Holding

The forfeiture of earnest money was partially valid, requiring the seller to refund 50 % of the forfeited amount while the remaining 50 % stays forfeited.

Summary

DLF Universal Ltd sold a flat to Ekta Seth & others under an Apartment Buyer’s Agreement that allowed the seller to increase the price and stipulated forfeiture of earnest money for default. The buyers paid installments for five years but stopped after the seller demanded a cost‑escalation sum and failed to deliver possession within the agreed three‑year period. DLF cancelled the allotment, forfeited the earnest money and returned the balance. The buyers filed a petition under Section 12‑B of the Monopolies and Restrictive Trade Practices Act alleging unfair trade practice; the MRTP Commission ordered the return of the earnest money with interest. On appeal, the Supreme Court held that the parties were bound by the contract terms, that clause 4 gave DLF unrestricted power to raise cost and clause 16 relieved DLF of liability for possession delay, and that there were bona‑fide reasons for the delay. Exercising its discretion under Article 142, the Court ordered DLF to refund 50 % of the forfeited earnest money, the remaining 50 % to remain forfeited, with interest on delayed payment, and clarified that the order is specific to these facts.

Issues considered

The validity of forfeiture of earnest money under the Apartment Buyer’s Agreement despite delayed possession and cost escalation.
Whether the seller’s demand for additional payment constitutes an unfair trade practice under Section 12‑B of the MRTP Act.
Whether the MRTP Commission’s direction to return the earnest money with interest is maintainable.
The interpretation and effect of clause 4 (price escalation) and clause 16 (possession timeline) of the agreement.
The propriety of the Supreme Court exercising discretionary jurisdiction under Article 142 in granting partial relief.

Legislation cited

Constitution of Indias. Article 142
Indian Contract Act, 1872
Monopolies and Restrictive Trade Practices Act, 1969s. 12-B

Subjects

contractearnest moneyforfeitureunfair trade practiceMRTP Actcost escalationpossession delayArticle 142discretionary jurisdictionapartment buyer agreement

Judgment

[2008] 10 S.C.R. 999
~4

DLF UNIVERSAL LTD. A
V.
EKTA SETH & ANR.
(Civil Appeal No. 4380 of 2008)
JULY 15, 2008
-,, B
[S.B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.]

Monopolies and Restrictive Trade Practices Act, 1969;
S.12-B:
Unfair trade practice - Compensation - Apartment c
Buyer's Agreement - Default in payment of instalment by
buyer - Cancellation of allotment and earnest money forfeited
- Application claiming compensation on ground of unfair trade
practice - MRTP Commission directing return of earnest
L money with interest - Correctness of - Held: Parties to con- D
t tract are governed by terms and conditions thereof - In terms
of clause 4 of agreement, seller vested in itself unrestricted
power to increase the cost - Allottee stopped payment of in-
stalment after certain period as increase in cost of the flat was
beyond his means - However, there were bonafide reasons E
· on the part of the seller for not handing over possession of the
flat in time and increase in cost - In such peculiar facts and
circumstances of the case, in exercise of discretionary Juris-
diction under Article 142 of the Constitution the seller directed
,), to refund 50% of the amount of earnest money forfeited by it F
·\;
to the buyerlallottee - Indian Contract Act, 1872 - Contract·-
Enforcing of
Respondent booked a flat by entering into an Apart-
ment Buyer's Agreement with the appellant. The sale price
of the flat was payable in instalments. Respondent after G
making payment of certain instalments stopped further
";..,. payment. The appellant demanded further sum on ac-
count of escalation of cost etc. in terms of the agreement,
which was also not paid by the respondent. Therefore,
999 H
1000 SUPREME COURT REPORTS [2008) 10 S.C.R.

