India: One-Sided Clause In A Builder Buyer Agreement To Constitute Unfair Trade Practices Under Consumer Protection Act, 1986

Last Updated: 11 April 2019
Article by Sindhuja Kashyap


Real Estate sector has seen an imperative shift from the legal perspective post introduction of the Real Estate (Regulation and Development) Act, 2016 and the Insolvency and Bankruptcy Code, 2016. However the picture that still needed renovation was the builders acting untrammelled with the terms and conditions as used for entering into an agreement with the proposed purchaser.

Supreme Court in its recent judgement dealt with this issue of arbitrary provisions in the builder buyer agreement and declaring them as unfair trade practices under the law.


The builder Pioneer Urban Land & Infrastructure Limited ("Builder") launched a residential project in Gurgaon wherein Govindan Raghavan ("Flat Purchaser") purchased an apartment by entering into an Apartment buyer's agreement ("Agreement") dated 08.05.2012. As per clause 11.2 of the Agreement, the Builder was required to make all efforts to apply for the occupancy certificate for the project within 39 months from the date of excavation with a grace period of 180 days. However, the Builder failed to apply for the same and the Flat Purchaser filed a case against the Builder before the Hon'ble National Commission on January 27, 2017. The Flat Purchaser alleged deficiency of service on part of the Builder in applying for occupancy certificate and handing over the possession of the apartment to the Flat Purchaser. Therefore, the Flat Purchaser prayed for the refund of the entire amount as deposited with the Builder @18% interest along with the interest, compensation for mental agony and litigation costs.

In furtherance to this case, the Hon'ble National Commission passed an interim order dated February 06, 2017 ("Interim Order") of restraining the Builder from cancelling the allotment of the apartment as allotted to the Flat Purchaser. As the occupancy certificate was obtained while the case was pending before the Hon'ble National Commission, the Builder submitted that the Flat Purchaser should be directed to take possession of the flat instead of being directed to refund the amount, which was clearly denied by the Flat Purchaser.

The National Commission vide its final judgement dated October 23, 2018 ("Judgement") passed the order in favour of the Flat Purchaser directing the Builder to provide refund at the rate of 10.7% p.a. in accordance with Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017.However, no interest was awarded for the period when the Interim Order was passed.

The Builder being aggrieved by the Judgement filed an appeal before the Hon'ble Supreme Court ("Supreme Court/Court").


Whether the Judgement by the Hon'ble National Commission was right?


Builder: The Builder submitted that Clause 11.5 of the Agreement clearly provided the Flat Purchaser with the right to terminate the Agreement in case of delay in handing over the possession even after 12 months from the end of grace period, by giving a notice of 90 days and obtaining a refund of the amount so deposited with the Builder along with interest @9%p.a. The Clause also stated that in case the intended allottee failed to exercise the abovementioned right of termination, it shall be bound by the provision of the Agreement. Further, Clause 20 of the Agreement that dealt with right of cancellation by the allottee also stated that in case the in case of clear and unambiguous failure of the warranties of the Builder that leads to frustration of the Agreement, Flat Purchaser shall have the right to cancel the Agreement. Upon cancellation, the Flat Purchaser shall be entitled to refund of the instalments actually paid along with interest at 6% p.a. Further, no claim against the Builder of whatsoever nature could be raised by the Flat Purchaser. Therefore, the Builder submitted that the Flat Purchaser was not entitled to the refund as the rights provided to them under the Agreement were not duly exercised.

Flat Purchaser: It was contended by the Flat Purchaser that the clauses of the Agreement were one-sided. As per the Agreement, Builder could charge interest at 18% for delayed payment, however the Flat Purchaser could only get a maximum of 9% interest rate for termination of the agreement due to delay by the Builder. Further, Flat Purchaser informed the Court about an alternate flat bough by it due to inordinate delay by the Builder and the bank loan as obtained by it for the purpose of purchase of the flat by the Builder.


