because there was a recession in the market. He

submits that since the Respondents themselves have cancelled

the deal on account of recession in the market, the Appellant

was fully justified in forfeiting the earnest money deposit.

7. He relies on the judgments of this Court in the cases of

Satish Batra v. Sudhir Rawal

1 and Desh Raj and others v.

Rohtash Singh

2 in support of his submissions.

8. Per contra, Shri Ashwarya Sinha, learned counsel for the

Respondents, relying on the judgments of the NCDRC in the

cases of Komal Aggarwal v. Godrej Projects Development

Ltd.

3, DLF Ltd. v. Bhagwanti Narula

4 and Ramesh

Malhotra and Another v. Emaar Mgf Land Limited and

Another

5, submits that the NCDRC has consistently held that

the condition of forfeiture of 20% of the BSP was not

reasonable and reduced it to 10% of the BSP.

1

(2013) 1 SCC 345

2

(2023) 3 SCC 714

3

Consumer Case No.2139 of 2018 dated 9.11.2022

4

2015 SCC OnLine NCDRC 1613

5

2020 SCC OnLine NCDRC 789

7

9. He further relying on the judgments of this Court in the

cases of Ireo Grace Realtech Private Limited v. Abhishek

Khanna and others

6 and Pioneer Urban Land and

Infrastructure Limited v. Govindan Raghavan

7 submits

that the condition of forfeiture of 20% of the BSP was one-sided

and unconscionable and, therefore, not enforceable in law.

10. He lastly relying on “The Real Estate (Regulation and

Development) Act, 2016” and “The Haryana Real Estate

Regulatory Authority Gurugram (Forfeiture of earnest

money by the builder) Regulations, 2018 ”, submits that in

view of the aforesaid Act and Regulations, the forfeiture of

earnest money deposit cannot be more than 10% of the BSP.

11. In the present case, it is not in dispute that the

Complainants had booked an Apartment with the Appellant for

BSP of Rs.1,70,81,400/- on 10

th January 2014. Accordingly,

an Agreement was entered into between the Appellant and the

Complainants on 20

th June 2014. The Complainants were also

allotted an Apartment on the 14

th Floor in Tower ‘C’ on 20

th

6

(2021) 3 SCC 241

7

(2019) 5 SCC 725

8

June 2014. On 20

th June 2017, the Appellant received the

Occupation Certificate. On 28

th June, 2017, the Appellant

issued an intimation to the Respondents calling upon them to

take possession. However, instead of taking possession, by

email dated 22

nd August 2017/31

st August 2017, the

Respondents refused to take possession and sought

cancellation.

12. The Appellant vide communication dated 1

st September

2017 informed the Respondents that out of the amount

deposited by the Respondents, the Respondents were entitled

to refund of Rs.4,22,845/-. However, the Respondents filed a

complaint seeking refund of an amount of Rs.51,12,310/ -

along with other ancillary reliefs. The NCDRC, as aforesaid,

passed the impugned order.

13. It will be relevant to refer to clauses 2.6 and 8.4 of the

Agreement entered into between the Parties, which read thus:

“2.6 It has been specifically agreed between

the Parties that, 20% of the Basic Sale Price,

shall be considered and treated as earnest

money under this Agreement (“Earnest

Money”), to ensure the performance,

compliance and fulfillment of the obligations

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and responsibilities of the Buyer under this

Agreement.

It has been made clear by the Developer and

the Buyer has understood that the Sale

Consideration and Statutory Charges as

mentioned in Schedule VI hereto have been

computed on the basis of Super Built Up Area

of the Apartment. The Buyer agrees that the

calculation of Super Built Up Area in respect

of the Apartment is tentative at this stage and

subject to variations till the Completion of

Construction. In case such variations are

beyond +/- 5%, then the Developer shall take

prior consent of the Buyer.

*** *** ***

8.4 On and from the date of such

termination on account of Buyer’s Event of

Default as mentioned above (“Termination

Date”), the Parties mutually agree that-

(i) The Developer shall, out of the entire

amounts paid by the Buyer to the Developer

till the Termination Date, forfeit the entire

Earnest Money and any other dues payable by

the Buyer including interest on delayed

payments as specified in this Agreement.

(ii) After the said forfeiture, the Developer

shall refund the balance amount to the Buyer

or to his banker/financial institution, as the

case may be, without any interest;

(iii) On and from the Termination Date, the

Buyer shall be left with no right, title, interest,

claim, lien, authority whatsoever either in

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respect of the Apartment or under this

Agreement and the Developer shall be

released and discharged of all its liabilities

and obligations under this Agreement.

