Case: M/S JANPRIYA BUILDESTATE PVT. LTD Vs. AMIT SONI &amp; ORS

1. These appeals are against the common judgment.2. We take Civil Appeal No. 1065 of 2021 as the lead case.3. On 09.04.2011, the appellant has purportedly entered into a collaboration agreement with Uppal Housing Private Limited and Umang Realtech Private Limited for development of a group housing project. The appellant owns the land on which the project was contemplated. Following the collaboration agreement, the appellant also figures as a party in agreement which is styled as a tripartite agreement. The parties to the tripartite agreement are apart from the appellant, the buyer and the developer. It would appear that after the agreement was entered into, a project commenced but it could not be completed as contemplated. This led to a complaint being filed before the National Consumer Disputes Redressal Commission (hereinafter referred to as NCDRC for brevity) under the Consumer Protection Act, 1986 (hereinafter referred to as Act for breavity). This complaint has been allowed by the NCDRC.4. The complaint of the appellant is that the NCDRC has erred in visiting the appellant also with liability under the Act. It is the case of the appellant that under the collaboration agreement and the tripartite agreement, the appellant has not undertaken any liability qua the consumers viz., the flat buyers. It is the case of the appellant that a perusal of the collaboration agreement and the tripartite agreement would make the following position clear.The appellant was to contribute the land on which the project was to come up. The developer, under the collaboration agreement and the tripartite agreement, was to undertake and complete the project. As between the appellant and the buyer, there is no other obligation which is undertaken, except, undoubtedly, such obligations as would be necessary for the purposes of conveying title in the land.5. The contention of the buyers, on the other hand, would appear to be that being a confirming party and having regard to the terms of the agreement, the appellant was rightly made liable by the NCDRC.6. We may notice the findings which have been entered into by the NCDRC in regard to the appellant which was the II opposite party:23. Now we address ourselves to the liability of the second Opposite Party. Learned counsel for the second Opposite Party argued that the second Opposite Party is only the owner of the land and an Collaboration Agreement entered into between both the Opposite Parties according to terms of which the rights to sell, transfer and receive payments has been assigned to the first Opposite Party and therefore the second Opposite Party cannot be made liable to refund any amounts received. The contention of the learned counsel that the second Opposite Party should be deleted from the array of parties and no liability can be fastened upon them is totally unsustainable, keeping in view that the Apartment Buyers Agreement which is subsequent to the Collaboration Agreement is a Tripartite Agreement signed by the first Opposite Party, the second Opposite Party and the Complainant. It is pertinent to note that the second Opposite Party was defined as the Confirming Party in the Apartment Buyers Agreement dated 17.08.2012, it is relevant to mention that a consideration of Rs.24,81,00,000/- towards non-refundable security deposit was paid by the first Opposite Party to the second Opposite Party towards the subject land. For better understanding of the revenue shared by both the Opposite Parties, Clauses 4.1 of the Collaboration Agreement are reproduced as hereunder:4.1 In consideration of the contribution of the Project Land by the Land Owner for execution of the Project and granting the rights to the Developer for development of the Project Land and the Developer bearing the costs, expenses and responsibility of execution of the Project including discharge of the respective obligations by the Parties under this Agreement and UHPLand the Land Owner agreeing to the suppression of the Original Agreement, the Gross Revenue received/realized shall be shared between the Parties in the ratio mentioned herein below:1. Land Onwer: 12.5%At the cost of repetition, having signed the Tripartite Agreement as a Confirming Party and when the Collaboration Agreement is mentioned in the Apartment Buyers Agreement, we are of the considered view that both the Opposite Parties are jointly and severally liable to pay the amounts received. Any other arrangement is only inter se between the Opposite Parties and shall not bind the Complainants.The NCDRC allowed the complaint and directed the developer and the appellant to return the amount deposited by the complainants with interest.

