In a big relief to lakhs of home-buyers who are put at a disadvantage while signing a builder-buyer agreement containing stringent clauses against them and lenient provisions against the builders for violation of the accord, the Supreme Court said such one-sided and the unfair agreement would not be binding.
A bench of Justices UU Lalit and Indu Malhotra said a real estate company could not be allowed to bind home-buyers with one-sided contractual terms which protect the interests of the company at the cost of the buyers.
“Terms 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 bench said while directing a builder to refund Rs 4.83 crore with 10.7 percent interest to a home-buyer.
A home-buyer is always put to a disadvantage in flat purchase agreement between the buyer and the company. The agreement is always skewed against buyers who are to pay higher rate of interest in case of delay in payment and the builders are allowed to cancel allotment in case of default of payment. But the punitive clauses against the builders are lenient with leeway given to them in case of delay in handing over possession and the interest rate in case of delay is very less.
After examining one such agreement in which it was stipulated that a home-buyer will have to pay interest at 18 percent per annum in case of delay in payment but the builder is liable to pay interest at 9% for delay in possession, the apex court said the agreement was unreasonable and biased which could not be binding.
The court also said the agreement was one-sided as it entitled the builder to cancel allotment in case of delay of 30 days by the buyer to pay installment but in case of delay in giving possession of flats, the buyer could terminate contract only after a period of 12 months over the grace period.
The court rejected the plea of Gurugram-based builder, Pioneer Urban Land & Infrastructure Ltd, that it should not be directed to pay interest to the buyer at the rate of 10.7 percent as the builder-buyer agreement provided interest at 6 percent. The court noted that the buyer was paying interest on the home loan at the rate of 10 percent and he was entitled to get 10.7 percent.
The court turned down the company’s plea that the buyer should be directed to take possession of the flat as there was a delay of only three years and held that a buyer cannot be compelled to take possession of flats at such a late stage. In this case, the buyer had invested Rs 4.83 crore in 2012 to buy a flat in Sector 62, Golf Course Extension Road, Gurugram and was assured to get possession in 2015 but the company failed to fulfill its promise and the buyer filed a case for a refund in 2017.
“The contractual terms of the builder-buyer agreement 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. In view of the above discussion, we have no hesitation in holding that the terms of the builder-buyer Agreement were wholly one-sided and unfair to the flat purchaser. The Builder could not seek to bind the Respondent with such one-sided contractual terms,” the court said.