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,

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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.  

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(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.  

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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.

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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

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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.  

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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.  

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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

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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].     

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(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

[xThe 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

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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

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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

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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

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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

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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

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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

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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

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‘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.  

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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

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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)   

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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 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

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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

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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

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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.

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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

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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

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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

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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.  

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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

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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

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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.   

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………………………….J [R. V. Raveendran]

…………………………J [Lokeshwar Singh Panta]

New Delhi. July 10, 2008

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