SC Ruling On One-sided Forfeiture Clauses: Godrej Projects Development Limited v. Anil Karlekar & Ors.

INTRODUCTION

In a landmark ruling delivered on 3 February 2025, the Supreme Court¹ provided significant relief to homebuyers by scrutinizing the enforceability of one‑sided forfeiture clauses in builder–buyer agreements. The Hon'ble Court held that any forfeiture of earnest money upon cancellation of a flat booking must be reasonable and proportionate and cannot be so excessive as to amount to a penalty under Section 74 of the Contract Act. Strongly criticizing real‑estate developers for incorporating arbitrary and onerous terms, the Court declared that such clauses constitute "unfair trade practices" within the meaning of the Consumer Protection Act, thereby reinforcing the principle that contractual fairness must prevail in housing transactions.