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REPORTABLE  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 944  OF 2016 (@ Special Leave Petition (Civil) No.1633 of 2015)

BUNGA DANIEL BABU         Appellant (s)

VERSUS

M/S SRI VASUDEVA CONSTRUCTIONS  Respondent(s) & ORS

J U D G M E N T

Dipak Misra, J.

The assail in the present appeal, by special leave, is to

the judgement and order passed by the National  Consumer

Disputes  Redressal  Commission,  New  Delhi  (for  short  “the

National  Commission”)  in Revision Petition No.  258 of  2013

whereby the said Commission has approved the decision of the

State Consumer Disputes Redressal Commission, Hyderabad

which had reversed the view of the District Consumer Forum

that  the  complainant  is  a  “consumer”  within  the  definition

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under Section 2(1)(d)  of  the Consumer Protection Act,  1986

(for brevity, “the Act”) as the agreement of the appellant with

the respondents was not a joint venture. The District Forum

had arrived at the said decision on the basis of legal principles

stated in  Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd.

and anr.1.  The State Commission had opined that the claim

of the appellant was not adjudicable as the complaint could

not be entertained under the Act inasmuch as the parties had

entered into an agreement for construction and sharing flats

which  had  the  colour  of  commercial  purpose.   Thus,  the

eventual conclusion that the State Commission reached was

that the complainant was not a consumer under the Act.  The

said conclusion has been given the stamp of affirmance by the

National Commission.  

2. The factual score that is essential to be depicted is that

the appellant is the owner of the plot nos. 102, 103 and 104 in

survey no. 13/1A2, Patta no. 48 admeasuring 1347 sq. yards

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(2008) 10 SCC 345

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situate  at  Butchirajupalem  within  the  limits  of

Visakhapatnam  Municipal  Corporation.  Being  desirous  of

developing  the  site,  the  land  owner  entered  into  a

Memorandum of Understanding (for short “the MOU”) with the

respondents  on  18.07.2004  for  development  of  his  land  by

construction  of  a  multi-storied  building  comprising  of  five

floors,  with  elevator  facility  and  parking  space.  Under  the

MOU, the apartments constructed were to be shared in the

proportion of  40% and 60% between the appellant  and the

respondent  No.  1.  Additionally,  it  was  stipulated  that  the

construction was to be completed within 19 months from the

date of approval of the plans by the Municipal Corporation and

in case of non-completion within the said time, a rent of Rs.

2000/- per month for each flat was to be paid to the appellant.

An addendum to the MOU dated 18.07.2004 was signed on

29.04.2005  which,  inter  alia, required  the  respondents  to

provide  a  separate  stair  case  to  the  ground  floor.  It  also

required  the  respondents  to  intimate  the  progress  of  the

construction  to  the  appellant  and  further  required  the

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appellant  to  register  14  out  of  the  18  flats  before  the

completion  of  the  construction  of  the  building  in  favour  of

purchasers of the respondents.

3. As  the  factual  matrix  would  further  unfurl,  the  plans

were  approved  on  18.05.2004  and  regard  being  had  to

schedule,  it  should  have  been  completed  by  18.12.2005.

However,  the  occupancy  certificates  for  the  12  flats  were

handed over to the occupants only on 30.03.2009, resulting in

delay of about three years and three months. In addition, the

appellant had certain other grievances pertaining to deviations

from  sanction  plans  and  non-completion  of  various  other

works and other  omissions for  which he  claimed a sum of

Rs.19,33,193/-  through  notices  dated  6.6.2009  and

27.6.2009. These claims were repudiated by the respondents

vide communications dated 17.07.2009 and 16.08.2009.  

