RAMESHWARAN vs Sujit Kumar Banerjee

IN this appeal, challenge is to the order dated 15.11.2002 of Consumer Disputes Redressal Commission Jharkhand, Ranchi partly allowing complaint filed by the respondents/complainants against appellants/opposite parties.

IN terms of the order dated 20.7.2004, it was decided to hear arguments on point of maintainability of complaint itself. Respondents were the owners of land measuring 08.75 Kathas forming part of plot Nos. 597 and 598 situated in Hinoo under Doranda P.S. in Ranchi. Appellants 2-6 were the partners of appellant No. 1 who had been carrying on business of construction and sale of plots. Respondents and appellants entered into an agreement on 10.8.1995 whereunder construction on the said land was to be raised by appellants at their own cost and residential and commercial areas constructed, were to be divided amongst them in the manner noted in the agreement. Alleging breach of conditions of the agreement by the appellants, the respondents filed complaint claiming certain reliefs which was contested by filing joint written version by the appellants. One of the pleas raised in written version was that respondents are not the ''consumers'' within the meaning of Section 2(1)(d)(ii) of the Consumer Protection Act, 1986 (for short the Act). State Commission answered that plea in favour of the respondents holding them to be the ''consumers''.

Relying on the decision in R.P. No. 1878 of 2000, Faqir Chand Gulati v. M/s. Uppal Agencies Pvt. Ltd. & Ors., decided by this Commission on 3.2.2004, the submission advanced by Mr. Vijay Hansaria, Sr. Advocate for appellants was that the document dated 10.8.1995 is a commercial collaboration/joint venture agreement with no element of hiring of ''service'' of the appellants and the State Commission acted erroneously in holding the respondents to be ''consumers''. On the contrary, contention advanced by Mr. Joy Basu for respondents was that construction activity carried on by a statutory body or private builder or contractor is covered under the definition of ''service'' as given in Clause 2(1)(o) and State Commission had rightly returned the finding of respondents being ''consumers'' under the Act. Reliance was placed on the decision in Lucknow Development Authority v. M.K. Gupta, III (1993) CPJ 7 (SC)=(1994) 1 SCC 243. In support of further contention that the said document is not a collaboration/joint venture agreement, our attention was drawn to Clause 1 of Article IX of the document. To decide the controversy on hand, reference to certain clauses of the agreement (copy at pp 34-46) has become necessary and the same are reproduced below: "Art. V. Apartment consideration- 1. In consideration of the Owner having agreed to permit the Builder to commercially exploit the said land and construct, erect and complete the building on the said premises as a whole the Builder agrees- (a) To prepare and cause the said plan to be sanctioned and to incur and bear all costs/charges and expenses for preparation design and sanction of the plan. Builder will submit the plan to R.R.D.A. for sanction within three month from the date of agreement. (b) At its own costs to obtain all necessary permissions and/or approvals and/or consents. (c) To pay all costs of supervision of the development and construction of the Owner''s allocation in the building at the said premises. (d) To bear all costs, charges and expenses for construction of the building at the said premises. (e) To allocate to the Owner''s allocation of the constructed area in the building to be constructed at the said premises. (f) To give possession of the Owner''s allocation within eighteen months of receipt of sanctioned plan from R.R.D.A. (g) The Builder will pay Rs. 1,600/- only to the land owner as monthly rent of the premises on or before 10th day of each month in advance from the date of the agreement upto the date of handing over of the flat. Upon the construction of landowner''s flat, complete internally, the landowner shall get himself completely satisfied about the work done as per specification enclosed in the sixth schedule herewith. Upon the landowner taking possession of the flat, he shall have no claim against the builder in respect of any item of work done internally in the flat which may be alleged not to have been carried out or completed. However, the rent will be doubled if the Builder fails to hand over the possession of the flat internally to the owner within eighteen months of receipt of sanction plan from the R.R.D.A. This shall be subjected to force majure clause mentioned elsewhere in this agreement. The aforesaid shall constitute a consideration for grant of exclusive right for development of the said land property. Art. VI. Owner''s Allocation- (1) The Builder shall at its own costs construct, create and complete in all respect the said building and shall allocate to the owner flat 27% of super builtup area in form of flats. One flat on the first floor on west direction and two flats on the second floor on south east, south west or south direction and in case fourth flat is also available within the available percentage it shall be on the fourth floor in the aforesaid building constructed by the said Builder as mutually agreed upon. And 30% of the commercial area in form of shops with frontage of the shops being not more than 50% of the total frontage of the building. The owner shall also get Rs. 20,000/- in case as per the mode of payment as specified in the Eighth Schedule (A).

(2) In case the total area of all the flats or shops to be given to the Owner increases or decreased the cash value shall be adjusted as follows: at Rs. 425/- per square feet; at Rs. 650/- per square feet.