The Hon'ble Supreme Court upon hearing the contentions of both the parties was of the view that the Builder had failed in handing over the possession of the flat to the Flat Purchaser within a reasonable period. Further the Court referred to the case of Lucknow Development Authority v M. K Gupta wherein the Court concluded that the inordinate delay in handing over the possession of the flat clearly amounts to deficiency of service under the Consumer Protection Act, 1986 ("Act"). Further the Court stated that a person cannot be made to wait indefinitely for possession of the flat allotted to him and is entitled to seek refund of the amount paid by him, along with compensation.1

The Court placed reliance on the clauses of the Agreement as was practiced by the Builder during the submission of their contentions, and stated that "the Agreement reveals stark incongruities between the remedies available to both the parties". The Court referred to the 199th Report of the Law Commission of India on 'Unfair (Procedural & Substantive) Terms in Contract" wherein it was stated that "A contract or a term thereof is substantively unfair if such contract or the term thereof is in itself harsh, oppressive or unconscionable to one of the parties".

While perusing the Agreement, Court referred to few such clauses as suggestive comparison for unfair trade practices, namely:

  1. Interest Rate: Clause 6.4(ii) of the Agreement entitles the Builder to charge interest @18%p.a. on account of delay in payment of instalments by the Flat Purchaser, however as per Clause 11.5 of the Agreement the Builder was only liable to refund the amount along with interest @ 9% p.a. in case case of delay in providing possession of the flat and the Flat Purchaser terminating the agreement by giving 90 days termination notice.
  2. Time Period: Clause 6.4(iii) of the Agreement entitles the Builder to cancel the allotment and terminate the Agreement if any instalment remains in arrears for more than 30 days, however as per Clause 11.5 the right to terminate the Agreement is provided to the Flat Purchaser only after delay in handing over the possession even after 12 months from the end of grace period. Further, the Builder gets 90 days of termination notice period and 90 days of period for refund which seems to be clearly missing for the Flat Purchaser.
  3. Forfeiting the amount: Clause 23.4 of the Agreement provides the Builder the right to serve a termination notice upon the Flat Purchaser for breach of any contractual obligation. In case of failure to rectify the breach/default within 30 days, the Agreement automatically stands cancelled and the Builder has the right to forfeit the amount so deposited by the Flat Purchaser. However, as per clause 11.5(v) if the Flat Purchaser fails to exercise his right to termination within stipulated time, then the Flat Purchaser shall have no right of termination thereafter and shall be bound by the provisions of the Agreement.

The Court clarified that Clause 2(r) of the Act is illustrative in nature and not exhaustive. Further Court referred to the case of Central Inland Water Transport Corporation Limited and Ors v Brojo Nath Ganguly and Ors wherein this very Hon'ble Court had held that an attempt to give illustrations can be made but no exhaustive list can be provided. However, the Court provided the basic guideline stating that it will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. Further the Court stated that it will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be.

Upon perusal of the above case, the Court was of the view that a term of contract shall not be considered final and binding if it is shown that the Flat Purchaser had no option but to sign on the dotted line, on a contract framed as per the comfort of the Builder.

The Builder could not bind the Flat Purchaser with such blinded contractual terms which were adopted as unfair methods or practices for the sole purpose of selling the flats by the Builder. The Appeal was therefore rightly dismissed by the Hon'ble Court.


We observe that the Hon'ble Court has taken up a constructive interpretation of the law by not restricting itself to the definition of unfair trade practices as provided under the Act, but analysing it as an illustrative definition to cover situations where such helpless Flat Purchasers could be provided with a remedy against such deficient service being provided to them. Further, the judgement comes as a great relief to the public at large due to increase in the investment in the real estate industry but lack of diligence by the Builder in providing the promised flat/apartments to the purchaser at the right time irrespective of all the financial troubles that the purchaser has to go through. This judgement would hopefully create the necessary and much needed deterrence among the builders with laid back attitude in standing by their own promises.


1. Fortune Infrastructure & Anr v Trevor D'Lima & Ors

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Singhania & Partners LLP, Solicitors and Advocates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Singhania & Partners LLP, Solicitors and Advocates
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions