P.M.Bhat, Member, Mysore Grahakara Parishat, writes,
Mysore is fast becoming a city of apartment buildings. In fact this is true of most cities in the country. Horizontal growth of cities is not keeping pace with the rapidly increasing urban population and this has given a fillip to apartment construction.
The vast majority of these apartments are built on sites meant for houses. The site owner makes an agreement ("collaboration" or "joint venture" agreement) with the builder under which the land is handed over to the builder and the site owner gets a certain number of finished apartments in return. If the builder does not keep his end of the agreement, can the site owner sue him for deficiency in service under the Consumer Protection Act? As a corollary, if a third party buys a defective apartment, can he sue both the builder and the site owner for deficiency in service? In a recent judgment (III (2008) CPJ 48 (SC)), the Supreme Court has answered these questions and ruled that the builder is completely responsible for such deficiency in service.
The case under consideration had gone through the District Consumer Forum, the State Consumer Commission and the National Consumer Commission. All these courts had concluded that since it was a joint venture, the builder and the site owner were on equal footing. So the site owner can not sue the builder for deficiency in service and in corollary, when a third party sues for service deficiency, both the builder and the site owner are liable. But the Supreme Court overturned these judgments. It said that the agreement may have been called a collaboration or joint venture, but in reality, there are no provisions for shared control of interest and shared liability for losses. It said that a true joint venture "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". Thus joint ventures are essentially partnerships. But in the so called joint ventures of site owners and builders, the site owner gets a certain number of finished apartments in exchange for his site, but he has no control or participation in the management of the venture. The Supremem Court declared that such an agreement, even though it may be called a joint venture by the signees, is not a joint venture as understood in law. So if there is any deficiency in construction, the site owner can sue the builder under the Consumer Protection Act, for deficiency in service. As a corollary, a third party who buys an apartment can sue only the builder for deficiency in service.