(iv) On and from the Termination Date, the

Developer shall be entitled, without any claim

or interference of the Buyer, to convey, sell,

transfer and/or assign the Apartment in

favour of third party(ies) or otherwise deal

with it as the Developer may deem fit and

appropriate, in such a manner that this

Agreement was never executed and without

any claim of the Buyer to any sale proceeds of

such conveyance, sale, transfer and/or

assignment of the Apartment in favour of

third party(ies).”

14. It can thus be seen that as per the Agreement between

the Parties, the Complainants were required to pay earnest

money deposit of 20% of the BSP, which undisputedly has

been paid. As per clause 8.4, on termination on account of

Buyer’s Event of Default, the Developer was entitled to forfeit

the entire earnest money deposit and other dues including

interest on delayed payments as specified in the Agreement.

15. Undisputedly, only upon the Appellant calling upon the

Respondents to take possession, the Respondents informed

the Appellant vide email dated 22

nd August 2017 as under:

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“Some of the promised connections from

internal roads to externals have been

abandoned. Overall the place falls to invite

you, entice your And the most painful part is

the fact that the market prices have sharply

fallen and a similar flat to a new buyer is

available at a substantially lower price, not

only in secondary market but even by Godrej

themselves. This is unfair, and one feels

cheated that an old customer of 4 years is a

loser compared to the new one. Under the

circumstances, am pained to state that I want

to cancel my booking of the said flat and

demand that the amount paid till date be

refunded along with applicable interest. We

shall appreciate a prompt action on our

request. Kindly share the cancellation

formalities, and the refund amount.”

16. The stand taken by the Respondents was specifically

borne out by the NCDRC from the written statement filed by

the Appellant.

17. It is thus clear that the Respondents had cancelled the

deal since there was recession in the market. Not only that,

but the NCDRC has specifically observed as under:

“Hence, the action of the OPs in cancelling the

apartment and forfeiting the amount as per

terms and conditions of the application form

and/or the BBA cannot be faulted with.

However, the condition of forfeiture of 20% of

BSP, being the earnest money liable for

forfeiture in case of cancellation appears

unreasonable. It will be in the interest of

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justice and fair play to both sides, if OPs are

allowed to deduct only 10% of the BSP as

earnest money i.e. Rs.17,08,140/- and refund

the balance amount to the complainants.”

18. This Court in the case of Satish Batra v. Sudhir Rawal

(supra), after considering the earlier judgments of this Court,

has observed thus:

“15. The law is, therefore, clear that to justify the

forfeiture of advance money being part of

“earnest money” the terms of the contract should

be clear and explicit. Earnest money is paid or

given at the time when the contract is entered

into and, as a pledge for its due performance by

the depositor to be forfeited in case of non-

performance by the depositor. There can be

converse situation also that if the seller fails to

perform the contract the purchaser can also get

double the amount, if it is so stipulated. It is also

the law that part-payment of purchase price

cannot be forfeited unless it is a guarantee for

the due performance of the contract. In other

words, if the payment is made only towards part-

payment of consideration and not intended as

earnest money then the forfeiture clause will not

apply.

16. When we examine the clauses in the instant

case, it is amply clear that the clause extracted

hereinabove was included in the contract at the

moment at which the contract was entered into.

It represents the guarantee that the contract

would be fulfilled. In other words, “earnest” is

given to bind the contract, which is a part of the

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purchase price when the transaction is carried

out and it will be forfeited when the transaction

falls through by reason of the default or failure

of the purchaser. There is no other clause that

militates against the clauses extracted in the

agreement dated 29-11-2011.

17. We are, therefore, of the view that the seller

was justified in forfeiting the amount of Rs

7,00,000 as per the relevant clause, since the

earnest money was primarily a security for the

due performance of the agreement and,

consequently, the seller is entitled to forfeit the

entire deposit. The High Court has, therefore,

committed an error in reversing the judgment of

the trial court.”

19. This Court has held that to justify the forfeiture of

advance money being part of “earnest money” the terms of the

contract should be clear and explicit. It has been observed that

the earnest money is paid or given at the time when the

contract is entered into and, as a pledge for its due

performance by the depositor to be forfeited in case of non-

performance by the depositor. However, this Court clarified

that if the payment is made only towards part-payment of

consideration and not intended as earnest money then the

forfeiture clause will not apply.

