TMI Blog2008 (7) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... the question whether a land owner, who enters into an agreement with a builder, for construction of an Apartment Building and for sharing of the constructed area, is a 'consumer' entitled to maintain a complaint against the builder as a service-provider under the Consumer Protection Act, 1986. The agreement 2. The appellant is the owner of premises no. L-3, Kailash Colony, New Delhi. He entered into a 'collaboration agreement' dated 17.5.1991 with thefirst respondent, the terms of which are, in brief, as follows : (i) The owner shall place at the disposal of the builder, vacant possessionof the premises and authorize the builder to secure necessary sanctions, permissions and approvals for demolition of the existing building and construction and completion of a new building. (iii) The builder shall demolish the existing structure and construct a residential building consisting of ground, first and second floors, at its cost and expense. (iv) The builder will have the right to appoint Architects, contractors, sub-contractors etc. (v) The new building to be constructed by the builder shall be of good quality as per the detailed specifications contained in Annexure-A t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the owners of the other floors. (xiii) The agreement and the power of attorney executed by the owner in favour of the builder are irrevocable. In the event of neglect, failure, default on the part of the owner or the builder, the affected party shall have the right to specific performance of the said agreement at the cost and risk of the defaulting party who shall also be liable to pay damages. (xiv) The agreement is not a partnership and shall not be deemed to be a partnership between the owner and the builder. The dispute and the decision. 3. The appellant (also referred to as 'land-owner') alleges that the first respondent (also referred to as the 'builder') secured sanction of the plan for construction from the Municipal Corporation of Delhi [for short 'MCD') but made several unauthorized deviations during construction, resulting in several deviation notices from MCD. In fact, MCD passed an order dated 16.1.1991 to seal the premises, but subsequently, the premises was de-sealed to enable the builder to rectify the deviations. The builder delivered possession of the ground floor on 2.4.1992. The builder sold the first and second floors to four persons under sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Sarup Gupta vs. M/s Kailash Nath Associates - II (1995) CPJ 275. However, as the appellant was old and as the first and third reliefs (relating to delivery of title deeds and electricity meter security deposit receipt and payment of the charges for the change of electricity meter) had already been secured by the appellant and the only pending issue related to C D forms, the State Commission proceeded to decide the appeal on merits. It noted that as the builder had already applied for the C D forms to the competent authority and was pursuing the matter and had undertaken to hand over the same to the appellant as and when made available, nothing further was required to be done by the builder. The Appeal was, therefore, dismissed as devoid of merit. 7. The appellant filed a revision petition before the National Commission. The appellant challenged the finding that the complaint was not maintainable. He also contended that as the builder had failed to secure and furnish the completion certificate and C D forms (that is property tax assessment listing) from MCD, his complaint could not have been dismissed. He also submitted that in view of the violations, the MCD had demolish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 3 provides that the provisions of the Act shall be in addition and not in derogation of the provisions of any other law for the time being in force. Any allegation in writing made by the complainant that the services hired or availed of or agreed to be hired or availed of by him suffered from deficiency in any respect, with a view to obtaining any relief provided for by or under the Act, is a 'complaint' under section 2(1)(c) of the Act. 9.1 The terms 'consumer', 'deficiency', and 'service' defined in clauses (d), (g) and (o) of section 2(1) of the Act as it stood at the time when the appellant approached the District Forum in 1994 are extracted below : "(d) 'Consumer' means any person who - (i) xxxxxx (ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person.* [*The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, the respondent contended that the agreement was for collaboration in the nature of a joint venture which required the owner to contribute the land and the builder to contribute the funds for construction of a building and thereafter share the construction that is ground floor with corresponding undivided share to the owner and upper floors with corresponding undivided share to the builder, and that it was in the nature of a single business adventure under which the parties agreed to share the benefits. It is also pointed out that the builder had paid a sum of Rs.8 lakhs to the owner as consideration in addition to agreeing to give the ground floor of the new building and therefore, the agreement was also in the nature of the agreement of sale of undivided share in land by the owner to the builder. It was contended that the two parties to the agreement were associates to carry out a single enterprise or business adventure for mutual profit and such a venture resulting in profit for both the parties was not an agreement for providing service. The respondent submitted that there was no contract for 'house construction' as such, nor for sale of a house and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aint under the Consumer Protection Act and whether in such circumstances, the owner can claim that he is a consumer and the builder is the service-provider. 