The Supreme Court has held that a contract between a land owner and developer which entitles the landowner to certain amount of built-up space, will not amount to a joint-venture between the land owner and the developer..Consequently, the court ruled that a land owner, who has entered into such a Memorandum of Understanding (MoU) with a developer, will be a consumer within the ambit of Consumer Protection Act..The decision was rendered by a Bench of Justices Dipak Misra and NV Ramana in an appeal filed by land owner against the decision of the N National Consumer Disputes Redressal Commission (National Commission)..By way of background, the case has it genesis in a Memorandum of Understanding (MoU) between the land owner (appellant) with Vasudeva Constructions (Developer) for development of land by construction of a five storied building. As per the MoU, the apartments constructed were to be shared in the proportion of 40% and 60% between the appellant and the developer..The construction was to be complete in 19 months and failing which a monthly rent of Rs. 2,000 per flat was to be paid by the developer to the land owner. The developer failed to abide by the time-limit and the land owner approached the District Consumer Forum with a claim of around 19 lakh..The District Forum, relying on the case Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd. and Anr. held that transaction between the parties could not be termed as a joint venture, in order to exclude it from the purview of the Act..Accordingly, the District Forum opined that the complainant came under the definition of Consumer under Section 2(1)(d)(ii) of the Act. It then went into the merits of the case and partly allowed the claim made by the appellants..The developer went in appeal to the State Commission which over turned the decision of the District Forum. It distinguished the case of Faqir Chand Gulati and held that the appellant did not come within the ambit of definition of “consumer” under the Act and accordingly dismissed his claims as not maintainable. It expressed the view that as the agreement was entered into by the appellant for more than two plots and there was an intention to sell them and let them on rent and earn profit, the transaction was meant for a commercial purpose. The National Commission also confirmed the decision of the State Commission prompting the appeal to the Supreme Court..The Supreme Court held that the relevant aspect to be considered is the nature of the MoU and not what the land owner intended to do with the constructed flats..“The National Commission has affirmed the order passed by the State Commission on the ground that the complaint is not a consumer as his purpose is to sell flats and has already sold four flats. In our considered opinion, the whole approach is erroneous. What is required to be scrutinised whether there is any joint venture agreement between the appellant and the respondent. The MOU that was entered into between the parties even remotely does not indicate that it is a joint venture, as has been explained in Faqir Chand Gulati…”.It, then, studied the clauses of MoU and concluded the following:.“On a studied scrutiny of the aforesaid clauses, it is clear as day that the appellant is neither a partner nor a co-adventurer. He has no say or control over the construction. He does not participate in the business. He is only entitled to, as per the MOU, a certain constructed area. The extent of area, as has been held in Faqir Chand Gulati (supra) does not make a difference. Therefore, the irresistible conclusion is that the appellant is a consumer under the Act.”.Holding that the appellant is a consumer under the Consumer Protection Act, the Court set aside the decisions of State and National Commissions. It remitted the matter back to the State Commission for deciding the case on merits..Read the judgment below.
The Supreme Court has held that a contract between a land owner and developer which entitles the landowner to certain amount of built-up space, will not amount to a joint-venture between the land owner and the developer..Consequently, the court ruled that a land owner, who has entered into such a Memorandum of Understanding (MoU) with a developer, will be a consumer within the ambit of Consumer Protection Act..The decision was rendered by a Bench of Justices Dipak Misra and NV Ramana in an appeal filed by land owner against the decision of the N National Consumer Disputes Redressal Commission (National Commission)..By way of background, the case has it genesis in a Memorandum of Understanding (MoU) between the land owner (appellant) with Vasudeva Constructions (Developer) for development of land by construction of a five storied building. As per the MoU, the apartments constructed were to be shared in the proportion of 40% and 60% between the appellant and the developer..The construction was to be complete in 19 months and failing which a monthly rent of Rs. 2,000 per flat was to be paid by the developer to the land owner. The developer failed to abide by the time-limit and the land owner approached the District Consumer Forum with a claim of around 19 lakh..The District Forum, relying on the case Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd. and Anr. held that transaction between the parties could not be termed as a joint venture, in order to exclude it from the purview of the Act..Accordingly, the District Forum opined that the complainant came under the definition of Consumer under Section 2(1)(d)(ii) of the Act. It then went into the merits of the case and partly allowed the claim made by the appellants..The developer went in appeal to the State Commission which over turned the decision of the District Forum. It distinguished the case of Faqir Chand Gulati and held that the appellant did not come within the ambit of definition of “consumer” under the Act and accordingly dismissed his claims as not maintainable. It expressed the view that as the agreement was entered into by the appellant for more than two plots and there was an intention to sell them and let them on rent and earn profit, the transaction was meant for a commercial purpose. The National Commission also confirmed the decision of the State Commission prompting the appeal to the Supreme Court..The Supreme Court held that the relevant aspect to be considered is the nature of the MoU and not what the land owner intended to do with the constructed flats..“The National Commission has affirmed the order passed by the State Commission on the ground that the complaint is not a consumer as his purpose is to sell flats and has already sold four flats. In our considered opinion, the whole approach is erroneous. What is required to be scrutinised whether there is any joint venture agreement between the appellant and the respondent. The MOU that was entered into between the parties even remotely does not indicate that it is a joint venture, as has been explained in Faqir Chand Gulati…”.It, then, studied the clauses of MoU and concluded the following:.“On a studied scrutiny of the aforesaid clauses, it is clear as day that the appellant is neither a partner nor a co-adventurer. He has no say or control over the construction. He does not participate in the business. He is only entitled to, as per the MOU, a certain constructed area. The extent of area, as has been held in Faqir Chand Gulati (supra) does not make a difference. Therefore, the irresistible conclusion is that the appellant is a consumer under the Act.”.Holding that the appellant is a consumer under the Consumer Protection Act, the Court set aside the decisions of State and National Commissions. It remitted the matter back to the State Commission for deciding the case on merits..Read the judgment below.