Land owner can approach Consumer Forum in case of breach committed by builder

Supreme Court: In the appeal against the order of the National Consumer Disputes Redressal Commission, which has approved the view of the State Consumer Disputes Redressal Commission, Hyderabad which held that the complainant was not a “consumer” within the definition under Section 2(1)(d) of the Consumer Protection Act, 1986 (the Act) as the agreement of the appellant with the respondents was a joint venture, the bench of Dipak Misra and N.V. Ramana, JJ remitted the matter back to the State Commission as both the Commissions erred in holding 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.

In the present case, the appellant who was the land owner, entered into an MoU with the respindents for construction of multi-storied building and that the apartments constructed were to be shared in the proportion of 40% and 60% between the appellant and the respondent. 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.  the District Consumer Forum upon scrutinising that whether there is any joint venture agreement between the appellant and the respondent, arrived to the conclusion that the MOU that was entered into between the parties even remotely does not indicate that it is a joint venture.

The Court took note of the principle laid down in Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd, (2008) 10 SCC 345, where it was held that the title or caption or nomenclature of the instrument/document is not determinative of the nature and character of the instrument/document, though the name usually gives some indication of the nature of the document and, therefore, the use of the words ‘joint venture’ or ‘collaboration’ in the title of an agreement or even in the body of the agreement will not make the transaction a joint venture, if there are no provisions for shared control of interest or enterprise and shared liability for losses. It was further held that the Court proceeded to observe that if there is a breach by the land owner of his obligations, the builder will have to approach a civil court as the land owner 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 and while 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 civil court or can approach consumer forum under the Act.

The Court, stating that the aforementioned ruling squarely applied to the factual matrix of the present case, held that the approach followed by the National and State Commissions was erroneous as they held that the complaint is not a consumer as his purpose is to sell flats and has already sold four flats. [Bunga Daniel Babu v. Sri Vasudeva Constructions, 2016 SCC OnLine SC 729, decided on 22.07.2016]