SC: One-sided clause in an agreement amounts to unfair trade practices*

The present batch of Appeals has been filed by the Appellant- Developer, to challenge the judgment passed by the National Consumer Disputes Redressal Commission (―National Commission‖) directing refund of the amounts deposited by the Apartment Buyers in the project.The issue which have arisen for consideration is:

Whether the terms of the Apartment Buyer‘s Agreement were one- sided, and the Apartment Buyers would not be bound by the same;

Clause 13.8 of the Agreement provides that the allottee shall be deemed to have waived all its claims in respect of the area, specifications, quality, construction, any other provision in the apartment against the Developer upon taking possession of the apartment.

Clause 21 provides for termination of the Agreement and forfeiture of earnest money by the Developer, if the allottee neglects or fails to make timely payments as stipulated in the Agreement, or fails to exercise the options offered by the Developer.

Clause 21.3 provides that upon such termination.Bench comprising Justices DY Chandrachud, Indu Malhotra and Indira Banerjee observed that the Developer cannot compel the apartment buyers to be bound by the one-sided contract.The court held that “We are of the view that the incorporation of such one-sided and unreasonable clauses in the Apartment Buyer‘s Agreement constitutes an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act.”

Even under the 1986 Act, the powers of the consumer fora were in no manner constrained to declare a contractual term as unfair or one-sided as an incident of the power to discontinue unfair or restrictive trade practices. An ―unfair contract‖ has been defined under the 2019 Act, and powers have been conferred on the State Consumer Fora and the National Commission to declare contractual terms which are unfair, as null and void. This is a statutory recognition of a power which was implicit under the 1986 Act.

In view of the above, we hold that the Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer‘s Agreement.

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