Bunga Daniel Babu vs M/S Sri Vasudeva Constructions & Ors

The assail in the present appeal, by special leave, is to the judgement and order passed by the National Consumer Disputes Redressal Commission, New Delhi (for short “the National Commission”) in Revision Petition No. 258 of 2013 whereby the said Commission has approved the decision of the State Consumer Disputes Redressal Commission, Hyderabad which had reversed the view of the District Consumer Forum that the complainant is a “consumer” within the definition under Section 2(1)(d) of the Consumer Protection Act, 1986 (for brevity, “the Act”) as the agreement of the appellant with the respondents was not a joint venture. The District Forum had arrived at the said decision on the basis of legal principles stated in Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd. and anr.[1]. The State Commission had opined that the claim of the appellant was not adjudicable as the complaint could not be entertained under the Act inasmuch as the parties had entered into an agreement for construction and sharing flats which had the colour of commercial purpose. Thus, the eventual conclusion that the State Commission reached was that the complainant was not a consumer under the Act. The said conclusion has been given the stamp of affirmance by the National Commission.

2. The factual score that is essential to be depicted is that the appellant is the owner of the plot nos. 102, 103 and 104 in survey no. 13/1A2, Patta no. 48 admeasuring 1347 sq. yards situate at Butchirajupalem within the limits of Visakhapatnam Municipal Corporation. Being desirous of developing the site, the land owner entered into a Memorandum of Understanding (for short “the MOU”) with the respondents on 18.07.2004 for development of his land by construction of a multi-storied building comprising of five floors, with elevator facility and parking space. Under the MOU, the apartments constructed were to be shared in the proportion of 40% and 60% between the appellant and the respondent No. 1. Additionally, it was stipulated that the construction was to be completed within 19 months from the date of approval of the plans by the Municipal Corporation and in case of non-completion within the said time, a rent of Rs. 2000/- per month for each flat was to be paid to the appellant. An addendum to the MOU dated 18.07.2004 was signed on 29.04.2005 which, inter alia, required the respondents to provide a separate stair case to the ground floor. It also required the respondents to intimate the progress of the construction to the appellant and further required the appellant to register 14 out of the 18 flats before the completion of the construction of the building in favour of purchasers of the respondents.

3. As the factual matrix would further unfurl, the plans were approved on 18.05.2004 and regard being had to schedule, it should have been completed by 18.12.2005. However, the occupancy certificates for the 12 flats were handed over to the occupants only on 30.03.2009, resulting in delay of about three years and three months. In addition, the appellant had certain other grievances pertaining to deviations from sanction plans and non-completion of various other works and other omissions for which he claimed a sum of Rs.19,33,193/- through notices dated 6.6.2009 and 27.6.2009. These claims were repudiated by the respondents vide communications dated 17.07.2009 and 16.08.2009.

4. Being aggrieved by the aforesaid communications, the appellant approached the District Forum for redressal of his grievances. The District Forum appreciating the factual matrix in entirety framed two issues for determination, which in essence are, whether the complainant was a “consumer” within the definition of Section 2(1)(d) of the Act; and whether there was any deficiency in services on the part of the opposite party. The District Forum after analysing various clauses of the MOU and the addendum and placing reliance on the decision of the Court in Faqir Chand Gulati (supra) came to hold that the transaction between the parties could not be termed as a joint venture, in order to exclude it from the purview of the Act. Accordingly, the District Forum opined that the complainant came under the definition of Consumer under Section 2(1)(d)(ii) of the Act. On the second point of deficiency as well, it partly allowed the claim in favour of the appellant-complainant by awarding a sum of Rs. 15,96,000/- towards rent for delayed construction, Rs. 19,800/- as reimbursement of vacant land tax, Rs. 70,000/- as cost for rectification of defects in the premises and Rs. 25,000/- for mental agony. It was further directed that the abovesaid sum shall carry interest @ 9% per annum from the date of filing of the complaint. Be it stated, cost of Rs. 10,000/- was also awarded.

5. The respondent constrained by the decision of the District Forum preferred an appeal before the State Commission which did not agree with the finding of the District Forum and came to hold that the appellant- complainant did not come within the ambit of definition of “consumer” under the Act and accordingly dismissed his claims as not maintainable. The appellate forum expressed the view that as the agreement was entered into by the appellant-complainant for more than two plots and there was an intention to sell them and let them on rent and earn profit, the transaction was meant for a commercial purpose. Grieved by the said decision, the appellant-complainant invoked the revisional jurisdiction of the National Commission which concurred with the view expressed by the State Commission by holding that the State Commission had rightly distinguished the authority in Faqir Chand Gulati’s case on facts because the flats were not for personal use and the complainant had already sold four of the twelve flats.

But we are concerned with a third hybrid category which is popularly called as “joint-venture agreements” or “development agreements” or “collaboration agreements” between a landholder and a builder. In such transactions, the landholder provides the land. The builder puts up a building. Thereafter, the landowner and builder share the constructed area. The builder delivers the “owner’s share” to the landholder and retains the “builder’s share”. The landholder sells/transfers undivided share(s) in the land corresponding to the builder’s share of the building to the builder or his nominees. As a result each apartment owner becomes the owner of the apartment with corresponding undivided share in the land and an undivided share in the common areas of the building. In such a contract, the owner’s share may be a single apartment or several apartments. The landholder who gets some apartments may retain the same or may dispose of his share of apartments with corresponding undivided shares to others. The usual feature of these agreements is that the landholder will have no say or control in the construction. Nor will he have any say as to whom and at what cost the builder’s share of apartments are to be dealt with or disposed of. His only right is to demand delivery of his share of constructed area in accordance with the specifications. The builders contend that such agreements are neither contracts for construction, nor contracts for sale of apartments, but are contracts entered for mutual benefit and profit and in such a contract, they are not “service providers” to the landowners, but a co- adventurer with the landholder in a “joint venture”, in developing the land by putting up multiple-housing (apartments) and sharing the benefits of the project. The question is whether such agreements are truly joint ventures in the legal sense.

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completion of the constructions in the complex within the above mentioned time, builder should pay rent Rs.2,000/- per month for each flat in a 40% share of the owner.

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11. The builder shall pay a sum of Rs.5 lakhs (Rupees five lakhs only) to the owner as interest free security deposit. The security deposit of Rs.5 lakhs shall be refunded at the time of completion of the apartment by way of cash.

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22. As the impugned orders will show, the District Forum had allowed the claim of the appellant. The State Commission had dismissed the appeal holding that the claim of the appellant was not entertainable under the Act, he being not a consumer and the said order has been given the stamp of approval by the National Commission. Therefore, there has to be appropriate adjudication with regard to all the aspects except the status of the appellant as a consumer by the appellate authority. Consequently, the appeal is allowed, the judgments and orders passed by the National Commission and the State Commission are set aside and the matter is remitted to the State Commission to re-adjudicate the matter treating the appellant as a consumer. We hereby make it clear that we have not expressed any opinion on the merits of the case. In the facts and circumstances of the case, there shall be no order as to costs.

………...................J. [Dipak Misra] New Delhi.