A appellant cancelled the allotment of the flat, forfeited the ·
earnest money and returned the balance amount due.
Aggrieved, the respondent filed an application before the
M.R.T.P. Commission claiming compensation on the
ground of unfair trade practice. The Commission directed
B the appellant to return the earnest money with certain rate ~-
of interest.· Hence the present appeal.
Appellant contended that its action in forfeiting the
earnest money was legal and justified.
c Respondent submitted that the posse:ssion was pro-
posed to be given to him within three years from the date
of booking, i.e. in 1993 but the possession was not given
even till 1998, therefore, the appellant could not have re-
sorted to the power of forfeiture of the •~arnest money;
that a sum of Rs.4,21,474.06/- demanded itowards cost of
0
escalation,. increase in area, external electrification, fire
fighting system and stand-by generators was exorbitant;
and that it is unfair on the part of the appeillant to dema.nd
such a huge amount in such a short span of six months.
E · Disposing of the aJ>peal, the Court
H~LD: 1.1. The parties to the contract are governed
and bound by the terms and conditions c>f the agreemen~
entered into. In the case in hand though it cannot be de-
nied that the respondents at the time of s,igning the Apart-
F ment Buyer's Agreement was well awarn of the fact that ~-
additional amount could be demanded oin account of fac-
tors enumerated in clause 4 of the agreiement, but what
would be the max.iinum enhancement was not prescribed
in' the agre·ement. It seems that by inserting the words "the
G decision of the Company in this regard would be final and
blnding on the Apartment Allottee" in clause 4 of the agree-
ment, the com·pany has vested in itself unrestricted power -¥ ~
to', increase
.
the cost. (Para - 10) [1006-G,D & "E] . .
.

1.2 As per clause 16 of the agreement, it was pro-
H
DLF UNIVERSAL LTD. v. EKTA SETH & 1001
ANR.

posed that the possession could be given within three A
years from the date of booking i.e. by 16th June, 1996 but
· the same was not done even till September 1998 and it is
evident from letter dated 22"d February, 1999 issued by
the Company that there was still some time and further
work to be done by it to enable it to hand over the pos- B
-y
session. The only option given was that if there is delay
in delivering the possession t~en the allottee would be
entitled for refund of entire amount deposited with the
appellant but without any interest. In other words,.as per
the terms of the agreement no liability will accrue upon c
the appellant due to delay in handing the possession.
(Para - 11) [1006-F,G & H]
2.1 The instalments were duly paid by the respondent
for at least five years and payment was stopped thereafter
>'.
on the ground that the increase in the cost of the flat was D
)- beyond his means and also the fact that appellant had failed
to deliver the possession of the flat in time. On the other
hand, there was bona fide reason on the part of the appel-
lant for their inability to handover the said possession with
the stipulated time and the increase in cost was on account E
of factors specifically enumerated in clause 2 (b) and clause
4 of the agreement. (Para -12) [1007-A & B]
2.2 In the facts and circumstances of the case, the
interest of justice would be subserved if this Court, in
). exercise of its discretionary jurisdiction under Article 142 F
-~
of the Constitution of India, direct that 50% of the amount
which was forfeited, to be refunded by the appellant to
the respondent within three months from the date of this
judgment and the balance 50% would be considered as
forfeited in terms of the provisions of the agreement. G
However, if the appellant fails to pay the said amount
\" -r· within the stipulated period the same will carry an inter-
est @ 8% p.a. which will be calculated from the date when
the abovementioned period expires till the date of pay-
ment. (Para - 13) [1007-C,D & E] H
1002 SUPREME COURT REPORTS [:2008] 10 S.C.R.

A 3. It is clarified that this order is passe!d in the pecu-
liar facts and circumstances of this case ;3nd would not
be considered as precedence in any other matter. (Para -
14) [1007-E]
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 4380
8 of 2008 ·y-

