REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3302 of 2005

Faqir Chand Gulati ........Appellant(s)

Vs.

Uppal Agencies Pvt. Ltd. & Anr. .......Respondent(s)

J U D G M E N T

R. V. RAVEENDRAN J.

This appeal is against the order dated 3.2.2004 passed by the National

Consumer Disputes Redressal Commission ('Commission' for short) in

Revision Petition No. 1878 of 2000. It relates to the question 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 Consumer Protection Act, 1986.

The agreement

2.The appellant is the owner of premises no. L-3, Kailash Colony, New

Delhi. He entered into a ‘collaboration agreement’ dated 17.5.1991 with the

first respondent, the terms of which are, in brief, as follows :

(i)The owner shall place at the disposal of the builder, vacant possession

of 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,

2

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 consideration

to the owner.

(vii)The remaining part of the building (the entire first and second floors

and two servant rooms and two car parking spaces) shall belong to the

builder as its share of the building in consideration of having spent the cost

of construction of the entire building and all other services rendered by him

under the agreement.

(viii)The owner and the builder shall be entitled to undivided and

indivisible share in the land, proportionate to their right in the building, that

is, an undivided one-third share in the land shall belong to the owner and

two-third share shall belong to the developer.

(ix)The builder shall be entitled to either retain or sell its share of the

building. The owner shall execute necessary documents for transferring the

share corresponding to the builder's portion of the building. The owner shall

give an irrevocable power of attorney enabling the builder to execute the

deed of conveyance in regard to the builder’s share in the land. The builder

will however, have the option to require the owner to personally execute the

sale deed in regard to the builder's share in the land instead of using such

power of attorney.

3

(x)On completion of the building, the builder shall apply for completion

certificate to the concerned authority and shall be liable to pay any penalty

that may be imposed or levied in regard to the deviations, if any, made in

the construction of the building.

(xi)The owner shall not interfere or obstruct the construction and

completion of the work in any manner, but will have access to the

construction to point out any defect in construction or workmanship or use

of inferior material, so as to require the builder to rectify such defects.

(xii)Title deeds handed over by the owner to the builder for completing

the formalities relating to the agreement shall thereafter be returned to the

owner, who shall however make available the same for reference by the

owners of the other floors.

(xiii)The agreement and the power of attorney executed by the owner in

favour of the builder are irrevocable. In the event of neglect, failure, default

on the part of the owner or the builder, the affected party shall have the right

to specific performance of the said agreement at the cost and risk of the

defaulting party who shall also be liable to pay damages.

(xiv)The agreement is not a partnership and shall not be deemed to be a

partnership between the owner and the builder.

4

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

5.The appellant therefore filed complaint No. 1866 of 1994 before the

District Consumer Disputes Redressal Forum-IX, Delhi, under the

Consumer Protection Act, 1986 (‘Act’ for short) seeking the following

reliefs against the builder :

a)Return of the title deeds relating to the premises;

b)Supply of completion certificate and C&D Forms from MCD; and

c)Delivery of security deposit receipt for electricity meter and payment

of Rs.4262.64 being the charges for change of electricity meter.

The District Forum dismissed the complaint by order dated 10.5.1996 as not

maintainable under the Act, holding that the appellant was not a ‘consumer’

as defined in section 2(1)(d)(ii) of the Act. It held that the agreement

between the parties created mutual rights and obligations with a provision

that in the event of breach of any condition, the affected party shall have the

right of specific performance and such an agreement cannot be construed as

a contract for hiring/availing a service, for consideration by a consumer.

6.The appellant filed an appeal against the order of the District Forum

and the said appeal was dismissed by the State Commission, Delhi, by order

dated 4.10.2000. The State Commission held that the agreement between the

6

parties, termed as a collaboration agreement, was in the nature of a joint

venture or agreement to collaborate; that the agreement contemplated

‘sharing’ of constructed area, that is the entire ground floor of the building

by the landowner and the remaining area by the builder; that the agreement

did not have any element of hiring any services; and that therefore, the

appellant was not a ‘consumer’ and the builder was not a ‘service-provider’.

