Com­pen­sa­tion clause in builder-buyer agree­ment is un­fair, one-sided

The Na­tional Com­mis­sion holds that the clause in the builder­buyer agree­ment pro­vid­ing nom­i­nal com­pen­sa­tion to buy­ers is un­just, ex­ploita­tive and tan­ta­mounts to un­fair trade prac­tice

HT Estates - - HTESTATES - Su­nil Tyagi

In a re­cent j udg­ment, the Na­tional Con­sumer Dis­pute Re d r e s s a l C o m m i s s i o n (Na­tional Com­mis­sion) ad­dressed al­most 24 sim­i­lar con­sumer com­plaints and granted ma­jor re­lief to con­sumers and apart­ment buy­ers by go­ing be­yond the terms of the builder and buyer agree­ment and hold­ing that the com­pen­satory clauses in the agree­ment were un­fair and one sided. In its judg­ment dated June 8, 2015, the Na­tional Com­mis­sion di­rected the builder to hand over pos­ses­sion of the flat to con­sumers in a time bound man­ner and also awarded le­gal costs to the buy­ers/con­sumers.

In this case, con­sumers/buy­ers had booked flats in a com­plex be­ing de­vel­oped in Gur­gaon, Haryana, and en­tered into in­di­vid­ual buyer agree­ment with the builder. It was agreed that pos­ses­sion of the flat would be handed to the buy­ers within 36 months from the date of the agree­ment. How­ever, even af­ter 50 months, nei­ther was pos­ses­sion de­liv­ered to the buy­ers nor was the con­struc­tion com­pleted by the builder.

The con­sumers ap­proached the Na­tional Com­mis­sion to seek ap­pro­pri­ate re­lief. The buy­ers in their com­plaints sought de­liv­ery of pos­ses­sion of flats and de­manded com­pen­sa­tion at the rate of 18% com­pound­able in­ter­est for the pe­riod of de­lay. In lieu of loss for rental in­come, the buy­ers de­manded com­pen­sa­tion at the rate of ₹ 5 per square feet, ac­cord­ing to the terms of the agree­ment from the date on which the pos­ses­sion of the flat was sup­posed to be handed.

In ad­di­tion to the above re­lief, the buy­ers also pleaded for grant of com­pen­sa­tion on ac­count of men­tal tor­ture and agony suf­fered due to such un­jus­ti­fi­able de­lay in hand­ing over pos­ses­sion of the flat.

The builder ad­mit­ted the de­lay in hand­ing over pos­ses­sion, but de­fended the de­lay on ac­count of var­i­ous fac­tors like slow­down in the real es­tate sec­tor and short­age in sup­ply of ma­te­rial and labour due to gov­ern­ment no­ti­fi­ca­tions and schemes, Com­mon­wealth Games, short­age of brick kilns and sand min­ing.

Af­ter hear­ing both the par­ties the Na­tional Com­mis­sion ob­served that the rea­sons/ex­cep­tional cir­cum­stances cited by the op­po­site party had no force and no such doc­u­ments were placed on record to sup­port that there was any short­age of ma­te­rial and labour at site and held that the op­po­site party/builder is li­able to pay com­pen­sa­tion for de­lay.

The Na­tional Com­mis­sion fur­ther turned down the con­tention of the builder that com­pen­sa­tion payable had to be cal­cu­lated only at the rate of ₹ 5 per sq ft of the su­per area of flats as it was stip­u­lated in the agree­ment and there­fore the same was bind­ing on the buy­ers. It held that such a term/ clause of the agree­ment was one sided, un­fair and un­rea­son­able. It also ob­served that in the event of de­fault/de­lay on the part of buyer in mak­ing pay­ment, the agree­ment pro­vided for pay­ment of 18% com­pound­able in­ter­est to the builder, on the con­trary in case of de­lay/de­fault by the builder in hand­ing over pos­ses­sion of the flat, the builder was li­able to only pay ₹ 5 per sq ft. There­fore, the Na­tional Com­mis­sion held that such a clause in the agree­ment pro­vid­ing nom­i­nal com­pen­sa­tion to buy­ers is un­just and ex­ploits the con­sumers and tan­ta­mounts to un­fair trade prac­tice.

With re­spect to the ob­jec­tions re­gard­ing main­tain­abil­ity of the com­plaints on the ground of pe­cu­niary j uris­dic­tion (ju­ris­dic­tion of a court over a law­suit based on the value of its sub­ject mat­ter. Delhi High court now has ju­ris­dic­tion over cases worth R2crore) and ar­bi­tra­tion clause, the Na­tional Com­mis­sion held that as on date of fil­ing of the com­plaint, the prices of the flats had in­creased to more than R1crore ru­pees and thus com­plaints had been rightly filed and ex­is­tence of ar­bi­tra­tion clause in a builder-buyer agree­ment did not stop con­sumer fo­rums from grant­ing ap­pro­pri­ate re­lief to con­sumers on ac­count of de­fi­ciency in ser­vices and un­fair trade prac­tices. On the is­sue of lim­i­ta­tion raised by the builder, the com­mis­sion held that non­de­liv­ery of pos­ses­sion is a con­tin­u­ous wrong, which con­sti­tutes re­cur­rent cause of ac­tion and so long the pos­ses­sion is not de­liv­ered, buy­ers can al­ways ap­proach con­sumer fo­rums for ap­pro­pri­ate re­lief.

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