GODREJ PROJECTS DEVELOPMENT LIMITEDversusANIL KARLEKAR & ORS.

                 [2025] 2 S.C.R. 343 : 2025 INSC 143

               Godrej Projects Development Limited
                                v.
                       Anil Karlekar & Ors.
                      (Civil Appeal No. 3334 of 2023)
                              03 February 2025
                 [B.R. Gavai* and S.V.N. Bhatti, JJ.]


                           Issue for Consideration
       Whether the National Consumer Disputes Redressal Commission
       (NCDRC) was justified in disposing of the consumer complaint filed
       by the respondents no. 1 and 2 thereby directing the appellant to
       deduct only 10% of the Basic Sale Price (BSP) towards cancellation
       of the complainants’ apartment and refund the balance amount
       along with simple interest @ 6% p.a. from the date of each payment
       till the date of refund.

                                 Headnotes†
       Consumer Protection Act, 1986 – s.2(1)(r) – Consumer
       Protection Act, 2019 – s.2(46) – Complainants booked an
       apartment with appellant and submitted application money –
       Apartment Buyer Agreement was entered into between the
       parties – After completion of construction, appellant offered
       possession to the complainants – However, the complainants
       sought cancellation of the allotment and refund of the amount
       paid – Pursuant thereto, consumer complaint was filed –
       The NCDRC directed the appellant to deduct only 10% of
       the BSP i.e. Rs.17,08,140/- only towards cancellation of the
       complainants’ apartment and refund the balance amount
       Rs.34,04,170/- alongwith simple interest @ 6% p.a. from date
       of each payment till the date of refund – Correctness:
       Held: The respondents had cancelled the deal since there was
       recession in the market – In the agreement between the parties,
       the complainants were required to pay earnest money deposit of
       20% of the BSP, which undisputedly was 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

* Author
344                                                              [2025] 2 S.C.R.

                        Digital Supreme Court Reports


       in the agreement – 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 consist the obligations of the developer
       in the event it does not comply with the timelines and a very
       meagre compensation is provided to the apartment purchaser –
       It provides that if 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, 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 – Thus,
       the agreement was one-sided and totally tilted in favour of the
       developer – It is settled 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 – Further, the contractual terms which are ex
       facie one-sided, unfair and unreasonable would constitute unfair
       trade practice u/s. 2(1)(r) of the 1986 Act – 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 – There is no reason to upset the view consistently taken
       by the NCDRC – However, in the instant case, the NCDRC was
       not justified in awarding interest on the amount to be refunded – As
       the 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 – There is
       a possibility that the respondents would have utilised the money
       which was payable by them to the appellant for purchasing another
       property at a lower rate – Since, appellant has already refunded
       an amount of Rs.22,01,215/- to the respondents – Therefore, the
       appellant directed to pay the balance amount of Rs.12,02,955/-
       [Rs.34,04,170/- minus Rs.22,01,215/-] to the respondents.
       [Paras 14, 17, 22, 24, 25, 26, 30, 39, 40, 41, 42, 44]

                                Case Law Cited
       Central Inland Water Transport Corporation Limited and Another
       v. Brojo Nath Ganguly and Another [1986] 2 SCR 278 : (1986) 3
       SCC 156; Maula Bux v. Union of India [1970] 1 SCR 928 : (1969)
       2 SCC 554 – relied on.
[2025] 2 S.C.R.                                                         345

     Godrej Projects Development Limited v. Anil Karlekar & Ors.


     Satish Batra v. Sudhir Rawal [2012] 9 SCR 662 : (2013) 1 SCC
     345; Desh Raj and others v. Rohtash Singh [2022] 18 SCR 65 :
     (2023) 3 SCC 714 – held inapplicable.
     Komal Aggarwal v. Godrej Projects Development Ltd., Consumer
     Case No.2139 of 2018 dated 9.11.2022; DLF Ltd. v. Bhagwanti
     Narula, 2015 SCC OnLine NCDRC 1613; Ramesh Malhotra and
     Another v. Emaar Mgf Land Limited and Another, 2020 SCC OnLine
     NCDRC 789; Ireo Grace Realtech Private Limited v. Abhishek
     Khanna and Others [2021] 2 SCR 1 : (2021) 3 SCC 241; Pioneer
     Urban Land and Infrastructure Limited v. Govindan Raghavan [2019]
     5 SCR 1169 : (2019) 5 SCC 725; Wing Commander Arifur Rahman
     Khan and Aleya Sultana and Others v. DLF Southern Homes Private
     Limited (Now Known as Begur OMR Homes Private Limited) and
     Others [2020] 9 SCR 136 : (2020) 16 SCC 512 – referred to.

                               List of Acts
     Consumer Protection Act, 1986; Constitution of India; Consumer
     Protection Act, 2019; Contract Act, 1872.

                            List of Keywords
     Apartment Buyer Agreement; Cancellation of the allotment; Earnest
     money; Refund of money; Forfeiture of earnest money; Unfair and
     unreasonable contract; Unfair trade practice; Section 74 of the
     Contract Act, 1872; Section 2(46) of Consumer Protection Act,
     2019; Section 2(1)(r) of Consumer Protection Act, 1986.

