A landowner who signs
a memorandum of understanding (MoU) with a builder to develop apartments on his
land is a consumer, and can demand compensation under the Consumer Protection
Act if the developer fails to complete the work in time, the Supreme Court has
held.
The ruling provides
relief to owners of small plots who often enter into collaborative agreements
with builders to re-develop their properties. The understanding usually
involves distribution of flats between the owner and the real-estate firm. In
case of a dispute, the parties have to approach the trial court – where the
proceedings may run for years on end.
A bench headed by
Justice Dipak Misra delivered the judgment on a petition filed by Bunga Daniel
Babu, a resident of Hyderabad.
In July 2004, Babu had
signed an agreement with a firm for constructing a multi-storey building
comprising five floors, elevator facilities and parking space. While 60% of the
apartments were supposed to go to the builder, the owner could keep the
remaining 40%. Under the agreement, the construction had to be completed within
19 months from the date of approval by the municipal corporation – failing
which the developer had to pay Rs 2,000 for each apartment every month.
According to the
petitioner, the builder delayed handing over the apartments by three years but
did not pay the stipulated compensation. To claim the money, he dragged the
builder to the district consumer forum and attempted to invoke the Consumer
Protection Act.
Although the district
forum declared Babu a consumer under the law, the state and national consumer
panels did not agree. Both said the landowner had entered into a commercial
contract with the builder, and the transaction wasn’t meant for something of
personal use. “The MoU that the parties entered into does not even remotely
indicate that it is a joint venture,” the bench said, sending the case back to
the state commission for a decision on how much compensation Babu was entitled
to.
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