From the final Order dated 3/7/2006 of the Monopolies &
Restrictive Trade Practices Commission, New Delhi in Com-
pensation Application No. 53 of 2002
C Ravinder Narain, Meghalee Barthakur, Akhil P. Chhabra,
Su brat Deb and Rajan Narain for the Appellant.
Amar Dave, E.C. Agrawala, Mahesh Agarwal, Rishi
Agrawala, Amit Kumar Sharma, Ashutosh Gar{l, Neha Aggarwal
D and Gaurav Goel for the Respondents.
The Judgment of the Court was delivere!d by
Dr. MUKUNDAKAM SHARMA, J. 1. L1eave granted.
2. This appeal is filed by the appellant challenging the le-
E gality of the judgment and order dated 3rd July, 2006 passed by
the Monopolies and Restrictive Trade Practices Commission,
New Delhi (for short "the Commission"). By tine aforesaid judg-
ment and order the learned Commission made certain obser-
vations and recorded findings against the appellant herein,
F which are under challenge in this appeal. The Commission re-
corded a finding that the action of the appe,llant in increasing
the cost which forced the respondent from making further pay-
ments resulting in the cancellation referred 1to by the appellant
was unfair trade practice and the appellant had no right to for-
G feit the earnest money. Consequently a direction was issued
that the appellant should return the earnest money with interest
thereon @ 9% per annum from the date of withholding the ear-
nest money till the date of repayment in respect of the main flat
as well as the parking space in respect of the letters dated 26th/
H 27th May, 1999.
DLF UNIVERSAL LTD. v. EKTA SETH & 1003
ANR. [DR. MUKUNDAKAM SHARMA, J]
'* 3. We may briefly state the facts leading to the aforesaid A
direction of the Commission. The respondent herein booked a
flat along with parking space in the appellant's DLF Regency
Park, Gurgaon by entering into an Apartment Buyer's Agree-
ment on 17th June, 1993. The sale price fixed by both the par-
- 'f
ties was at Rs.16,37,448/- payable in 42 installments spread B
over a period of ten years commencing from 9th March, ending
on 9th March, 2003. The respondent, herein admittedly paid all
the installments due upto September 1998 which came to a
sum of Rs.9,94,836/-. But thereafter he did not make any pay-
ment of installment and therefor was considered to be a de- c
faulter by the appellant. In the meantime by letter date 19th Feb-
ruary, 1998 the appellant demanded an additional amount of
Rs. 4,21, 474.06 from respondent on account of cost of escala-
tion, increase in area, external electrification, fire fighting sys-
tern and stand-by generators. The said amount was to be paid
D
"} in four equal bi-monthly installment of Rs.1,05,368.52/- com-
mencing from 15th March, 1998. The respondent did not honor
the said demand. Consequently, the appellant cancelled the al-
lotment of the flat vide its letter dated 26th May, 1999 and for-
feited the earnest money and returned the balance amount due.
E
4. The respondent sent a legal notice dated 23rd May, 2001
to the appellant contending that the cancellation of the allotment
of the flat was illegal and arbitrary. The appellant sent a reply to
the legal notice on 25th June, 2001 stating that the deductions
made were lawful and in accordance with the terms of the agree- F
ment.

5. The respondent, however, was not satisfied with the re-
ply sent by the appellant and instead filed an application under
Section 12-B of the Monopolies and Restrictive Trade Prac-
tices Act, 1969 before the Commission for payment of com- G
pensation on the ground of unfair trade practice. It was con-
"f-
tended inter alia, by the respondent that the appellant was not
entitled to forfeit the earnest money as they themselves were
unable to give delivery of the flat within the stipulated time and
more particularly, when the appellant has re-sold the said flat at H
1004 SUPREME COURT REPORTS [2008] 10 S.C.R.

A a good price, therefore, as the appellant did not incur any loss, """ ,:.,.~

1.l
they could not and were not, entitled to forfeit th13 earnest money.
The aforesaid submission of the respondent found favour with
the Commission and it recorded the aforesaid finding and al-
lowed the application filed by the respondent, consequent to
8 which the impugned directiol")S were issued which are under
~-
challenge in this appeal.
6. The issue which was raised and urged before us, there-
fore, clearly revolves around the power and jurisdiction of the
appellant in forfeiting the earnest money whiclh was to the tune
c of Rs.1,80,470/-. On going through the record w1e, however, found
that out Rs.1,80,470/- an amount of Rs.1,69,012/-was forfeited
as earnest money, out of which an amount of Rs. 1,62,412/-
was for the flat and an amount of Rs. 6600/- was for the parking
alloted to the respondent. The balance amount i.e Rs.9,571/-
D was forfeited by the appellant on account of interest on the de-
-"
layed payment. -\
7~ On behalf of the learned counsel forthE~ appellant a spe-
cific contention was raised before us that the appellant was
entitled to forfeit the earnest money in terms of the stipulations
E in the agreement arrived at between the parties with mutual
consent. Learned counsel appearing for the appellant has drawn
our attention to the various clauses of the said agreement which
empowered the appellant to deduct the aforesaid earnest
money. In this connection, reference was made to the provi-
F sions contained in clause 8 and 9 of the said ;agreement which ..;
)
read as follows:
"8. That the Company and the Apartment Allottee hereby
agree that the amounts paid on registration to the extent
of 10% of the sale price of the said premises and on
G
allotment or in instalments as the case may be, will
collectively constitute the earnest money. Non-fulfillment
by the Apartment Allottee of the terms and conditions of ¥""
application fo( allotment, terms and conditions of sale arid
those of this Agreement as also in the 1event of failure to
H
DLF UNIVERSAL LTD. v. EKTA SETH & 1005
ANR. [DR. MUKUNDAKAM SHARMA, J]

sign this Agreement by Apartment Allottee within the time A
allowed may entail the forfeiture of the earnest money.

