“A forfeiture clause is a clause which brings an interest to a premature end by reason of a breach of covenant or condition, and the Court will penetrate the disguise of a forfeiture clause dressed up to look like something else. A forfeiture clause is not to be construed strictly, but is to receive a fair construction.”
In Union of India vs. Vertex Broadcasting Company Private Limited & Ors., (2015) 16 SCC 198 wherein Their Lordships held inter alia that in the absence of any power in the contract to forfeit the license money deposited by the licensee, the action of the Union to forfeit the license fees is held illegal. This is what was held:
“10. Coming to the aforesaid question of availability of a power to order forfeiture, a reading of the relevant clauses i.e. Clauses 8(f), 10(d) and 12 extracted above would go to show that the Union had not protected/empowered itself to forfeit the licence fee. The forfeiture contemplated by the aforesaid clauses are altogether in different contexts and situations. In the absence of any such power, the forfeiture that has taken place in this case will have to be adjudged as null and void.”
[ Suresh Kumar Wadhwa Vs. State of Madhya Pradesh & Ors. SC 2017]
