Case Note & Summary
The dispute arose from a delayed housing project where the builder, NBCC (India) Limited, failed to hand over possession of a residential unit to the purchaser, Shri Ram Trivedi, within the stipulated period. In 2012, the builder floated a group housing project in Gurgaon, and the respondent applied for allotment, receiving an allotment letter in June 2012. Clause 20 of the allotment letter stated the builder would 'endeavour' to complete construction within two and a half years, with compensation for delay at Rs 2 per sq ft per month after certain conditions. Possession was eventually handed over in July 2018, leading the respondent to file a consumer complaint in January 2017 before the National Consumer Disputes Redressal Commission (NCDRC). The NCDRC, in its order dated 20 September 2019, directed the builder to pay compensation at 10% per annum on the deposited amount from June 2015 until possession, along with Rs 2,00,000 for loss of rent and Rs 25,000 in costs. The builder appealed to the Supreme Court, arguing that the 'endeavour' clause did not impose an absolute commitment, the respondent delayed instalment payments, and the contractually stipulated compensation rate should apply. The core legal issues were whether the 'endeavour' clause absolved the builder from liability and whether the compensation rate in Clause 20 was binding or an unfair trade practice. The builder contended that the clause only required efforts, not guaranteed delivery, and that force majeure conditions applied. The respondent sought upheld compensation for the delay. The Supreme Court analyzed Clause 20, interpreting 'endeavour' as requiring reasonable efforts to meet the deadline, with the burden on the builder to explain compliance steps. It held that construing the clause as allowing indefinite delay would leave purchasers at the builder's mercy. The court referenced the precedent Pioneer Urban Land and Infrastructure Limited v. Govindan Raghavan, which established that one-sided contractual terms constitute unfair trade practices under Section 2(1)(r) of the Consumer Protection Act, 1986. It found Clause 20's compensation rate one-sided and unfair, as it disproportionately favored the builder. The court upheld the NCDRC's award of 10% per annum compensation, noting that the builder's delay amounted to a deficiency in service under Section 2(1)(o). The decision affirmed the NCDRC's order, requiring the builder to pay the directed compensation with interest in case of default, thus favoring the purchaser in the consumer dispute.
Headnote
A) Consumer Law - Deficiency in Service - Compensation for Delay - Consumer Protection Act, 1986, Section 2(1)(r) - Builder failed to hand over possession of residential unit within stipulated period despite 'endeavour' clause - Court held that 'endeavour' requires reasonable efforts and does not allow indefinite delay - Builder must explain steps taken to comply - Deficiency in service established under Section 2(1)(o) - Compensation awarded at 10% per annum instead of contract rate (Paras 5-8). B) Consumer Law - Unfair Trade Practices - One-Sided Contractual Terms - Consumer Protection Act, 1986, Section 2(1)(r) - Clause 20 of allotment letter stipulated compensation at Rs 2 per sq ft per month for builder's delay - Court found this term one-sided, unfair, and unreasonable as it left purchaser at builder's mercy - Upheld NCDRC's finding that it constitutes unfair trade practice - Followed precedent Pioneer Urban Land and Infrastructure Limited v. Govindan Raghavan (Paras 7-8). C) Contract Law - Interpretation of Clauses - 'Endeavour' Obligation - Not mentioned - Builder argued 'endeavour' meant no unconditional commitment for specific delivery date - Court interpreted 'endeavour' in context of entire clause, requiring all reasonable efforts to hand over possession by stipulated date - Burden on builder to explain compliance steps - Clause must be construed to protect purchaser from indefinite delay (Paras 6-7). D) Consumer Law - Compensation Calculation - Interest Rate - Not mentioned - NCDRC awarded compensation at 10% per annum on deposited amount from June 2015 till actual possession - Court upheld this computation, rejecting builder's reliance on contract rate of Rs 2 per sq ft - Additional awards for loss of rent and costs also upheld (Paras 4, 6, 8).
Issue of Consideration
Whether the builder's obligation to 'endeavour' to complete construction within two and a half years absolves it from liability for delay, and whether the contractually stipulated compensation rate of Rs 2 per sq ft per month is binding or constitutes an unfair trade practice.
Final Decision
Supreme Court upheld NCDRC's judgment dated 20 September 2019, directing appellant to pay compensation computed at 10% per annum on amount deposited by respondent from June 2015 till actual date of possession, plus Rs 2,00,000 towards loss of rent and costs of Rs 25,000, with interest at 12% if not paid within four weeks
Law Points
- Interpretation of 'endeavour' clauses in builder-buyer agreements
- Unfair trade practices under Consumer Protection Act
- Compensation for deficiency in service
- Force majeure conditions
- One-sided contractual terms