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20. Recently, this Court in the case of Desh Raj and others

(supra), after considering the earlier judgments, has reiterated

the aforesaid legal position.

21. We, therefore, find that Shri Dhruv Mehta, learned Senior

Counsel is justified in placing reliance on the aforesaid

judgments of this Court.

22. However, the issue does not rest at that. It will be

relevant to consider the reciprocal obligations of the Appellant

i.e., the Developer in case the Developer does not comply with

the timelines in the Agreement. Clauses 4.2 and 4.3 of the

Agreement are as follows:

“4.2. The Apartment shall be ready for

occupation within 42 months from the date

of issuance of Allotment Letter. (“Tentative

Completion Date"), however the Developer

is entitled for a grace period of 6 months

over and above this 42 month's period.

Upon the Apartment being ready for

possession and occupation the Developer

shall issue the Possession Notice to the

Buyer of the Apartment.

Notwithstanding the above, the Developer

shall be entitled to an extension of time

from the Tentative Completion Date for

issue of the Possession Notice, if the

Completion of Construction of the said

Apartment or the part/portion of the

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Project where the said Apartment is

situated is delayed on account of any of the

following reasons –

(i) Non-availability of steel, cement,

other building materials, water or

electric supply or labour, or

(ii) Any change in the Applicable Law or

existence of any injunction, stay

order, prohibitory order or directions

passed by any Court, Tribunal, Body

or Competent Authority; or

(iii) Delay in securing any permission,

Approvals, NOC, sanction building

plan, building completion and/or

occupation certificate, water,

electricity, drainage or sewerage

connection from the Competent

Authority for reasons beyond the

control of the Developer, or

(iv) Force Majeure Event or any other

reason (not limited to the reasons

mentioned above) beyond the control

of or unforeseen by the Developer,

which may prevent, restrict, interrupt

or interfere with or delay the

construction of Project on the Subject

Lands or which may prevent the

Developer in performing its

obligations under this Agreement;

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In case there are is any delay on account of

the aforesaid reasons, the Developer shall

keep the Buyer fully informed about the

same along with a revised tentative date of

possession.

4.3. Subject to the provisions of Clause 4.2

herein above, in the event the Developer

fails or neglects to issue the Possession

Notice on or before the Tentative

Completion Date and/or on such date as

may be extended by mutual consent of the

Parties, then the Developer shall be liable

to pay to the Buyer a compensation for the

entire period of such delay computed at the

rate of Rs. 5/- (Rupees Five only) per

month per square feet of the Super Built

Up Area of the Apartment.

In the alternative, the Developer, at the

request of the Buyer, may refund the total

amounts already received in respect of the

said Apartment together with simple

interest at the rate of 15% per annum to

the Buyer. It has been agreed between the

Parties that upon such repayment, the

Agreement shall stand terminated and the

Buyer shall not be entitled to claim any loss

and/or damages whatsoever. The said

refund by the Developer to the Buyer, sent

through cheque/demand draft by

registered post acknowledgement due or by

courier at the address of the Buyer

mentioned herein, shall be full and final

satisfaction and settlement of all claims of

the Buyer under this Agreement,

irrespective of whether the Buyer

accepts/encashes the said

cheque/demand draft or not. Thereafter

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the Buyer shall cease to have any interest

or claim on the said Apartment and the

proportionate undivided interest in the

Common Areas and Facilities and Limited

Common Areas and Facilities whatsoever

or howsoever. The Developer thereafter

shall be entitled to sell the said Apartment

along with undivided interest in the

Common Areas and Facilities and Limited

Common Areas and Facilities to any

prospective buyer/third party of its

choice.”

23. If we consider the obligations of the Developer in the event

it does not comply with the timelines, a very meagre

compensation is provided to the Apartment purchaser. Not

only that clause 4.2 of the Agreement, which provides that the

Apartment shall be ready for occupation within 42 months

from the date of issuance of Allotment Letter, also provides that

the Developer would be entitled for a grace period of 6 months

over and above this 42 months’ period. The said clause 4.2

further provides for various eventualities in case of which the

Developer would be entitled to further extension of period for

handing over the possession.

24. In any case, clause 4.3 of the Agreement provides that,

subject to the provisions of clause 4.2 of the Agreement, if the

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Developer fails or neglects to issue the Possession Notice on or

before the Tentative Completion Date and/or on such date as

may be extended by mutual consent of the Parties, the

Developer shall be liable to pay to the Buyer a meagre

compensation for such a delay at the rate of Rs.5/- per month

per square feet of the Super Built Up Area of the Apartment.

