The Consumer Protection Act, 1986 -
Sections 2 (r), 23 - ‘unfair trade practices’ - 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 contractual terms of the
Agreement dated 08.05.2012 are 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.
The Consumer Protection Act, 1986 -
Sections 2 (r), 23 - ‘unfair trade practices’ - The terms of the Apartment
Buyer’s Agreement were wholly one-sided and unfair to the Flat Purchaser. The
Builder could not seek to bind the Flat Purchaser with such one-sided
contractual terms.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
(UDAY UMESH LALIT) AND (INDU MALHOTRA) JJ.
April 2, 2019.
CIVIL APPEAL NO. 12238 OF 2018
Pioneer Urban Land & Infrastructure Ltd. …Appellant
Versus
Govindan Raghavan …Respondent
WITH
CIVIL APPEAL NO. 1677 OF 2019
Pioneer Urban Land & Infrastructure Ltd. …Appellant
Versus
Geetu Gidwani Verma & Anr. …Respondent
J U D G M E N T
INDU MALHOTRA, J.
1. The present statutory Appeals have
been filed under Section 23 of the Consumer Protection Act, 1986 to challenge
the Final Judgment and Order dated 23.10.2018 passed in Consumer Case No. 238 of 2017 and Consumer Case No. 239 of
2017 by the National Consumer Disputes Redressal Commission (hereinafter referred to as “the
National Commission”).
2. Since a common issue arises in both
the Civil Appeals, they are being disposed of by the present common Judgment
and Order.
3. For the sake of brevity, the facts in
C.A. No. 12238 of 2018 are being referred to, being the lead matter.
The factual matrix of the said Civil Appeal is as
under :
3.1. The Appellant – Builder launched a residential
project by the name “Araya Complex” in Sector 62, Golf Course Extension Road,
Gurugram.
The Respondent – Flat Purchaser entered into an
Apartment Buyer’s Agreement dated 08.05.2012 with the Appellant – Builder to
purchase an apartment in the said project for a total sale consideration of Rs.
4,83,25,280/-.
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.
3.2. The excavation of the project commenced on 04.06.2012.
As per Clause 11.2 of the Agreement, the Builder was required to apply for the
Occupancy Certificate by 04.09.2015, or within a further grace period of 6
months i.e. by 04.03.2016, and offer possession of the flat to the Respondent – Flat Purchaser.
The Appellant – Builder however failed to apply for
the Occupancy Certificate as per the stipulations in the Agreement.
3.3. The Respondent – Flat Purchaser filed a Consumer
Complaint before the National Commission on 27.01.2017 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.
The Respondent prayed inter-alia for :-
•
•
Refund of the entire amount deposited being Rs. 4,48,43,026/-, along with
Interest @18% p.a.; and
• Compensation of Rs. 10,00,000/- for mental agony,
harassment, discomfort and undue hardship; and
•
• Refund of
the wrongfully charged taxes including Service Tax, and other charges along
with Interest @18% p.a.; and
•
• Litigation
Costs of Rs. 1,00,000/-.
3.4. On 06.02.2017, the National Commission passed an ex-parte Interim Order restraining the
Appellant – Builder from cancelling the allotment made in favour of the
Respondent – Flat Purchaser during the pendency of the Consumer Case.
3.5. 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.
3.6. The Appellant – Builder submitted before the
National Commission that since the construction of the apartment was complete,
and the Occupancy Certificate had since been obtained, the Respondent – Flat
Purchaser must be directed to take possession of the apartment, instead of
directing refund of the amount deposited.
3.7. 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. The Respondent – Flat Purchaser stated that he had, in the
meanwhile, taken an alternate property in Gurugram, and sought refund of the
entire amount of Rs. 4,48,43,026/- deposited by him along with Interest @18%
p.a.
3.8. The National Commission vide Final
Judgment and Order dated 23.10.2018 allowed the Consumer Complaint filed by the
Respondent – Flat Purchaser, and held that since the last date stipulated for
construction had expired about 3 years before the Occupancy Certificate was
obtained, the Respondent – Flat Purchaser could not be compelled to take
possession at such a belated stage.
The grounds urged by the Appellant – Builder for delay
in handing over possession were not justified, so as to deny awarding
compensation to the Respondent – Flat Purchaser. The clauses in the Agreement
were held to be wholly one – sided, unfair, and not binding on the Respondent –
Flat Purchaser.
The Appellant – Builder was directed to refund Rs. 4,48,43,026/- i.e. the
amount deposited by the Respondent – Flat Purchaser, along with Interest @10.7%
S.I. p.a. towards compensation. The rate of Interest @10.7% S.I. p.a. was fixed
in accordance with Rule 15 of the Haryana Real Estate (Regulation and
Development) Rules, 2017 which reads as follows :
“15. An allottee shall be compensated
by the promoter for loss or damage sustained due to incorrect or false
statement in the notice, advertisement, prospectus or brochure in the terms of
Section 12. In case, allottee wishes to withdraw from the project due to
discontinuance of promoter’s business as developers on account of suspension or
revocation of the registration or any other reason(s) in terms of clause (b)
sub-section (I) of Section 18 or the promoter fails to give possession of
the apartment/ plot in accordance with terms and conditions of agreement for
sale in terms of sub-section (4) of section 19. The promoter shall return the
entire amount with interest as well as the compensation payable. The rate of
interest payable by the promoter to the allottee or by the allottee to the
promoter, as the case may be, shall be the State Bank of India highest marginal
cost of lending rate plus two percent. …”
(emphasis supplied)
However, for the period when the Interim Order dated
06.02.2017 was in operation, which restrained the Appellant – Builder from
cancelling the Respondent’s allotment, no Interest was awarded. The National Commission
ordered payment of Interest from the date of each installment till 05.02.2017;
and from the date of the Order passed by the Commission till the date on which
the amount would be refunded.
3.9. Aggrieved by the Order dated 23.10.2018 passed by the
National Commission, the Appellant – Builder preferred the present statutory Appeal under
Section 23 of the Consumer Protection Act, 1986.
4. Mr. C.A. Sundaram, Senior Counsel
appeared for the Appellant – Builder, and drew our attention to the following
Clauses in the Apartment Buyer’s Agreement dated 08.05.2012 viz. Clause
11.5 (ii), (iv) and (v) along with Clause 20 which read as under :
“11.5. (ii) In the event of
further delay by the Developer in handing over of the possession of the Unit even
after 12 months from the end of grace period, then in such case, the intending
Allottee shall have an additional option to terminate this Agreement by giving
termination notice of 90 days to the Developer and refund of the actual
installment paid by him against the Unit after adjusting the taxes paid /
interest / penalty on delayed payments.
…
(iv) Developer shall, within ninety
(90) days from the date of receipt of termination notice of said Unit, refund
to the intending Allottee, all the monies received excluding the service tax
collected on various remittances, till the date of the refund, from the
Intending Allottee under this Agreement. In case the Developer fails to refund the
Sale Price, the Developer shall pay interest to the Intending Allottee @ 9%
per annum for any period beyond the said period of ninety (90) days. The
Intending Allottee shall have no other claim against the Developer in respect
of the said Unit along with the parking space. The Intending Allottee in
this event shall have no right to seek any compensation apart from the interest
as stipulated herein.
…
(v) If the Intending Allottee
fails to exercise his right of termination within the time limit as aforesaid,
by delivery to the Developer of a written notice acknowledged by the Developer
in this regard, then he shall not be entitled to terminate this Agreement
thereafter and he shall continue to be bound by the provisions of this
Agreement, provided that in such case, the Developer shall continue to pay the
compensation provided herein.
20. RIGHT OF CANCELLATION BY THE ALLOTTEE
Except to the extent specifically and
expressly stated elsewhere in this Agreement, the Intending Allottee shall have
the right to cancel this Agreement solely in the event of the clear and
unambiguous failure of the warranties of the Developer that leads to
frustration of the contract on that account. In such case, the Allottee
shall be entitled to a refund of the installments actually paid by it along
with interest thereon @ 6% per annum, within a period of 90 days from the date
of communication to the Developer in this regard less any payments made towards
taxes paid by the Developer or interest paid due or payable, any other
amount of a non-refundable nature. No other claim, whatsoever, monetary or
otherwise shall lie against the Developer nor shall be raised otherwise or in
any manner whatsoever by the Allottee. Save and except to this limited
extent, the Allottee shall not have any right to cancel this Agreement on any
ground whatsoever.”
