Introduction
The Supreme Court in Godrej Projects Development Ltd. v. Anil Karlekar & Ors.¹ recently dealt with a judgment passed by the National Consumer Disputes Redressal Commission (“NCDRC”) that disposed off the Consumer Complaint filed by the Respondents directing the Appellant to deduct only 10% of the Basic Sale Price (“BSP”) towards cancellation of the Respondents’ Apartments 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 was filed under Section 23 of Consumer Protection Act, 1986 by the Appellant.

Facts
The Respondents booked an apartment in the Appellant’s project called "Godrej Summit" in the year 2014 by an application form and submitted Rs.10,00,000/- as application money. Subsequently an allotment letter was issued and thereafter an Apartment Buyer Agreement (“the Agreement”) was entered into between the parties. The Respondents paid Rs.51,12,310/- each toward the purchase. However, after the completion of the project and upon receiving the Occupation Certificate in the year 2017, when the Appellant offered possession to the Respondents, they sought cancellation of their allotment citing a significant drop in market prices. They demanded a full refund of the amount paid.

The Appellant Developer, relying on the agreement’s forfeiture clause, retained 20% of the Basic Sale Price (BSP) as an "earnest money deposit" and offered to refund the remainder. Dissatisfied, the Respondents approached the NCDRC, which ruled that the developer could deduct only 10% of the BSP, instead of 20%, and must refund the balance with 6% interest per annum.

Supreme Court’s Observations
The Supreme Court, by taking recourse to Article 14 of the Constitution of India, has previously held that the courts will not enforce an unfair and unreasonable contract or clause in a contract, entered into between parties who are not equal in bargaining power. In the present case, the Supreme Court while considering the obligations of the Appellant in case of non-compliance with timelines, observed that the compensation to be provided to a buyer was meagre. While the Agreement permitted the Appellant to forfeit 20% of the BSP upon buyer default, it only imposed minimal penalties on the Appellant for delays in project completion.

This imbalance led the Court to conclude that such clauses constitute an “unfair trade practice” under Section 2(1)(r) of the Consumer Protection Act, 1986 and relying on Pioneer Urban Land and Infrastructure Limited v. Govindan Raghavan⁴, Wing Commander Arifur Rahman Khan and Aleya Sultana and Ors. v. DLF Southern Homes Pvt Ltd.² and Ireo Grace Realtech Private Limited v. Abhishek Khanna³, held the Agreement to be totally tilted in favour of the Appellant. It further reiterated that earnest money forfeited upon flat booking cancellation must be reasonable and not excessive enough to be considered a penalty under Section 74 of the Contract Act, 1872.

Conclusion
Thus, the Supreme Court upheld the judgement of the NCDRC with respect to computing 10% of the BSP as a reasonable amount to be forfeited as earnest money. However, the Court partly allowed the Appeal by holding that the NCDRC was not justified in awarding interest on the amount to be refunded by the Appellant and reasoned it with an observation that it was 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.

By - Lakshmi Raman