Home buyers welcome SC’s ruling against unfair contracts favouring builders

By Praveen Dwivedi
Photo: Akash Mishra
Posted: Apr 04, 2019

The Supreme Court on Tuesday ruled that one-sided contracts between the builder and buyer, which are drafted in favour of the builder, should not be a final one and binding. It has been often seen that builders put stringent clauses in the contracts against the buyers whereas it is lenient for the builders.

The Apex court said that one-sided and unfair agreement would not be binding. A bench of Justices UU Lalit and Indu Malhotra said that any contract should not protect the interest of the company at the cost of buyers.

The bench also directed a builder to refund Rs 4.83 crore with 10.7 per cent interest to its home buyer. They also said that if purchasers have no option but to sign on the contract framed by the builder then it should not be a final one.

Many home buyers have already complained that the contracts are always skewed in favour of the builder. It has been seen that builder charge heavy interest rates when there is a delay in the payment whereas builders are given freehand to cancel the contract on their own terms.

It has always been a case that there is no provision of punitive clauses against builders when there is a delay in handover of the flats. There are lesser interest rates for the builders when there is delay in possession.

When the court examined a contract, it was found that there was provision of 18 per cent interest rate for delay in payment to the builder whereas builder is only liable to pay 9 per cent interest rate for delay in possession. They said that such kind of contracts are unreasonable.

The disparity can also be seen in the contracts in terms of time period for imposition of interest rates. Normally, interests are incurred when the buyer fails to pay after 30 days of the date of payment whereas buyers cannot terminate the contract in case of delay in possession by 12 months after the grace period.

A home buyer in Greater Noida, Akansha Agrawal said, “I welcome the SC's ruling. There should be equal interest rates for both buyer and builder. They compensate us Rs 5 per sqm when there is delay in possession. It is just 2-3 per cent of interest rate. Contrary to that, we are charged 18 per cent when there is delay in payment. This disparity is certainly not in favour of the buyers. It should be taken care of at the earliest.”

It is to be noted that the National Consumer Disputes Redressal Commission (NCDRC) had also earlier said that the unreasonable contracts are challengeable. They said that if builder charges 18-24 per cent when there is delay in payment then builders should also be charged at the same rate when there is delay in possession.

“It has also been found that the builder has clause in the agreement stating the possibility of escalation charges of the raw materials during the waiting period to get possession of flats. This is also unfair. The payments should be done according to the agreement made at the time of booking of the flats,” said Manish Kumar, a home buyer at Greater Noida West.

TAGS: Builder buyer contracts / SC rules against unfair flat contracts / Unfair contracts favouring builders / Supreme Court of India / Noida news