(emphasis supplied)
4.1. It was submitted that the Respondent – Flat Purchaser was not entitled to
refund of the amount deposited, since the Apartment Buyer’s Agreement was not terminated by the Respondent – Flat
Purchaser in accordance with Clause 11.5 (ii) of the Agreement, which
stipulates that the allottee has to terminate the Agreement by giving a
Termination Notice of 90 days to the Developer.
Since the Respondent – Flat Purchaser had not
terminated the Agreement by a written notice as per Clause 11.5, the Builder
could not sell the apartment, and refund the money to the Respondent – Flat
Purchaser. On the contrary, the Respondent filed a Consumer Complaint and
obtained an ex-parte Interim Order dated 06.02.2017 restraining the
Builder from cancelling the allotment made in favour of the Respondent.
4.2. It was further submitted that if the filing of
the Consumer Complaint is considered as an act of termination of the Agreement,
then the same was pre-mature. As per Clause 11.5 (ii), the Respondent – Flat
Purchaser could have claimed refund only after the expiry of 12 months after
the grace period came to an end i.e. after 04.03.2017. However, the Consumer
Complaint was filed on 27.01.2017. In these circumstances, even if it is found that the Appellant – Builder is liable to refund the
amount deposited with Interest, then the date of the Impugned Order i.e.
23.10.2018, must be treated as the date of serving the Termination Notice as
per Clause 11.5 (ii) of the Agreement, and the Appellant – Builder should be
held liable to pay Interest only after 90 days from the date of termination
i.e. from 23.01.2019.
4.3. With respect to rate of Interest awarded by the
National Commission, it was submitted that the Commission erred in granting Interest
@10.7% S.I. p.a. even though Clause 20 of the Agreement provided Interest @6%
p.a. in case of delay in handing over possession. Even under Clause 11.5 of the
Agreement, the Builder was liable to pay Interest @9% p.a., but not @10.7% S.I.
p.a. The learned Senior Counsel relied upon this Court’s Judgment in Bharathi
Knitting Company v. DHL Worldwide Express Courier Division of Airfreight
Ltd., (1996) 4 SCC 704. and
submitted that the National Commission could not have granted compensation in
excess of the rate prescribed by the Agreement.
5. Mr. Sushil Kaushik, learned Counsel represented
the Respondent – Flat
Purchaser.
5.1. It was submitted that the filing of the Consumer
Complaint may be treated as his Termination Notice under Clause 11.5 (ii) of
the Agreement. Under the Agreement, the Builder was obligated to apply for the
Occupancy Certificate within 39 months from the date of excavation, with a
grace period of further 6 months. The period got over by 04.03.3016 after
taking into account the grace period.
Admittedly, the Appellant – Builder offered possession
after an inordinate delay of almost 3 years on 28.08.2018. On account of the
inordinate delay, the Respondent – Flat Purchaser had no option but to arrange
for alternate accommodation in Gurugram. Hence, he could not be compelled to
take possession of the apartment after such a long delay.
It was in these circumstances that the Respondent –
Flat Purchaser sought stay of the cancellation of the allotment as a
collateral, till his claim for refund was adjudicated by the National
Commission.
5.2. It was further submitted that the Clauses of the
Agreement were one-sided. As per Clause 6.4 (ii) of 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 Clause 11.5 (iv) of 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.
5.3. The Respondent further submitted that the
National Commission had ordered payment of Interest as per the statutory Rules
i.e. Rule 15 of the Haryana Real Estate (Regulation and Development) Rules,
2017 @10.7% S.I. p.a.
The Respondent – Flat Purchaser submitted that he had
obtained a loan for Rs. 3,30,00,000/- from Standard Chartered Bank to purchase
the flat in question, and had entered into a Tripartite Loan Agreement with the
Bank and the Builder. The Respondent – Flat Purchaser had to pay Interest @10%
p.a. for servicing the loan for the entire period. Hence, Interest @10.7% S.I.
p.a. awarded by the National Commission was just and fair.
It was pointed out that even though the National
Commission had not granted Interest for the period during which the Order of
stay of cancellation of the allotment was in operation, the Respondent – Flat
Purchaser had to pay Interest to the Bank even for this period.