4.  Being  aggrieved  by  the  aforesaid  communications,  the

appellant approached the District Forum for redressal of his

grievances. The District Forum appreciating the factual matrix

in  entirety  framed  two  issues  for  determination,  which  in

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essence  are,  whether  the  complainant  was  a  “consumer”

within the definition of Section 2(1)(d) of the Act; and whether

there was any deficiency in services on the part of the opposite

party.  The District Forum after analysing various clauses of

the  MOU  and  the  addendum  and  placing  reliance  on  the

decision of the Court in Faqir Chand Gulati (supra) came to

hold  that  the  transaction between the  parties  could  not  be

termed  as  a  joint  venture,  in  order  to  exclude  it  from the

purview of the Act. Accordingly, the District Forum opined that

the complainant came under the definition of Consumer under

Section 2(1)(d)(ii) of the Act.  On the second point of deficiency

as  well,  it  partly  allowed  the  claim  in  favour  of  the

appellant-complainant by awarding a sum of Rs. 15,96,000/-

towards  rent  for  delayed  construction,  Rs.  19,800/-  as

reimbursement of  vacant land tax,  Rs. 70,000/- as cost for

rectification of defects in the premises and Rs. 25,000/- for

mental agony.  It was further directed that the abovesaid sum

shall carry interest @ 9% per annum from the date of filing of

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the  complaint.  Be  it  stated,  cost  of  Rs.  10,000/-  was  also

awarded.  

5. The  respondent  constrained  by  the  decision  of  the

District  Forum  preferred  an  appeal  before  the  State

Commission  which  did  not  agree  with  the  finding  of  the

District  Forum  and  came  to  hold  that  the

appellant-complainant  did  not  come  within  the  ambit  of

definition  of  “consumer”  under  the  Act  and  accordingly

dismissed  his  claims  as  not  maintainable.   The  appellate

forum expressed the view that as the agreement was entered

into by the appellant-complainant for more than two plots and

there was an intention to sell them and let them on rent and

earn  profit,  the  transaction  was  meant  for  a  commercial

purpose.   Grieved  by  the  said  decision,  the

appellant-complainant  invoked  the  revisional  jurisdiction  of

the  National  Commission  which  concurred  with  the  view

expressed by the State Commission by holding that the State

Commission had rightly distinguished the authority in  Faqir

Chand Gulati’s case on facts because the flats were not for

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personal use and the complainant had already sold four of the

twelve flats.

6.  The  seminal  issue  that  emanates  for  consideration  is

whether the appellant-complainant falls within the definition

of “consumer” under Section 2(1)(d)  read with the Explanation

thereto  of  the  Act.  The  issue  that  further  arises  for

determination is whether the National Commission has rightly

distinguished the authority in Faqir Chand Gulati’s case.  It

is necessary to mention that the controversy involved in the

case had arisen prior to the 2002 amendment by which the

definition of the term “consumer” has been amended in the

dictionary clause.  

7.  To  appreciate  the  heart  of  the  dispute,  we  think  it

apposite to x-ray the definition of the term “consumer” from

the inception till today. Section 2(1)(d) at the commencement

of the Act read as follows:-  

“Section 2(1)(d) "consumer" means any person who —  

(i)  buys  any  goods  for  a  consideration which has been  paid  or  promised  or  partly  paid  and  partly

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promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or  promised or  partly  paid or  partly  promised,  or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or  

(ii) hires any services for a consideration which has been  paid  or  promised  or  partly  paid  and  partly promised, or under any system of deferred payment and includes any beneficiary of such services other than  the  person  who  hires  the  services  for consideration paid or promised, or partly paid and partly  promised,  or  under  any system of  deferred payment, when such services are availed of with the approval of the first mentioned person;”  

The aforesaid definition, as is manifest, did not include a

person  who  obtained  such  goods  for  resale  or  for  any

commercial purpose.   

8. In  Morgan Stanley Mutual Fund v. Kartick Das2 the

question that arose before a three-Judge Bench was  whether

the prospective investor in future goods could be treated as a

consumer.  Answering the question in favour of the appellant,

2

 (1994) 4 SCC 225

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the  Court  opined  that  a  prospective  investor  like  the

respondent was not a consumer.  However, a passage relating

to  the  description  of  consumer  from  the  said  authority  is

worth reproducing:-

“The  consumer  as  the  term  implies  is  one  who consumes.  As per  the  definition,  consumer is  the one  who  purchases  goods  for  private  use  or consumption. The meaning of the word ‘consumer’ is  broadly  stated in  the  above definition so as to include anyone who consumes goods or services at the  end  of  the  chain  of  production.  The comprehensive  definition  aims  at  covering  every man who pays money as the price or cost of goods and services. The consumer deserves to get what he pays for in real quantity and true quality. In every society, consumer remains the centre of gravity of all  business  and  industrial  activity.  He  needs protection  from  the  manufacturer,  producer, supplier, wholesaler and retailer.”

