Holding

The MRTP Commission had no jurisdiction to award compensation where the claim arose only from breach of contract and forfeiture of earnest money, and no unfair trade practice was established.

Summary

The appellant purchased a flat from DLF Universal Ltd. and paid earnest money and instalments, but later could not continue payments and sought a refund of the amounts paid, proposing a swap for a smaller property. DLF refused to adjust the earnest money and the appellant filed an application before the Monopolies and Restrictive Trade Practices (MRTP) Commission under Section 12‑B of the MRTP Act, alleging unfair trade practice under Section 36‑A. The Commission held DLF guilty and ordered a full refund with interest. On appeal, the Supreme Court held that the Commission’s power to award compensation is limited to cases where loss or damage arises from a monopolistic, restrictive or unfair trade practice and not for a mere breach of contract. The Court further clarified that earnest money is a security deposit that may be lawfully forfeited under the contract, and no unfair trade practice was established. Consequently, the Commission lacked jurisdiction, and the appellant’s claim for full refund was dismissed, with the Court directing DLF to retain the earnest money as per the agreement.

Issues considered

The MRTP Commission’s jurisdiction under Section 12‑B to award compensation for a claim based solely on breach of contract and forfeiture of earnest money.
Whether the developer’s refusal to adjust or refund earnest money constitutes an unfair trade practice under Section 36‑A of the MRTP Act.
The distinction between earnest money and security deposit and its treatment under contract law and the MRTP Act.
Whether the appellant suffered loss or damage attributable to an unfair or restrictive trade practice as required by Section 12‑B.
Whether an application before the Commission can proceed without a prior inquiry.

Legislation cited

Indian Contract Act, 1872s. 74
Monopolies and Restrictive Trade Practices Act, 1969s. 12-B, s. 2(o), s. 2(r), s. 2(u), s. 36-A

Subjects

unfair trade practiceMRTP ActSection 12-BSection 36-Aearnest moneybreach of contractjurisdictioncompensationreal estatepenaltysecurity deposit

Judgment

SAURABH PRAKASH A
v.
DLF UNIVERSAL LTD.

NOVEMBER 24, 2006

[S.B. SINHA AND DAL VEER BHANDARI, JJ.] B

Monopolies and Restrictive Trade Practices Act, 1969: Sections 12-B
36-A.

Unfair trade practice-Monopolies and Restrictive Trade Practices C
Commission-Extent ofjurisdiction-Distinction between security and earnest
money-Purchaser entered into an agreement with the developer for
purchasing a flat and paid earnest money-Purchaser also paid some
instalments but showed his inability to make further payments-Purchaser
made a request for refund of the entire amount already paid-Purchaser also D
suggested that he might be allotted some other smaller property with a
condition that the earnest money would not be forfeited but adjusted in this
new property as it was a case of swapping-As the developer did not accede
to his request, the purchaser filed an application before the Commission
under S. 12-B-The Commission held the developer guilty of unfair trade
' .. practice under S.36-A and directed the developer to refund the entire amount E
together with interest-Correctness of-Held: The power of the Commission
to award compensation is restricted to a case where loss or damage had been
caused as a result of monopolistic or restrictive or unfair trade practice-
lt has no jurisdiction where damage is claimed for mere breach of contract-
A distinction exists between security and earnest money-The developer was F
entitled to deduct the amount of earnest money.

A purchaser entered into an agreement with the respondent-developer
for purchasing a flat and made payment of a certain sum as earnest money at
the first instance. The balance payment was to be made in instalments. Clause
17 of the agreement entitled the allottee to cancel the allotment at any time G
and take refund of the amount paid by him without interest, but the earnest
money was liable to be forfeited. The purchaser paid some instalments but
allegedly was unable to pay the same for the subsequent months. Reminders
were sent as the purchaser did not pay the instalment in due time but the

625 H
-
626 SUPREME COURT REPORTS (2006] SUPP. 9 S.C.R.

A purchaser showed his inability to make any payment and made a request for
refund of the amount already paid. The purchaser also suggested that he might
be allotted some other smaller property with a condition that the earnest money
would not be forfeited but adjusted in this new property as it was a case of
swapping.

B The purchaser filed an application before the Monopolies and Restrictive
Trade Practices Commission under Section 12-B of the Monopolies and
Restrictive Trade Practices Act, 1969 as the respondent-developer did not
accede to his request. The Commission held the respondent-developer guilty
of unfair trade practice under Section 36-A of the Act and directed the
C respondent to refund the entire amount together with interest. Hence the
appeal ·

On behalf of the respondent-developer, it was contended that the
Commission had no jurisdiction to entertain the application as no case of
indulgence in unfair trade practice or restrictive trade practice was made
D out; that the purchaser did not prove as to how he suffered any damage by
reason of any action on the part of the respondent-developer; and that in any
event, in terms of Clause 17 of the agreement, refund could be directed to be
made only after deduction of the earnest money.