25. It can thus be seen that the Agreement is one-sided and

totally tilted in favour of the Developer.

26. In the case of Central Inland Water Transport

Corporation Limited and Another v. Brojo Nath Ganguly

and Another

8, this Court, by taking recourse to Article 14 of

the Constitution of India, has held that the courts will not

enforce an unfair and unreasonable contract or an unfair and

unreasonable clause in a contract, entered into between

Parties who are not equal in bargaining power. It will be

relevant to refer to the following observations of this Court in

the said case:

“89. ……We have a Constitution for our

country. Our judges are bound by their oath

to “uphold the Constitution and the laws”. The

Constitution was enacted to secure to all the

8

(1986) 3 SCC 156

19

citizens of this country social and economic

justice. Article 14 of the Constitution

guarantees to all persons equality before the

law and the equal protection of the laws. The

principle deducible from the above

discussions on this part of the case is in

consonance with right and reason, intended

to secure social and economic justice and

conforms to the mandate of the great equality

clause in Article 14. This principle is that the

courts will not enforce and will, when called

upon to do so, strike down an unfair and

unreasonable contract, or an unfair and

unreasonable clause in a contract, entered

into between parties who are not equal in

bargaining power. It is difficult to give an

exhaustive list of all bargains of this type. No

court can visualize the different situations

which can arise in the affairs of men. One can

only attempt to give some illustrations. For

instance, the above principle will apply where

the inequality of bargaining power is the

result of the great disparity in the economic

strength of the contracting parties. It will

apply where the inequality is the result of

circumstances, whether of the creation of the

parties or not. It will apply to situations in

which the weaker party is in a position in

which he can obtain goods or services or

means of livelihood only upon the terms

imposed by the stronger party or go without

them. It will also apply where a man has no

choice, or rather no meaningful choice, but to

give his assent to a contract or to sign on the

dotted line in a prescribed or standard form or

to accept a set of rules as part of the contract,

however unfair, unreasonable and

unconscionable a clause in that contract or

form or rules may be. This principle, however,

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will not apply where the bargaining power of

the contracting parties is equal or almost

equal. This principle may not apply where

both parties are businessmen and the

contract is a commercial transaction.”

27. This Court in the case of Pioneer Urban Land and

Infrastructure Limited (supra) was considering similar

clauses in an Agreement between a Developer and an

Apartment Purchaser. This Court observed thus:

“6.4. A perusal of the apartment buyer's

agreement dated 8-5-2012 reveals stark

incongruities between the remedies available

to both the parties. For instance, Clause 6.4(ii)

of the agreement entitles the appellant builder

to charge interest @18% p.a. on account of

any delay in payment of instalments from the

respondent flat purchaser. Clause 6.4(iii) of

the agreement entitles the appellant builder to

cancel the allotment and terminate the

agreement, if any instalment remains in

arrears for more than 30 days. On the other

hand, as per Clause 11.5 of the agreement, if

the appellant builder fails to del iver

possession of the apartment within the

stipulated period, the respondent flat

purchaser has to wait for a period of 12

months after the end of the grace period,

before serving a termination notice of 90 days

on the appellant builder, and even thereafter,

the appellant builder gets 90 days to refund

only the actual instalment paid by the

respondent flat purchaser, after adjusting the

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taxes paid, interest and penalty on delayed

payments. In case of any delay thereafter, the

appellant builder is liable to pay interest @9%

p.a. only.

6.5. Another instance is Clause 23.4 of the

agreement which entitles the appellant

builder to serve a termination notice upon the

respondent flat purchaser for breach of any

contractual obligation. If the respondent flat

purchaser fails to rectify the default within 30

days of the termination notice, then the

agreement automatically stands cancelled,

and the appellant builder has the right to

forfeit the entire amount of earnest money

towards liquidated damages. On the other

hand, as per Clause 11.5(v) of the agreement,

if the respondent flat purchaser fails to

exercise his right of termination within the

time limit provided in Clause 11.5, then he

shall not be entitled to terminate the

agreement thereafter, and shall be bound by

the provisions of the agreement.