9. In  Lucknow Development  Authority  v.  M.K.  Gupta3,

the two-Judge Bench adverted to the concept of “consumer” as

defined under the Act.  Analysing the definition in the context

of the Act, the Court held:-

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(1994) 1 SCC 243

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“It is in two parts. The first deals with goods and the other  with  services.  Both  parts  first  declare  the meaning  of  goods  and  services  by  use  of  wide expressions. Their ambit is further enlarged by use of  inclusive  clause.  For  instance,  it  is  not  only purchaser  of  goods  or  hirer  of  services  but  even those who use the goods or who are beneficiaries of services with approval of the person who purchased the goods or who hired services are included in it. The  legislature  has  taken  precaution  not  only  to define  ‘complaint’,  ‘complainant’,  ‘consumer’  but even  to  mention  in  detail  what  would  amount  to unfair  trade  practice  by  giving  an  elaborate definition  in  clause  (r)  and  even  to  define  ‘defect’ and ‘deficiency’  by clauses (f)  and (g)  for  which a consumer can approach the Commission. The Act thus  aims  to  protect  the  economic  interest  of  a consumer as understood in commercial sense as a purchaser of goods and in the larger sense of user of  services.  The  common  characteristics  of  goods and services are that they are supplied at a price to cover the costs and generate profit or income for the seller of goods or provider of services. But the defect in  one  and  deficiency  in  other  may  have  to  be removed  and  compensated  differently.  The  former is, normally, capable of being replaced and repaired whereas  the  other  may  be  required  to  be compensated by award of the just equivalent of the value or damages for loss.”

10. While adverting to the term “service” as defined in clause

(o), the Court ruled:-

“In other words service which is not only extended to actual users but those who are capable of using it are covered in the definition. The clause is thus

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very  wide  and  extends  to  any  or  all  actual  or potential  users.  But  the  legislature  did  not  stop there. It expanded the meaning of the word further in  modern  sense  by  extending  it  to  even  such facilities  as  are  available  to  a  consumer  in connection  with  banking,  financing  etc.  Each  of these are wide-ranging activities in day to day life. They are discharged both by statutory and private bodies.  In  absence  of  any  indication,  express  or implied there is no reason to hold that authorities created by  the  statute  are  beyond purview of  the Act.”

11. The abovementioned definition was amended in the year

1993.  The  definition  under  Section  2(1)(d)  that  defined

“consumer” after the amendment of 1993 read as follows:-  

“Section 2(1)(d) "consumer" means any person who —  

(i)  buys  any  goods  for  a  consideration which has been  paid  or  promised  or  partly  paid  and  partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or  promised or  partly  paid or  partly  promised,  or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or  

(ii)  hires  or  avails of any  services  for  a consideration which has been paid or promised or partly  paid  and  partly  promised,  or  under  any system  of  deferred  payment  and  includes  any beneficiary of such services other than the person

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who hires or avails of the services for consideration paid  or  promised,  or  partly  paid  and  partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person;  

Explanation.—For the purposes of sub-clause (i), “commercial purpose” does not include use by a consumer  of  goods  bought  and  used  by  him exclusively  for  the  purpose  of  earning  his livelihood, by means of self-employment.”

12. In  Laxmi  Engineering  Works  v.  P.S.G.  Industrial

Institute4, while dealing with the connotative expanse of the

term  “consumer”  in  the  unamended  definition,  the  Court

considering  the  Explanation  added  by  the  Consumer

Protection (Amendment) Act, 1993 (50 of 1993) ruled that the

said Explanation is clarificatory in nature and applied to all

pending  proceedings.   Further  proceeding,  the  Court  held

that:-

“…….. (ii)  Whether  the  purpose  for  which  a  person  has bought goods is a “commercial purpose” within the meaning of the definition of expression ‘consumer’ in Section 2(d) of the Act is always a question of fact

4

 (1995) 3 SCC 583

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to be decided in the facts and circumstances of each case.

