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Pioneer Urban Land & Infrastructure Ltd. v/s Govindan Raghavan

Civil appeal No. 12238 of 2018

Facts of the case:

In this case, the appellant builder launched a housing residential project in Gurugram. The respondent agreed to buy an apartment in the said project of the appellant for a sale consideration of Rs. 4,83,25,280/-. As per their agreement, the appellant had to make every possible attempt to apply for the Occupancy Certificate within thirty-nine months from the date of excavation with a grace period of 180 days. The appellant failed to comply with the agreement and the respondent filed a consumer complaint before NCDRC claiming deficiency of services and failure to hand over the possession of flat in the said project. The national commission passed an interim order restraining the appellant to reject the appointment of the flat made to the respondent till the pendency of the matter. During the course of the matter, the appellant issued the possession letter asking, since the finality of the flat the respondent must accept the flat instead of refund amount. But the National Commission in their final order regulated the appellant to refund the amount of the sale consideration along with the interest as it will be unfair to hand-in the possession of the flat after three years. The appellant filed an appeal claiming the respondent had a ‘Right of cancelation by the allottee’ under the agreement, and he should be bound by the agreement, and has no right to seek compensation.

Issues:

  1. Whether the right of cancellation by the allottee stands and the respondent is not entitled to compensation or not?
  2. Whether the interest stipulated on the compensation is valid or not?

Held:

The court held that the consumer complaint in the present case can be treated as a termination notice under the agreement. There was an inordinate delay in the handing over of the flat and there was a failure to abide by the contractual obligation of giving the occupancy certificate. Hence, the impugned order of the National commission is valid as there is a case of deficiency of service on behalf of the appellant and the respondent is entitled to the refund of sale consideration amount and legitimate compensation. The respondent should not be coerced to accept the flat after an unjustifiable delay in handing over the flat. The clauses of the agreement the appellant relied upon that established the interest rate are “unfair trade practices.” It is entirely one-sided and the court referred to the case stating “Article 14” of the Constitution guarantees to all people equality before the law and equal protection of the laws. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power.” So the national commission was right in awarding the interest on the compensation.

Conclusion

In the contractual agreements, where one party has the upper hand to take unfair advantage of another due to lack of information, then the court must assess based on facts and circumstances to cease the unreasonable clause from applying. These one-sided clauses encourage unfair trade practices that are exploited by the contractors to take advantage of a layman.

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