Supreme Court clarified that Consumer Forums are not bound by one side clauses in the Contracts and they can grant higher interest

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Shubham Budhiraja[1]

 

The Homebuyers filed a consumer complaint against Builder. The NCDRC directed the Builder to handover the possession after obtaining the occupancy certificate with interest as compensation. The Builder challenged the same before the Hon’ble Supreme Court on the ground that NCDRC has exceeded its jurisdiction by granting beyond the contract. The Hon’ble Supreme Court held as under:

 

1.    The jurisdiction of the consumer fora is traceable not merely to the contractual terms agreed between the parties but to the statute itself. Sections 12 and 22 of the Act empower the consumer fora, including the NCDRC to adjudicate complaints relating to deficiency in service and to grant appropriate reliefs.

 

2.    Section 22 expressly incorporates the powers under Sections 12, 13 and 14, thereby enabling the NCDRC to issue directions and award compensation for loss or injury caused to a consumer. The source of power, therefore, is statutory, and not contractual.

 

3.    It is equally well settled that contractual stipulations cannot curtail the statutory jurisdiction of the consumer fora. In Pioneer Urban Land & Infrastructure Ltd v. Govindan Raghavan11, this Court held that one-sided and unreasonable clauses in builder-buyer agreements constitute an unfair trade practice under Section 2(1)(r) of the Act. It was further observed that the incorporation of such oppressive terms in a standard form contract, where purchasers have little or no bargaining power, cannot bind the consumer so as to defeat statutory remedies under the Act.

 

4.    A reading of Clause 10(c) reveals that compensation for delay is stipulated at the rate of Rs. 10 per sq. ft. per month. Whereas, Clause 5(b) of the Agreement empowers the developer to charge interest at 24% per annum for delayed payments by the allottee and to forfeit a substantial portion of the earnest money. Thus, the terms are evidently one-sided and have been drafted unilaterally by the developer. The stipulated compensation is nominal and disproportionate, particularly in cases of prolonged delay causing financial strain and mental hardship to homebuyers

 

5.    The statute does not impose any embargo on the grant of higher or reasonable compensation merely because the parties have agreed to a particular clause, especially where such clause is found to be unfair or oppressive. While consumer fora must act judicially and not arbitrarily enhance compensation, they are not bound to mechanically enforce a contractual term that results in manifest injustice. Departure from such a clause, where justified by the nature and duration of the delay and the hardship caused, lies within the statutory competence of the forum.

 

6.    NCDRC acted well within the ambit of its statutory authority in awarding compensation, notwithstanding the restrictive stipulation contained in Clause 10(c) of the Agreement. The power of the consumer fora to grant just and reasonable compensation for deficiency in service is traceable to the statute and cannot be curtailed by contractual terms which operate to the detriment of the consumer. The award therefore represents a legitimate and permissible exercise of statutory jurisdiction.

 

7.    The possession without an Occupancy Certificate cannot be forced upon the allottees. Obtaining such certificate is a statutory pre-condition integral to lawful delivery of possession.


[1] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], Budhirajalawchambers@gmail.com, +91-9654055315

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