(iii)  A  person  who  buys  goods  and  uses  them himself,  exclusively for the purpose of  earning his livelihood,  by  means  of  self-employment  is  within the definition of the expression ‘consumer’.”   

13. It is necessary to state here that in the said case prior to

recording its conclusions, the Court has elaborately dealt with

the  definition  of  “consumer”  under  Section  2(1)(d)(i)  and

Explanation added by 1993 amendment Act.  Because of what

we are going to ultimately say in this case, we think seemly to

reproduce the relevant discussion from the said authority:-

“11.  Now  coming  back  to  the  definition  of  the expression ‘consumer’ in Section 2(d), a consumer means insofar as is relevant for the purpose of this appeal,  (i)  a  person  who  buys  any  goods  for consideration;  it  is  immaterial  whether  the consideration  is  paid  or  promised,  or  partly  paid and  partly  promised,  or  whether  the  payment  of consideration  is  deferred;  (ii)  a  person  who  uses such  goods  with  the  approval  of  the  person  who buys such goods for consideration; (iii) but does not include a person who buys such goods for resale or for any commercial purpose. The expression ‘resale’ is  clear enough. Controversy has,  however,  arisen with  respect  to  meaning  of  the  expression “commercial purpose”. It is also not defined in the Act. In the absence of a definition, we have to go by its  ordinary  meaning.  ‘Commercial’  denotes

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“pertaining  to  commerce”  (Chamber’s  Twentieth Century  Dictionary);  it  means  “connected  with,  or engaged in commerce; mercantile; having profit as the main aim” (Collins English Dictionary)  whereas the word ‘commerce’ means “financial transactions especially buying and selling of merchandise, on a large  scale”  (Concise  Oxford  Dictionary).  The National Commission appears to have been taking a consistent  view  that  where  a  person  purchases goods “with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit” he will not be a ‘consumer’ within the meaning  of  Section  2(d)(i)  of  the  Act.  Broadly affirming the said view and more particularly with a view  to  obviate  any  confusion  —  the  expression “large  scale”  is  not  a  very  precise  expression  — Parliament stepped in and added the explanation to Section 2(d)(i) by Ordinance/Amendment Act, 1993. The explanation excludes certain purposes from the purview of the expression “commercial purpose” — a  case  of  exception  to  an  exception.  Let  us elaborate: a person who buys a typewriter or a car and uses them for his personal use is certainly a consumer but a person who buys a typewriter or a car for typing others’ work for consideration or for plying the car as a taxi can be said to be using the typewriter/car  for  a  commercial  purpose.  The explanation  however  clarifies  that  in  certain situations,  purchase  of  goods  for  “commercial purpose” would not yet take the purchaser out of the  definition  of  expression  ‘consumer’.  If  the commercial use is by the purchaser himself for the purpose  of  earning  his  livelihood  by  means  of self-employment, such purchaser of goods is yet a ‘consumer’.  In  the  illustration  given  above,  if  the purchaser himself works on typewriter or plies the car  as  a  taxi  himself,  he  does  not  cease  to  be  a consumer.  In  other  words,  if  the  buyer  of  goods

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uses  them  himself,  i.e.,  by  self-employment,  for earning his livelihood, it would not be treated as a “commercial purpose” and he does not cease to be a consumer  for  the  purposes  of  the  Act.  The explanation  reduces  the  question,  what  is  a “commercial  purpose”,  to  a question of  fact  to be decided in the facts of each case. It is not the value of the goods that matters but the purpose to which the goods bought are put to.”

14. In  Kalpavruksha  Charitable  Trust  v.  Toshniwal

Brothers (Bombay) Pvt. Ltd. and another5  reiterating the

principles stated in  Laxmi Engineering Works (supra), the

Court ruled whether a person would fall within the definition

of “consumer” or not would be a question of fact in every case.

