The Apex Court held that a term of a contract which is one sided and opposed to the interest of the buyers cannot 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.
The above ratio was passed by the Apex Court in the case of Pioneer Urban Land & Infrastructure Ltd. Vs. Govindan Raghavan, Civil Appeal No. 12238 of 2018 decided 02.04.2019.
The Respondent – Flat Purchaser entered into an Apartment Buyer’s Agreement dated with the Appellant – Builder to purchase an apartment in one of its projects. As per Clause 11.2 of the Agreement, the Appellant – Builder was to make all efforts to apply for the Occupancy Certificate within 39 months from the date of excavation, with a grace period of 180 days. The Appellant – Builder however failed to apply for the Occupancy Certificate as per the stipulations in the Agreement. The Respondent – Flat Purchaser filed a Consumer Complaint before the National Commission alleging deficiency of service on the part of the Appellant – Builder for failure to obtain the Occupancy Certificate, and hand over possession of the flat. During the pendency of the proceedings before the National Commission, the Appellant – Builder obtained the Occupancy Certificate on 23.07.2018, and issued a Possession Letter to the Respondent – Flat Purchaser on 28.08.2018. The Respondent – Flat Purchaser however submitted that he was not interested in taking possession of the apartment on account of the inordinate delay of almost 3 years. Among other reliefs, the Commission erred in granting Interest @10.7% S.I. p.a. even though the Agreement provided Interest @6% p.a. in case of delay in handing over possession.
The decision of the Commission came to be challenged.
Among other issues raised, it was also contended by the Respondents that the Clauses of the Agreement were one-sided. As per the Apartment Buyer’s Agreement, the Appellant Builder could charge Interest @18% p.a. for delayed payments. However, the Appellant – Builder was not required to pay equivalent Interest to the Respondent – Flat Purchaser for delay in handing over possession of the flat. On the contrary, as per the Agreement, in case of delay on the part of the Appellant – Builder in handing over possession of the flat, the Respondent – Flat Purchaser was entitled to Interest @9% p.a. only.
The Apex Court observed that the Apartment Buyer’s Agreement revealed stark incongruities between the remedies available to both the parties. The Court referred to a clause of the Agreement which entitled the Appellant – Builder to charge Interest @18% p.a. on account of any delay in payment of installments from the Respondent – Flat Purchaser. Further another clause of the Agreement entitles the Appellant – Builder to cancel the allotment and terminate the Agreement, if any installment remains in arrears for more than 30 days.
The Court further noted that on the other hand, as per Clause 11.5 of the Agreement, if the Appellant – Builder fails to deliver possession of the apartment within the stipulated period, the Respondent – Flat Purchaser has to wait for a period of 12 months after the end of the grace period, before serving a Termination Notice of 90 days on the Appellant – Builder, and even thereafter, the Appellant – Builder gets 90 days to refund only the actual installment paid by the Respondent – Flat Purchaser, after adjusting the taxes paid, interest and penalty on delayed payments. In case of any delay thereafter, the Appellant – Builder is liable to pay Interest @9% p.a. only.
The Apex Court held that a term of a contract will 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.
The Court held that contractual terms of the Agreement were ex-facie one-sided, unfair, and unreasonable. The incorporation of such one-sided clauses in an agreement constitutes an unfair trade practice as per Section 2 (r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the Builder.