National Consumer Disputes Redressal
M. Govinda Reddy & Anr. vs M/S. Venkat Estates Pvt. Ltd. & Anr. on 10 November, 2022
Author: R.K. Agrawal
Bench: R.K. Agrawal
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 484 OF 2022 (Against the Order dated 24/06/2022 in Complaint No. 27/2021 of the State Commission Karnataka) 1. M. GOVINDA REDDY & ANR. S/O. P. MUNIKRISHNA REDDY, R/ AT NO. 40, DOMLUR VILLAGE, BANGALORE, KARNATKA-560071 ...........Appellant(s) Versus 1. M/S. VENKAT ESTATES PVT. LTD. & ANR. HAVING ITS REGD. OFFICE AT FLAT NO. 205, 6TH FLOOR, RAJNIGANDHA BLOCK, GARDEN APARTMENTS, OPP. UB CITY, VITTAL MALYA ROAD, BANGALORE- KARNATAKA-5600001 2. PUNJAB NATIONAL BANK . 3. SMT. M. YASHODAMMA, W/O. V. KRISHNA REDDY, E/AT NO. 109, MUNEKOLALA, MARATHALLI POST, BANGALORE, KARNATAKA 4. PUNJAB NATIONAL BANK REP. ITS AUTHORISED OFFICER, SUNDARA RAMAN V.S. BO: SASTRTA DEPARTMENT CIRCLE OFFICE, BENGALURU-5600001 ...........Respondent(s)
BEFORE: HON'BLE MR. JUSTICE R.K. AGRAWAL,PRESIDENT
For the Appellant : Mr.BalajiSrinivasan, Advocate
Mr. DevanshuBehl, Advocate For the Respondent : Mr.Rohit Singh, Advocate for R-1
Mr. PBA Srinivasan
Mr. V. Arvind, Advocate for R-2
Dated : 10 Nov 2022 ORDER
1. The present Appeal has been filed against the Order dated 24.06.2022 passed by the State Consumer Disputes Redressal Commission, Karnataka (hereinafter referred to as State Commission), whereby the Complaint filed by the Complainants was dismissed with cost to ₹50,000/- to be paidin Consumer Welfare Fund of the State Commission.
2. Brief facts of the case are that Appellants/Complainants Sri M. Govinda Reddy and M. Yashodamma,are the absolute owners of the Property of bearing Sy. No. 101 of Kittaganur Village, BidarahalliHobli, Bangalore measuring 4 acres (hereinafter referred to as the land). Respondent No. 1, M/s. Venkat Estates Pvt. Ltd., approached them to develop multi-story residential apartments with all amenities in 2 acres out of the total 4 acres of Land. A Joint Development Agreement (hereinafter referred to as the Agreement) was executed between the Appellants and the Respondent No. 1 on 15.11.2013. As per terms of the Agreement, the Respondent No.1 was solely responsible to develop/construct/complete the multi-story residential apartments on the Land. A Supplementary Agreement was also executed on 10.07.2015 between the Parties for sharing of Flats on the Land. As per terms of the Agreement, the Appellant was entitled for 45% of the total built-up area, which works out to 1,04,778 sq. ft. 80 Apartmentsmeasuring 1,04,719 sq. ft. fell into the share of the Appellants and for the shortage of 59 sq. ft., was to be compensated by the Respondent No.1 by paying mutually agreed amount, in due course of time. As per terms of the Agreement, the Respondent No.1 Developer ought to have completed the Appellants' share, i.e., 80 Apartment within 38 months from the date of execution of the JDA, i.e., 15.01.2017. But the Respondent No. 1 Developer could not complete the Project within stipulated period. Alleging deficiency in service on the part of the Respondent No. 1 Developer the Appellants filed a consumer complaint before the State Commission seeking following reliefs:-
"a. Pay the amount of ₹4,61,81,079/- towards damages for not completing the building within the stipulated period as per JDA.
b. Pay future damages for the delay in completing the project at the rate of 18% p.a on the value of ₹3,000/- per sq.ft of the carpet area of the Complainants share till the OP completes the project.
c. Complete the project with all amenities as shown in the brochure issued by OP and JDA within a reasonable period as may be fixed by this Commission.
d. Obtain Occupancy Certificate from the competentauthority after completion of the project.
e. Provide all interiors for 2 apartments out of the apartments fallen to the share of the Complainants as per JDA.
f. Replace the sub-standard materials used for interior works including electrical fixtures and plumbing fittings and sanitary items."