14. In Lucknow Development Authority vs. M. K. Gupta [1994 (1) SCC 243] referring to the nature and object of the Act, this Court observed: "To begin with the preamble of the Act, which can afford useful assistance to ascertain the legislative intention, it was enacted, 'to provide for the protection of the interest of consumers'. Use of the word 'protection' furnishes key to the minds of makers of the Act. Various definitions and provisions which elaborately attempt to achieve this objective have to be construed in this light without departing from the settled view that a preamble cannot control otherwise plain meaning of a provision. In fact the law meets long felt necessity of protecting the common man from such wrongs for which the remedy under ordinary law for various reasons has become illusory. Various legislations and regulations permitting the State to intervene and protect interest of the consumers have become a haven for unscrupulous ones and the enforcement machinery either does not move or it moves ineffectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been used in an enactment. What remains to be examined is if housing construction or building activity carried on by a private or statutory body was service within meaning of Clause (o) of Section 2 of the Act as it stood prior to inclusion of the expression 'housing construction' in the definition of "service" by Ordinance No. 24 of 1993. As pointed out earlier the entire purpose of widening the definition is to include in it not only day to day buying and selling activity undertaken by a common man but even to such activities which are otherwise not commercial in nature yet they partake of a character in which some benefit is conferred on the consumer. Construction of a house or flat is for the benefit of person for whom it is constructed. He may do it himself or hire services of a builder or contractor. The latter being for consideration is service as defined in the Act.... If the service is defective or it is not what was represented then it would be unfair trade practice as defined' in the Act. Any defect in construction activity would be denial of comfort and service to a consumer. When possession of property is not delivered within stipulated period the delay so cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conveniently walks away having pocketed the money leaving behind the unfortunate occupants to face the music in the event of unauthorized constructions being detected or exposed and threatened with demolition. Though the local authorities have the staff consisting of engineers and inspectors whose duty is to keep a watch on building activities and to promptly stop the illegal constructions or deviations coming up, they often fail in discharging their duty. Either they don't act or do not act promptly or do connive at such activities apparently for illegitimate considerations. If such activities are to stop, some stringent actions are required to be taken by ruthlessly demolishing the illegal constructions and non-compoundable deviations. The unwary purchasers who shall be the sufferers must be adequately compensated by the builder. The arms of the law must stretch to catch hold of such unscrupulous builders. At the same time in order to secure vigilant performance of duties, responsibility should be fixed on the officials whose duty was to prevent unauthorized construction, but who failed in doing so either by negligence or connivance." [Emphasis supplied] 16. There is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re' in New Horizons Ltd vs. Union of India [1995 (1) SCC 478). This Court held : "The expression "joint venture" is more frequently used in the United States. It connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contribute assets and share risks. It requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and losses. [Black's Law Dictionary; Sixth Edition, p. 839]. According to Words and Phrases, Permanent Edition, a joint venture is an association of two or more persons to carry out a single business enterprise for profit [P.117, Vol. 23]." [Emphasis supplied] The following definition of 'joint venture' occurring in American Jurisprudence [2nd Edition, Vol.46 pages 19, 22 and 23] is relevant: "A joint venture is frequently defined as an association of two or more persons formed to carry out a single business enterprise for profit. More ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signation, or as an association of two or more persons to carry out a single business enterprise for profit or a special combination of persons undertaking jointly some specific adventure for profit, for which purpose they combine their property, money, effects, skill, and knowledge........ Among the acts or conduct which are indicative of a joint venture, no single one of which is controlling in determining whether a joint venture exists, are: (1) joint ownership and control of property; (2) sharing of expenses, profits and losses, and having and exercising some voice in determining division of net earnings; (3) community of control over, and active participation in, management and direction of business enterprise; (4) intention of parties, express or implied; and (5) fixing of salaries by joint agreement." (emphasis supplied) Black's Law Dictionary (7th Edition, page 843) defines `joint venture' thus : "Joint Venture : A business undertaking by two or more persons engaged in a single defined project. The necessary elements are : (1) an express or implied agreement; (2) a common purpose that the group intends to carry out; (3) shared profits and losses; and (4) each membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the builder. He asks the builder to construct a house and give it to him. He says that as he does not have the money to pay for the construction and will therefore permit the builder to construct and own additional floor/s as consideration. He also agrees to transfer an undivided share in the land corresponding to the additional floor/s which falls to the share of the builder. As a result, instead of being the full owner of the land with an old building, he becomes a co-owner of the land with a one-third share in the land and absolute owner of the ground floor of the newly constructed building and agrees that the builder will become the owner of the upper floors with corresponding two-third share in the land. As the cost of the undivided two-third share in the land which the land owner agrees to transfer to the builder, is more than the cost of construction of the ground floor by the builder for the landowner, it is also mutually agreed that the builder will pay the landowner an additional cash consideration of Rs.8 lakhs. The basic underlying purpose of the agreement is the construction of a house or an apartment (ground floor) in accordance with the specifications, by the build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-adventurer in the joint venture, a service provider. The land owner himself is responsible for the construction as a co-adventurer in the venture. But such true joint ventures are comparatively rare. What is more prevalent are agreements of the nature found in this case, which are a hybrid agreement for construction for consideration and sale and are pseudo joint-ventures. Normally a professional builder who develops properties of others is not interested in sharing the control and management of the business or the control over the construction with the land owners. Except assuring the land owner a certain constructed area and/or certain cash consideration, the builder ensures absolute control in himself, only assuring the quality of construction and compliance with the requirements of local and municipal laws, and undertaking to deliver the owners' constructed area of the building with all certificates, clearances and approvals to the land owner. 21. Learned counsel for the respondent contended that the agreement was titled as "collaboration agreement" which shows an intention to collaborate and therefore it is a joint venture. It is now well settled that the title or capti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to 36% and the builder was entitled to 64% of the built up area. The State Commission held that the complaint was not maintainable on the ground that on similar facts the National Commission in Narasimha Rao's case (supra) had held that the fora under the Consumer Protection Act did not have jurisdiction. But Narasimha Rao (supra), as noticed above, was not similar on facts, nor did it lay down any such proposition. Har Swarup Gupta is clearly wrongly decided. 23. We may notice here that if there is a breach by the landowner of his obligations, the builder will have to approach a civil court as the landowner is not providing any service to the builder but merely undertakes certain obligations towards the builder, breach of which would furnish a cause of action for specific performance and/or damages. On the other hand, where the builder commits breach of his obligations, the owner has two options. He has the right to enforce specific performance and/or claim damages by approaching the civil court. Or he can approach the Forum under Consumer Protection Act, for relief as consumer, against the builder as a service-provider. Section 3 of the Act makes it clear that the remedy a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws and sanctioned plan or if the deviations are beyond the permissible compoundable limits. The agreement clearly contemplates the builder completing the construction and securing completion certificate. The agreement, in fact, refers to the possibility of deviations and provides that if there are deviations, the builder will have to pay the penalties, that is do whatever is necessary to get the same regularized. Even if such a provision for providing completion certificate or payment of penalties is not found in the agreement, the builder cannot escape the liability for securing the completion certificate and providing a copy thereof to the owner if the law requires the builder to obtain completion certificate for such a building. 27. A prayer for completion certificate and C D Forms cannot be brushed aside by stating that the builder has already applied for the completion certificate or C D Forms. If it is not issued, the builder owes a duty to make necessary application and obtain it. If it is wrongly withheld, he may have to approach the appropriate court or other forum to secure it. If it is justifiably withheld or refused, necessarily the builder will have to do whatever ..... 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