Vinod Kumar Thareja vs M/S. Alpha Construction & Ors

2. The appellant, the owner of a plot measuring about 11000 sq.ft. situated at Bhopal, entered into a Joint Venture Agreement dated 2.7.2004 with the first respondent for development of the said plot by construction and sale of nine duplex flats. Under the said agreement, the appellant was to provide his land to the first respondent for construction of flats; the first respondent was responsible for the construction and sale of the duplex flats; and out of the sale proceeds realized by sale of the flats, the appellant was 2 entitled to 45% and the first respondent was entitled to the balance of 55%. The first respondent was authorized to enter into agreements of sale with prospective purchasers of flats even at the stage of construction and receive the price either in a lump sum or in instalments. The first respondent was solely responsible for completion of construction and the quality of construction. According to the appellant, his obligation under the joint venture agreement was only to contribute the land and in consideration thereof receive 45% of sale proceeds.

3. In pursuance of it, the appellant and first respondent entered into an agreement dated 18.9.2004 with respondents 2 and 3, who were interested in purchasing one of the nine duplex flats to be constructed in the property. The said agreement clearly stated that the first respondent was to construct the duplex flat and receive the consideration from respondents 2 and 3. In pursuance of it, the first respondent's proprietor (Rajbir Singh), as Attorney holder of the appellant, executed a sale deed dated 14.1.2005 in favour of respondents 2 & 3, conveying an extent of 968 sq.ft., of land with a skeletal structure thereon for Rs.6 lakhs.

4. Respondents 2 and 3 filed a complaint dated 22.6.2006 before the District Consumer Redressal Forum, Bhopal (`District Forum' for short) against the first respondent alleging deficiency in service. In the said complaint they alleged that they had paid Rs.11,80,000/- to the first respondent out of a total consideration of Rs.13,50,000/- for the purchase of a duplex flat; that on 25.6.2005, the Municipal Corporation demolished the structure constructed by the first respondent; and that the first respondent committed an unfair trade practice by not disclosing the true facts and by not delivering the constructed flat. The complainants also alleged that thereafter the first respondent failed to construct the flat and was guilty of gross negligence and deficiency in service. The complainants consequently demanded from the first respondent, refund of the sum of Rs.11,80,000/- paid by them with interest of Rs.3,35,000/-, compensation of Rs.2,00,000/- and punitive damages of Rs.2,00,000/- in all Rs.19,15,000/-.

6. The District Forum allowed the complaint by order dated 11.1.2007 and directed the first respondent to refund the sum of Rs.11,80,000/- paid by the respondents 2 and 3 to the first respondent, with interest at 18% per annum from the date of deposit till date of payment.

7. Feeling aggrieved, the first respondent filed an appeal before the Madhya Pradesh Consumer Dispute Redressal Commission (`the State Commission' for short) challenging the order of the district forum. In the said appeal, the first respondent made an application for impleading the appellant herein as the third respondent. That application was allowed on 28.4.2008 and the State Commission impleaded the appellant as third respondent in the appeal and directed the appellant to file its response to the complaint filed by the complainants under section 12 of the Act. 5

9. The State Commission allowed the appeal of the first respondent in part by a brief order dated 19.9.2008. It held that as the flats were constructed by the first respondent in the land belonging to the appellant in pursuance of a joint venture agreement between them and as the agreement for sale in favour of respondents 2 and 3 had been executed jointly by the appellant and first respondent and as the subsequent sale deed in favour of respondents 2 and 3 was executed by the proprietor of first respondent as attorney holder of the appellant, and as obtaining of building permission for construction was the joint responsibility of the appellant and the first 6 respondent, the appellant herein was also responsible to compensate the complainants for any loss suffered by them on account of the demolition by the Municipal Corporation. As a consequence, the State Commission, while upholding the direction of the District Forum for refund of Rs.11,80,000/- paid by the complainants, made the following modifications :

(Emphasis supplied) The said order is challenged by the appellant in this appeal by special leave.

15. This appeal is, therefore, allowed and the order of the National Commission affirming the order of the State Commission making the appellant liable jointly with first respondent is set aside. It is, however, made clear that :