Decision cited:

In "Bunga Daniel Babu versus M/s. Sri Vasudeva Constructions & Ors." (supra) the Apex Court brought out clearly that in cases where development is made by a developer on the property provided by the land owner, and in lieu of that a certain portion of the developed property is to be provided to the land owner, the Builder does fall in the definition of 'service provider' vis-Ã -vis the land owner and hence, the land-owner is a “consumer”. There is only one rider provided in the matter that the land-owner should not be an active participant in managing the affairs of the builder.

In Faqir Chand Gulati Vs. Uppal Agencies Pvt. Ltd. and Ors. 2008 (10) SCC 345 the Apex Court has held 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.

Acelegal Analysis:

 

1. In the case were land owner gives his land to the builder for developing building on said land, the developer would be a “service provider” and land owner would normally be a “consumer”. If the land owner actively participates in the managing affairs of the builder then builder cannot be called as “service provider” and land owner is not a “consumer”. The second arrangement would acquire the nature of a joint venture where two parties would come to benefit from the development of project. Therefore the substance of agreement between the land owners developer is to be seen.

 

2. Accordingly it is the terms of agreement between the parties and mutual rights or obligations and roles or functions that would determine whether the owner is a “consumer” or not. In our view this concept has to be considered even by RERA authorities before they treat each land owner as a “co-promoter” in every case.

 

3. The land owner has a right to file complaint against the builder even after a lapse of 10 years, when the cause of action for which he is filing such complaint is enduring. Thus, the complaint filed by the land owner cannot be barred on grounds that, it was filed after the expiry of time as prescribed in the Consumer Protection Act, 1986.  

Facts of the case:

 Hermonie Mary Salazar and her four other siblings (“land owners”) owned land admeasuring 4972 sq.m Andheri (E) (the said “land”). On 07/11/1987 said land owners entered into Agreement with the Anthony H. Silva (“Builder”) for development of the said land, as per which the builder took the possession said land along with structures standing there i.e. on “as is where is” basis for development. As per the terms of the agreement the builder was supposed to provide flats on ownership basis to the land owner admeasuring 8,500 sq.ft .i.e. 1700 sq.ft. to each sibling/land owner within the period of 3 years and was entitled to sell rest of the flats. It was also stipulated that if the flats allotted by the developer to the owners do not cover up the entire area agreed to be allotted, the developer shall pay the cost of such deficient area at the then prevailing market price.

Building was constructed on the said land in 1994 and as per the terms in the Agreement between the builder and the said land owner, builder allotted flats to the siblings of the Hermonine Mary Salazar .i.e. other four land owners and handed them possession. However, the builder failed to hand over possession to Hermonine Mary Salazar as per the terms of the agreement and sold the flats of her share and earned enormous profit out of that. As the builder failed to comply the terms of the Agreement, Hermonine Mary Salazar filed complaint against the builder in the State Consumer Forum. Builder was held liable for not fulfilling the terms of the agreement and was directed to give flat to Hermonine Mary Salazar as per the terms of agreement signed between them. Appeal was filed by the builder before National Consumer Dispute Redressal Commission and contention was raised that, the complaint was barred by limitation as per section 24A of the Consumer Protection Act, 1986.

Issues before National Consumer Dispute Redressal Commission:

1. Was the complaint filed by the complainant barred by Limitation under section 24A of the Consumer Protection Act, 1986 ?

2. Whether builder is not the “service provider” and land owner is not the “consumer”?

National Consumer Dispute Redressal Commission Verdict:

1. The NCDRC held that, “Even if the complainant failed to file the consumer complaint within a period of 2 years as prescribed under section 24A of the Act, she cannot be barred from filing the same after the expiry of the said period, as the default is a continuing default. Hence, the complainant cannot be denied the offer of flat in terms of the agreement.”

2. It was also held that, if the land owner has given land to the builder for development and such land owner is not active participant to the managing affairs of builder then such land owner comes under the preview of “consumer” and builder comes under the preview of “service provider” Reliance was placed on "Bunga Daniel Babu versus M/s. Sri Vasudeva Constructions & Ors." (supra) and “Faqir Chand Gulati Vs. Uppal Agencies Pvt. Ltd. and Ors.” 2008 (10) SCC 345. Accordingly the appeal of builder was dismissed on both the courts.