Allottees cannot be made to wait indefinitely for possession of the apartments allotted to them, Supreme Court

The SC on Jan 11, 2021 {IREO GRACE REALTECH PVT. LTD. vs. ABHISHEK KHANNA & OTHERS} held that in the present lis the terms of the Apartment Buyer‘s Agreement are oppressive and wholly one-sided, and would constitute an unfair trade practice under the Consumer Protection Act, 1986.

It was also held by the Bench, comprising of Justice Indu Malhotra, Justice D.Y. Chandrachud and Justice Indira Banerjee that the terms of the agreement authored by the Developer does not maintain a level platform between the Developer and the flat purchaser. It was held that the stringent terms imposed on the flat purchaser are not in consonance with the obligation of the Developer to meet the timelines for construction and handing over possession, and do not reflect an even bargain. It was held that the failure of the Developer to comply with the contractual obligation to provide the flat within the contractually stipulated period, would amount to a deficiency of service. It was also held that given the one-sided nature of the Apartment Buyer‘s Agreement, the consumer fora had the jurisdiction to award just and reasonable compensation as an incident of the power to direct removal of deficiency in service. 

The issues falling for consideration before the SC were whether the terms of the Apartment Buyer‘s Agreement were one-sided, and the Apartment Buyers would not be bound by the same, and also whether on account of the inordinate delay in handing over possession, the Apartment Buyers were entitled to terminate the agreement, and claim refund of the amounts deposited with interest.

The SC held that that the incorporation of 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. It was held that  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 which are unfair, as null and void. It was held that this is a statutory recognition of a power which was implicit under the 1986 Act. 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.

DOCTRINE OF ELECTION

The SC held that an allottee may elect or opt for one out of the remedies provided by law for redressal of its injury or grievance. It was held that an election of remedies arises when two concurrent remedies are available, and the aggrieved party chooses to exercise one, in which event he loses the right to simultaneously exercise the other for the same cause of action. However, it was held that there are three elements of election viz. existence of two or more remedies, inconsistencies between such remedies, and a choice of one of them. It was held that if any one of the three elements is not there, the doctrine will not apply. 

The SC held that Consumer Protection Act, 1986 was enacted to protect the interests of consumers, and provide a remedy for better protection of the interests of consumers, including the right to seek redressal against unfair trade practices or unscrupulous exploitation. It was held that remedies under the Consumer Protection Act were in addition to the remedies available under special statutes. It was further held that the absence of a bar under Section 79 of the RERA Act to the initiation of proceedings before a fora which is not a civil court, read with Section 88 of the RERA Act makes the position clear. Section 18 of the RERA Act specifies that the remedies are ―without prejudice to any other remedy available.

The SC finally held that allottees are not bound to accept the offer of  allotment because of the inordinate delay in completing the construction of the Towers where units were allotted to them. It was held that the Occupation Certificate is not available even as on date, which clearly amounts to deficiency of service. It was held that the allottees cannot be made to wait indefinitely for possession of the apartments allotted to them, nor can they be bound to take the apartments in Phase 1 of the project. It was also held that the allottees have submitted that they have taken loans, and are paying high rates of interest to the tune of 7.9% etc. to the Banks. Consequently, the SC held that the allottees in Chart B are entitled to refund of the entire amount deposited by them.