Reasoning:
8. The obligations of the developer have been set out in clauses 6.1 to 6.6. Thereafter, the obligations of the land owner viz., the appellant, have been clearly articulated in clauses 7.1 to 7.7. Clause 8.1 contemplates that subject to Force Majeure conditions and due performance of their obligations by the land owners, the Developer shall complete the development of the project on the project land inter alia within a period of four years from the date of receipt of the sanctioned building plans with respect to the project, subject to the grace period indicated. Article 11 provides for various representations and warranties which have been made by the appellant in its capacity as the land owner.We may notice that the tripartite agreement reveals that the home buyer is put on notice of the collaboration agreement. There is reference to general power of attorney which has been executed by the appellant in favour of the developer. The tripartite agreement further refers to the fact that the buyer has inspected the collaboration agreement and has understood the limitations and obligations of the owner inter alia. Under clause 1.1, the developer has agreed to sell to the buyer and the buyer has agreed to purchase the apartment at the prices indicated in clause 3. The sale consideration is set out in clause 3. There is elaboration of the consideration in various sub clauses of clause 3. The payment is governed by clause 4 and the various sub clauses thereunder. Clause 5 deals with the basic concept of the proposed complex. Clause 6 deals with maintenance charges. It is stated in clause 7 that the company, subject to force majeure, undertakes to complete the construction. The meaning of the word company is not exactly clear and for reasons which shall follow, we do not intend to pronounce on the same.A perusal of the complaint does not reveal any specific complaint lodged against the appellant. The appellant is made respondent No. 2. The complaint, in short, was that the possession of the flat was not made over by 31.12.2015. Substantial amounts were paid as consideration. The complainant suffered financial losses without getting benefit of the use due to the sole conduct of the opposite party for not building within the promised time. Act and omission of the opposite party fall within the definition of unfair trade practices and restrictive trade practices it is averred. There is even allegation that there are malpractices on the part of the opposite party to take money from the buyers who purchased apartments / flats in Umang Realtech group housing project and to use it elsewhere and delay the project unreasonably for their wrongful gains causing wrongful losses and injuries to the complainant.The final prayer was to direct the opposite party to refund the entire amount collected from the complainants with 18 per cent interest from date of the collection of the amount. The appellant filed a reply therein. It is contended that there is no cause of action against the appellant. It was indicated that the appellant was a land owner. It had given vacant possession to the developer. There is no liability incurred by the appellant also. Clause 14.3 of the collaboration agreement was extracted in reply. Clause 14.3 indicated that the development and sale of project being the responsibility of the developer, the developer shall be liable to indemnify the land owner.16. Though the NCDRC did note the contention of the appellant, the matter came to be dealt with in the manner which we have indicated, namely, by directing the appellant and the developer to refund the amounts with interest.17. We have indicated the scheme of the Act. A claim can succeed in a case of this nature if the consumer establishes deficiency of service. No doubt, the law giver contemplates other elements as contemplated in the definition of the word complaint. The word deficiency has been widely worded. Equally so, is the word service. A statute of this nature must, indeed, if possible, be construed in favour of the consumer. However, that is a far cry from holding that if deficiency is not established, yet the opposite party must bear the liability which cannot be thrust on its shoulders. We would clarify that by making it clear that what we intend to say is that when there is no privity between the complainant and the opposite party, the opposite party could not become liable under the Act. In other words, if there is no law under which a person is to provide a service and if it does not fall within the residuary clause, namely, otherwise as defined under the word deficiency, it is necessary for a consumer to succeed, that there must be a contract. It is in that context, we indicated that the existence of an obligation under a contract is a sine qua non for a consumer to successfully prosecute a case under the Act.18. The NCDRC has despite the stand taken specifically by the appellant, proceeded to premise its finding on a particular clause. The clause in question which has persuaded the NCDRC to hold against the appellant, in our view, cannot by itself result in the appellant being held liable under the Act. We have noticed the scheme of the dealings between the parties. Apparently it originated with the collaboration agreement between the appellant and the developer. The home buyer comes in, undoubtedly, through the tripartite agreement. It is no doubt true that there is a power of attorney which is executed by the appellant in favour of the developer. We will not say anything on the power of attorney as there is an argument by the learned counsel for the complainant that the power of attorney clinchingly establishes that the appellant was the principal and the developer was a mere agent. We say that we are not reflecting anything more about this for the reason that