Disposing of the appeal, the Court
E
HELD: i. The power of the Monopolies and Restrictive Trade Practices
Commission to award compensation is restricted to a case where loss or
da~age had been caused as a result of monopolistic or restrictive or unfair
trade practice. It has no jurisdiction where damage is claimed for mere breach
of contract. [637-D, E)
F
2. It was not a case where a notice ofinquiry had been directed. If there
had been no inquiry, the petitioner has to file a suit wherein, th~ relevant
particulars are required to be stated as to how loss or damage oc~urred owing
to one or the other trade practices ref~rred to therein. The power of the
G Com'!lission is not in addition to the power of the civil court. An application
under Section 12-B of the Monopolies and Restrictive.Trade Practices Act,
1969 would not lie where a. complaint is confined to a brea~h of contract.
Purchases must necessarily relate to one or the other trade practices
contemplated under Section 12-B (1) of the Act. [637-E, F)

H Colgate Palmolive (India) Ltd. v. MRTP Commission, [2003) 1SCC129;
SAURABH PRAKASH v. DLF UNIVERSAL LTD. fS.B. SINHA, J.] 627
Hindustan Ciba Geigy v. Union of India, 120031 1 SCC 134 and Premier A
Engineers v. Taj Rubber Industries, f2005) 6 SCC 610, referred to.

3. The respondent-developer was entitled to deduct the amount of earnest
money. A distinction exists between the security and earnest money. The
Commission unfortunately lost sight of the said issue. (638-H; 639-Al
B
RUDA v. Kewal Krishan Goel, (19961 4 SCC 249; Union of India v.
Rampur Distillery & Chemical Co. Ltd., (197311 SCC 649 and Mau/a Bux v.
Union of India, 11969) 2 SCC 554, relied on.

4. The validity or otherwise of the conditions imposed by the respondent-
developer is not in question. It was, therefore, not a case which could be C
entertained by the Commission. {6·*2-GI

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7960 of2004.

From the Judgment and Order dated 17 .9.2004 of the Monopolies
Restrictive Trade Practices Commission, New Delhi in C.A. No. 4/2001. D
WITH

C.A. Nos. 5179 and 5180/2006.

Anil B. Divan, 0.P. Dua, Ambrish Agarwal, Nagesh Sudhir, Nandrajog, E
Ravinder Narain, Sushma Sharma, Subrat Deb, Sanjeev Dahiya, Nupur Singh,
Rajan Narain, Vajay Kumar, Madhuri Narang and Vishwajit Singh for the
appear.fog pai ties.

Saurabh Prakash Appellant-In-Person.

The Judgment of the Court was delivered by

S.B. SINHA, J. Leave granted in the SLPs.

Extent of jurisdiction of the Monopolies and Restrictive Trade Practices
Commission (for short "tl1., Commission") is the question involved in these
appeals, although they arose under different fact situafions.

We would notice the fact involved in both the appeals separately.

In Civil Appeal arising out of SLP (C) No. 26795 of2004, Suni\ Gu\ati,

-- Respondent herein entered into an agreement with Respondent No. l (DLF).
628 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A for purchasing a flat in a building known as Windsor Court, DLF City, Gurgaon
and made payment of a sum equivalent to I 0% of the agreed price as earnest
money at the first instance. The balance payment was to be made in instalments.
Clause 17 of the Agreement entitled the allottee to cancel the allotment at any
time and take refund of the amount paid by him without interest, but the
B earnest money was liable to be forfeited in the following terms:

"17. In case the allotment is got cancelled by the Allottee himself, he
shall be entitled to the refund of the amount paid by him, after
deducting the earnest money, but without payment of any interest on
the balance amount, paid by him."

c Clause 8 of the said Agreement reads as under:

"8. That the time of payment of installments as stated in schedule of
payments (Annexure II) and applicable stamp duty, registration fee,
maintenance charges and other charges payable under this agreement
as and when demanded is the essence of this Agreement. It shall be
D incumbent on the Apartment Allottee to comply with the terms of
payment and/ or other terms and conditions of sale, failing which he
shall forfeit to the Company the entire amount of earnest money and
the Agreement of sale shall stand cancelled and the Apartment Allottee
shall have no right, title, interest or claim of whatsoever nature on the
E said premises. The company shall thereafter be free to resell and deal
with the said premises in any manner, whatsoever, at its sole discretion.
The amount(s), if any paid over and above the earnest money shall
however be refunded to the Apartment Allottee by the Company
without any interest or any compensation of whatsoever nature."

F Respondent paid some instalments but allegedly was unable to pay the
same from the month of June, 1996. One of his cheques bounced which fact
was intimated to him by Appellant by a letter dated 7th January, 1998.

