TaxTMI 
TaxTMI 
2008 (7) TMI 159
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.... 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 to the agreement. (vi) On completion of construction, the land-owner will be entitled to the entire ground floor (consisting of three bedrooms with attached bathrooms, one drawing-cum-dining, one store room, one kitchen) with one servant room under the overhead water tank on rear terrace and one parking space, as his share in consideration of his having made available the land. The builder shall also pay a sum of Rs.8 lakhs as non-refundable considera....
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....med 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 deeds dated 18.3.1992, 18.3.1992, 2.6.1995 and 2.6.1995. 4. The delivery of the ground floor was made by the builder to appellant's son during appellant's absence from India. On his return, the appellant sent a letter dated 29.10.1992, pointing out several shortcomings in the construction and the violations of sanctioned plan, and called upon the builder to rectify the deviations and defects. The builder did not comply. 5. The appellant therefore filed complaint No. ....
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....r 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 demolished certain portions of the structure and was insisting upon the other deviations which were beyond compoundable limits to be rectified; and that MCD was refusing to issue the completion certificate and C&D forms without those rectifications; and that the prayer for delivery of completion certificate and C&D forms required the builder to rectify all defects and bring the deviations within permissible limits and secured completion certificate and C&D forms. He pointed out that in the absence of....
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.... 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 above definition was amended by Consumer Protection (Amendment) Act, 62 of 2002 by adding the words 'but does not include a person who avails of such services for any commercial purpose', at the end]. (g) 'Deficiency' means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relatio....
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....enefits. 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 therefore, it was not a 'service-provider'. It was also pointed out that it was not only the builder who had certain obligations towards the owner, but the owner also had the following obligations towards the builder: (a) The owner shall execute all documents required for effecting transfer of builder's share of the land. (b) The owner shall not obstruct or interfere with the construction in any manner. (c) The owner had to keep the property wholly free from encumbrances during the currency of the agreement. (d) If the....
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....es 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 ineffectively, inefficiently and for reasons which are not necessary to be stated. The importance of the Act lies in promoting welfare of the society by enabling the consumer to participate directly in the market economy. It attempts to remove the helplessness of a consumer which he faces against powerful business, described as, 'a network of rackets' or a society in which, 'producers have secured power' to 'rob the rest' and the might of public bodies which are degenerating into store house of inaction where papers do not move from one....
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....ivities 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 caused is denial of service. Such disputes or claims are not in respect of immoveable 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 ® of Section 2 as unfair trade practice. If a builder of a house uses sub-standard 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 ....
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....parently 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 no dispute or doubt that a complaint under the Act will be maintainable 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. But we are concerned with a third hybrid category which is popularly called ....
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.... 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 specifically, it is in association of persons with intent, by way of contract, express or implied, to engage in and carry out a single business venture for joint profit, for which purpose such persons combine their property, money, effects, skill, and knowledge, without creating a partnership, a corporation or other business entity, pursuant to an agreement that there shall be a community of interest among the parties as to the purpose of the undertaking, and that each joint venturer must stand in the relation of principal, as well as ag....
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....d 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 member's equal voice in controlling the project." An illustration of joint venture may be of some assistance. An agreement between the owner of a land and a builder, for construction of apartments and sale of those of apartments so as to share the profits in a particular ratio may be a 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. 18. We may now notice the various ....
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....lute 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 t....
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....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 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. 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 th....
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....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 available under the Act is in addition to the normal remedy or other remedy that may be available to the complainant. 24. The District Forum, the State Commission and the National Commission committed a serious error in wrongly assuming that agreements of this nature being in the nature of joint venture are outside the scope of consumer disputes. Re : Second Question 25. Under the agreement, the builder is required to construct the ground floor in accordance with the sanctioned plan, and specifications and the terms in the agreement and deliver the s....