In a significant ruling, the Supreme Court has reaffirmed the power of consumer forums to intervene in builder-buyer agreements that unfairly tilt in favor of developers. The verdict, which came in a case involving Godrej Development, mandates a refund to homebuyers who canceled their property allotment, citing an unjust forfeiture clause.
The dispute traces back to an apartment booking in 2014 for the “Godrej Summit” project in Gurgaon. According to the agreement, if buyers backed out, they would lose 20% of the Basic Sale Price (BSP). When construction was completed in 2017, Godrej secured an occupation certificate and offered possession, but some buyers chose to cancel and requested a full refund.
After an unsuccessful legal notice, the buyers approached the National Consumer Disputes Redressal Commission (NCDRC), which ruled in their favor. The commission allowed only a 10% deduction from the BSP and ordered a refund with 6% interest per annum. Godrej challenged this in the Supreme Court, arguing that the buyers backed out due to market conditions, not any fault of the company.
The Supreme Court, however, sided with the buyers, emphasizing that agreements with disproportionate penalties for consumers amount to unfair trade practices. It upheld the NCDRC’s decision, stating that a 10% forfeiture was reasonable and aligned with legal precedents. The ruling also highlighted the stark imbalance in obligations—while buyers faced steep penalties for cancellations, developers incurred only minimal compensation for project delays.
Although the Court removed the 6% interest on the refunded amount, citing that the cancellation was voluntary, it directed Godrej to return the remaining money within six weeks. The judgment reinforces consumer protection laws and sets a precedent against exploitative clauses in real estate agreements.