Allowing an appeal in Bunga Daniel Babu v M/S Sri Vasudeva Constructions & Ors, the Supreme Court held that a landowner who had entered into an agreement with a developer to build on his land in exchange for a certain amount of built-up space was a consumer as per the Consumer Protection Act, 1986, as a memorandum of understanding (MoU) entered into between the landowner and the developer for that purpose did not amount to a joint venture.
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The landowner, Babu, had entered into a MoU with a developer for construction of an apartment building on his land. The apartments constructed were to be shared in the proportion of 40% to the landowner and 60% to the developer. The construction was to be completed within 19 months from the date of approval of the plans by the municipal authorities and if it was not completed within the stipulated time, the developer was to pay rent to the landowner. The developer failed to fulfil its obligations and the landowner approached the state consumer forum (Andhra Pradesh State Consumer Disputes Redressal Commission, Hyderabad) for redressal of his grievance.
The state commission refused to entertain the complaint on the ground that the landowner was not a consumer as per the act, as there was a collaboration agreement between the landowner and the developer, which was in the nature of a joint venture agreement. The state commission’s decision was upheld by the National Consumer Disputes Redressal Commission.
The Supreme Court observed that as per the terms of MoU, the landowner and developer were neither partners nor co-adventurers – as argued by the developer. The landowner had no control over the construction and so did not participate in the developer’s business. Thus, the agreement between them was not a joint-venture agreement.
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi.
The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