                           Case Arising From
     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3334 of 2023
     From the Judgment and Order dated 25.10.2022 of the National
     Consumers Disputes Redressal Commission, New Delhi in CC
     No. 262 of 2018

                        Appearances for Parties
     Dhruv Mehta, Sr. Adv., Kapil Madan, Saurabh Gauba, Akshit Narula,
     Shailendra Pratap Singh, Randhir Kumar Ojha, Ms. Surabhi Kapur,
     Advs. for the Appellant.
     Ashwarya Sinha, Aditya Malhotra, Advs. for the Respondents.
346                                                            [2025] 2 S.C.R.

                        Digital Supreme Court Reports


                  Judgment / Order of the Supreme Court

                                   Judgment

       B.R. Gavai, J.

1.     The present appeal takes exception to the final judgment and
       order dated 25th 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 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 20th June, 2014 by an allotment letter, the Appellant allotted
            an Apartment being Apartment No. C-1501 on the 14th 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.
       2.3. On 20th 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 28th 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.
[2025] 2 S.C.R.                                                          347

     Godrej Projects Development Limited v. Anil Karlekar & Ors.


     2.5. On 29th 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 14th 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 25th 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/- 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 5th December, 2022, the NCDRC also dismissed the Review
          Application filed by the Appellant challenging the impugned order.
     2.9. Aggrieved thereby, on 10th January 2023 the Appellant filed the
          present appeal challenging only the order dated 25th October,
          2022.
     2.10. By an order dated 24th 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.
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.
348                                                          [2025] 2 S.C.R.

                           Digital Supreme Court Reports


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 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 Rawal1 and Desh Raj and others v. Rohtash Singh2 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 Narula4 and Ramesh Malhotra and Another v.
       Emaar Mgf Land Limited and Another5, 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.
9.     He further relying on the judgments of this Court in the cases of
       Ireo Grace Realtech Private Limited v. Abhishek Khanna and
       others6 and Pioneer Urban Land and Infrastructure Limited v.



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
6    (2021) 3 SCC 241
[2025] 2 S.C.R.                                                         349

      Godrej Projects Development Limited v. Anil Karlekar & Ors.


     Govindan Raghavan7 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 10th January 2014. Accordingly, an Agreement was entered into
    between the Appellant and the Complainants on 20th June 2014.
    The Complainants were also allotted an Apartment on the 14th Floor
    in Tower ‘C’ on 20th June 2014. On 20th June 2017, the Appellant
    received the Occupation Certificate. On 28th June, 2017, the Appellant
    issued an intimation to the Respondents calling upon them to take
    possession. However, instead of taking possession, by email dated
    22nd August 2017/31st August 2017, the Respondents refused to take
    possession and sought cancellation.
12. The Appellant vide communication dated 1st 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 and responsibilities of the
            Buyer under this Agreement.



7   (2019) 5 SCC 725
350                                                      [2025] 2 S.C.R.

                  Digital Supreme Court Reports


       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 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).”
[2025] 2 S.C.R.                                                           351

     Godrej Projects Development Limited v. Anil Karlekar & Ors.


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 22nd August 2017 as under:
           “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 justice and fair play to both sides, if OPs are allowed
           to deduct only 10% of the BSP as earnest money i.e.
352                                                           [2025] 2 S.C.R.

                     Digital Supreme Court Reports


          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 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.”
[2025] 2 S.C.R.                                                            353

     Godrej Projects Development Limited v. Anil Karlekar & Ors.


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.
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 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
354                                                       [2025] 2 S.C.R.

                  Digital Supreme Court Reports


       (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;
       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 the Buyer shall cease to
[2025] 2 S.C.R.                                                          355

      Godrej Projects Development Limited v. Anil Karlekar & Ors.


            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 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 Another8, 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:


8   (1986) 3 SCC 156
356                                                        [2025] 2 S.C.R.

                    Digital Supreme Court Reports


         “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 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, 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
[2025] 2 S.C.R.                                                            357

     Godrej Projects Development Limited v. Anil Karlekar & Ors.


     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 deliver 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 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:
358                                                          [2025] 2 S.C.R.

                        Digital Supreme Court Reports


            “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.…”,
            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) and others9.
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


9   (2020) 16 SCC 512
[2025] 2 S.C.R.                                                           359

      Godrej Projects Development Limited v. Anil Karlekar & Ors.


     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 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;”
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”.
360                                                          [2025] 2 S.C.R.

                        Digital Supreme Court Reports


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 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 this Court in the case
    of Maula Bux v. Union of India10:



10   (1969) 2 SCC 554
[2025] 2 S.C.R.                                                         361

     Godrej Projects Development Limited v. Anil Karlekar & Ors.


           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 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 had
    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
362                                                      [2025] 2 S.C.R.

                          Digital Supreme Court Reports


       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 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 24th 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
    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.

       Result of the case: Appeal partly allowed.



       †
           Headnotes prepared by: Ankit Gyan