2008 Supreme(Ori) 286

2008 (II) OLR (SC) — 446
R. V. RAVEENDRAN AND LOKESHWAR SINGH PANTA, JJ
Faqir Chand Gulati...Appellant(s)
Versus
Uppal Agencies Pvt. Ltd. & Anr....Respondent(s)
Civil Appeal No. 3302 of 2005
Decided on 10th July, 2008.

Headnote:1. CONSUMER PROTECTION ACT, 1986 - Sec. 2(1)(d)(ii) - 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 Act ? - District forum dismissed the complaint as not maintainable - Appeal dismissed by the State Commission - National Commission dismissed the revision petition - Appeal before Apex Court - A complaint under the Act will be maintain¬able in the following circumstances:

       (a)Where the owner/holder of a land who has entrusted the construction of a house to a contractor, has a

       complaint of deficiency of service with reference to the construction.

       (b)Where the purchaser or intending purchaser of an apartment/flat/house has a complaint against the builder/developer with reference to construction or delivery or amenities.

       In the present case discussing the facts, contention and provisions of law held, the District Forum, the State Commission and the National Commission committed a serious error in wrongly assuming that agreements of the nature being in the nature of joint venture are outside the scope of consumer disputes.

       What then is the nature of the agreement between the appellant and the first respondent ? Appellant is the owner of the land. He wants a new house, but is not able to construct a new house for himself either on account of paucity of funds or lack of expertise or resources. He, therefore, enters into an agreement with 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 builder for the owner, the consideration for such construction being the transfer of undivided share in land to the builder and grant of permission to the builder to construct two floors. Such agreement whether called as a `collaboration agreement' or a `joint-venture agreement', is not however a `joint-venture'. There is a contract for construction of an apartment or house for the appellant, in accordance with the specifications and in terms of the contract. There is a consideration for such construction, flowing from the landowner to the builder (in the form of sale of an undivided share in the land and permission to construct and own the upper floors). To adjust the value of the extent of land to be transferred, there is also payment of cash consideration by the builder. But the important aspect is the availment of services of the builder by the land-owner for a house construction (construction of owner's share of the building) for a consideration. To that extent, the land-owner is a consumer, the builder is a service-provider and if there is deficiency in service in regard to construction, the dispute raised by the land owner will be a consumer dispute. We may mention that it makes no difference for this purpose whether the collaboration agreement is for construction and delivery of one apartment or one floor to the owner or whether it is for construction and delivery of multiple apartments or more than one floor to the owner. The principle would be the same and the contract will be considered as one for house construction for consideration. The deciding factor is not the number of apartments deliverable to the land owner, but whether the agreement is in the nature of a joint-venture or whether the agreement is basically for construction of certain area for the land-owner.

       It is however true that where the contract is a true joint venture the scope of which has been pointed out in para 17 above, the position will be different. In a true joint venture agreement between the land-owner and another (whether a recognized builder or fund provider), the land-owner is a true partner or co-adventurer in the venture where the land owner has a say or control in the construction and participates in the business and management of the joint venture, and has a share in the profit/loss of the venture. In such a case, the land owner is not a consumer nor is the other 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. (Paras - 18 to 24)

       2. CONSUMER PROTECTION ACT, 1986 - Sec. 32 - Land owner enters into an agreement with a builder for construction of apartment building - Breach of obligations by builder - Remedy available under the Act is in addition to the normal remedy or other remedy that may be available to the complainant.

       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.

       (Para - 23)

       3. DOCUMENT - Instrument - The title or caption or the nomenclature of the instrument/document is not determinative of the nature and character of the instrument/document, though the name may usually give some indication of the nature of the document - The nature and true purpose of a document has to be determined with reference to the terms of the document which express the intention of the parties. (Para - 21)

       4. AGREEMENT - Joint venture - An agreement between the owner of a land and a builder, for construction of apartments and sale of those apartments so as to share the profits in a particu¬lar ratio may be joint venture, if the agreement discloses an intent that both parties shall exercise joint control over the construction/development and be accountable to each other for their respective acts with reference to the project. (Para - 17)