He entered into an Apartment Buyers Agreement on 8.4.1996. At his
request a 2 and Vi year payment plan was converted into a 7 year payment
G plan in May, 1996. Respondent did not pay the instalment in due time wherefor
allegedly reminders were sent.

A demand letter was also sent to him. Respondent on or about 3.8.1998
showed his inability to make any payment and informed Appellant that he
was in desparate need of funds so as enable him to make a new beginning
H
SAURABH PRAKASH v. DLF UNIVERSAL LTD. (S.B. SINHA,J.] 629
in lndia, requested Appellant to promptly make payment of the amount with A
interest at the rate of 24% per annum. A reminder was sent by him on 10th
September, 1998. On 3 .11.1998, he suggested that he may be allotted some
other smaller property. The said letter reads as under:
"The Chairman,
DLF Universal Limited B
New Delhi.
Dear Sir,

Re: S08B Windsor Court

I am writing this letter with the hope I.hat due regard and consideration C
will be extended to mt by your goodselves.

I was working in Bangkok and due to the Asian fallout I have lost my
job and I am back home trying to settle my family and myself. I have
been paying my instalments against the above stated property, but
now due to my present circumstances, I will not be able to pay any D
further instalments. Till date I have already paid a sum of Rs. 24,96,685/
- towards the said property.

Since I do not have a house, my immediate need is to settle down my
family. I have been talking to your sales people and they have
suggested me to look for some other smaller property where I could E
swap the amount paid against the new property. On getting a list of
the limited available options, I have chosen property No. Ll9/97 in
Phase II (a town house unit) for which an application form has already
been handed over by me to your sales department. The cost of the
property is Rs. 24,85,428/- plus Rs. 2,60,000/- towards registration.
F
The figure works out as under:

Total amount paid: Rs. 24,96,685/- +parking charges

Cost of townhouse: Rs. 23,45,428/-

The amount snits my budget and the balance amount should be G
refunded to me so that I can get the interiors done and settle down
my family.

I have been told that the earnest money of Rs. 602,2211- will not be
adjusted against the new property and will be forfeited. Since I am H
630 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A swapping from one property to another I don't see why this amount
would not be adjusted against the cost of the townhouse, this
townhouse is a backside unit and is• lying unsold since it was
constructed. The drawback of a backside unit is evident by itself. To
add to this, my dream of property an 'A' class unit in Windsor Court
is not coming true as I am now settling down for a lesser grade
B property. If I am told that my earnest money will be forfeited, inspite
of the fact that I am swapping from one property to another, I will not
be able to pay any further difference and in that case would request
you to refund my money of Rs. 18,94,464/- immediately so that I can
go somewhere else and buy a house and settle my family.
c I have always believed in the name DLF and inspite of my present
financial situation I would stil! like to be a part of your colony. The
rest depends on your goodselves I hope that my earnest money will
not be forfeited but adjusted in this new property as it is a case of
swapping.
D
Hoping for a favourable consideration.

With due regards,
Sd/-
SUNIL GULATI
E Nov. 3, 1998"
Respondent through his advocate by a notice dated 26th March, 1999
called upon AppeUant to pay the entire amount i.e., Rs. 25,83,625/- along with
interest at the rate of 24% as also damages.

F As Appellant did not accede to his request, he filed an application
before the Commission purported to be under Section 12-8 of the Monopolies
and Restrictive Trade Practices Act, 1969 (for short "the Act") contending:

"The Applicant desired to swap the amount paid for this property
against another property which was less expensive. The Applicant
G indicated his choice of property in this letter and requested the
Respondent to adjust the amount paid in installments by the Applicant
towards the cost of the new property. In the alternative the Respondent
was asked to refund the money of the Applicant at the earliest.
Thereafter the Applicant visited the office of the Respondent and
inquired about the possible options now that it was decided that the
H Applicant was not proceeding with the purchase of this property. The
SAURABH PRAKASH':, DLF UNIVERSAL LTD. [S.B. SINHA, J.] 631

Applicant was told by the Respondent to go in for a corporate A
discount scheme and then adjust the moneys already paid by him
against a new property which the Respondent would help him identify.
Thereafter on many occasions the Applicant went to the office of the
Respondent but was denied any sort of change in the situation. In
fact on 28.08.98 the Applicant sent a fax and letter to the respondents B
from McCreade Software (Asia) Pvt. Ltd. to clarify that the applicant
was working for them as a SAP Consultant. The respondent replied
to this letter by their letter dated 12.12.98 that they had not received
any intimation from the applicant on the subject of swapping and so
were closing that option."

