SUPREME COURT OF INDIA HOLDS ONE-SIDED AND UNFAIR CLAUSES OF APARTMENT BUYER’S AGREEMENT TO BE NOT BINDING ON BUYERS

In a recent case of Pioneer Urban Land & Infrastructure Ltd. Vs. Govindan Raghavan 2019 and Pioneer Urban Land & Infrastructure Ltd. Vs. Geetu Gidwani Verma & Anr., the Supreme Court has passed a Common Judgment dated 02.04.2019 and held that a builder cannot seek to bind a buyer with one-sided and unfair contractual terms of an Apartment Buyer’s Agreement (‘Agreement’).

In the said case, the Buyer had deposited Rs. 4,83,25,280/- with the Builder for purchase of a flat in Araya Complex, Gurugram (the ‘Flat’), but the Builder had failed to obtain the occupancy certificate within the stipulated time period of 39 months with a grace period of 180 days and therefore, could not offer possession of the Flat to the Buyer within the time period agreed by them vide Agreement dated 08.05.2012.

As a result, the Buyer had approached the National Consumer Disputes Redressal Commission (NCDRC), whereby the NCDRC directed the Builder to pay compensation to the Buyer and also awarded interest for a part of the period of delay, vide Order dated 23.10.2018.

Meanwhile, the Builder obtained the Occupancy Certificate on 23.07.2018 and issued a Possession Letter to the Buyer on 28.08.2018. But the Buyer refused to accept the same as they were no longer interested to buy the said Flat and were looking for a flat elsewhere. Aggrieved by the Order dated 23.10.2018 of the NCDRC, the Builder filed an appeal before the Supreme Court (‘Appeal’).

In the said Appeal, the Supreme Court held the Builder liable for the following reasons:

1.The following clauses in the Agreement were found to be unfair and one-sided, as they were favouring the Builder:

i. The Builder was entitled to charge 18% interest from the Buyer for delayed payments.

But the Buyer was entitled to charge only 9% interest from the Builder for delay in handing over possession of the Flat to the Buyer.

ii. The Builder had the right to serve a termination notice to the Buyer for breach of his contractual obligations and also, cancel the Agreement if the Buyer fails to rectify the breach or default within 30 days of the termination notice and also forfeit the entire amount of earnest money towards liquidated damages.

Whereas, in the event of default or breach by the Builder, then if the Buyer fails to exercise his right of termination within the time limit provided in the Agreement, the Buyer cannot terminate the Agreement.

2. Such unfair and unreasonable terms of contract would not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder.

3. In accordance with the Consumer Protection Act, 1986 as amended thereof, the incorporation of such clauses in an agreement constituted unfair trade practice, as the Builder had adopted unfair methods or practices for the purpose of selling the flats.

4. The Builder cannot compel the Buyer to purchase the Flat after causing an inordinate delay of almost 3 years in handing over the possession of the Flat to the Buyer.

5. Therefore, the Builder cannot seek to bind the Buyer with one-sided and unfair contractual terms of the Agreement.

Thus, the Apex Court directed the Builder to pay compensation and interest to the Buyer for the entire period of delay caused in handing over possession of the Flat to the Buyer.

Harini Daliparthy

Senior Associate

The Indian Lawyer

Leave a Reply

Your email address will not be published. Required fields are marked *