Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, Supreme Court
Landowners Not Concerned With Construction Can’t Be Held Liable For Deficiency In Service For Lapse On Developer’s Part: Supreme Court
|The appeals before the Supreme Court were filed under Section 67 of the Consumer Protection Act, 2019, against the impugned judgment passed by the National Consumer Disputes Redressal Commission.
While dismissing the appeals filed by the flat buyers, the Supreme Court has held that the landowners, who are not concerned with the construction, cannot be held liable for deficiency in service for the lapse on the part of the developer, particularly when the developer has indemnified them against acts of commission or omission in construction.
The appeals before the Apex Court were filed under Section 67 of the Consumer Protection Act, 2019, against the impugned judgment passed by the National Consumer Disputes Redressal Commission (Commission) in the Review Petition and consumer case.
The Division Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe held, “The Clauses relied upon by the appellants mainly, Clauses V, VII, 12(b) and 12(c) do not indicate that landowners are under any obligation to raise construction. For the lapse on the part of the developer, the landowners, who are in no way concerned with the construction, cannot be held liable for deficiency in service, particularly when the developer has indemnified them against acts of commission or omission in construction. The Commission has partly allowed the Review Petition and has rightly fastened the liability for delay compensation on the developer as it was responsible for the delay in construction. The appellants’ interest has been fully protected as landowners as well as the developer have been directed to transfer title.”
Advocate Chandrachur Bhattacharyya represented the Appellant while AOR Kumar Sudeep represented the Respondent.
Factual Background
The landowners entered into a Joint Development Agreement (JDA) with the developer and executed a General Power of Attorney (GPA) in favour of the developer. Under the Sale Agreements, the developer agreed to hand over possession of the flats within 36 months. The initial 36-month period for handing over possession of the flats, as well as the six-month grace period, also expired. The project remained incomplete. The appellants issued a notice seeking redressal for the delay in handing over the possession of the flats. The appellants filed a Complaint before the Commission alleging a deficiency in service and unfair trade practices. The Commission found a deficiency in service due to the delay of more than six years in handing over the possession of the flats. The developer was directed to complete the construction of the flats allotted to the appellants and handover the possession of the flats within three months. The landowners were not held liable for delay, as the obligation to complete the construction rested solely with the developer.
The appellants filed a review petition seeking to hold the landowners jointly and severally liable and to enhance the compensation awarded to Rs 5 per square foot per month. The Commission partly allowed the Review Petition and held the landowners jointly and severally liable for completion of construction and for payment of delay compensation. However, the relief to award delay compensation @ Rs 5 per square feet was declined. The landowners challenged the aforesaid order. The Commission was directed to dispose of the Review Petition after giving an opportunity of hearing to the contesting parties. The Commission held that in view of the JDA and the Sale Agreement, the landowners couldnot be held jointly and severally liable for the deficiency in service. However, the landowners and the developer were directed to transfer the title of the property in question and proceed with the execution of the sale deed in favour of the appellants. The Review Petition was thus partly allowed. The challenge in the appeals before the Apex Court was confined to the extent that the impugned orders held the landowners not liable for payment of compensation for deficiency in service.
Reasoning
On a perusal of the JDA and the GPA, the Bench noted that in respect of the flats falling in the developer’s share, the developer has the right to enter into sale agreements, undertake construction, receive consideration, transfer possession and convey title. The construction has to be carried out by the developer. The delay in delivery of possession is in respect of flats falling to the share of the developer.
“The liability to pay the delay compensation is sought to be fastened only on the ground that there is a relationship of principal and agent. The landowners are undoubtedly jointly responsible with the developer to ensure transfer of title to the appellants. The Commission, therefore, has rightly directed both the landowners and the developer to transfer the title and execute sale deeds in favour of the appellants”, it stated.
Reference was also made to the judgment in Akshay & Anr. v. Aditya & Ors. (2018), where the State Commission and the NCDRC held that the developer alone was liable for payment of delay compensation. The Bench was of the view that the Commission had rightly fastened the liability for delay compensation on the developer as it was responsible for the delay in construction.
Thus, finding no merit in the appeal, the Bench dismissed the same.
Cause Title: Sriganesh Chandrasekaran v. M/s Unishire Homes LLP (Neutral Citation: 2026 INSC 172)
Appearance
Appellant: Advocates Chandrachur Bhattacharyya, AOR Sahil Tagotra, Advocate Shreya Kasera
Respondent: AOR Kumar Sudeep, AOR Sushil Balwada