The application filed by Respondent herein was allowed by the C
Commission on arriving at the following findings:

"The Respondents did not reciprocate and took no steps to refund
the amount even consequent to the terms of the agreement by retaining
the earnest money and making the necessary payment to which the D
Applicants were entitled in law. The Applicants sent'a legal notice
through their Counsel dated March 26, 1999 which also ood no effect
and the Respondent continued to withhold the amount which was
allegedly and validly due to the A~plicants even according to the
terms of the agreement. These facts illustrate that the Respondent was
clearly guilty of unfair and restrictive trade practices causing immense E
damage to the Applicants. In this background, it is neither understood
nor appreciated in what context the Respondent has made lengthy
legal submissions taking shelter of the law which will not apply to the
facts and circumstances of the present case. It is unfortunate that the
Respondent only treated cancellation from 26th February, 2004 and F
·claimed recovery from the Applicants for a sum of Rs. 33,21,290/-.
This is a 'preposterous claim and cannot be given any credence. In
this _background we feel that even the forfeiture of earnest money by
the Respondent cannot be justified as immense delay in the refund of
the amount requested by the Applicants as far back as in 1998 was
without any just and bonafide reason and is clearly an arbitrary and G
discriminatory exercise of power which does not vest in the
Respondent. The gross delay in return of the money even in terms of
the agreement by the Respondent is an unfair trade practice within the
meaning of Section 36-A as well as restrictive trade pract\ce within the
meaning of Section 2(o) and the Compensation Application filed by H
632 SUPREME COURT REPORTS (2006] SUPP. 9 S.C.R.

A the Applicants is maintainable and the Applicants are entitled for the
relief as prayed for. The Respondent has also not proved any loss
which may have occurred by the action of the Applicants to justify
retention of alleged earnest money. Clause 7 of the agreement may
also be referred to reiterate that the Respondent is not entitled to
retain the earnest money in the facts and circumstances of the case.
B Furthermore the law is well settled that the party to a contract taking
security deposit from the other party to ensure due performanc~ of the
contract is not entitled to forfeit the deposit on ground of default
when no loss is caused to it in consequence of such default."

C Appellant was directed to refund the entire amount together with the
interest at the rat~ of 12% per annum from the date of filing of the Compensation
Application till the date of payment.

Mr. Anil B. Divan, learned senior counsel appearing on behalf of
Appellant principally raised three contentions:
D (i) The Commission had no jurisdiction to entertain the application
as no case of indulgence in unfair trade practices or restrictive
trade practices was made out.
(ii) Respondent did not prove as to how he suffered any damage by
reason of any action on the part of Appellant.
E
(iii) In any event, in terms of Clause 17 of the Agreement, refund
could be directed to be made only after deduction of earnest
money.

Mr; O.P. Dua, learned counsel appearing on behalf of Respondent, on
F the other hand, would submit that Appellant in the instant case has accepted
that a sum of more than Rs. 25 lakhs was paid. The only contention raised
by Appellant, it was pointed out, was that such refund of the amount would
be subject to deduction of the earnest money. It was contended that Appellant
had been constructing flats. It had been promoting sale of apartments including
promotion of the services which would come within the purview of the
G provisions of the said Act.

The fact involving Civil Appeal No. 7960 of 2004 is as under:

On 3.6. I 995, Appellant made an application to DLF for sale of an
apartment and a parking space for a total consideration of Rs. 54,37,664 and
H
- SAURABH PRAKASH v. DLF UNIVERSAL LTD. [S.B. SINHA, J.] 633

paid Rs. 5.48 lakhs as earnest money. In the application form, it was stated A
that the possession would be given in 4 years. Under clause 9 of the application
form, it was stated that the existing fire fighting safety code/ regulations were
already covered and extra fire-fighting charges would be levied if further
measures are required to be taken due to additional requirements imposed by.
the authorities. It was also stipulated that DLF would send the buyer an B
Apartment Buyers' Agreement which the buyer would have to sign.

On 8.8.1998, DLF sent Appellant an unsigned Apartment Buyers'
Agreement for his signatures thereupon. In this Agreement, DLF unilaterally
altered the time period for handing over the possession. It extended the time
period by a grace period of 90 days in terms of clause 15 of the application C
fonn. It also added several other exclusion clauses on various grounds and
limited their liability for delay. However, Appellant signed the Agreement and
returned it to DLF.

On 31.l 0.1995, DLF sent the Agreement signed by it at a future date,
i.e., 6.1 I .1995. It had subsequently taken this date, i.e., 6.11. I 995 as the base D
date for computing the compensation payable by it for delay. On the other
hand, it purported to have counted delay on Appellant's part with reference
to the date of application and, thus, it had burdened Appellant with interest
for such prior period also. However, the said period is not a long one.

Appellant contended that Respondent had taken an advantage of eight E
months for which no compensation had been paid to anyone. Even at the rate
it had offered compensation, this could have come to Rs. 120,000 for Appellant's
flat. Since there were 134 flats in Windsor Court, DLF had gained well over
Rs. 1.5 crores.

