Courts Can't Rewrite Contract, Have To Rely on T&Cs Agreed By Parties While Adjudicating Disputes: Supreme Court

Recently, the Supreme Court held that the Courts cannot rewrite or create a new contract between the parties and have to simply rely on the terms and conditions of the agreement as agreed between the parties while deciding a dispute between the parties.The Bench comprising Justices Aniruddha Bose and Sanjay Kumar observed that once the contract in written form is entered by the parties, then the same would be binding upon them, and it is not open for the court to rewrite or make a new contract by giving a new interpretation to the contract. “Once the parties committed themselves to a written contract, whereby they reduced the terms and conditions agreed upon by them to writing, the same would be binding upon them…It was not for the NCDRC to rewrite the terms and conditions of the contract between the parties and apply its own subjective criteria to determine the course of action to be adopted by either of them.”, opined the judgment authored by Justice Sanjay Kumar.Background In the instant case, the National Consumer Dispute Redressal Commission (“NCDRC”) made a new interpretation of the contract entered by the buyer and seller of the apartment. The contract specifically stated that the buyer would have an option of election to end the contract and claim back the refund of consideration paid, in the event that the seller is not able to provide an 'occupation certificate' before the expiry of the grace period of one year. Despite the seller's failure to grant an 'occupation certificate' within the grace period, the NCDRC rejected the buyer's right to terminate the contract and to get the refund of the consideration amount already paid to the seller for the purchase of the apartment. The NCDRC while rejecting the appellant/buyer application stated that there was 'some delay' in handing over possession of the apartment by the respondent company, but opined that it was not 'unreasonable', whereby the appellants could cancel the Agreement and seek a refund. Aggrieved by such a decision, the appellant/buyer preferred a civil appeal before the Supreme Court. Issue The short question appeared before the Supreme Court was that whether the NCDRC can rewrite the terms and conditions of the covenants binding on the parties or make a new contract based on its interpretation. Supreme Court's Observation Answering the question mentioned above negatively, the Supreme Court observed that it is not for the court to rewrite or make a new contract, and it is incumbent upon the courts to abide by the terms and conditions laid down in the contract which is binding on the parties to the contract. The Supreme Court endorsed the Constitution Bench Judgment of General Assurance Society Ltd. vs. Chandumull Jain and another, where the Supreme Court held that “wherein it was observed that, in interpreting documents relating to a contract of insurance, the duty of the Court is to interpret the words in which the contract is expressed by the parties because it is not for the Court to make a new contract, however reasonable, if the parties have not made it themselves.” “this Court reiterated that a contract, being a creature of an agreement between two or more parties, is to be interpreted giving the actual meaning to the words contained in the contract and it is not permissible for the Court to make a new contract, however reasonable, if the parties have not made it themselves.”, the Supreme Court stated in Rajasthan State Industrial Development & Investment Corporation vs. Diamond & Gem Development Corporation Ltd. Action of Buyer In Terminating The Agreement Can't Be Faulted With The Supreme Court stated that if the buyer is not provided with the 'occupation certificate' with in the expiry of the grace period, then the action of the appellant/buyer in terminating the Agreement on the first available date, as provided therein, cannot be found fault with. “It is not clear as to when the appellants were actually provided with the 'Part Occupancy Certificate' dated 08.06.2017 obtained by the respondent-company, but it is not in dispute that the appellants took steps to terminate the Agreement immediately after expiry of the grace period on 30.06.2017, by getting a legal notice issued on 01.07.2017. As there was no novation of the contract in writing by the parties and as it was not open to one of the parties thereto, viz., the respondent-company, to unilaterally change the agreed terms and conditions, the action of the appellants in terminating the Agreement on the first available date, as provided therein, cannot be found fault with.”, observed the Supreme Court. NCDRC Overstepped Its Power and Jurisdiction In Ignoring Binding Covenants In Agreement After recording that the appellant/buyer action of the termination of the contract cannot be faulted with, and the NCDRC was wrong in not allowing the application of the appellant/buyer, the Supreme Court observed that the NCDRC overstepped its power and jurisdiction in...

Courts Can't Rewrite Contract, Have To Rely on T&Cs Agreed By Parties While Adjudicating Disputes: Supreme Court

Yash Mittal

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