It therefore, confirmed the District Forum’s decision that the petition was

not maintainable. For this purpose, it also relied on the decision of the

National Commission in C. Narasimha Rao vs. K.R. Neelakandan – I (1994)

CPJ 160 and its own decision in Har Sarup Gupta vs. M/s Kailash Nath &

Associates – II (1995) CPJ 275. However, as the appellant was old and as

the first and third reliefs (relating to delivery of title deeds and electricity

meter security deposit receipt and payment of the charges for the change of

electricity meter) had already been secured by the appellant and the only

pending issue related to C&D forms, the State Commission proceeded to

decide the appeal on merits. It noted that as the builder had already applied

for 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

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 completion

certificate and C&D forms, he was facing threats of demolition apart from

harassment from MCD. He contended that the non-completion of building

as per the sanctioned plan and making deviations on a large scale resulting

in non-issue of completion certificate and C&D forms amounted to

deficiency in service and therefore, his complaint ought to have been

allowed.

8

8.The National Commission dismissed the revision petition by order

dated 3.2.2004. The order extracted the relevant provisions of the agreement

in extenso and then proceeded to reject the petition by merely observing that

the agreement was in the nature of a joint venture and transaction did not

have any element of hiring the services of the builder within the meaning of

section 2(1)(d)(ii) of the Act and that the District Forum and the State

Commission had rightly held that the appellant was not a consumer. The

said order is challenged in this appeal by special leave.

Legal Provisions.

9.We may briefly notice the provisions of the Act before referring to

the contentions of the parties. The object of the Act is to provide for better

protection of the interests of consumers. It establishes consumer disputes

redressal agencies and enables persons having grievances regarding goods

supplied or services provided, to file complaints before such redressal

agencies. Section 14 enumerates the reliefs that can be granted by a

redressal agency to the complainant if he satisfies the agency about the

defect in goods or deficiency in service. Two of the reliefs that can be

granted by the forum, if it is satisfied that any of the allegations contained in

9

the complaint about the deficiency in the service are proved, are, a direction

to the opposite party to remove the deficiencies in the service in question

and a direction to pay compensation to the consumer for any loss or injury

suffered by him. Section 3 provides that the provisions of the Act shall be in

addition and not in derogation of the provisions of any other law for the

time being in force. Any allegation in writing made by the complainant that

the services hired or availed of or agreed to be hired or availed of by him

suffered from deficiency in any respect, with a view to obtaining any relief

provided for by or under the Act, is a ‘complaint’ under section 2(1)(c) of

the Act.

9.1)The terms 'consumer', 'deficiency', and 'service' defined 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].

10

(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 relation to any service."

(o).'Service' means service of any description which is made available

to potential users and includes the provision of facilities in connection

with banking, financing, insurance, transport, processing, supply of

electrical or other energy, board or lodging or both, housing construction,

entertainment, amusement or the purveying of news or other information,

but does not include the rendering of any service free of charge or under a

contract of personal service."

x

[

x

The words 'the provision of' are substituted by the words 'but not limited to,

the provision of' by the Consumer Protection (Amendment) Act, 2002 (62 of

2002) with effect from 15.3.2003]

Contentions :

10.The appellant contends that though the agreement is captioned as

'collaboration agreement', it is not a joint venture as assumed by the State

Commission and National Commission but an agreement under which the

builder agreed to make a housing construction for the land owner and

therefore, the activity of the builder squarely falls within the definition of

service. According to him, the fact that he entered into an agreement making

available the plot for construction of a three-storeyed building and agreeing

to share the building after construction and receive towards his share the

ground floor of the building plus Rs.8 lakhs did not amount to entering into

a joint venture to share the profits and losses. He submitted that the basic

11

scheme of the agreement was that the builder should construct and deliver a

house (ground floor of the building) to the owner and if there was any

deficiency in fulfilling the obligations undertaken in connection with such

construction, there would be a deficiency in service; and that therefore,

insofar as the term relating to construction of the ground floor for his

benefit, the builder was a service provider and he was a consumer.