In a letter dated 14.10.1999 issued by DLF, it was stated that the F
apartment would be completed by January, 2000. It demanded an additional
amount of Rs. 2,08,099.22 which included:

(i) Rs. 50,943.33 towards additional fire-fighting equipment.
(ii) Rs. 59,76753 towards increase in area of 3.026 sq. mts. G
(iii) Rs. 97,388.76 towards DG sets to provide about 7 to 10 KW per
apartment.

It was further stated in the aforesaid letter:

H
634 SUPREME COURT REPORTS (2006] SUPP. 9 S.C.R.

A "We are in the process of submitting these figures for independent .
auditing and we wish to assure you that if during the process of audit
any reduction is effected, the same shall be credited to your account".

However, it allegedly never gave any accounts despite repeated requests.
Appellant paid these amounts.
B
On 29.5.2000, Appellant requested DLF for the audited statement of
accounts. DLF in its letter dated 9.6.2000 stated that the audit was not
complete and it would .inform him thereabout as and when the same is
completed. It has not supplied audited accounts. However, ithas only offered
C to show Appellant the accounts in its office when they become available ..

On 25.7.2000, Appellant asked DLF for a statement of accounts which
was denied by DLF.

On or about 31, 7 .2000, DLF asked Appellant to furnish an undertaking
in the following terms:
D
Clause 11 " ......... Further, I hereby agree not to raise any claim or
dispute on any account whatsoever."

Clause 16 "That IfWe undertake not to approach HSEB for individual
electric connection to the Apartment in view of the. Power Back up
E being provided by the Company."
·'
Appellant objected to the said terms ·of undertakings artd on 5.8:2000
offered to submit the same without the objectionable clauses. DLF gave no
reply thereto.

F It may be mentioned that as of this date Appellant had paid all principal
amounts. There was no demand for interest outstanding as on that date. On
11.11.2000, Appellant invoked Clause 18 of the agreement and cancelled his
booking. He also exercised his option of taking immediate refund of the full
amount in the alternative. As DLF did not act according to Clause 18, Appellant
G filed the application before the Commission.

The Commission held that Appellant was not seeking possession of the
apartment but was seeking refund of the ~oney deposited by him along with
interest. It stated:

"Looking at the totality of facts and circumstances as discussed in
H
- SAURABHPRAKASHv. DLF UNIVERSAL LTD. [S.B. SINHA,J.]

the foregoing order, a case of unfair trade practice as defined in
635

A
Section 36-A of the MRTP Act, is made out against the respondent.
We have, therefore, no hesitation in holding that the applicant is
entitled to refund of the amount deposited by him with interest.
Although the applicant has claimed interest @20% per annum and he
has also cited case law in support of his claim. He has also referred
to the ruling of Hon'ble Supreme Court to justify award of interest B
@18% per annum. However, in Ghaziabad Development Authority v.
Union of India's case (supra), the Hon'ble Supreme Court has
considered that it is reasonable to award interest @12% per annum.
In a recent case in Sunil Gulati and Anr. v. DLF Universal Limited,
in Compensation Application No. 222/1999 also, which is similar to the C
instant case, the MRTP Commission has ordered refund of the amount
deposited by the applicant at a rate of 12%_per annum.

In view of the above, we order that the respondent shall refund the
entire amount of Rs. 57,45,763.22 (Rupees fifty seven lacs forty five
thousand seven hundred sixty three and paise twenty two only) D
deposited by the applicant with interest @ 12% per annum from the
date of filing of the present Compensation Application till the date of
refund. We also award costs which are quantified at Rs. 30,000=00
(Rupees thirty thousand only). The respondent is directed to comply
with this order within two months from the date ofreceipt of this order E
and file an affidavit of compliance within two weeks thereafter."

Appellant, who appeared in person, submitted that in the instant case
Section 36-A of the Act was clearly attracted as the action on the part of DLF
would come within the purview of the expression "for the purpose of promoting
the sale". According to him, as there had been no cancellation, the offer F
remained valid and, thus, he was entitled to purchase the self-same flat at the
rate which was prevailing in the year 2000 upon deducting the amount which
has already been paid.

Mr. Anil Diwan, learned senior counsel appearing on behalf of
Respondent would submit that the Commission in the facts and circumstances G
of this case had no jurisdiction to grant any relief to Appellant and in any
event, it has not determined the jurisdictional fact.

The Act was enacted to provide that the operation of th~ economic
system does not result in the concentration of economic power to the common
detriment for the control of monopolies, for the prohibition of monopolistic H
636 SUPREME COURT REPORTS [2006) S_UPP. 9 S.C.R.
...
A and restrictive trade practices and for matters connected therewith or incidental
thereto. The Act, therefore, primarily deals with the control of monopolies and -
prohibition of monopolistic and restrictive trade practices.

