Source: https://www.ilntoday.com/2016/08/landowners-are-also-consumers-qua-the-builders-supreme-court/
Timestamp: 2019-04-22 15:01:17+00:00

Document:
The Supreme Court of India (“Supreme Court”) has recently laid down in Bunga Daniel Babu v. M/s Sri Vasudeva Constructions (“Case”) that a land owner (“Appellant”) who entered into a Memorandum of Understanding (“MoU”) with a builder (“Respondent”) for development of his land by construction of a multi-story building, will be deemed to be a consumer within the definition of Section 2(1)(d) of the Consumer Protection Act, 1986 (“CPA”) despite the rider inserted by the amendment in 2002 thereto whereby the definition of consumer was amended to exclude from its purview any person who avails services for any commercial purpose.
Under the MoU, the apartments constructed were to be shared in the proportion of 40% and 60% between the Appellant and the Respondent respectively, and construction of the building was to be completed within 19 (nineteen) months from the date of approval of the plans by the Municipal Corporation. In the case of non-completion, a rent of INR 2,000/- per month was to be paid by the Respondent to the Appellant. There were also other compliances to be carried out by the Respondent under the MoU which the Respondent failed to perform. Accordingly, the Appellant demanded certain sums as compensation towards the Respondent’s failure to abide by the terms of the MoU and upon repudiation of the legal notices sent by him in this regard, approached the District Forum with a consumer complaint alleging deficiency of service by the Respondent.
(ii) Whether there was any deficiency in service on the part of the Respondent.
Relying on the legal principles laid down by the Supreme Court in Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd. & Anr. (“Faqir Chand Case”), the District Forum concluded that the Appellant was a consumer and that the agreement between the parties could not be termed as joint-venture for a commercial purpose.
State Commission:The Respondents approached the State Commission in appeal, which opined that the claim of the Appellant could not be adjudicated under the CPA as the parties had entered into an agreement for two plots on which there was supposed to be construction and sharing of flats for the purposes of selling or renting them out to earn profit and therefore the agreement had the colour of a commercial purpose.
National Commission:Aggrieved by the order of the State Commission, the Appellant approached the National Commission by way of revision petition. The National Commission, affirmed the decision of the State Commission and noted that as the Appellant had already sold some of the flats, the agreement was for a commercial purpose. The Appellant therefore appealed to the Supreme Court.
In Super Engineering Corporation v. Sanjay Vinayak Pant & Anr., the National Commission observed that the intention behind the 2002 amendment to the CPA was to ensure that the protection of the CPA benefitted only those consumers who were buying goods and availing of services for personal use and not those who were doing the same for a commercial purpose or for any profit making activity.
It is significant to note that the terms “commercial purpose” and “profit making” have not been defined under the CPA and thus one needs to rely upon the courts’ interpretation of the same on a case to case basis. In fact, the National Commission had laid down in Synco Textile Private Limited v. Greaves Cotton and Co. Ltd. that the term “for any commercial purpose’ is wide enough to take in all cases where goods are purchased for being used in any activity directly intended to generate profit.” The Supreme Court has also laid down the test of close and direct nexus with the commercial activity for classification of a transaction as a “commercial purpose” in Lakshmi Engineering Works v. PSG Industrial Institute.
In Punjab University v. Unit Trust of India and Ors. the Supreme Court clarified that a person who buys or uses services exclusively for the purposes of earning his livelihood by means of self-employment is a consumer and such purchase of goods and services does not constitute use for a “commercial purpose”.
The Supreme Court concluded that the principles discussed in the Faqir Chand Case would apply even after the said amendment to the CPA and laid down the principle that commercial purpose is required to be interpreted considering the facts and circumstances of each case. The Supreme Court determined that the MoU entered into between the parties does not indicate that it is joint venture and therefore since the Appellant was neither a partner, nor a co-adventurer and did not have control over the construction, he was a consumer under the CPA. The Supreme Court has remanded the matter back to the State Commission for re-adjudicating the matter by treating the Appellant as a consumer.

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