In  the  said  case,  the  National  Commission  had  already

returned  a  finding  that  the  appellant  therein  was  not  a

“consumer”  as  the  machinery  was  installed  for  commercial

purpose.  An argument was advanced that the activity of  a

charitable  institution,  though  commercial  in  nature,  was  a

part of charitable activity. For the said purpose, reliance was

placed  on  CIT  v.  Surat  Art  Silk  Cloth  Manufacturers’

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(2000) 1 SCC 512

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Association6.  The  two-Judge  Bench  distinguished  the  said

verdict on the ground that it was a decision rendered under

the  Income  Tax  Act.   It  was  also  urged  there  that  if  the

dominant object of the trust or institution is charitable, the

activity carried on by it would not be treated as an activity for

profit. To bolster the said submission, the authority in CIT v.

Federation  of  Indian  Chambers  of  Commerce  and

Industries7 was commended to the Court but the same was

not accepted on the foundation that  the verdict  was in the

context of Income Tax Act. Eventually, the Court held thus:-  

“In  the  instant  case,  what  is  to  be  considered  is whether the appellant was a “consumer” within the meaning of the Consumer Protection Act, 1986, and whether the goods in question were obtained by him for “resale” or for any “commercial  purpose”.  It  is the case of the appellant that every patient who is referred to  the  Diagnostic  Centre  of  the appellant and who takes advantage of the CT scan, etc. has to pay for it and the service rendered by the appellant is not free. It is also the case of the appellant that only ten per cent of the patients are provided free

6

(1980) 2 SCC 31 7

(1981) 3 SCC 156

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service.  That  being  so,  the  “goods”  (machinery) which were  obtained by  the  appellant  were  being used for “commercial purpose”.”

15. The purpose of referring to the aforesaid pronouncements

is to appreciate the views expressed by this Court from time to

time prior to the amendment in 2002 and also the philosophy

behind the consumer protection and the concept of rendition

of service.  It is necessary to mention here that the definition

of the term “consumer” has been amended by the Consumer

Protection  (Amendment)  Act,  2002  (62  of  2002)  with  effect

from  15.03.2003.  Be  it  stated,  clause  2(1)(d)(ii)  was

substituted.   We think it appropriate to reproduce the same:-  

“Section 2(1)(d) "consumer" means any person who —  

       x x x x x

(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly  promised,  or  under  any system of  deferred payment  and  includes  any  beneficiary  of  such services other than the person who hires or avails of the services for consideration paid or promised, or partly  paid  and  partly  promised,  or  under  any system of deferred payment, when such services are availed of with the approval of the first mentioned

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person but does not include a person who avails of such services for any commercial purpose;  

Explanation.—For  the  purposes  of  this  clause, “commercial purpose” does not include use by a person  of  goods  bought  and  used  by  him and services  availed  by  him  exclusively  for  the purposes of earning his livelihood by means of self-employment.”

16. The bold portions indicate the nature of amendment in

the  definition  of  the  word  “consumer”.   In  the  first  part  it

excludes  services  for  any  commercial  purpose.  After  the

amendment  the  decisions  that  have  been  rendered  by  this

Court require careful consideration. As has been stated earlier,

on behalf of the complainant heavy reliance was placed on the

authority in  Faqir Chand Gulati (supra) but the same has

been distinguished by the National Commission.  

17. The  decision  in  Faqir  Chand  Gulati (supra),  we  are

disposed to  think,  requires  appropriate  appreciation.   Be  it

noted, it is relatable to a stage where the amended definition

had not come into existence.  Despite the same, it is noticeable

that  the  principles  laid  down  therein  are  pertinent  and

significant to the existing factual scenario.  In the said case,

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the  Court  while  dealing  with  a  building  construction

agreement between a landowner and a builder, was required to

decide whether the owner of a plot of land could maintain a

complaint under the Act claiming that he was a consumer and

the builder,  a  service  provider.   The two-Judge Bench after

referring to various authorities opined thus:-

“20. There is no dispute or doubt that a complaint under the Act will be maintainable in the following circumstances: (a)  Where  the  owner/holder  of  a  land  who  has entrusted  the  construction  of  a  house  to  a contractor, has a complaint of deficiency of service with reference to the construction. (b) Where the purchaser or intending purchaser of an apartment/flat/house has a  complaint  against the builder/developer with reference to construction or delivery or amenities.