'Trade Practice' has been defined in Section 2(u) to mean any practice
relating to the carrying on of any trade, and includes -
B
(i) anything done by any person which contro1s or affects the price
charged by, or the method of trading of, any trader or any class
of traders,

(ii) a single or isolated action of any person in relation to any trade.
c Section 2(o) defines 'restrictive trade practice' to mean a trade practice
which has, or may have, the effect of preventing, distorting or restricting
competition in any manner and in particular -

(i) which tends to obstruct the flow of capital or resources into the
stream of production, or
D
(ii) which tends to bring about manipulation of prices, or conditions
of delivery or to affect the flow of supplies in the market relating
to goods or services in such manner as to impose on the
consumers unjustified cost or restrictions.

E The expression 'service' has been defined in Section 2(r) in the following
tenns:

"service" means service which is made available to potential users
and includes the provision of facilities in connection with banking,
financing, insurance chit fund, real estate, transport, processing, supply
F of electrical or other energy, board or lodging or both, entertainment,
amuse-ment or the purveying of news or other information, but does
not include the rendering of any service free of charge or under a
contract of personal service."

'Unfair trade practice' has been defined in Section 36-A of the Act to
G. mean a trade practice which, for the purpose of promoting the sale, use or
supply of any good or for the provision of any services, adopts any unfair
method or unfair or deceptive practice including any of the practices
enumerated therein.

Sub-section (1) of Section 36-A enumerates various kinds of visible
H
•

SAURABH PRAKASH v. DLF UNIVERSAL LTD. [S.B. SINHA, J.] 637

representation. A
The power of the Commission is enumerated under Section 12 of the
Act. Section 12-A provides for the power of the Commission to grant temporary
injunction. Power to award compensation by the Commission is contained in
Section 12-B of the Act, sub-section (I) whereof reads as under:
B
"J 28. Power of the Commission to award compensation.(l) Where,
as a result of the monopolistic or restrictive, or unfair trade practice,
carried on by any undertaking or any person, any loss or damage is
caused to the Central Government, or any State Government or any
trader or class of traders or any consumer, such Government or, as the
case may be, trader or class of traders or consumer may, without C
prejudice to the right of such Government, trader or class of traders
or consumer to institute a suit for the recovery of any compensation
for the Joss or damage so caused,· make an application to the
Commission for an order for the recovery from that undertaking or
owner thereof or, as the case may be, from such person, of such D
amount as the Commission may determine, as compensation for the
loss or damage so caused."

The power of the Commission to award compensation, therefore, is
restricted to a case where loss or damage had been caused as a result of
monopolistic or restrictive or unfair trade practice. It has no jurisdiction where E
damage is claimed for mere breach of contract.

It was not a case where a notice of inquiry had been directed. If there
had been no inquiry, the petitioner has to file a suit wherein the relevant
particulars are required to be stated as to how loss or damage occurred owing
to one or the other trade practices referred to therein. The power of the F
Commission is not in addition to the power of the civil court. An application
under Section 12-B of the Act would not lie where a complaint is confined
to a breach of contract. Purchases on the part of Respondent must necessarily
relate to one or the other trade practices contemplated under sub-section ( l)
of Section 12-B of the Act.
G
The question came up for consideration before this Court in Colgate
Palmolive (India) Ltd. v. MRTP Commission and Ors., [2003] I SCC 129 and
Hindustan Ciba Geigy v. Union of India and Ors., [2003] I SCC 134. In
Colgate Palmolive (supra), it was stated:
H
•

638 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A "16. A bare perusal of the aforementioned provision would clearly
indicate that the following.five ingredients are necessary to constitute
an unfair trade practice:

I. There must be a trade practice [within the meaning of Section 2(u)
of the Monopolies and Restrictive Trade' Practices Act].
B
2. The trade practice must be employed for the purpose of promoting
the sale, use or supply of any goods or the provision of any services.

3. The trade practice should fall within the ambit of one or more of
the categories enumerated in clauses (1) to (5) of Section 36-A.
c 4. The trade practice should cause loss or injury to the consumers of
goods or services.

5. The trade practice under clause (I) should involve making a
"statement" whether orally or in writing or by visible representation."

D Yet again in Premier Engineers v. Taj Rubber Industries and Anr., [2005]
6 SCC 610, following Colgate Palmolive (supra), this Court categorically held:

"12. In the present case, we find that in the application filed by the
respondent applicant apart from saying that the defective machinery
fitted with old/second-hand parts had been supplied after considerable
E delay the respondent did not say a word regarding the actual loss and
injury or a notional loss caused to the ·respondent There is nothing
on the record to suggest that any actual loss or injury was caused
to the respondent. The application filed by the respondent applicant
was not only cryptic but lacked in particulars to fall within the definition
F of unfair trade practice as defined in Section 36-A read with Section
2(u) of the MRTP Act. The MRTP Commission in its order has not
adverted to. this fact and has not recorded a finding as to any actual
loss or injury caused to the respondent."