3. The Complaint was contested by the Respondent No.1 Developer before the State Commission by denying all the allegations made by the Complainants and it wassubmitted that the Complainants are not consumers within the definition of either U/s 2(1)(d) of CPA 1986 or U/s. 2(7) of CPA 2019. It was submitted that as per terms of the Joint Development Agreement & Supplementary Agreement, out of the total Apartments, 80 Apartments were fell in the share of the Appellants and 96 Apartments were fell in the share of Respondent No. 1. Out of their 96 Apartments, they have already sold 76 apartments to the prospective buyers and 20 Apartments are yet to be sold. 46 Apartment purchasers are in physical possession and are enjoying the same as they have provided all the basic amenities to the Flat owners. As far as the share of the Complainants is concerned, they too have already sold 4 Apartments out of 80 Apartments and the buyers are in the physical possession of the Apartments. This clearly shows that this is a purely commercial and joint venture transaction and revolves around business dispute and not a consumer dispute. It was prayed that the Complaint be dismissed being not maintainable.
4. After hearing both the Parties and perusal of material on record, the State Commission dismissed the Complaint by observing as under:-
"6. Let us examine the contentions of Complainants, since placed huge documents along with huge pleadings, contending that the Hon'ble Supreme Court has declared the law that when the builder is entrusted the work of constructing house, he is service provider. It is held that in a JDA, the owner transfers the land as a price for construction of the flats which are allotted to the share of the owners. The entire responsibility of construction is undertaken by the builder and therefore the builder is a provider of service to the owners. When deficiency arises the owners are entitled to claim compensation before the consumer forum. In this regard placed reliance reported in 2020 (16) SCC 512 in the case of Wing Commander Arifur Rahman Khan vs Aleya Sultana and others, wherein at para 28 held that "the builder is liable to pay compensation for breach of obligation undertaken by him to deliver the flats as per the agreement" and submits the Commission has jurisdiction to entertain the complaint filed by the Complainants No.1 & 2, which in our view could not be apply to the facts of the case, since the Complainants and OP.1 entered into JDA for sharing of apartments as stated above. In our view it makes no difference, whether 96 apartment units will go to the OP.1 or 80 apartment units will go to the Complainants as share, facts remain that, the dispute prima facie appears to be a commercial activity and the same has to be said is a business to business and not as consumer to service provider, which could not be entertained by the Commission under consumer laws.
7. Learned counsel for the Complainants placed reliance in the case of Imperia Structures Ltd., vs. Anil Patni and another reported in (2020) 10 SCC 783 at para 23 & 39, wherein held "the provisions of RERA Act will not come in the way of consumer forum granting reliefs when the default is committed by the builder in providing service". As already stated above question of default could not be examined by the consumer commission, since Complainant nos.1 & 2 and OP.1 entered in to JDA is purely commercial activity and in other words Complainants.1 & 2 could not be said consumers within the definition of Sec.2(1)(d) of CPA 1986 or Sec.2(7) of CPA 2019. No doubt, Sec.3 of CPA 1986 or Sec.100 of CPA 2019 is not in derogation of the provisions of any other law provided under other acts, when there is clear bar, Complainants cannot contend that they are consumers and their dispute has to be examined by this Commission under consumer laws, since the issues raised by parties to the complaint are all hard issues are to be tried in comprehensive manner by a court competent to try, definitely not before the consumer commissions.
8. In so far as contentions of learned counsel for the Complainants that Sec.7(6) of the Insolvency and Bankruptcy Code, 2016, provides "the corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5)", as such, even a case is not registered under the said Act, Commission can examine their dispute. In our view, all such contentions are irrelevant since they could not be examined by the commission for simple reason that the complainants have failed to prove that they are the consumers.
.....
10. It would be appropriate for the Commission to make mention that as OP.1 said to have failed to pay the loan dues of OP.2, loan accounts were classified as NPA on 31.03.2021. Thereafter OP.2 proceeded further with SARFAESI action. The Commission also has to take notice of the fact from complaint papers that Complainants have advertised a public notice in Times of India English daily newspaper giving caution to the public at large not to purchase any of the flats of OP.1. Further OP.1 filed OS/1160/19 which subsequently transferred to commercial court in OS/221/2021. It is also submitted by OP.2 that, Complainant has already taken possession of the four flats and have sold the same, suffice to hold that they are not to be defined within the meaning of consumers either under 1986 Act or under 2019 Act, for the simple reason that the dispute between the Complainants and OP.1 without any doubt has to be held a dispute from business to business and not as that of consumer to business or consumer to service provider. In our view, it would be appropriate here to make mention that in 2015 SCC online NCDRC 961 in the case of IndrajitDatta vs. Samruddi Developers Pvt., Ltd., wherein held "when a consumer has booked more than one unit of residential premises, it amounts to booking of such premises for commercial purposes." If this be the position of law as to dealconsumer cases, here on facts, the Complainants being entered in to JDA with OP.1 as already stated above could not be said consumers and their dispute has to be held a dispute between to business men or to be said from business to business and not that of consumer to business or consumer to service provider as the case may be. In such conclusion, Commission proceed to record finding that complaint raised by Complainant no.1 & 2 U/s.47 of CPA 2019 is not maintainable and in view of such finding proceed to dismiss the complaint with cost of ₹50,000/- payable to Consumer Welfare Fund of State Commission."
