2008 (7) TMI 572 - SC - Companies Law

Power and jurisdiction of the appellant in forfeiting the earnest money to the tune of Rs. 1,80,470 - Held that - 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 per cent 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 per cent 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 at the rate of 8 per cent p.a. which will be calculated from the date when the abovementioned period expires till the date of payment.

Summary

Issues:
Challenge to legality of judgment and order by Monopolies and Restrictive Trade Practices Commission regarding forfeiture of earnest money.

Analysis:
The appellant challenged the judgment and order of the Monopolies and Restrictive Trade Practices Commission, which found the appellant's action of increasing costs and forfeiting earnest money as an unfair trade practice. The respondent had booked a flat and parking space but failed to make payments after September 1998. The appellant demanded additional payment for various reasons, leading to cancellation of the allotment and forfeiture of earnest money. The respondent contended the cancellation was illegal and arbitrary, leading to the filing of an application for compensation under the Monopolies and Restrictive Trade Practices Act.

The main issue revolved around the appellant's power to forfeit the earnest money. The agreement between the parties allowed forfeiture of earnest money if the terms were not fulfilled, with specific clauses empowering the appellant to deduct the earnest money. The appellant argued that the forfeiture was legal as per the agreement terms. However, the respondent argued that the possession was not provided within the stipulated time, and the additional amount demanded was exorbitant and unfair.

The Commission found in favor of the respondent, stating that the escalation in costs was unfair and the contract was one-sided. The agreement gave the company unrestricted power to increase costs, and the possession was not delivered within the agreed timeframe. The court, considering all facts, directed the appellant to refund 50% of the forfeited amount to the respondent within three months and deemed the remaining 50% as forfeited as per the agreement terms. Failure to pay within the stipulated period would attract interest. The court clarified that the judgment was specific to this case and not a precedent for others.

In conclusion, the appeal was disposed of with the above directions, and no costs were awarded.