11.On the other hand, the respondent contended that the agreement was

for collaboration in the nature of a joint venture which required the owner to

contribute the land and the builder to contribute the funds for construction

of a building and thereafter share the construction that is ground floor with

corresponding undivided share to the owner and upper floors with

corresponding undivided share to the builder, and that it was in the nature of

a single business adventure under which the parties agreed to share the

benefits. 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

12

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 owner's title was found to be defective, owner was liable to pay

damages, losses and costs to the builder and its nominees.

e)Owner shall do all acts, deeds and things required to keep the rights

in the land subsisting.

f)Owner shall not revoke or cancel the agreement or power of attorney.

As each party had to discharge and fulfill certain obligations towards the

other in consideration of the other party fulfilling some certain obligations,

the remedy in the event of any alleged breach, according to the builder, is to

13

sue for specific performance and/or damages in a civil court and a complaint

under the Act was not maintainable.

12.On the contentions raised, two questions arise for consideration :

(i)Whether on the facts and circumstances, a complaint under the

Consumer Protection Act, 1986 is maintainable, in regard to the

Agreement dated 17.5.1991 between the parties

(ii)Whether a complaint is maintainable under the Act for a prayer

seeking delivery of completion certificate and C&D Forms in regard

to a building and whether the prayer for completion certificate/C&D

Forms involves a prayer for rectification of the deficiencies in the

building so as to secure the completion certificate and C&D Forms.

Re : First Question :

13.The first question in fact involves examination of the following issue:

When the owner of a plot of land enters into an agreement with a builder for

development of the property by construction of a building and sharing the

constructed area between the owner and the builder, and the developer

commits any breach either by failing to deliver owner's share of constructed

area or by constructing the building contrary to specifications, or by failing

to fulfill the obligations relating to completion certificate or amenities like

14

water, electricity and drainage, whether the owner can maintain a complaint

under the Consumer Protection Act and whether in such circumstances, the

owner can claim that he is a consumer and the builder is the service-

provider.

14.In Lucknow Development Authority vs. M. K. Gupta [1994 (1) SCC

243] referring to the nature and object of the Act, this Court observed:

"To begin with the preamble of the Act, which can afford useful assistance

to ascertain the legislative intention, it was enacted, 'to provide for the

protection of the interest of consumers'. Use of the word 'protection'

furnishes 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 desk to another as a

matter of duty and responsibility but for extraneous consideration leaving

the common man helpless, bewildered and shocked. The malady is

becoming so rampant, widespread and deep that the society instead of

bothering, complaining and fighting for it, is accepting it as part of life.

The enactment in these unbelievable yet harsh realities appears to be a

silver lining, which may in course of time succeed in checking the rot. A

scrutiny of various definitions such as 'consumer', 'service', 'trader', 'unfair'

trade practice indicates that legislature has attempted to widen the reach of

the Act. Each of these definitions are in two parts, one, explanatory and

the other expandatory. The explanatory or the main part itself uses

expressions of wide amplitude indicating clearly its wide sweep then its

15

ambit is widened to such things which otherwise would have been beyond

its natural import."

This Court next considered the meaning of the word 'service'. Thereafter,

this Court dealt with the question whether ‘service’ included housing

construction, even before the inclusion of ‘housing construction’ in the

definition of ‘service’ by Act No.50 of 1993 with effect from 18.6.1993.

This Court observed:

"What is the meaning of the word 'service'? Does it extend to deficiency in

the building of a house or flat? Can a complaint be filed under the Act

against the statutory authority or a builder or contractor for any deficiency

in respect of given property. The answer to all this shall understanding of

the word 'service'. The term has variety of meanings. It may mean any

benefit or any act resulting in promoting interest or happiness. It may be

contractual, professional, public, domestic, legal, statutory etc. The

concept of service thus is very wide. How it should be understood and

what it means depends in the context in which it has been used in an

enactment.