But we are concerned with a third hybrid category which  is  popularly  called  as  “joint-venture agreements”  or  “development  agreements”  or “collaboration  agreements”  between  a  landholder and a builder. In such transactions, the landholder provides the land. The builder puts up a building. Thereafter,  the  landowner  and  builder  share  the constructed area. The builder delivers the “owner’s share” to the landholder and retains the “builder’s share”.  The  landholder  sells/transfers  undivided share(s) in the land corresponding to the builder’s share of the building to the builder or his nominees. As  a  result  each  apartment  owner  becomes  the

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owner  of  the  apartment  with  corresponding undivided share in the land and an undivided share in  the  common  areas  of  the  building.  In  such  a contract,  the  owner’s  share  may  be  a  single apartment  or  several  apartments.  The  landholder who gets some apartments may retain the same or may  dispose  of  his  share  of  apartments  with corresponding  undivided  shares  to  others.  The usual  feature  of  these  agreements  is  that  the landholder  will  have  no  say  or  control  in  the construction. Nor will he have any say as to whom and at what cost the builder’s share of apartments are to be dealt with or disposed of. His only right is to demand delivery of his share of constructed area in accordance with the specifications. The builders contend that such agreements are neither contracts for  construction,  nor  contracts  for  sale  of apartments,  but  are  contracts  entered for  mutual benefit and profit and in such a contract, they are not  “service  providers”  to  the  landowners,  but  a co-adventurer  with  the  landholder  in  a  “joint venture”,  in  developing  the  land  by  putting  up multiple-housing  (apartments)  and  sharing  the benefits of the project. The question is whether such agreements  are  truly  joint  ventures  in  the  legal sense.

x x x x x 25. An illustration of joint venture may be of some assistance.  An agreement between the owner of  a land and a builder, for construction of apartments and  sale  of  those  apartments  so  as  to  share  the profits in a particular ratio may be a joint venture, if the agreement discloses an intent that both parties shall  exercise  joint  control  over  the construction/development  and  be  accountable  to each other for their respective acts with reference to the project.

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x x x x x 29. It is, however, true that where the contract is a true  joint  venture  the  scope  of  which  has  been pointed out in paras 21 to 25 above, the position will be different.  In a true joint venture agreement between  the  landowner  and  another  (whether  a recognised builder or fund provider), the landowner is  a  true partner  or  co-adventurer  in  the  venture where  the  landowner  has  a  say  or  control  in  the construction and participates in the business and management of the joint venture, and has a share in the profit/loss of the venture. In such a case, the landowner  is  not  a  consumer  nor  is  the  other co-adventurer  in  the  joint  venture,  a  service provider. The landowner himself  is responsible for the construction as a co-adventurer in the venture. But such true joint ventures are comparatively rare. What  is  more  prevalent  are  agreements  of  the nature  found  in  this  case,  which  are  a  hybrid agreement  for  construction  for  consideration  and sale  and  are  pseudo  joint  ventures.  Normally  a professional  builder  who  develops  properties  of others is not interested in sharing the control and management of the business or the control over the construction with the landowners. Except assuring the  landowner  a  certain  constructed  area  and/or certain  cash  consideration,  the  builder  ensures absolute  control  in  himself,  only  assuring  the quality  of  construction  and  compliance  with  the requirements  of  local  and  municipal  laws,  and undertaking to deliver the owners’ constructed area of the building with all certificates, clearances and approvals to the landowner.”