6.6. Section 2(1)(r) of the Consumer

Protection Act, 1986 defines “unfair trade

practices” in the following words:

“2.(1)(r) “unfair trade practice” means a

trade practice which, for the purpose of

promoting the sale, use or supply of any goods

or for the provision of any service, adopts any

unfair method or unfair or deceptive

practice.…”,

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and includes any of the practices enumerated

therein. The provision is illustrative, and not

exhaustive.

xxx xxx xxx

6.8. A term of a contract will not be final and

binding if it is shown that the flat purchasers

had no option but to sign on the dotted line,

on a contract framed by the builder. The

contractual terms of the agreement dated 8-

5-2012 are ex facie one-sided, unfair and

unreasonable. The incorporation of such one-

sided clauses in an agreement constitutes an

unfair trade practice as per Section 2(1)(r) of

the Consumer Protection Act, 1986 since it

adopts unfair methods or practices for the

purpose of selling the flats by the builder.

7. In view of the above discussion, we have no

hesitation in holding that the terms of the

apartment buyer's agreement dated 8-5-2012

were wholly one-sided and unfair to the

respondent flat purchaser. The appellant

builder could not seek to bind the respondent

with such one-sided contractual terms.”

28. The view taken by this Court in the case of Pioneer Urban

Land and Infrastructure Limited (supra) was followed in the

case of Wing Commander Arifur Rahman Khan and Aleya

Sultana and others v. DLF Southern Homes Private

Limited (Now Known as Begur OMR Homes Private Limited)

23

and others

9.

29. Further, a three-judge Bench of this Court in the case of

Ireo Grace Realtech Private Limited (supra) approved the

legal position as laid down in the case of Pioneer Urban Land

and Infrastructure Limited (supra).

30. It is further to be noted that when the cases of Pioneer

Urban Land and Infrastructure Limited (supra), Wing

Commander Arifur Rahman Khan and Aleya Sultana and

others (supra) and Ireo Grace Realtech Private Limited

(supra) were decided, they were decided based on the

provisions of the Consumer Protection Act, 1986. Relying on

the provisions of Section 2(1)(r) of the Consumer Protection

Act, 1986, which defines the term “unfair trade practice”, this

Court held that the contractual terms which are ex facie one-

sided, unfair and unreasonable would constitute unfair trade

practice as per the aforesaid definition of “unfair trade

practice”.

31. Now, Parliament in 2019 has enacted the Consumer

Protection Act, 2019, which has specifically provided a

9

(2020) 16 SCC 512

24

definition for “unfair contract”. It will be apposite to refer to the

relevant part of clause (46) of Section 2 of the Consumer

Protection Act, 2019, which reads thus:

2. Definitions.- In this Act, unless the

context otherwise requires,-

xxx xxx xxx

(46) “unfair contract” means a contract

between a manufacturer or trader or

service provider on one hand, and a

consumer on the other, having such terms

which cause significant change in the

rights of such consumer, including the

following, namely:-

(i) requiring manifestly excessive

security deposits to be given by a

consumer for the performance of

contractual obligations; or

(ii) imposing any penalty on the

consumer, for the breach of contract

thereof which is wholly

disproportionate to the loss occurred

due to such breach to the other party

to the contract; or

xxx xxx xxx

(vi) imposing on the consumer any

unreasonable charge, obligation or

condition which puts such consumer

to disadvantage;”

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32. No doubt that the aforesaid definition would be applicable

after the Consumer Protection Act, 2019 came into effect,

however, even prior to that while considering the term “unfair

trade practice”, this Court has found that such one-sided

Agreements, as in the present case, would be covered by the

definition of term “unfair trade practice”.

33. Insofar as the judgment in the case of Satish Batra

(supra) is concerned, the clause providing for “forfeiture of

earnest money deposit” cannot be said to be one-sided. It will

be relevant to refer to the term which fell for consideration

before this Court in the aforesaid case, which reads thus:

“(e) If the prospective purchaser fails to

fulfil the above condition, the transaction

shall stand cancelled and earnest money

will be forfeited. In case I fail to complete

the transaction as stipulated above, the

purchaser will get double the amount of

the earnest money. In both conditions,

the dealer will get 4% commission from

the faulting party.”

34. It can thus be seen that in the aforesaid case though the

term in the Agreement provided for forfeiture of the earnest

money in the event the prospective purchaser fails to fulfill the

26

conditions, it also provided for payment of double the amount

of earnest money by the vendor to the purchaser in case the

vendor fails to complete the transaction. As such, the said

term cannot be said to be one-sided.

35. Similarly, in the case of Desh Raj and others (supra),

this Court was considering an Agreement to Sell with respect

to the landed property. A perusal of the judgment would reveal

that it was a case of an Agreement between two equal Parties

and there are no terms in the Agreement which could be said

to be one-sided and tilted totally in favour of one of the Parties.

