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Incorporation of one-sided and unreasonable clauses in the agreement are unfair trade practices: Supreme Court of India

Developer cannot push the apartment buyers to be in one-sided and unreasonable contract/agreement and if they do so, it will be considered as an unfair practice u/s 2(1)(r) of Consumer Protection Act. This decision was held by Supreme Court in the case of Ireo Grace Realtech Pvt. Ltd. vs. Abhishek Khanna & others [Civil Appeal no. 5785 of 2019] by the bench comprising of Hon’ble Justice DY Chandrachud, Justice Indira Banerjee and Justice Indu Malhotra.

In the above cited case, appeals were filed by the Appellant, to challenge the judgment passed by the National Consumer Disputes Redressal Commission directing refund of the amounts deposited by the Apartment Buyers in the project of the “Corridors” developed in Sector 67-A, Gurgaon, Haryana, on account of the inordinate delay in completing the construction and obtaining the Occupation Certificate. Appellant had filed the appeal u/s 23 of the Consumer Protection Act.

The real issues faced by the bench were:-

  1. Determination of the date from which the 42 months period for handing over possession is to be calculated.
  2. Whether the contract was one sided and unfair for the allottees?
  3. Was it possible for the allottees to terminate the contract because of the delay in giving possession of the property to them?

When the SC Bench read the agreement, it was clear that the agreement was absolutely biased and unreasonable and it reflected the wholly one-sided terms of the Apartment Buyer’s Agreement, which were entirely loaded in favor of the Developer, and against the allottee at every step.

SC Contended that the agreement was biased and was considered as an unfair practice under the Consumer Protection Act, 1986.

SC referred to the judgment of M/s Imperia Structures Ltd. v. Anil Patni where it was held that Section 79 of the RERA Act does not bar the Consumer forum from entertaining complaint on behalf of an allottee.

SC gave its final decision and concluded 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 forum 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 Forum 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”.

And therefore, it was held that the developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer’s Agreement.

Click here to read the Judgment.

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