Landowners are also liable along with Builder for Deficiencies in Flat Constructions, SC

The Supreme Court held –

“ A revocation of power of attorney executed between landowners and builder for developing their land would not absolve the landowners from being jointly and severally liable along with the builder in a consumer case for deficiency of service.”

Case Details : Akshay & Anr. V. Aditya & Ors Civil Appeal Nos.3642-3646/2018 

Bench :Bela M. Trivedi J Satish Chandra Sharma J 

 Decided on 29th August, 2024.

Facts of the case:

The appellants who are landowners, and respondent No.2 (builder) Glandstone Mahaveer Infrastructure Pvt. Ltd had entered into a Joint Venture Agreement (JVA) for building flats and selling them subsequently. Appellants(landowners) had also executed an Irrevocable Power of Attorney (IPA) in favour of the respondent No.2(Builder) on July 6, 2013. On the premise of the said IPA, the respondent No.2 (builder) entered into an agreement with complainants /home buyers for the units. on the basis of the said documents 

Subsequently the said power of attorney was revoked by the appellants vide the letter dated 12-8-2014,  In the letter dated 12-8-2014, the appellants had stated to be not liable “Henceforth”, i.e. after the said letter was sent.

 The respondents, complainants filed the complaints before the `State Commission’ under Section 17 of the Consumer Protection Act, 1986 against the present Appellants(landowners ) and Respondent No.2(Builders) seeking the declaration that the present Appellants(Landowners ) and the Respondent No.2 (Builders )were jointly and severally involved in the unfair trade practices and were guilty of deficiency in service, they were jointly and severally liable to complete the activities and construction as per the terms and conditions agreed upon between the parties.

The  `State Commission’ holding Builders and Landowners (the present appellants and Respondent No.2) liable for the completion of the construction of dwelling units as per the agreement with the complainants and passed the following order:-

1. The OP Nos.1,2&3 before the state commission  to provide the possession of the dwelling unit agreed in Agreement to Sell (SA) with each complainant in the span of six months from the date of the receipt of copy of this order
2. The complainants to pay the entire consideration of the dwelling unit as per the stages and the final amount at the time of sale deed and possession as per the agreement.
3. The O.P. No.1 before the state commission   to provide the compensation of Rs.1,00,000/- to each of complainant for physical and mental harassment The O.P.No.1 to provide the cost of Rs.10,000/- to each of the complainant in the span of 30 days from the date of the receipt of copy of this order

The present appellants, preferred the First Appeals before the `NCDRC’, which came to be dismissed by the `NCDRC. NCDRC stated :

“The State Commission concluded that at the time of the agreement between the builder and the complainants, the JVA and IPA were very much operative. It is evident, therefore, that the appellants cannot wash their hands off from the matter, as it would result in grave injustice to the complainants’ consumers.”

Now matter comes before SC for adjudication 

Arguments by Advocate appearing for the appellants 

• That the appellants revoked the IPA granted to respondent no.2(Builder) on August 12, 2014 along with a public notice and hence could not be held liable for the acts done by the respondent no.2.

• That since the appellants were not privy to the agreement between the respondent no.2 and flat buyer/remaining respondents, a complaint against them under the Consumer Protection Act would not be maintainable.

• Advocate representing respondent no.2 had submitted that respondent no.2 was ready to complete the construction work and honour the JVA 

Supreme Court observed that 

“that though allegedly the said power of attorney was revoked by the appellants vide the letter dated 12-8-2014, the JVA has not been revoked so far and the same still continues to be in force”

It is further stated –

“In the letter dated 12-8-2014, the appellants had stated to be not liable “Henceforth”, i.e. after the said letter was sent. The appellants therefore were bound by the acts/deeds of the Respondent No.2 carried out pursuant to the irrevocable Power of Attorney till it was terminated, in accordance with law.”

To sum-up SC held – 

• The Joint Venture Agreement (JVA) between the builder and the landowners remained operative even after the revocation of the power of attorney.
•  It was also held that the expression ‘henceforth’ used in the revocation letter to the builder meant that landowners would be ceased of any liability for builder’s actions that occurs subsequent to the termination
• that would not exclude the landowners’ liability for the agreements that the builder entered into with the buyers before the termination of JVA or revocation of Power of attorney