36. We are, therefore, of the view that the present case would

not be governed by the law laid down by this Court in the cases

of Satish Batra (supra) and Desh Raj and others (supra), but

would be governed by the law as laid down in the cases of

Pioneer Urban Land and Infrastructure Limited (supra),

Wing Commander Arifur Rahman Khan and Aleya

Sultana and others (supra) and Ireo Grace Realtech

Private Limited (supra).

37. It will further be relevant to refer to the following

observations by a Bench consisting of three learned Judges of

27

this Court in the case of Maula Bux v. Union of India

10:

5. Forfeiture of earnest money under a

contract for sale of property — Movable or

immovable — If the amount is reasonable,

does not fall within Section 74. That has

been decided in several cases: Chiranjit

Singh v. Har Swarup; Roshan Lal v. Delhi

Cloth and General Mills Company Ltd.

Delhi [1910 SCC OnLine All 98 : ILR (1911)

33 All 166] ; Mohd Habibullah v. Mohd

Shafi [1919 SCC OnLine All 87 : ILR 41 All

324] ; Bishan Chand v. Radhakishan Das.

[1897 SCC OnLine All 52 : ILR (1897) 19

All 490] These cases are easily explained,

for forfeiture of reasonable amount paid as

earnest money does not amount to

imposing a penalty. But if forfeiture is of

the nature of penalty. Section 74 applies.

Where under the terms of the contract the

party in breach has undertaken to pay a

sum of money or to forfeit a sum of money

which he has already paid to the party

complaining of a breach of contract, the

undertaking is of the nature of a penalty.”

38. It can be seen that this Court has held that if the

forfeiture of earnest money under a contract is reasonable,

then it does not fall within Section 74 of the Indian Contract

Act, 1872, inasmuch as, such a forfeiture does not amount to

imposing a penalty. It has further been held that, however, if

10

(1969) 2 SCC 554

28

the forfeiture is of the nature of penalty, then Section 74 would

be applicable. This Court has further held that under the

terms of the contract, if the party in breach undertook to pay

a sum of money or to forfeit a sum of money which he ha d

already paid to the party complaining of a breach of contract,

the undertaking is of the nature of a penalty.

39. Relying on the aforesaid observations of this Court, the

NCDRC, in a series of cases right from the year 2015, has held

that 10% of the BSP is a reasonable amount which is liable to

be forfeited as earnest money. The NCDRC has initially taken

this view in the case of DLF Ltd. v. Bhagwanti Narula

(supra). The said view has been followed subsequently in

various judgments of the NCDRC. We see no reason to upset

the view consistently taken by the NCDRC based on the

judgment of this Court in the case of Maula Bux (supra).

40. Though we are not inclined to interfere with the direction

of the NCDRC for refund of the amount in excess of 10% of the

BSP, we however find that the NCDRC was not justified in

awarding interest on the amount to be refunded.

41. As has been pointed out herein above, after the

29

Agreement was entered into between the Parties in the year

2014, only after the possession was offered by the Appellant to

the Respondents, they sought cancellation of the allotment.

The reason given by them is that on account of sharp decline

in the prices, a person would be able to buy a flat at a

substantially lower price even in Primary market.

42. It is quite probable that the Respondents would have

utilised the money which was payable by them to the Appellant

for purchasing another property at a lower rate.

43. In the facts and circumstances, therefore, we find that the

NCDRC was not justified in awarding interest on the amount

to be refunded by the Appellant.

44. In pursuance of our order dated 24

th April 2023, the

Appellant has refunded an amount of Rs.22,01,215/- to the

Respondents. After deducting an amount of Rs.17,08,140/-

(i.e. 10% of the BSP) from Rs.51,12,310/- (amount paid by the

Respondents to the Appellant) , the amount comes to

Rs.34,04,170/-. The Appellant is, therefore, required to pay

balance amount of Rs.12,02,955/ - [Rs.34,04,170/- minus

Rs.22,01,215/-] to the Respondents. We, therefore, direct the

30

Appellant to pay the said amount of Rs.12,02,955/- to the

respondents within a period of six weeks from today.

45. The appeal is partly allowed in the above terms.

46. Pending application(s), if any, shall stand disposed of.

..............................J

(B.R. GAVAI)

..............................J

(S.V.N. BHATTI)

NEW DELHI;

FEBRUARY 03, 2025