What remains to be examined is if housing construction or building

activity carried on by a private or statutory body was service within

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 to 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 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

16

rendering of service of particular standard, quality or grade. Such

deficiencies or omissions are defined in Sub-clause (ii) of Clause (r) 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 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 sub-standard floor is denial of

service. ………….A person who applies for allotment of a building site or

for a flat constructed by the development authority or enters into an

agreement with a builder or a contractor is a potential user and nature of

transaction is covered in the expression 'service of any description'. It

further indicates that the definition is not exhaustive. The inclusive clause

succeeded in widening its scope but not exhausting the services which

could be covered in earlier part. So any service except when it is free of

charge or under a constraint of personal service is included in it. Since

housing activity is a service it was covered in the clause as it stood before

1993."

15.The predicament faced by the persons who deal with builders and

promoters, was noticed by this Court in Friends Colony Development

Committee vs. State of Orissa [2004 (8) SCC 733] in a different context

while dealing with town planning laws :

"Builders violate with impunity the sanctioned building plans and indulge

deviations much to the prejudice of the planned development of the city

and at the peril of the occupants of the premises constructed or of the

inhabitants of the city at large. Serious threat is posed to ecology and

environment and, at the same time, the infrastructure consisting of water

supply, sewerage and traffic movement facilities suffer unbearable burden

and are often thrown out of gear. Unwary purchasers in search of roof over

their heads and purchasing flats/apartments from builders, find themselves

having fallen prey and become victims to the design of unscrupulous

builders. The builder conveniently walks away having pocketed the money

leaving behind the unfortunate occupants to face the music in the event of

unauthorized constructions being detected or exposed and threatened with

demolition. Though the local authorities have the staff consisting of

engineers and inspectors whose duty is to keep a watch on building

17

activities and to promptly stop the illegal constructions or deviations

coming up, they often fail in discharging their duty. Either they don't act or

do not act promptly or do connive at such activities apparently 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

as ‘Joint-Venture Agreements’ or ‘Development Agreements’ or

‘Collaboration Agreements’ between a land-holder and a Builder. In such

transactions, the land-holder provides the land. The Builder puts up a

building. Thereafter, the land owner and builder share the constructed area.

The builder delivers the ‘owner’s share’ to the land-holder and retains the

18

‘Builder’s share’. The land-holder sells/transfers undivided share/s in the

land corresponding to the Builder’s share of the building to the builder or

his nominees. As a result each Apartment owner becomes the owner of the

Apartment with corresponding undivided share in the land and an undivided

share in the common areas of the building. In such a contract, the owner’s

share may be a single apartment or several apartments. The land-holder who

gets some apartments may retain the same or may dispose of his share of

apartments with corresponding undivided shares to others. The usual feature

of these agreements is that the land-holder will have no say or control in the

construction. Nor will he have any say as to whom and at what cost the

builder’s share of apartments are to be dealt with or disposed of. His only

right is to demand delivery of his share of constructed area in accordance

with the specifications. The builders contend that such agreements are

neither contracts for construction, nor contracts for sale of apartments, but

are contracts entered for mutual benefit and profit and in such a contract,

they are not ‘service-providers’ to the land-owners, but a co-adventurer with

the land-holder in a ‘joint venture’, in developing the land by putting up

multiple-housing (Apartments) and sharing the benefits of the project. The

question is whether such agreements are truly joint-ventures in the legal

sense.

19

17.This Court had occasion to consider the nature of ‘joint-venture’ in

New Horizons Ltd vs. Union of India [1995 (1) SCC 478). This Court held :

"The expression "joint venture" is more frequently used in the United

States. It connotes a legal entity in the nature of a partnership engaged in

the joint undertaking of a particular transaction for mutual profit or an

association of persons or companies jointly undertaking some commercial

enterprise wherein all contribute assets and share risks. It requires a

community of interest in the performance of the subject matter, a right to

direct and govern 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 agent, as to each of the other coventurers within the

general scope of the enterprise.

Joint ventures are, in general, governed by the same rules as partnerships.

