Punjab & Haryana High Court, Chandigarh
Citation(2015) 4 SCC 136
CourtSupreme Court of India
Date13 January 2015
Year2015
BenchT.S. Thakur, A.K. Sikri JJ.
Acts/ArticlesIndian Contract Act Section 74, Transfer of Property Act Section 55
CategoryProperty & Land Law

Key Principle Established

Earnest money deposited in a property transaction can be forfeited only if the contract specifically provides for it and the forfeiture is reasonable. Court can grant relief against forfeiture if the amount is penal in nature.

Brief Facts

A property allottee’s earnest money was forfeited by DDA upon cancellation of allotment. The allottee challenged the forfeiture as unreasonable.

Ratio Decidendi

The Court held that forfeiture of earnest money is permissible only if:

  • The contract specifically provides for forfeiture
  • The amount forfeited is reasonable and represents genuine pre-estimate of damages
  • Forfeiture of amounts beyond 10% of the total consideration is generally considered unreasonable
  • Courts have the power to grant relief against forfeiture under Section 74 of the Indian Contract Act

Impact & Significance

This judgment protects property buyers from excessive forfeiture clauses and is widely cited in cases involving DDA, HUDA/HSVP, and other development authorities.

Tags & Related Topics

Property & Land Law Indian Contract Act Section 74 Transfer of Property Act Section 55
← Previous Judgment Smt. Katiji v. Second Income Tax Officer (Pre-emption analogy)
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Disclaimer

This judgment summary is for educational and research purposes. While care has been taken to accurately represent the ratio and findings, for authoritative reference always consult the original judgment text from official sources (SCC Online, AIR, Manupatra, or court websites).

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