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Godrej Projects Development Limited v. Anil Karlekar

Civil Appeal · 2025 INSC 143Decided 3 Feb 2025
C.A. No.-003334 - 2023
Justice B.R. Gavai · Justice S.V.N. Bhatti

Background

In 2014, the respondents booked an apartment with Godrej in a Gurgaon project and signed a Buyer's Agreement that allowed the developer to forfeit 20% of the Basic Sale Price as "earnest money" if the buyer cancelled. In 2017, after the developer offered possession, the buyers instead sought to cancel the deal, citing a fall in market prices, and demanded a full refund. The developer offered to refund the amount after deducting 20% earnest money; the buyers approached the National Consumer Disputes Redressal Commission (NCDRC), which reduced the forfeitable amount to only 10% of the Basic Sale Price plus interest. Godrej appealed to the Supreme Court against this reduction.

Decision Breakdown

The Supreme Court examined the Buyer's Agreement and found its terms heavily one-sided: while the developer could forfeit the full 20% earnest money on a buyer's default, the compensation payable to a buyer for the developer's own delay was comparatively meagre. Relying on its own precedents on unfair, one-sided contracts under consumer protection law, the Court agreed with the NCDRC that a 20% forfeiture was excessive and unreasonable, and upheld capping it at 10% of the Basic Sale Price: consistent with an existing line of NCDRC decisions on the same point. However, the Court held that the NCDRC was wrong to also award interest on the refunded amount, since the buyers themselves chose to cancel due to a market downturn rather than any fault of the developer.

Lesson Learnt

Standard-form builder-buyer agreements that heavily favour the developer can still be struck down as unfair by consumer protection forums, even a contractually agreed forfeiture clause must be reasonable in amount, not simply enforced as written.

Official source (sci.gov.in)View Judgment (PDF)

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