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Incorporation Of One-Sided And Unreasonable Clauses In Apartment Buyer's Agreement Constitutes An Unfair Trade Practice: Supreme Court

In the case of Ireo Grace Real Tech Pvt. Ltd. vs. Abhishekh Khanna & Others the appellant filed appeals to the National Consumer Disputes Redressal Commission, which ordered a refund of the amounts deposited by apartment buyers in the Corridors� project developed in Sector 67-A, Gurgaon, Haryana, due to the excessive delay in completing the construction and obtaining the Occupation Certificate. The appeal was filed under section 23 of the Consumer Protection Act by the appellant.

The case at hand talks about the scenario in which the license for construction was granted to the developer by the Department of Town and Country Planning for the development of a group housing colony on a large plot of land covering approximately 37.5125 acres, with various towers containing 1356 flats. The main crux of the case is about handing over the possession of the property.

The main reason which emerged in this case for the delay in possession was issuance of the NOC by the fire authority. The commissioner of Municipal corporation raised 16 objections regarding the proposed firefighting scheme (Letter dated 30.12.2013). The developer submitted on 22.01.2014 that the Commissioner's objections had been remedied. Municipal Corporation (Letter dated 28.03.2014) informed the developer that the inadequacies in application for fire NOC has not been rectified. The developer was granted 15 days� time to rectify the defects. Failing which, the application would be deemed to be rejected. In the end on 27.11.2014, the director, Haryana Fire Service granted approval to the developer for the same.

The purchasers filed complaints before the National Commission seeking reimbursement of the instalments along with interest because, within the agreed period of 42 months + 6 months (grace period) the plaintiff had failed to grant possession. However, the purchase agreements prevented a buyer from terminating until 12 months after the expiry of the 42 + 6 months period, and further restricted compensation for delayed delivery to ₹7.5 per square foot per month for a period of 12 months.

The developer said the National Commission did not have the power under the Consumer Protection Act to nullify the terms of a contract alleged to be unfair or one-sided. This is apparent by comparison with the provisions of the Consumer Protection Act 2019, which give the consumer forums this particular power. The National Commission disagreed and laid down in the purchase agreement that the offending clauses were unilateral and unfair. In addition to this National Commission also instructed the developer to repay the instalment it received together with the interest of 10% per annum.

The supreme court mentioned the Section 2(1)(C) of the 1986 Act which says that a complaint can be filed in respect of an unfair trade practice, and also mentioned the Section 2(1)(r) which provides an inclusive definition of an unfair trade practice. The Supreme Court held that the consumer for a are able to declare contractual terms as unfair or one sided:
as an incident of the power to discontinue unfair or restrictive trade practices�. While the 2019 Act specifically defines an unfair contract� and says these can be declared null and void, this is only a statutory recognition of a power which was implicit under the 1986 Act�.

The Supreme Court stated that delays in delivery of ownership amounted to a service deficiency which entitled the purchaser to a refund of the money paid together with a decent compensation. In accordance with the agreement of Rs. 7.5 per square foot per month, the compensation for delayed possession amounts to just 0.9% to 1% annual interest, which was clearly insufficient. In cases where the customer was entitled to a reimbursement, the Supreme Court directed interest payments to the buyer at 9% from the date of delivery to the actual reimbursement date.

The position in accordance with the 1986 Act is effectively equivalent to the 2019 Act, and the decision may not be restricted only to claims against developers. In addition this might require sellers and service providers, to review practices of the use of standardized take it out or leave contracts in their dealings with consumers by specifically including unfair contract provisions and the power to set the same aside under the 2019 Act.

A similar case also exists On April 2, 2019, the Supreme Court passed a judgment in the matter of Pioneer Urban Land & Infrastructure Limited v. Govindan Raghava, wherein the Court held that the incorporation of one-sided clauses in an Agreement constitutes the unfair trade practices within the meaning of Section 2(r) of the Consumer Protection Act, 1986, and such clauses cannot bind a party.

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