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Unfair terms do not bind home buyers
Y G Muralidharan
Last Updated IST

Have you ever made an attempt to read in full the agreement you have entered into with the builder or seller of your flat? If not do it and you will find several unilateral or unfair conditions being imposed upon you. For instance if there is delay in handing over possession of the building your builder will not pay you any interest or penalty. On the other hand if there is a delay on your part in paying one instalment you may have to shell out heavy penalty. Despite having a separate real estate regulator in place, consumers are being virtually taken for a ride. Thanks to the recent decision of the Supreme Court, (Civil Appeal No. 12238 of 2018) home buyers will no more be bound by the unilateral conditions imposed by the builders, even if they have signed on the dotted lines.

One of the home buyer had entered into an agreement with the builder Pioneer Urban Land and Infrastructure Ltd, for purchasing a flat in Gurugram costing Rs 4,83,25,280. The builder was to issue the Occupancy Certificate (OC) within 39 months from the date of excavation, with a grace period of 180 days. The excavation work started in June 2012. According to the terms of the agreement the flat was to be delivered by March 2016. As the builder failed to procure the OC and handover the flat, the buyer filed a complaint in the National Consumer Disputes Redressal Commission (NC). The consumer sought refund of amount paid with interest in addition to Rs 10 lakhs for mental agony and other hardships. Besides he also prayed for Rs 1 lakh towards litigation cost.

During the pendency of the case before the NC, the builder obtained the OC and issued a Possession Letter to the buyer in August 2018. The builder submitted that since the construction of the apartment is completed, the purchaser must be directed to take possession of the flat, instead of demanding refund of money, interest etc. But the buyer refused on the ground that it was too late and he had already purchased another flat.

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The NC decided in favour of the buyer and held that since the last date stipulated for construction had expired about 3 years before the OC was obtained, the buyer could not be compelled to take possession. The builder was directed to refund the entire amount deposited by the buyer along with interest as fixed by the Haryana Real Estate (Regulation and Development) Rules, 2017. This was challenged by the builder in the Supreme Court.

The builder argued that the flat purchaser was not entitled to refund of the amount deposited, since the Agreement was not terminated in accordance with the Apartment Buyer’s Agreement, which stipulates that the allottee has to terminate the Agreement by giving a Termination Notice of 90 days to the developer. Since this was not done the builder could not sell the apartment, and refund the money to the purchaser. The builders also questioned the NC awarding interest at 10% though Clause 20 of the Agreement provided interest @6% per annum.

One-sided clauses

The Apex Court observed that the Apartment Buyer’s Agreement reveals stark incongruities between the remedies available to both the parties and found that they were one sided and thereby unfair. The court found that whereas the builder could charge interest @18% per annum for delayed payments, they were not required to pay equivalent interest to buyers for delay in handing over possession of the flat. In such a case the buyer was entitled interest at 9% per annum. Further the builder can cancel the allotment and terminate the Agreement, if any instalment remains in arrears for more than 30 days. If the builder fails to deliver possession of the flat within the stipulated time, the buyer has to wait for 12 months and a grace period before terminating the contract. Even after termination the builder is supposed to pay only the actual amount paid by the buyer. Interest will be paid only when there is delay.

The court said that the buyer has made a clear case of deficiency on the part of the builder and the buyer was justified in terminating the agreement. Quoting from its earlier judgments and the Law Commission of India Report, the Court said 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 a contract framed by the builder. The Court observed that the terms of the Apartment Buyer’s Agreement were wholly one-sided and unfair to the flat purchaser and the builder could not seek to bind the respondent with such one-sided contractual terms.

(The writer is founder trustee of Consumer Rights Education and Awareness Trust (CREAT))

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(Published 30 April 2019, 22:00 IST)