The Supreme Court has ruled that the jurisdiction of consumer fora to award just and reasonable compensation for deficiency in service is statutory and cannot be curtailed or defeated by one-sided and unfair terms in a builder-buyer agreement. The ruling came while answering to the appeals challenging three separate orders passed by the National Consumer Disputes Redressal Commission (NCDRC) concerning a residential project, “Parsvnath Exotica”, developed by the appellant, Parsvnath Developers Ltd.
The Court clarified that the incorporation of oppressive and one-sided clauses in a standard form agreement, where the homebuyer has no option but to sign, constitutes an unfair trade practice. Accordingly, the Consumer fora are not bound to mechanically enforce a contractual term that stipulates nominal compensation for delay, especially when it results in manifest injustice to the consumer.
Offering possession of a flat without obtaining the mandatory Occupancy Certificate is not a valid offer of possession and amounts to a deficiency in service, asserted the Court, while emphasising that a developer cannot compel a homebuyer to take possession under such circumstances, as the Occupancy Certificate is a statutory pre-condition for lawful delivery.
A Two-Judge Bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan observed that the jurisdiction of consumer fora is statutory, not contractual, and is derived from the Consumer Protection Act, 1986. Thus, the power to adjudicate complaints and grant relief for “deficiency in service” under Sections 12, 14, and 22 of the 1986 Act is not limited by the terms of an agreement between the parties.
The Bench further observed that housing construction is a “service”, and the failure to deliver possession within the stipulated period constitutes a “deficiency” under the Consumer Protection Act, and citing precedents, the Bench noted that the term “compensation” is of wide amplitude and includes redress for mental agony and harassment, not just pecuniary loss.
The Bench critically examined the contractual terms and found them to be “evidently one-sided” and “unilaterally” drafted by the developer. It highlighted the disparity between the nominal compensation of ₹10 per sq. ft. per month offered to the buyer for delay (Clause 10(c)) and the developer’s right to charge 24% per annum interest for the buyer’s default (Clause 5(b)). The Bench held that the incorporation of such one-sided and unreasonable clauses in a standard form contract, where the purchaser has little to no bargaining power, constitutes an “unfair trade practice” under Section 2(1)(r) of the 1986 Act.
Further, the Bench observed that offering possession without a valid Occupancy Certificate is not a lawful offer of possession and constitutes a continuing deficiency in service. A homebuyer cannot be compelled to accept possession in such circumstances, as obtaining the certificate is a statutory pre-condition for lawful delivery. The Bench took note of the appellant’s persistent non-compliance and failure to secure the Occupancy Certificate despite repeated undertakings given before the Court. In this context, the award of interest at 8% per annum was deemed to be fair and reasonable compensation.
Briefly, the respondents, who were homebuyers, had filed consumer complaints due to the appellant’s failure to deliver possession of their respective flats within the contractually stipulated period of 36 months, with a grace period of six months. Despite the respondents having paid almost the entire sale consideration, possession was not delivered.
The NCDRC directed the appellant to complete construction, hand over possession after obtaining the Occupancy Certificate, and pay compensation for the delay in the form of simple interest at 8% per annum. The NCDRC also directed the appellant to pay litigation costs and bear any increase in stamp duty that occurred after the promised possession dates.
The appellant challenged these orders before the Supreme Court, arguing that the NCDRC had exceeded its jurisdiction by granting relief beyond the contractual terms. The appellant contended that Clause 10(c) of the Flat Buyer Agreement provided for a fixed compensation of ₹10 per sq. ft. per month for delays, and no further compensation could be awarded. The appellant attributed the delays to factors beyond its control, such as financial shortages, lack of labour, and delays in statutory approvals.
Appearances:
AOR Rajesh P., for the Appellant
AORs Divya Jyoti Singh and Himanshu Shekhar, along with Advocates Parmanand Yadav, Ankita Singh, M.L. Lahoty, Anchit Sripat, and Arvind Kumar, for the Respondent