9. That the time of payment of installments as stated in
schedule of payments (Annexure-11) is the essence of this
Agreement. It shall be incumbent on the ApartmentAllottee
-y B
to comply with the terms of payment and 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 said premises. The Company c
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 be however refunded to theApartmentAllottee
/.. by the Company without any interest." D
>-
Relying on the said provision it was contended by the
learned counsel for the appellant that the action of the
appellant in forfeiting the earnest money was legal and
justified.
E
8. Counsel for the respondent, however, refuted the afore-
said position contending, inter alia that the possession was pro-
posed to be given to the respondent on or before June 16, 1996
i.e. within three years from the date of booking, but the said
,. possession was not given even till 1998, therefore, the appel-
( F
lant could and would not have resorted to the power of forfeiture
of the earnest money. It was submitted on behalf of the respon-
dent that a sum of Rs. 4,21,474.06/- demanded towards cost of
escalation, increase in area, external electrification, fire fight-
ing system and stand by gene.rators was exorbitant. It was also
G
submitted that it is unfair on the part of the appellant to demand
,;. -,...,._. such a huge amount in such a short span of six months.

9. The aforesaid submission of the respondent was also
advanced before the Commission and the same found favour
with the Commission. The learned Commission observed that H
1006 SUPREME COURT REPORTS [2008) 10 S.C.R.

A substantial portion of the escalation has been attributed towards
creating additional facilities and upgrading the flats, thus put-
ting additional and unforeseen burden upon the allottee and that
to, to be fulfilled in short span of time. The Commission further
held that the contract was one sided and the respondent was
B required to sign on the doted lines. While corning to the afore-
said conclusion the Commission has relied upon one of its ear-
lier order dated 2nd May, 2006 in Grahak Shayak Gurgon Vol-
untary Consumer Association and Ors. v. DLF Universal Ltd.
& Anr. wherein in respect to the same complex for which the
c respondent filled the application for allotment, the escalation
made by the appellant has been held to be unfair trade prac-
tice.
10. Th.e parties to the contract are governed and bound by
the terms and conditions of the agreement emtered into. In the
D case in hand though it cannot be denied that ithe respondents at
the time of signing the Apartment Buyer's A{~reement was well
aware of the fact that additional amount could be demanded on
account of factors enumerated in clause 4, but what would be
the maximum enhancement was not prescribed in the agree-
E ment. It seem that by inserting the words "the decision of the
Company in this regard would be final and bi.nding on the Apart-
ment Allottee" in clause 4 of the agreement the company has
vested in itself unrestricted power to increase the cost.
11. Coming to the second aspect as per clause 16 of the
F agreement it was proposed that the possession could be given
within three years from the date of booking i.e by 161h June, 1996
but the same was not done even till September 1998 and it is
evident from letter dated 22nd February, 199'9 that there was still
some time and further work to be done by th13 appellant to· enable
G it to hand over the possession. As per clause· 18 the only option
given was that if there is delay in delivering the possession then
the allottee would be entitled for refund of entire amount depos-
ited with the appellant but without any intemst. In other words as
per the terms of the agreement no liability w!ll accrue upon the
H appellant due to delay in handing the poss ession.
1
'"):
DLF UNIVERSAL LTD. v. EKTA SETH & 1007
ANR. [DR. MUKUNDAKAM SHARMA, J]

12. In the present case we find that the installments were A
duly paid for at least five years and payment was stopped there-
after on the ground that the increase in the cost of the flat was
beyond the means of the respondent and also the fact that ap-
- '( pellant had failed to deliver the possession of the flat in time.
On the other hand as submitted there were bona fide reasons B
on the part of the appellant for their inability to handover the
said possession within the stipulated time and the increase in
cost was on account of factors specifically enumerated in clause
2 (b) and clause 4.
13. Considering the entire facts and circumstances of the c
case, we are of the considered opinion that the interest of jus-
tice would be subserved if we, in exercise of our discretionary
jurisdiction under Article 142 of the Constitution o"f India, direct
;_ that 50% of the amount which was forfeited be refunded by the
? appellant to the respondent within three months from the date D
of this Judgment and the balance 50% would be considered as
forfeited in terms of the provisions of the agreement. However,
if the appellant fails to pay the said amount within the stipulated
period the same will carry an interest @ 8% p.a. which will be
calculated from the date when the abovementioned period ex- E
pires till the date of payment.

14. We also make it clear that this order is passed in the
peculiar facts and circumstances of this case and would not be
>
1 considered as precedence in any other matter.
F
15. The appeal stands disposed of in terms of the afore-
said directions. There will be no order as to costs.

S.K.S. Appeal disposed of

l'~>f-