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Can The Consumer Protection Act, 1986 Be Invoked In Cases Of Unfair Contractual Terms?

Court: The Supreme Court of India.

Judgment Name: Ireo Grace Real Tech Pvt Ltd. V Abhishek Khanna and others (Civil Appeal No. 5785 of 2019)

Judgment Date: 11th January 2021.

Bench: Justice Indu Malhotra.

INTRODUCTION

In this case, the Court deals with multiple issues related to the delay in the allotment of the flats to the buyers. The dispute inter alia relates to delay in the allotment, consequent refunds and one-sided contractual terms.  The Developer/Appellant on being aggrieved with the decision of the National Consumer Disputes Redressal Commission has appealed to the Supreme Court of India. The Commission had directed the Developer to refund the amounts that have been deposited by the Apartment buyers in his project called, ‘The Corridors’ in Gurgaon, Haryana.

BRIEF FACTS

  1. The Appellant was constructing a residential project named ‘The Corridors’ in Gurgaon, Haryana. Many people showed their interest in this property and eventually purchased it.
  2. The Appellant failed to give possession of the Apartments to the buyers within the said period of 42 months with an additional grace period of 6 months.
  3. The Respondents wanted to terminate their contract with the developer but could not do so for a period of 12 months after the expiry also as per the purchase agreements. The Developer further restricted the compensation to Rupees 7.5 per square foot for a month for their delayed delivery for a period of 12 years.
  4. Many Respondents filed complaints to the National Commission for Redressal of their grievances.

ISSUES

  1. Whether the date from which the stipulated period of 42 months is to be calculated is from the date of the issuance of Fire NOC or from the date when the building plans were sanctioned?
  2. Were the terms and conditions laid down in the Buyer’s Agreement one-sided?
  3. Whether primacy should be given to RERA over the Consumer Protection Act?
  4. Were the Buyers eligible to terminate the contract or receive a refund of the amount deposited?

CONTENTIONS OF THE APPELLANTS

  1. There was no delay in handing over the possession as there was a waiting period of 42 months from the date of approval of the Building plans.
  2. The complaint was pre-mature and therefore was eligible for dismissal.

CONTENTIONS OF THE RESPONDENT

  1. The Developers had misrepresented that all the formalities with respect to the constructions had been completed while inviting applications. There was no access road in the actual project as mentioned in the layout plan.
  2. Possession was to be given within 42 months with an additional grace period of 180 days which had been exhausted.
  3. The entire layout was changed in 2017 which led to the scrapping of many residential towers.

PRINCIPLES AND OBSERVATIONS OF THE COURT

Issue 1: in determining the date from which the stipulated period of 42 months is to be calculated, the Bench pointed out Section 15 of the Haryana Fire Safety Act, 2009 which states that it is compulsory for the Developer to receive the approval for the Fire Fighting Scheme which conforms to the National Building Code of India and also a ‘No Objection Certificate’ is to be obtained in order, to begin with, the construction work. The Apartment’s Buyer’s Agreement mentions the fact that the period of 42 months shall be calculated from the date when the building plans are approved and the pre-conditions are fulfilled in clause 13.3.

The Bench was of the opinion that the condition of Fire NOC was stipulated in the building plans and also in Environment Clearance.

Issue 2: As per Section 2(1) (r) of the Consumer Protection Act, any incorporation of one-sided and unreasonable clauses amounts to an unfair trade practice.

On referring to the clauses of the Buyer’s agreement, the Court opined that it was completely one-sided, loaded with points favouring the developer and not the Buyer.

Issue 3: The Court referred to various case laws to reach a decision on this issue. The case of Emaar MGF Land Ltd V Aftab Singh clearly stated that the remedy received under the Consumer Protection Act is only confined to the complaints that the consumer files as per the provisions of the Act.

In the case of Imperia Structures Ltd V Anil Patni, the Court had held that the remedy provided under the Consumer Protection Act is an addition to the remedies provided under the Special Statutes. Moreover, Section 18 of the RERA Act clearly states that these remedies are without any prejudice to the other remedies available.

Issue 4: In order to determine whether the Buyers were eligible for the termination and refund, the Court divided the Buyers into categories:

  • Phase I Buyers who had been granted the occupation certificate and the offer of possession.
  • Phase II Buyers who had not been granted the Occupation Certificate.

For the Phase I buyers, the Court noticed that these buyers were obliged to take possession of the allotted apartments as they had received a possession offer from the Developer as the Construction of Phase I was complete which was not the case for the buyers of Phase II houses.

JUDGMENT

  1. The Bench held that the period of 42 months was to be calculated from the date on which the Fire NOC had been issued and not from the sanction of building plans.
  2. It was adjudicated that the terms of the Agreement were oppressive and completely one-sided which constitutes an unfair trade practice as per the Consumer Protection Act, of 1986.
  3. The Court upheld the applicability of the Consumer Protection Act, of 1986 as an additional remedy even after the existence of the Special Status.
  4. The Court held that the Phase I buyers are obliged to take possession. However, they shall be entitled to receive compensation for the delay till the date of the offer of possession. The Phase II buyers were entitled to receive a full refund from the Developers along with Compensation and Interest.

OPINION

The researcher believes that this judgment is just and fair as the Developer cannot compel the apartment buyers to be bound by the one-sided contractual obligations as it is an unfair trade practice as per Section 2(1) (r) of the Consumer Protection Act, 1986. This judgment is a perfect example of upholding the rights of home buyers.

REFERENCES

  1. https://main.sci.gov.in/supremecourt/2019/23235/23235_2019_38_1501_25365_Judgment_11-Jan-2021.pdf
  2. https://www.scconline.com/blog/post/2021/01.12/one-sided-and-unreasonable-clauses-in-apartment-buyers-agreement-unfair-trade-practice-read-scs-verdict/
  3. Consumer Protection Act, 1986, Sec 2 (1) cl (r), Acts of Parliament, 1949.
  4. Haryana Real Estate Regulatory Authority, 2016.
  5. Emaar MGF Land Ltd V Aftab Singh Civil Appeal No. 23512-23513 of 2017.
  6. Imperia Structures Ltd V Anil Patni Civil Appeal No. 3581-3590 of 2020.

Written By: Drishti Rathi, CHRIST (Deemed to be University) [Delhi (NCR)].

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