5.4. The Respondent – Flat Purchaser submitted that the present Appeal be
dismissed, and the Builder be directed to pay the amount awarded by the
National Commission with Interest, within 1 week, so that the Respondent can
discharge his loan liability.
6. We have heard the learned Counsel for
both the parties, and perused the pleadings, and written submissions filed.
6.1. In the present case, admittedly the Appellant – Builder obtained the
Occupancy Certificate almost 2 years after the date stipulated in the Apartment
Buyer’s Agreement. As a consequence, there was a failure to hand over possession of the flat to the Respondent – Flat Purchaser within a reasonable
period. The Occupancy Certificate was obtained after a delay of more than 2
years on 28.08.2018 during the pendency of the proceedings before the National
Commission.
In Lucknow Development Authority v. M.K.
Gupta, (1994) 1 SCC 243. this Court held that when a person hires the services of a
builder, or a contractor, for the construction of a house or a flat, and the
same is for a consideration, it is a “service” as defined by Section 2 (o) of
the Consumer Protection Act, 1986. The inordinate delay in handing over
possession of the flat clearly amounts to deficiency of service.
In Fortune Infrastructure & Anr. v. Trevor
D’Lima & Ors., (2018) 5 SCC 442. this Court held that a person cannot be made to wait
indefinitely for possession of the flat allotted to him, and is entitled to
seek refund of the amount paid by him, along with compensation.
6.2. The Respondent – Flat Purchaser has made out a clear case of
deficiency of service on the part of the Appellant – Builder. The Respondent –
Flat Purchaser was justified in terminating
the Apartment Buyer’s Agreement by filing
the Consumer Complaint, and cannot be compelled to accept the possession
whenever it is offered by the Builder. The Respondent – Purchaser was legally
entitled to seek refund of the money deposited by him along with appropriate
compensation.
6.3. The National Commission in the Impugned Order dated 23.10.2018
held that the Clauses relied upon by the Builder were wholly one-sided, unfair
and unreasonable, and could not be relied upon.
The Law Commission of India in its 199th Report, addressed the issue of ‘Unfair (Procedural & Substantive) Terms in
Contract’. The Law Commission inter-alia recommended that a legislation
be enacted to counter such unfair terms in contracts. In the draft legislation
provided in the Report, it was stated that :
“A contract or a term thereof is
substantively unfair if such contract or the term thereof is in itself harsh,
oppressive or unconscionable to one of the parties.”
6.4. A perusal of the Apartment Buyer’s Agreement dated 08.05.2012
reveals stark incongruities between the remedies available to both the parties.
For instance, Clause 6.4 (ii) of the Agreement entitles the
Appellant – Builder to
charge Interest @18% p.a. on account of any delay in payment of installments
from the Respondent – Flat Purchaser.
Clause 6.4 (iii) 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.
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.
6.5.
Another instance is Clause 23.4 of the Agreement which entitles the Appellant – Builder to serve a Termination Notice upon the
Respondent – Flat Purchaser for breach of any contractual obligation. If the
Respondent – Flat Purchaser fails to rectify the default within 30 days of the
Termination Notice, then the Agreement automatically stands cancelled, and the
Appellant – Builder has the right to forfeit the entire amount of Earnest Money
towards liquidated damages.
On the other hand, as Clause 11.5 (v) of the Agreement, if
the Respondent – Flat
Purchaser fails to exercise his right of termination within the time limit
provided in Clause 11.5, then he shall not be entitled to terminate the
Agreement thereafter, and shall be bound by the provisions of the Agreement.
6.6. Section 2 (r) of the Consumer Protection Act, 1986 defines ‘unfair
trade practices’ in the following words :
“‘unfair
trade practice’ means a trade practice which, for the purpose of promoting the
sale, use or supply of any goods or for the provision of any service, adopts
any unfair method or unfair or deceptive practice …”, and includes anyof the practices enumerated therein. The provision
is illustrative, and not exhaustive.