this is not the case which was set up before the NCDRC. There are no pleadings in this regard. Very fairly, the learned counsel for the complainant has stated that there is no foundation for such a case and such a case is even not reflected in the order. The only aspect which appealed to the NCDRC was clause 4.1.19. Clause 4.1 contemplates revenue sharing and this clause is part of the collaboration agreement. The buyer in terms of the tripartite agreement must be understood to have familiarised itself with the terms of the collaboration agreement. The NCDRC has proceeded to hold that it is pertinent to note that the appellant was the signing and confirming party. Thereafter, reference is made to the consideration towards non-refundable security deposit paid by the developer to the appellant. And finally, the NCDRC has seized upon the terms of clause 4.1. Clause 4.1 deals with the revenue sharing between the appellant and the developer. Thereafter, NCDRC reiterates the fact that the appellant has signed the tripartite agreement as a confirming party. On this basis, NCDRC found that both parties are jointly and severely liable to pay the amount. Lastly it is found that any other arrangement is only inter se between the opposite parties and shall not bind the complainant.Apparently, this is the answer to clause 14.1 set up by the appellant. Clause 14.1 deals with the arrangement entered between the developer and the owner because it speaks about reimbursement and protecting the owner from any loss it may be visited with. The fact that developer has agreed to reimburse the land owner would not detract from any liability which the land owner may incur under the law and under the contract. While that may be so, the substratum of the finding of the NCDRC is clause 4.1 and the fact that the appellant is a confirming party. We are of the view that in the contracts in question, the NCDRC has not correctly appreciated the nature of the obligations and requirement under the Act to make a party liable. The NCDRC has not adverted to the relevant provisions, the collaboration agreement and the tripartite agreement which would spell out the nature of the obligations incurred by the developer and the appellant. The appellant, as the owner of the land on which the project was contemplated, has indeed undertaken certain obligations. So did the developer. It is, at this stage, that the consumer appears in the form of a party in the tripartite agreement. The learned counsel for the complainants has a case that the complainants were not aware of the terms of the collaboration agreement as such.21. The mere fact without anything more that the appellant was a confirming party also would not advance the case of the complainant. We are unable to divine as to on what basis it could be said in a contract of this nature that merely because the appellant has confirmed terms of the agreement which is styled as a tripartite agreement, it would by itself make the appellant liable. This is a matter which should have been dealt with, with reference to the various other provisions in both the collaboration agreement and the tripartite agreement. Such an exercise was not undertaken by NCDRC.22. There is another aspect which is perhaps determinative of the course of action which has appealed to us. Learned counsel for the complainants would point out that this Court must bear in mind that this is a case where the management of both the developer and the land owner have actually been carried out by the same group. Learned counsel would point out that understanding the pattern of the composition of the Board of Management would successfully show that in essence, a single entity is running the whole show.23. The present scenario is that the developer has gone into a state of insolvency. Proceedings under the Insolvency and Bankruptcy Code (IBC) has been lodged. It is, no doubt, in such a scenario, that the home buyers, who despite an order which they have obtained, are left high and dry as they cannot proceed against the developer after having obtained relief which consist of refund with interest as already observed. This brings on the scene the IRP represented by Mr. Sai Deepak, learned counsel, who would point out that not only has the IRP been appointed but an order has been passed by the National Company Law Appellate Tribunal (NCLAT) in appeal against an order under Section 7 of the IBC. Learned counsel points out that there is an opportunity available to the home buyers made available by the order of the NCLAT which may be availed of by the home buyers.25. Having regard to the Act being a beneficial piece of legislation, the Court should lean in favour of the hapless consumer so that any such manoeuvring by corporate entities if any does not succeed.26. We have already scanned the pleadings of the parties. As fairly stated by the learned counsel for the complainants there is a complete lack of pleadings to support the case of the nature which is sought to be set up, viz., that this is a fit case for employing the doctrine of lifting of the corporate veil or that the appellant would be liable being the principal of the the developer.28. Having heard learned counsel for the parties, while we are of the view that we cannot uphold the order of the NCDRC in the manner in which it is being done, we should afford an opportunity to the respondents to seek amendment of the pleadings, if they are so advised, and to allow an opportunity to establish the case which is being set up which is based on matters which go beyond the scope of the findings by the NCDRC. At the same time, we must leave it open to the appellant to raise all contentions including the contentions against such pleadings being introduced as also the limitations on the jurisdiction of the NCDRC to make such an inquiry.