We have noticed hereinbefore that the issue addressed before us veered
G around the question as to whether it was a sheer breach of contract or
deficiency in service. There had been allegations and counter-allegations. The
fact remains that the applicant before the Commission did not pay the amount.
They intended to get refund of the amount which had already been paid.
They sought for grant of interest also.

H In Civil Appeal arising out of SLP (C) No. 26795 of 2004, Appellant was
SAURABH PRAKASH v. DLF UNIVERSAL LTD. [S.B. SINHA, J.] 639
entitled to deduct the amount of earnest money. A distinction exists between A
the security and earnest money. The Commission unfortunately lost sight of
the said issue.

In H. U.D.A. and Anr. v. Kewal Krishan Goel and Ors., [1996] 4 SCC 249,
the law was stated in the following terms:
B
"7. A combined reading of the aforesaid three clauses of letter of
allotment together with the advertisement issued indicates that the
scheme of allotment was that an applicant could make an application
along with 10% of the tentative price of the land as earnest deposit.
On receipt of the letter of allotment he is required to indicate either C
his letter of acceptance or letter of refusal within 30 days from the date
of the receipt of the allotment letter. In case of acceptance he would

- be further required to make an additional deposit which deposit together
with the earnest money already deposited would constitute 25% of
the total tentative price. If he fails to accept the allotment within 30
days from the date of receipt of the letter then the authority is entitled D
to forfeit the earnest money. Further the balance amount could be
deposited in instalments. Thus under the allotment in question an
allottee was required to deposit I 0% of the tentative price of the land
as earnest money which is given to bind the contract and the said
earnest money could be forfeited by the authority in case the allottee
does not communicate the letter of refusal within 30 days from the E
date of receipt of the allotment order."

In the facts of the matter, it was held that the demand was not
unreasonable.

Yet again in Union of India v. Rampur Distillery & Chemical Co. Ltd., F
[1973] 1 SCC 649, this Court stated:

"3. Only one contention was urged on behalf of the appellants before
us: that the security deposit was taken from the respondents in order
to ensure the due performance of the contract and respondents having
defaulted, the entire amount was liable to be forfeited. A similar G
contention was advanced before this Court but was rejected in Maztla
Bux v. Union of India. The appellant therein had entered into a
contract with the Government of India for the supply of certain goods
and had deposited a certain amount of security for the due performance
of the contract. As in the instant case, it was stipulated in the contract H
640 SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.

A there that the amount of security deposit was to stand forfeited in
case the appellant neglected to perform his part of the contract. On
the appellant committing default in the supply, the Government
rescinded the contract and forfeited the security deposit. It was held
by this Court that forfeiture of earnest money under a contract for sale
of property does not fall within Section 70 of the Contract Act, if the
B amount is reasonable, because the forfeiture of a reasonable sum paid
as earnest money does not amount to the imposition of a penalty. But,
· "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,
c the undertaking is of the nature of a penalty". It was further held that
the amount depositi::d by way of security for guaranteeing the due
•:performance of the contract cannot be regarded as earnest money."

The distinction between a security and an earnest money has also been
pointed out by this Court in Mau/a Bux v. Union of India, [1969] 2 SCC 554 ,.•
D in the following terms:

"4. Under the terms of the agreements the amounts deposited by the
plaintiff as security for due performance of .the contracts were to
stand forfeited in case the plaintiff neglected to perform his part of the
contract. The High Court observed that the deposits so made may be
E regarded as earnest money. But that view cannot be accepted.
According to Earl Jowitt in Dictionary of English Law at p. 689;
"Giving an earnest or earnest-money is a mode of signifying assent
to a contract of sale or the like, by giving to the vendor a nominal sum
(e.g. a shilling) as a token that the parties are in earnest or have made
up their minds". As observed by the Judicial Committee in Kunwar
F
Chiranjit Singh v. Har Swarup:

"Earnest money is part of the purchase p_rice when the transaction
goes forward; it is forfeited when the transaction falls through, by
reason of the fault or failure of the vendee."
G In the present case the deposit was made not of a sum of money by
the purchaser to be applied towards part payment of the price when
the contract was completed and till then as evidencing an intention
on the part of the purchaser to buy property or goods. Here the
plaintiff had deposited the amounts claimed as security for
H guaranteeing due performance of the contracts. Such deposits cannot ·
SAURABH PRAKASH v. DLF UNIVERSAL LTD. (S.B. SINHA, J.] 641

be regarded as earnest money." A
Referring to Section 74 of the Indian Contract Act, it was observed:

