India is set to become the third-largest consumer market by the end of 2030. In addition to the various laws implemented in favour of the consumers, consumer satisfaction and effective marketing processes are considered to be the primary reasons for attaining such a milestone. India has many laws for the safeguard of consumer rights, however, one of the most effective ones among them is the Consumer Protection Act, 1986 (the “Act”).
Prior to the implementation of the Act, there were no other laws in place for the protection of the consumers, except under the law of torts. Under tort law, a civil suit was to be filed to get damages for the wrong caused by the shopkeeper or service provider. Thus, the Act was implemented to ensure effective and efficient protection of the consumers’ rights. The Act is based on the doctrine of ‘Caveat Emptor’ which means that it is the responsibility of the buyer to identify the defect in the goods.
Remedies available to an Allottee against a Builder intentionally delaying the construction
In the event that there is a delay in delivering the flat to an allottee by the builder, civil as well as criminal penalties are attracted. Such delays not only affect the allottee monetarily but also mentally. Consumers can definitely take recourse under the Act in such a situation and usually, the Courts dictate a judgement in favour of the buyer/allottee, punishing the builders severely. Mostly it is witnessed that there is exist malpractices on the part of the builder. The most common ones include delay in possession of the flat, change in area contrary to what was promised, fund’s shortage, setting aside the agreed-upon the plan or the agreed-upon the design to the property.
There are a few important clauses in every agreement that has to be looked upon when such delay is made by the builder. Every agreement contains, inter alia, the name of the party and the builder’s name, the details of the property to be delivered, the date of execution, the consideration to be paid, the penalty that has to be given in case of delay (defers on a case to case basis), the conditions under which the property has to be delivered, the time schedule of construction, the expected possession date, the rights of the builder as well as the allottee and the provisions relating to cancellation/termination.
The builder buyers’ agreement (“BBA”) is considered to be a vital document as it lays out the important clauses/provisions that must be carefully read and understood by the buyer before entering into the BBA, to ensure that his rights are protected. It is to be borne in mind that the rights of both parties arise from this very BBA entered between them.
A one-sided clause in the BBA
Usually, since the builders use a standard form of the contract without negotiating the same with the allottees, they tend to impose one-sided terms and conditions under the BBA. The Hon’ble Supreme Court has in a plethora of cases declared that such unfair trade practices by the builder are bad in law.
In one such case, the builder, Pioneer Urban Land and Infrastructure Limited, had started a project in Gurgaon. In due course, the purchaser entered into the BBA and booked an apartment. Under the BBA, the builder was to get an occupancy certificate within a certain stipulated time period, however, the builder failed to get the occupancy certificate within the stipulated time period. Resultantly, a case was filed before the National Consumer Disputes Redressal Commission (“NCDRC”) against the builder for the deficiency of services and compensation was sought.
The NCDRC passed a judgement in favour of the buyer, granting compensation along with the 10 per cent interest. The builder, being aggrieved by the NCDRC’s decision, preferred an appeal to the Supreme Court. The builder claimed that as per the BBA, the allottee/buyer was entitled to terminate the BBA within a 12 months period only, by giving a note of 90 days. Further, the BBA also stipulated that the buyer was entitled to 9 per cent interest in the event of delay and for cancellation, the buyer would be entitled to a return of 6 per cent interest only and no further claims could be made against the builder. It was the buyer’s case that these clauses in the BBA were unfair and one-sided in nature.
Having heard the parties, the Supreme Court held that the builder cannot force the allottee/buyer to wait for an indefinite amount of time and expect the buyer to accept the one-sided clauses in the BBA. It was further held that this was an unfair trade practice and thus, the buyer was awarded compensation as well as interest. The Apex Court held that “A contract or a term thereof is substantively unfair if such contract or the term thereof is in itself harsh oppressive or unconscionable to one of the parties” and clarified the position in this regard, that one-sided agreement by the builders are completely unfair and cannot be accepted.
As per Section 11 of the Act, the pecuniary jurisdiction of the District Forum shall not exceed INR 20 lakhs. An appeal can be made to the State Commission, under its appellate jurisdiction, within 30 days against the order by the District Forum. Further, under Section 17 of the Act, the State Commission’s pecuniary jurisdiction has been envisaged as more than INR 20 lakhs but not exceeding INR 1 crore. An appeal may be preferred to the NCDRC in case the party is aggrieved by the decision of the State Commission, invoking the NCDRC’s appellate jurisdiction, within 30 days. Under Section 21 of the Act, NCDRC’s pecuniary jurisdiction is more than INR 1 crore. The Act also provides a statutory appeal to the Supreme Court against the decision of the NCDRC, under Section 23, within 30 days from the date of the decision.
It is very important to understand that the need of the buyer plays a very important role in deciding its locus before the Consumer Forums. If the buyer’s income is solely dependent on the property or it has been purchased for residential purposes, then there is no better remedy available to such buyer, other than approaching the respective consumer forum under the Act. Moreover, the jurisdiction of the respective consumer forum is decided on the basis of the value of the property in question. It must, however, be borne in mind that a legal notice must be sent to the opposite party prior to instituting a consumer complaint and invoking the jurisdiction of the consumer courts/forums.