Whether the terms of the Apartment Buyer's Agreement were one-sided, and the Apartment Buyers would not be bound by the same;

Ireo Grace Realtech Pvt. Ltd. … Appellant

 Versus

 Abhishek Khanna & Others … Respondent

Civil Appeal No. 5785 Of 2019 (Supreme Court )

Bench -Dr Dhananjaya ,Y Chandrachud,  Indu Malhotra, Indira Banerjee.

Decided on –January11, 2021

Facts leading to Appeal ;

Batch of Appeals have been filed by Appellant/Developer , challenging  the judgment of National Commission  by which developer was directed to refund of the amounts deposited by the Apartment Buyers on account of the inordinate delay in completing the construction and obtaining the Occupation certificate for  the project, developed in Sector 67-A, Gurgaon, Haryana.

The following issues were raised in the appeal before the Apex Court:

(i)                 Determination of the date from which the 42 months period for handing over possession is to be calculated under Clause 13.3, whether it would be from the date of issuance of the Fire NOC as contended by the Developer; or, from the date of sanction of the Building Plans, as contended by the Apartment Buyers;

 

Court Observed that

·         It was stipulated in General Conditions that the project proponent would obtain all other statutory clearances, approvals, from the concerned authorities, prior to the construction of the project.

·         Section 15 of the Haryana Fire Safety Act, 2009 also makes it mandatory for a Builder/Developer to obtain the approval of the Fire Fighting Scheme conforming to the National Building Code of India, and obtain a No Objection Certificate before the commencement of construction

·          Assuming that the date for possession would begin from the date of issuance of the Fire NOC i.e. 27.11.2014, the Developer was required to offer possession by 27.11.2018. The Developer offered possession to certain Apartment Buyers only after it received the Occupation Certificate in 2019.

·         The grant of Fire NOC was not a pre-condition for commencement of construction work. In fact, the Developer had started the construction before the grant of Fire NOC. Therefore, it could not be contended that the delay in issuance of the Fire Safety clearance had impeded the construction of the units allotted to the respondent

·          On 27.11.2014, the Director, Haryana Fire Service granted approval to the Fire Fighting Scheme The computation of the period for handing over possession would be computed from this date. The Commitment Period of 42 months plus the Grace Period of 6 months from 27.11.2014, would be 27.11.2018, as being the relevant date for offer of possession.

(!!)   Whether the terms of the Apartment Buyer's Agreement were one-sided, and the Apartment Buyers would not be bound by the same;

National Commission had held that the Agreement contained one-sided clauses, which were not final and binding on the apartment buyers, and would constitute an unfair trade practice. Reliance was placed on the judgment of this Court in Pioneer Urban Land and Infrastructure Ltd v. Govindan Raghavan.

·         Clause 6 provided that the apartment buyers would be required to deposit 20% of the sale consideration within 45 days of booking of the apartment

·         Clause 7.4 of the Agreement provides that if there is a delay in payment of an instalment, the apartment buyer would be required to pay Interest on every delayed payment of such instalment @ 20% p.a.

·         Clause 13.2 of the Agreement provides that if the allottee fails, ignores or neglects to take possession of the said Apartment in accordance with the Notice of Possession, the allottee shall be liable to pay ―Holding Charges on the super area @ Rs.7.5 per sq. ft. per m

IN CONTRAST,

·         Clause 13.3 of the Agreement provides that if the Company fails to offer possession by the end of the Grace Period i.e. 42+6 months, it would be liable to pay Delay Compensation @ Rs.7.5 per sq. ft. of the super area for every month of delay. Delay compensation at Rs. 7.5 per sq. ft. works out to approximately 0.9% to 1 % Interest per annum.whereas for delay in payment buyer has to pay 20% p.a  

The aforesaid clauses reflect the wholly one-sidedThe Delay Compensation specified in the Apartment Buyer‘s Agreement of Rs. 7.5 per sq. ft. which translates to 0.9% to 1% p.a. on the amount deposited by the Apartment Buyer cannot be accepted as being adequate compensation for the delay in the construction of the project

 

Argument by Builder –

The finding recorded by the National Commission was illegal and without jurisdiction, under the Consumer Protection Act, 1986. It was only under the Consumer Protection Act, 2019, which came into effect from 20.07.2020, that the State Consumer Forum and the National Commission were conferred with the power to declare contractual terms that were as unfair to consumers as null and void. Such power did not exist under the 1986 Act.

Further ,these buyers had breached their obligation to make payments as per the construction linked payment plan. Despite this, the Developer had made an alternate offer of similar units in the completed towers in Phase 1 of the project where the Occupation Certificate had been granted, before the expiry of the Extended Delay Period.