"There is authority, no doubt coloured by the view which was taken
in English cases, that Section 74 of the Contract Act has no application
to cases of deposit for due perfonnance of a contract which is stipulated B
to be :fb.rfu.:itB:i :fbrbl:ffi:h,Natesa Aiyar v. Appayu Padayachi; Singer
Manufacturing Company v. Raja Prosad; Manian Pattar v. Madras
Railway Company. But this view is no longer good law in view of the
judgment of this Court in Fateh Chand case. This Court observed at
p. 526:
c
'"Section 74 of the Indian Contract Act deals with the measure of
damages in two classes of cases: (i) where the contract names a sum
to be paid in case of breach, and (ii) where the contract contains any
other stipulation by way of penalty,' 'The measure of damages in the
case of breach of a stipulation by way of penalty is by Section 74,
reasonable compensation not exceeding the penalty stipulated for."' D

The Court also observed:

"It was urged that the section deals in terms with the right to receive
from the party who has broken the contract reasonable compensation
and not the right to forfeit what has already been received by the E
party aggrieved. There is however no warrant for the assumption
made by some of the High Courts in India, that Section 74, applies
only to cases where the aggrieved party is seeking to receive some
amount on breach of contract and not to cases whereupon breach of
contract an amount received under the contract is sought to be
forfeited. In our judgment the expression "the contract contains any F
other stipulation by way of penalty" comprehensively applies to every
covenant involving a penalty whether it is for payment on breach of
contract of money or delivery of property in future, or for forfeiture
of right to money or other property already delivered. Duty not to
enforce the penalty clause but only to award reasonable compensation G
is statutorily imposed upon courts by Section 74. In all cases, therefore,
where there is a stipulation in the nature of penalty for forfeiture of
an amount deposited pursuant to the tenns of contract which expressly
provides for forfeiture, the court has jurisdiction to award such sum
only as it considers reasonable, but not exceeding the amount specified H
642 SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.

A in the contract as liable to forfeiture, and that,

"There is no ground for holding that the expression 'contract contains
any other stipulation by way of penalty' is· limited to cases of
stipulation in the nature of an agreement to pay money or deliver
property on breach and does not comprehend covenants under which
B amounts paid or property delivered under the· contract, which by the
terms of the contract expressly or by clear impli~ation are liable to be
forfeited."

DLF, therefore, cannot be said to be wrong in exercising its right to
forfeit the earnest amount.
c
It may be so, but we have noticed hereinbefore that Respondent in its
letter dated 3. I I. I 998 gave three offers. It was expected that at least the
amount would be refunded after deducting the earnest amount. DLF, however,
did not do so.

D In Civil Appeal arising out ofSLP (C) No. 26795 of2004, we, therefore,
are of the opinion that the interest of justice would be subserved if we, in
exercise of our discretionary jurisdiction under Article 142 of the Constitution
of India keeping in view the facts and circumstances ::>f this case, direct DLF
to pay a sum of Rs. 37 lakhs to Respondent herein. Such payment should be
E made within four weeks from date failing which interest at the rate of 9% per
annum shall be levied till actual payment is made. The appeal is disposed of
accordingly.

In Civil Appeal No. 7960 of2004, the principal contention of Appellant
was his insistence on the part of the developer not to deposit further amount
F by way of additional fire fighting equipments as the same was not necessary.
Our attention has further been drawn to the fact that DLF insisted on furnishing
of undertakings which is contrary to law. Appellant also questions the levy
of holding charges and/ or maintenance charges. There had been some delay
also in handing over of the possession. DLF, however, appears to have
treated all the allottees on similar terms.
G
The validity or otherwise of the conditions imposed by DLF is not in
question. It was, therefore, not a case which could be entertained by the
Commission. However, we suggested as to whether Appellant herein can be
given possession of the flat on his clearing of the dues, DLF agreed thereto.
H The total amount payable in respect of the flat is a sum ofRs.17,27,612/-. DLF
SAURABH PRAKASH :v. DLF UNIVERSAL LTD. [S.B. SINHA, J.] 643
has agreed to deduct a sum of Rs.93, 745/- which was agreed to be paid by A
way of compensation. The total amount payable, therefore, would be
Rs.16,33,867/-. The amount has been calculated on the premise that the
registration would be done in the name of Appellant's wife and/or daughter
on the rate of stamp duty and charges payable in case of family allottee.

We furthermore clarify that Appellant, upon getting possession of the B
said flat shall be treated by DLF at par with all others similarly situated.
Appellant may pay the aforementioned amount of Rs.16,33,867 /- within eight
weeks from date, whereupon, Respondent shall execute and/or register the
requisite documents in favour of the wife of Appellant.

We are passing this order on broad consensus arrived at by the parties C
as also in exercise of our jurisdiction under Article 142 of the Constitution of
India,

This order shall not be treated to be a precedent.

We are, therefore, of the opinion that in a case of this nature the D
Commission had no jurisdiction. Civil Appeal No. 7960 of 2004 and Civil
Appeal arising out of SLP (C) No. 3788 of 2005 are disposed of accordingly.

v.s.s. Appeal disposed of.