The relations of the parties to a joint venture and the nature of their

association are so similar and closely akin to a partnership that their

rights, duties, and liabilities are generally tested by rules which are closely

analogous to and substantially the same, if not exactly the same as those

20

which govern partnerships. Since the legal consequences of a joint venture

are equivalent to those of a partnership, the courts freely apply partnership

law to joint ventures when appropriate. In fact, it has been said that the

trend in the law has been to blur the distinctions between a partnership and

a joint venture, very little law being found applicable to one that does not

apply to the other. Thus, the liability for torts of parties to a joint venture

agreement is governed by the law applicable to partnerships."

“A joint venture is to be distinguished from a relationship of independent

contractor, the latter being one who, exercising an independent

employment, contracts to do work according to his own methods and

without being subject to the control of his employer except as to the result

of the work, while a joint venture is a special combination of two or more

persons where, in some specific venture, a profit is jointly sought without

any actual partnership or corporate designation.”

(emphasis supplied)

To the same effect is the definition in Corpus Juris Secundum (Vol. 48A

pages 314-315):

"Joint venture," a term used interchangeably and synonymous with 'joint

adventure', or coventure, has been defined as a special combination of two

or more persons wherein some specific venture for profit is jointly sought

without any actual partnership or corporate designation, or as an

association of two or more persons to carry out a single business enterprise

for profit or a special combination of persons undertaking jointly some

specific adventure for profit, for which purpose they combine their

property, money, effects, skill, and knowledge…….. Among the acts or

conduct which are indicative of a joint venture, no single one of which is

controlling in determining whether a joint venture exists, are: (1) joint

ownership and control of property; (2) sharing of expenses, profits and

losses, and 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)

21

Black’s Law Dictionary (7

th

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 terms in the agreement between the

appellant and first respondent which militate against the same being a ‘joint

venture’. Firstly, there is a categorical statement in clause 24, that the

agreement shall not be deemed to constitute a partnership between the

owner and the builder. The land-owner is specifically excluded from

management and is barred from interfering with the construction in any

manner (vide clause 15) and the Builder has the exclusive right to appoint

the Architects, contractors and sub-contractors for the construction (vide

22

clause 16). The Builder is entitled to sell its share of the building as it

deemed fit, without reference to the land owner. (vide clauses 7 and 13).

The builder undertakes to the landowner that it will construct the building

within 12 months from the date of sanction of building plan and deliver the

owner’s share to the land owner (vide clauses 9 & 14). The Builder alone is

responsible to pay penalties in respect of deviations (vide clause 12) and for

payment of compensation under the Workmen’s Compensation Act in case

of accident (vide clause 10). Secondly, there is no community of interest or

common/joint control in the management, nor sharing of profits and losses.

The land owner has no control or participation in the management of the

venture. The requirement of each joint venturer being the principal as well

as agent of the other party is also significantly absent. We are therefore of

the view that such an agreement is not a joint venture, as understood in law.

19.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

23

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

24

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.

25

20.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

26

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 there are no provisions for shared

control of interest or enterprise and shared liability for losses.

22.The State Commission and National Commission have proceeded on

an assumption, which appears to be clearly baseless, that wherever there is

an agreement for development of a property between the property owner

and builder under which the constructed area is to be divided, it would

27

automatically amount to a joint venture and there is no question of the

landholder availing the service of the builder for consideration. Reliance

was placed on two decisions, the first being that of the National

Commission in C Narasimha Rao v. K R Neelakandan - I (1994) CPJ 160

and the second being that of the Delhi State Commission in Har Sarup

Gupta v. M/s. Kailash Nath & Associates - II (1995) CPJ 275. In C

Narasimha Rao, there was an agreement between the landowners and a

builder for construction of a building and sharing of the constructed area.

The old building was demolished, but the builder failed to complete the

construction of a new building and hand over the owner’s share of flats. The

landowners preferred a complaint claiming Rs.94,000/- as the value of the

malba (retrievable valuables from the debris of the old building) that had

been removed by the builder. The National Commission held that as the

claim was for recovery of the money being value of the malba removed by

the builder, it does not amount to a claim based on deficiency of service and

therefore such a claim would fall outside the scope of the Consumer

Protection Act. The said decision is wholly inapplicable, as it dealt with a

different question. In Har Swarup Gupta, the State Commission was

concerned with a claim of the landowners for compensation alleging that the

builder had not built the flats in terms of the contract under which the

28

landowners were entitled to 36% and the builder was entitled to 64% of the

built up area. The State Commission held that the complaint was not

maintainable on the ground that on similar facts the National Commission in

Narasimha Rao’s case (supra) had held that the fora under the Consumer

Protection Act did not have jurisdiction. But Narasimha Rao (supra), as

noticed above, was not similar on facts, nor did it lay down any such

proposition. Har Swarup Gupta is clearly wrongly decided.