Supreme court agreed with the order of National Commission The bench comprising Justices DY Chandrachud, Indu Malhotra and Indira Banerjee observed 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 confirmed that The aforesaid clauses reflect the wholly one-sided terms of the Apartment Buyer‘s Agreement, which are entirely loaded in favour of the Developer, and against the allottee at every step..

"We are of the view 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. In view of the above, we hold that the Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer's Agreement."

In a similar case, this Court in Wg. Cdr. Arifur Rahman Khan & Others v. DLF Southern Homes Pvt. Ltd.,  affirmed the view taken in Pioneer (supra), and held that the terms of the agreement authored by the Developer does not maintain a level platform between the Developer and the flat purchaser. The stringent terms imposed on the flat purchaser are not in consonance with the obligation of the Developer to meet the timelines for construction and handing over possession,

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

The Court held thus while disposing an appeal filed by a Developer against an order passed by National Consumer Disputes Redressal Commission directing it to refund of the amounts deposited by the Apartment Buyers on account of the inordinate delay in completing the construction and obtaining the Occupation Certificate.

 

(!!!) Whether the provisions of the Real Estate (Regulation and Development) Act, 2016 must be given primacy over the Consumer Protection Act, 1986;

·         It was contended that the decision of the RERA must be given primacy over the National Commission. The impugned judgment passed by the National Commission was in direct conflict with the judgment passed by the RERA, Haryana since the National Commission had assumed the due date for offer of possession as 23.01.2017. The RERA had correctly held that the due date for delivery of possession of apartments under the Agreement was 27.11.2018. RERA had directed the Developer to hand over possession by 30.06.2020, as mentioned in the Registration Certificate filed before the RERA. In view of the conflicting views taken by the two Fora which exercise original jurisdiction, it is the order of RERA which ought to be upheld. Particularly, since RERA is a specialized fact-finding authority with respect to real estate projects, it is the special law which prevail over the general law. RERA has been established under the Real Estate (Regulation & Development) Act, 2016 for regulation and promotion of the real estate sector

Supreme Court Held-

·         Act not in derogation of any other law.—The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.‖ In Secretary, Thirumurugan Cooperative Agricultural Credit Society v. M. Lalitha (dead) through this Court held that. From the Statement of Objects and Reasons and the scheme of the 1986 Act, it is apparent that the main objective of the Act is to provide for better protection of the interest of the consumer and for that purpose to provide for better redressal, mechanism through which cheaper, easier, expeditious and effective redressal is made available to consumers.

·         In yet another  judgment delivered by this Court in M/s Imperia Structures Ltd. v. Anil Patni and Anr,  it was held that remedies under the Consumer Protection Act were in addition to the remedies available under special statutes.

·         The absence of a bar under Section 79 of the RERA Act to the initiation of proceedings before a fora which is not a civil court, read Section 88 of the RERA Act makes the position clear.

 Section 18 of the RERA Act specifies that the remedies are ―without prejudice to any other remedy available‖. We place reliance on this judgment, in M/s Imperia Structures Ltd. v. Anil Patni and Anr,  wherein it has been held that Proviso to Section 71(1) of the RERA Act entitles a complainant who had initiated proceedings under the CP Act before the RERA Act came into force, to withdraw the proceedings under the CP Act with the permission of the Forum or Commission and file an appropriate application before the adjudicating officer under the RERA Act. The proviso thus gives a right or an option to the complainant concerned but does not statutorily force him to withdraw such complaint nor do the provisions of the RERA Act create any mechanism for transfer of such pending proceedings to authorities under the RERA Act

  (!V) Whether on account of the inordinate delay in handing over possession, the Apartment Buyers were entitled to terminate the agreement, and claim refund of the Deposited amount

Builder contended that Buyers had breached their obligation to make payments as per the construction linked payment plan. Despite this, the Developer had made an alternate offer of similar units in the completed towers in Phase 1 of the project where the Occupation Certificate had been granted, before the expiry of the Extended Delay Period Developer had made an alternate offer of similar units in the completed towers in Phase 1 of the project where the Occupation Certificate had been granted, before the expiry of the Extended Delay Period

The allottees cannot be made to wait indefinitely for possession of theapartments allotted to them, nor can they be bound to take the apartments in Phase 1 of the project. The allottees have submitted that they have taken loans, and are paying high rates of interest to the tune of 7.9% etc. to the Banks.Consequently, we hold that the allottees in Chart B are entitled to

refund of the entire amount deposited by them.

Final order

We direct the Developer to refund the amount deposited by the said Appellant within a period 4 weeks from the date of this judgment with interest @ 9% p.a. from 16.09.2019 (date of the affidavit filed by the Developer before the NCLT). If this direction is not complied with, the Developer will be liable to pay Default Interest @12% p.a. on the entire amount.

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