5. Aggrieved by theOrderdated 24.06.2022 passed by the State Commission, the Appellants/Complainants have filed the present Appeal before this Commission.
6. Mr. Balaji Srinivasan, learned Counsel appearing on behalf of the Appellants/Complainants submitted that the State Commission has failed to appreciate that there was no Joint Venture Agreement between the Parties but the Joint Development Agreement was executed between the Parties according to which they provided only land to the Respondent No.1 Developer, who was to develop the Land and in lieu of the land, Developer has to provide certain part of the developed property to them. The Appellants have no role in management of the Project or venture or in construction activity. Respondent No.1 Developer is the service provider vis-à-vis the land owner, i.e., Appellants. Therefore, Land owners, i.e., Appellants do fall under the definition of 'Consumer' under the Consumer Protection Act, 1986. In support of his contention he relied upon the Judgment passed by the Hon'ble Supreme Court in 'Faqir Chand vs. Uppal Agencies Private Limited' [(2008) 10 SCC 345] and 'Bunga Daniel Babu vs. Sri Vasudeva Constructions' [(2016) 8 SCC 429]. He further submitted that the State Commission erroneously held that the execution of JDA is a commercial activity and dismissed the Complaint. It was prayed that the Impugned Order passed by the State Commission be set aside and the Appeal be allowed.
7. Per contra, Mr. Rohit Singh, learned Counsel appearing on behalf of the Respondent No. 1 and Mr. PBA Srinivasan, learned Counsel appearing on behalf of the Respondent No.2, had supported the Order passed by the State Commission as according to them the State Commission has passed a well-reasoned order which is based on a correct and rightful appreciation of evidence and material available on record and does not call for any interference.
8. I have heard Mr.Balaji Srinivasan, learned Counsel appearing on behalf of the Appellants,Mr. Rohit Singh, learned Counsel appearing on behalf of the Respondent No. 1 and Mr. PBA Srinivasan, learned Counsel appearing on behalf of the Respondent No.2, perused the material available on record and have given a thoughtful consideration to the various pleas raised by both the Parties.
9. The Hon'ble Supreme Court in 'Faqir Chand vs. Uppal Agencies Private Limited' [(2008) 10 SCC 345] has held that the land owners are consumers within the definition of 'consumer' under the Consumer Protection Act and the extent of area does not make a difference, by observing as under:-
"28. 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 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 landowner for a house construction (construction of the owner's share of the building) for a consideration. To that extent, the landowner 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 landowner 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 landowner, 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 landowner."
10. In "Bunga Daniel Babu v. Sri Vasudeva Constructions, [(2016) 8 SCC 429]" the Hon'ble Supreme Court has held as under:-
"18. It is worthy to note that in the said case a stand was taken by the respondent that the agreement was a "collaboration agreement" as it was so titled. Emphasis was laid on the fact that the agreement showed the intention to collaborate and, therefore, it was a joint venture. The Court ruled 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. After so stating, the Court in Faqir Chand Gulati case [Faqir Chand Gulati v. Uppal Agencies (P) Ltd., (2008) 10 SCC 345] proceeded to observe 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. It has also been stated therein that 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 the civil court or can approach the consumer forum under the Act. In the course of delineation, the Court proceeded to state: (SCC p. 362, para 26) "26. ... But the important aspect is the availment of services of the builder by the landowner for a house construction (construction of the owner's share of the building) for a consideration. To that extent, the landowner 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 landowner 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.
21. 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 [Faqir Chand Gulati v. Uppal Agencies (P) Ltd., (2008) 10 SCC 345] does not make a difference. Therefore, the irresistible conclusion is that the appellant is a consumer under the Act."
11. In the present case also, the Appellants have no role in management of the Project or venture or in construction activity. They also have no control over the construction. As per terms of the Agreements, they were only entitled to certain constructed area. The extent of area does not make a difference as has been held by the Hon'ble Supreme Court in 'Faqir Chand vs. Uppal Agencies Private Limited' [supra]. Respectfully following the ratio of the Judgments passed by the Hon'ble Supreme Court in the 'Faqir Chand vs. Uppal Agencies Private Limited' [supra] and 'Bunga Daniel Babu vs. Sri Vasudeva Constructions' [supra], it is held that the Appellants do fall under the definition of 'Consumer' as defined under Section 2(1)(d) of Consumer Protection Act, 1986 now replaced by Section 7 of CPA, 2019 and the Complaint is maintainable before the Consumer Fora.
12. For the reasons stated hereinabove, the Impugned Order dated 24.06.2022 passed by the State Commission is set aside and the matter is remanded to the State Commission to decide the matter afresh on merits after giving proper opportunities to the Parties in accordance with law. Parties are directed to appear before the State Commission on 12.12.2022. Keeping in view the peculiar facts and circumstances of the case, there shall be no order as to costs. The Appeal stands disposed off in above terms. The Registry is directed to send a copy of this Order to the Registrar of the State Commission immediately.
......................J R.K. AGRAWAL PRESIDENT