In Central
Inland Water Transport Corporation Limited and Ors. v. Brojo Nath Ganguly and Ors., (1986)
3 SCC 156. this Court
held that :
“89. … Our judges are bound by their oath to
‘uphold the Constitution and the laws’. The Constitution was enacted to secure
to all the citizens of this country social and economic justice. Article 14 of
the Constitution guarantees to all persons equality before the law and equal
protection of the laws. This principle is that the courts will not enforce
and will, when called upon to do so, strike down an unfair and unreasonable
contract, or an unfair and unreasonable clause in a contract, entered into
between parties who are not equal in bargaining power. It is difficult to
give an exhaustive list of all bargains of this type. No court can visualize
the different situations which can arise in the affairs of men. One can only
attempt to give some illustrations. For instance, the above principle will
apply where the inequality of bargaining power is the result of the great
disparity in the economic strength of the contracting parties. It will apply
where the inequality is the result of circumstances, whether of the creation of
the parties or not. It will apply to situations in which the weaker party is in
a position in which he can obtain goods or services or means of livelihood only
upon the terms imposed by the stronger party or go without them. It will also
apply where a man has no choice, or rather no meaningful choice, but to give
his assent to a contract or to sign on the dotted line in a prescribed or
standard form or to accept a set of rules as part of the contract, however
unfair, unreasonable and unconscionable a clause in that contract or form or
rules may be. This principle, however, will not apply where the bargaining
power of the contracting parties is equal or almost equal. This principle may
not apply where both parties are businessmen and the contract is a commercial
transaction. …
… These cases can neither be
enumerated nor fully illustrated. The court must judge each case on its own
facts and circumstances.”
(emphasis supplied)
6.7.
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 contractual terms of the Agreement dated
08.05.2012 are 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.
7. In view of the above discussion, we
have no hesitation in holding that the terms of the Apartment Buyer’s Agreement
dated 08.05.2012 were wholly one-sided and unfair to the Respondent – Flat
Purchaser. The Appellant – Builder could not seek to bind the Respondent with
such one-sided contractual terms.
8. We also reject the submission made by the
Appellant – Builder that
the National Commission was not justified in awarding Interest @10.7% S.I. p.a.
for the period commencing from the date of payment of each installment, till
the date on which the amount was paid, excluding only the period during which
the stay of cancellation of the allotment was in operation.
In Bangalore Development Authority v. Syndicate
Bank, (2007) 6 SCC 711. a Coordinate Bench of this Court held that when possession of
the allotted plot/flat/house is not delivered within the specified time, the
allottee is entitled to a refund of the amount paid, with reasonable Interest
thereon from the date of payment till the date of refund.
8.1. In the present case, the National Commission has passed an
equitable Order. The Commission has not awarded any Interest for the period
during which the Order of stay of cancellation of the allotment was in
operation on the request of the Respondent – Flat Purchaser.
The National Commission has rightly awarded Interest
@10.7% S.I. p.a. by applying Rule 15 of the Haryana RealEstate (Regulation And Development) Rules, 2017
from the date of each installment till 05.02.2017 i.e. till the date after
which the Order of stay of cancellation of the allotment was passed; and
thereafter, from the date of the Commission’s final Order till the date on which the amount is
refunded with Interest.
9. We see no illegality in the Impugned
Order dated 23.10.2018 passed by the National Commission. The Appellant –
Builder failed to fulfill his contractual obligation of obtaining the Occupancy
Certificate and offering possession of the flat to the Respondent – Purchaser
within the time stipulated in the Agreement, or within a reasonable time
thereafter. The Respondent – Flat Purchaser could not be compelled to take
possession of the flat, even though it was offered almost 2 years after the
grace period under the Agreement expired. During this period, the Respondent –
Flat Purchaser had to service a loan that he had obtained for purchasing the
flat, by paying Interest @10% to the Bank. In the meanwhile, the Respondent –
Flat Purchaser also located an alternate property in Gurugram. In these circumstances,
the Respondent – Flat Purchaser was entitled to be
granted the relief prayed for i.e. refund of the entire amount deposited by him
with Interest.
10. The Civil Appeals are accordingly
dismissed, and the Final Judgment and Order dated 23.10.2018 passed by the
National Consumer Disputes Redressal Commission is affirmed. The appellant is
granted a period of three months from today to refund the amount to the
respondent. All pending Applications, if any, are accordingly disposed of.