The Supreme Court Bench of Justice U.U. Lalit and Justice Indu Malhotra held that one sided clauses in builder-buyer agreements are considered to be an unfair trade practice under Section 2(r) of the Consumer Protection Act, 1986. The Bench further observed that the builder cannot bind the buyer under the terms of the one-sided clauses in the agreement. The appeals were filed by the Appellant-Builders against the two orders of the National Consumer Disputes Redressal Forum.

The Bench observed, with reference to the Agreement, that the one sided clauses were evident in the sense that the interest on delayed payments by the buyer to the builder were as high as 18% whereas the interest payable by the builder to the buyer for delayed possession was as low as 9%. The Bench further observed that the termination clause in the agreement was also unilateral in the sense that the buyer had to wait for a period of 12 months after the end of the grace period under the agreement and subsequently issue a notice of termination for a period of 90 days, whereas the builder could automatically terminate the agreement if there is a default on part of the buyer towards its contractual obligations and if the buyer fails to rectify the default within the period of 30 days of the termination notice from the builder.

On the aspect of unfair trade practice, the Bench gave an extensive interpretation of Section 2(r) as follows:

“6.7. A term of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder.

The contractual terms of the Agreement dated 08.05.2012 are ex-facie one-sided, unfair, and unreasonable. The incorporation of such one-sided clauses in an agreement constitutes an unfair trade practice as per Section 2 (r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the Builder.”

Accordingly, the Bench dismissed the appeals and directed the appellant builder to refund the amounts as per the order of the National Commission.


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