One-Sided And Unreasonable Clause – Unfair Trade Practice In Apartment Buyer’s Agreement

Approach of Art.136 Cannot Be Adopted While Deciding Petitions by The High Court Under Art.227: SC

The Supreme Court under Section 2(1) (r) of the Consumer Protection Act held that the including  one-sided and unreasonable clauses in the Apartment Buyer’s Agreement constitutes an unfair trade. The court held that apartment buyers cannot be compelled by the developer to follow one-sided contractual terms of an Apartment Buyer’s Agreement.

The court disposed of an appeal that the developer had filed against the order that was passed by National Consumer Disputes Redressal Commission directing the developer to refund the amount due to the delay in completing the construction.

Issues raised in the appeal were:

Determining the date from which the period of 42 months starts where possession is to be handed over under Clause 13.3.

Whether Apartment Buyers would be bound by one-sided terms.

Whether Real Estate (Regulation and Development) Act, 2016 should be given primacy over Consumer Protection Act, 1986.

Whether inordinate delay would entitle Apartment Buyers to terminate the agreement and get a refund.

What the court held:

While discussing the second issue the court held that one sided terms were an unfair trade practice under Consumer Protection Act, 1986.

The court answered the third issue while referring to the judgement of M/s Imperia Structures Ltd. v. Anil Patni and Anr. where it was held that Section 79 of RERA Act is not a bar on the Consumer fora to entertain the complaint on behalf of an allottee.

“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 that are unfair, as null and void. This is a statutory recognition of a power that 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.”

The other issues were also in the favour of the allottees.

I am Kaveesha, a student of B.A LL.B (Hons.) from Dharmashastra National Law University, Jabalpur. Knowledge is like an endless ocean and I try to fill my cup with it as much as possible. I believe one should not only aspire to be a student of law but a student of justice as well.