23.We may notice here that 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. 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.

29

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 same to the owner. If the

construction is part of a building which in law requires a completion

certificate or C&D forms (relating to assessment), the builder is bound to

provide the completion certificate or C&D forms. He is also bound to

provide amenities and facilities like water, electricity and drainage in terms

of the agreement. If the completion certificate and C&D forms are not being

issued by the Corporation because the builder has made

deviations/violations in construction, it is his duty to rectify those

30

deviations or bring the deviations within permissible limits and secure a

completion certificate and C&D forms from MCD. The builder can not say

that he has constructed a ground floor and delivered it and therefore fulfilled

his obligations. Nor can the builder contend that he is not bound to produce

the completion certificate, but only bound to apply for completion

certificate. He cannot say that he is not concerned whether the building is in

accordance with the sanction plan or not, whether it fulfills the requirements

of the municipal bye-laws or not, or whether there are violations or

deviations. The builder cannot be permitted to avoid or escape the

consequences of his illegal acts. The obligation on the part of the builder to

secure a sanctioned plan and construct a building, carries with it an implied

obligation to comply with the requirements of municipal and building laws

and secure the mandatory permissions/certificates.

26.The surviving prayer is no doubt only for a direction to the builder to

furnish the completion certificate and C&D forms. It is not disputed that a

building of this nature requires a completion certificate and building

assessment (C&D forms). The completion certificate and C&D forms will

not be issued if the building constructed is contrary to the bye-laws and

sanctioned plan or if the deviations are beyond the permissible

31

compoundable limits. The agreement clearly contemplates the builder

completing the construction and securing completion certificate. The

agreement, in fact, refers to the possibility of deviations and provides that if

there are deviations, the builder will have to pay the penalties, that is do

whatever is necessary to get the same regularized. Even if such a provision

for providing completion certificate or payment of penalties is not found in

the agreement, the builder cannot escape the liability for securing the

completion certificate and providing a copy thereof to the owner if the law

requires the builder to obtain completion certificate for such a building.

27.A prayer for completion certificate and C&D Forms cannot be

brushed aside by stating that the builder has already applied for the

completion certificate or C&D Forms. If it is not issued, the builder owes a

duty to make necessary application and obtain it. If it is wrongly withheld,

he may have to approach the appropriate court or other forum to secure it. If

it is justifiably withheld or refused, necessarily the builder will have to do

whatever that is required to be done to bring the building in consonance

with the sanctioned plan so that the municipal authorities can inspect and

issue the completion certificate and also assess the property to tax. If the

builder fails to do so, he will be liable to compensate the complainant for all

32

loss/damage. Therefore, the assumption of the State Commission and

National Commission that the obligation of the builder was discharged

when he merely applied for a completion certificate is incorrect.

Conclusion

28.The District Forum and National Commission did not examine the

matter with reference to facts. The State Commission held that the

complaint was not maintainable but purported to consider the factual

question in a half-hearted and casual manner. The matter will now have to

go back to District Forum for deciding the matter on merits. We,

accordingly, allow this appeal as follows :

a)The orders of the National Commission, State Commission and

District Forum are set aside.

b)The appellant’s complaint is held to be maintainable.

c)The District Forum is directed to consider the matter on merits and

dispose of the matter in accordance with law, within six months from

the date of receipt of this order.

d)The respondents shall pay costs of Rs.25,000/- to the appellant.

33

………………………….J

[R. V. Raveendran]

…………………………J

[Lokeshwar Singh Panta]

New Delhi.

July 10, 2008

34