REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.             OF 2008 (Arising out of S.L.P. (Civil) No. 18834 of 2006)

DLF Universal Ltd. …. Appellant Versus

Ekta Seth & Anr.    …. Respondents

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Leave granted.

2. This  appeal  is  filed  by  the  appellant  challenging  the

legality 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 the aforesaid judgment and order

the  learned  Commission  made certain  observations  and  recorded

findings against the appellant herein, which are under challenge in

this appeal.   The Commission recorded a finding that the action of

the appellant in increasing the cost which forced the respondent from

making further payments resulting in the cancellation referred to by

the appellant was unfair trade practice and the appellant had no right

to forfeit 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 earnest

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/27th May, 1999.   

3. We may briefly state the facts  leading to the aforesaid

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 Agreement on 17th

June,  1993.   The  sale  price  fixed  by  both  the  parties  was  at

Rs.16,37,448/- payable in 42 installments spread 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 payment of installment and therefor

was considered to be a defaulter by the appellant.  In the meantime

2

by  letter  date  19th February,  1998  the  appellant  demanded  an

additional amount of Rs. 4,21, 474.06 from respondent on account of

cost  of  escalation,  increase  in  area,  external  electrification,  fire

fighting system and stand-by generators. The said amount was to be

paid  in  four  equal  bi-monthly  installment  of  Rs.1,05,368.52/-

commencing from 15th March, 1998. The respondent did not honor

the  said  demand.  Consequently,  the  appellant  cancelled  the

allotment of the flat vide its letter dated 26th May, 1999 and forfeited

the earnest money and returned the balance amount due.  

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 agreement.  

5. The respondent, however, was not satisfied with the reply

sent by the appellant and instead filed an application under Section

12-B of  the Monopolies  and Restrictive Trade Practices Act,  1969

before the Commission for payment of compensation on the ground

of  unfair  trade  practice.    It  was  contended  inter  alia,  by  the

3

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 a good price, therefore, as the appellant

did not incur any loss, they could not and were not, entitled to forfeit

the  earnest  money.   The aforesaid  submission  of  the  respondent

found  favour  with  the  Commission  and  it  recorded  the  aforesaid

finding  and  allowed  the  application  filed  by  the  respondent,

consequent to which the impugned directions were issued which are

under challenge in this appeal.

6. The  issue  which  was  raised  and  urged  before  us,

therefore, clearly revolves around the power and jurisdiction of the

appellant  in forfeiting the earnest  money which was to the tune of

Rs.1,80,470/-. On going through the record we, 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/- was forfeited by the

appellant on account of  interest on the delayed payment.   

4

7. On  behalf  of  the  learned  counsel  for  the  appellant  a

specific  contention  was  raised  before  us  that  the  appellant  was

entitled to forfeit the earnest money in terms of the stipulations 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 provisions 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 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 for allotment, terms and conditions of sale and those of this Agreement as also in the event of failure to sign this Agreement by Apartment Allottee within the time allowed may entail the forfeiture of the earnest money.

9. That  the time of  payment  of  installments  as stated  in  schedule  of  payments  (Annexure-II)  is  the essence of this Agreement.  It shall be incumbent on the Apartment Allottee 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 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,

5

paid over and above the earnest money shall be however refunded  to  the  Apartment  Allottee  by  the  Company without any interest.”

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.

8. Counsel  for  the  respondent,  however,  refuted  the

aforesaid  position  contending,  inter  alia  that  the  possession  was

proposed 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  appellant

could and would not have resorted to the power of forfeiture of the

earnest money.  It was submitted on behalf of the respondent that a

sum  of  Rs.  4,21,474.06/-  demanded  towards  cost  of  escalation,

increase  in  area,  external  electrification,  fire  fighting  system  and

stand by generators was exorbitant. It was also 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.  

6

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 substantial

portion  of  the  escalation  has  been  attributed  towards  creating

additional  facilities  and upgrading  the  flats,  thus  putting  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 required to sign on the doted

lines.  While coming to the aforesaid conclusion the Commission has

relied upon one of its earlier order dated 2nd May, 2006 in  Grahak

Shayak  Gurgon  Voluntary  Consumer  Association  and  Ors. v.

DLF Universal Ltd. & Anr. wherein in respect to the same complex

for  which  the  respondent  filled  the  application  for  allotment,  the

escalation made by the appellant has been held to be unfair trade

practice.    

10. The parties to the contract are governed and bound by

the terms and conditions of the agreement entered into. In the case

in hand though it cannot be denied that the respondents at the time

of signing the Apartment Buyer’s Agreement was well aware of the

fact that additional amount could be demanded on account of factors

7

enumerated  in  clause  4,  but  what  would  be  the  maximum

enhancement was not prescribed in the agreement. It seem that by

inserting the words “the decision of the Company in this regard would

be final  and binding on the Apartment  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

agreement it was proposed that the possession could be given within

three 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 22nd February, 1999 that there was still  some time and

further work to be done by the appellant to enable 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 deposited with the appellant but

without  any  interest.  In  other  words  as  per  the  terms  of  the

agreement no liability will accrue upon the appellant due to delay in

handing the possession.

8

12. In  the  present  case  we find  that  the  installments  were

duly paid for at least five years and payment was stopped thereafter

on the ground that the increase in the cost of the flat was beyond the

means of the respondent and also the fact that appellant had failed

to deliver the possession of the flat in time.  On the other hand as

submitted there were bona fide reasons 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

case,  we are of  the considered 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, direct that 50% of the

amount  which  was  forfeited  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. 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 expires till the date of payment.     

9

14. We also  make it  clear  that  this  order  is  passed in  the

peculiar  facts  and  circumstances  of  this  case  and  would  not  be

considered as precedence in any other matter.

15. The appeal stands disposed of in terms of the aforesaid

directions.  There will be no order as to costs.

……………………… …...J.

(S.B. Sinha)

……………………………J. (Dr. Mukundakam Sharma)

New Delhi; July 15, 2008

10