The Supreme Court has held that the developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer‘s Agreement and incorporation of one-sided and unreasonable clauses in any selling and Buying Agreement constitutes an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act, 1986.
The bench comprising Justices Dr D.Y. Chandrachud, Indu Malhotra and Indira Banerjee has directed the developer to refund the entire amount deposited by the respondent along with interest @ 9% S.I. p.a. within a period of 4 weeks from the date of this judgment. The failure to refund the amount within 4 weeks will make the Developer liable for payment of default interest @ 12% S.I. p.a. till the payment is made.
In the present case, the license for construction was granted to the Appellant – Developer by the Department of Town and Country Planning for developing a group housing colony on a vast tract of land admeasuring about 37.5125 acres where multiple towers comprising of 1356 apartments were to be constructed.
The license was granted with a stipulation that NOC/ Clearance from the Fire Authority shall be submitted within 90 days from the date of issuance of the sanctioned Building Plans.
The Commissioner, Municipal Corporation vide letter dated 30.12.2013 raised 16 objections with respect to the proposed Fire Fighting Scheme submitted by the Developer. On 22.01.2014 the developer had submitted that the objections raised by the Commissioner had been rectified.
The Municipal Corporation vide letter dated 28.03.2014 informed the Developer that the deficiencies in the application for Fire NOC had not been cured and the Developer was granted 15 days‘ time to cure the defects, failing which, the application would be deemed to be rejected.
Ultimately, on 27.11.2014, the Director, Haryana Fire Service granted approval to the Appellant for the same.
On 12.05.2014, the Developer executed the Apartment Buyer‘s Agreement in favour of Apartment Buyer for a total consideration of Rs.1,45,22,006/-.
On 27.12.2017, Apartment Buyer filed a Consumer Complaint before the National Commission, wherein it was prayed that the Developer be directed to refund the amount of Rs.1,44,72,364/- paid by the Apartment Buyer along with interest @ 20% per annum compounded quarterly till realization, and compensation towards damages on account of harassment, mental agony and litigation charges.
The Apartment Buyer has submitted that the Developer had invited applications from the public for booking flats in the housing complex ―The Corridors, by misrepresenting that all necessary approvals/pre-clearances with respect to the and constructions had already been obtained from the office of the Director, Town and Country Planning, Haryana, and other civil authorities. The Apartment Buyers were induced to book apartments on false representations made by the Developer that construction of the project would be completed within 42 months from the collection of the initial booking amount.
In the present appeal the point of controversy is whether the 42 months period is to be calculated from the date when the Fire NOC was granted by the concerned authority, as contended by the Developer; or, the date on which the Building Plans were approved, as contended by the Apartment Buyers.
The Court observed that the 42 months‘ period for handing over possession of the apartments would be required to be computed from the date on which Fire NOC was issued, and not from the date of the Building Plans being sanctioned.
The Court has further held that on the issue of wholly one-sided clauses in the agreement are entirely loaded in favour of the Developer, and against the allottee at every step. The terms of the Apartment Buyer‘s Agreement are oppressive and would constitute an unfair trade practice under the Consumer Protection Act, 1986.
The Court has relying on the judgement passed by the Apex Court in Wg. Cdr. Arifur Rahman Khan & Others v. DLF Southern Homes Pvt. Ltd., and affirmed the view that,
“The failure of the Developer to comply with the contractual obligation to provide the flat within the contractually stipulated period, would amount to a deficiency of service. And the one-sided nature of the Apartment Buyer‘s Agreement, the consumer fora had the jurisdiction to award just and reasonable compensation as an incident of the power to direct removal of deficiency in service.”
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Thus, having the aforementioned views the Court has held that,
“the incorporation of such one-sided and unreasonable clauses in the Apartment Buyer‘s Agreement constitutes an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act. Even under the 1986 Act, the powers of the consumer fora were in no manner constrained to declare a contractual term as unfair or one-sided as an incident of the power to discontinue unfair or restrictive trade practices. An unfair contract has been defined under the 2019 Act, and powers have been conferred on the State Consumer Fora and the National Commission to declare contractual terms which are unfair, as null and void. This is a statutory recognition of a power which was implicit under the 1986 Act.”