(3) It is agreed between the parties that the Owners shall have no interest in the land or the building except the flats and shops more particularly described in Schedule two. It is clearly understood that all the cost including the cost of the flats or shops, proportionate share of land or any other cost shall be paid to the builder by the purchasers of the flats/shops although the sale deed shall be executed by the Owners in favour of the purchasers who shall be nominee or nominees of the Builder.

(4) Save and except in respect of owner''s allocation and the consideration payable in the manner set on the schedule eight and save and except in the said flat the easements, quasi easements, benefits, privileges and advantages (more particularly described in schedule six and seven) in common to be conferred in favour of the Owner, none among the owners shall have any claim or right of any nature in other flat, floor spaces and area of the said property and/or the said building adjoining above or beneath of his flat.

(5) That in case any portion of land is acquired by the Government for road widening and if any compensation is paid it shall be receivable only by the owners. The Builder or his nominees shall not have any claim over such compensation paid for road widening. Art. VII. Builder''s allocation- (1) In consideration of the above the builder shall be entitled to the salable space in the building to be constructed at the land property together with the proportionate undivided share on the said land and also together with the proportionate undivided share in the common parts and facilities and other service area in the said building after providing to the owners allocation as provided in Article VI hereinabove and the builder shall be entitled to enter into agreement for sale and transfer of the builder''s allocation and to receive, realise and collect all moneys in this respect and it is hereby expressly agreed by and between the parties hereto that for the purpose of entering into such an agreement it shall not be obligatory on the part of the Builder to obtain any further consent of any of the owners and this agreement by itself shall be treated as consent by the Owner. (2) The Builder shall be entitled to mortgage charge or to deal with the Builder''s allocation and the right, title and interest under this agreement."

CLAUSE 1 of Article IX - Miscellaneous to which our attention was drawn by Mr. Basu provides that nothing contained in the agreement shall be deemed to constitute as partnership between the builder and owner or as a joint venture between them. In M.K. Gupta''s case (supra), one of the issues which arose for consideration was if the housing construction or building activity carried on by a statutory authority or private builder or contractor came within the purview of the Act only after the amendment by Ordinance No. 24 in 1993 or Commission could entertain a complaint for such activity even before. While dealing with that issue in Para No. 6 of the judgment (at p. 256 of the report) which is material, it was held- "What remains to be examined is, if housing construction or building activity carried on by a private or statutory body was service within the 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 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 for himself or hire services of a builder or contractor. The latter being for consideration is service as defined in the Act. Similarly when a statutory authority develops land or allots a site or constructs a house for the benefit of commonman it is as much service as by a builder or contractor. The one is contractual service and other statutory service. 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 caused is denial of service. Such dispute or claims are not in respect of immovable property as argued but deficiency in rendering of service of particular standard, quality or grade. Such deficiencies or omissions are defined in Sub-clause (ii) of Clause (2) of Section 2 as unfair trade practice. If a builder of a house uses substandard material in construction of a building or makes false or misleading representation about the condition of the house then it is denial of the facility or benefit of which a consumer is entitled to claim value under the Act. When the contractor or builder undertakes to erect a house or flat then it is inherent in it that he shall perform his obligation as agreed to. A flat with a leaking roof, or cracking wall or substandard floor is denial of service. Similarly when a statutory authority undertakes to develop land and frame housing scheme, it while performing statutory duty renders service to the society in general and individual in particular. The entire approach of the learned Counsel for the development authority in emphasizing that power exercised under a statute could not be stretched to mean service proceeded on misconception. It is incorrect understanding of the statutory functions under a social legislation. A development authority while developing the land or framing a scheme for housing discharges statutory duty the purpose and objective of which is service to the citizens. As pointed out earlier the entire purpose of widening the definitions is to include in it not only day to day buying of goods by a common man but even such activities which are otherwise not commercial but professional or service-oriented in nature......."

(Emphasis supplied).

''SERVICE'' as used in Section 2(1)(d)(ii) has been defined in Section 2(1)(o) of the Act. A conjoint of aforesaid Clauses V, VI and VII would show that the document dated 10.8.1995 is a collaboration/joint venture agreement whereunder land was to be provided by the respondents for being commercially exploited and building raised thereon; entire cost of construction was to be borne by the appellants in lieu whereof they were entitled to allocation of major portion in the building with right to dispose of the allocated portion as deemed fit by them and a small portion in building was to go to the share of respondents. Assertion made in Clause 1 of Article IX in regard to the said agreement not being a joint venture was immaterial. Applying the ratio in M.K. Gupta''s case to the facts of this case, the finding returned by the State Commission of the respondents being ''consumer'' cannot be legally sustained. Complaint itself was, thus, not maintainable under the Act. In somewhat similar circumstances, petitioner in aforesaid R.P. No. 1878 of 2000 was held to be not a ''consumer'' and complaint not maintainable by a Bench whereof both of us were the Members. Order under appeal, therefore, deserves to be set aside on the said ground alone. Resultantly, appeal is allowed and order dated 15.11.2002 is set aside and complaint dismissed. No order as to cost. Appeal allowed.