[Emphasis added]

18. It worthy to note that in the said case a stand was taken

by  the  respondent  that  the  agreement  was  a  ‘collaboration

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agreement’ as it was so titled.  Emphasis was laid on the fact

that the agreement showed the intention to collaborate and,

therefore, it was a joint venture.  The Court ruled that the title

or caption or nomenclature of the instrument/document is not

determinative  of  the  nature  and  character  of  the

instrument/document,  though the name usually  gives some

indication of the nature of the document and, therefore, the

use of the words ‘joint venture’ or ‘collaboration’ in the title of

an agreement or even in the body of the agreement will not

make the transaction a joint venture, if there are no provisions

for shared control of interest or enterprise and shared liability

for losses.   After so stating, the Court proceeded to observe

that if there is a breach by the land owner of his obligations,

the  builder  will  have  to  approach a  civil  court  as  the  land

owner is not providing any service to the builder but merely

undertakes certain obligations towards the builder, breach of

which would furnish a cause of action for specific performance

and/or damages.  It has also been stated therein that while

the builder commits breach of his obligations, the owner has

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two options; he has the right to enforce specific performance

and/or  claim  damages  by  approaching  civil  court  or  can

approach consumer forum under the Act.   In  the  course  of

delineation, the Court proceeded to state:-

“But  the  important  aspect  is  the  availment  of services of the builder by the landowner for a house construction (construction of  the owner’s  share of the building) for a consideration. To that extent, the landowner is a consumer, the builder is a service provider  and  if  there  is  deficiency  in  service  in regard  to  construction,  the  dispute  raised  by  the landowner  will  be  a  consumer  dispute.  We  may mention that it makes no difference for this purpose whether  the  collaboration  agreement  is  for construction and delivery of one apartment or one floor to the owner or whether it is for construction and delivery of  multiple apartments or more than one floor to the owner. The principle would be the same and the contract will be considered as one for house construction for consideration….”

19. In  our  considered  opinion,  the  aforesaid  passage  is

extremely illuminative.   It  can be unhesitatingly stated that

though the controversy in the said case had arisen before the

amendment of 2002, the principles laid down therein would

apply even after  the amendment if  the fact situation comes

within the four corners of the aforestated principles.  In this

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context, we may usefully refer to the recent pronouncement in

Punjab  University  v.  Unit  Trust  of  India  and  others8

wherein  a  two-Judge  Bench,  while  dealing  with  the  term

“consumer”, observed that it is clear that “consumer” means

any  person  who  hires  or  avails  of  any  services  for  a

consideration,  but  does  not  include a  person who avails  of

such  services  for  any  commercial  purpose  and  the

“commercial purpose” does not include services availed by him

exclusively for the purposes of earning his livelihood by means

of self-employment.  Be it noted, the Court was considering

whether the deposit of money in mutual fund scheme could

amount to availing of services for “commercial purposes”.  The

Court after referring to few passages from Laxmi Engineering

Works (supra) has observed that:-

“21.  It  is  thus seen from the above extracts from Laxmi Engg. Works (supra) that Section 2(1)(d)(i) is discussed exclusively by this Court. We are of the opinion that clauses (i) and (ii) of Section 2(1)(d) of the  Act  must be interpreted harmoniously  and in light  of  the  same,  we  find  that  the  Explanation

8

(2015) 2 SCC 669

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following  Section  2(1)(d)(ii)  of  the  Act  would  be clarificatory  in  nature  and  would  apply  to  the present  case and as held by this  Court  in  Laxmi Engg. Works (supra), the term “commercial purpose” must  be  interpreted  considering  the  facts  and circumstances of each case.”

Though  the  said  decision  was  rendered  in  a  different

context, yet the principle that commercial purpose is required

to be interpreted considering the facts and circumstances of

each case has been reiterated.  We respectfully concur with

the same.

20. The  obtaining  factual  matrix  has  to  be  tested  on  the

touchstone  of  the  aforestated  legal  position.   The  National

Commission  has  affirmed  the  order  passed  by  the  State

Commission  on  the  ground  that  the  complaint  is  not  a

consumer as his purpose is to sell flats and has already sold

four flats.  In our considered opinion, the whole approach is

erroneous.  What is required to be scrutinised whether there is

any joint  venture agreement  between the  appellant  and the

respondent.   The  MOU that  was  entered  into  between  the

parties  even  remotely  does  not  indicate  that  it  is  a  joint

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venture,  as  has  been  explained  in  Faqir  Chand  Gulati

(supra).   We  think  it  appropriate  to  reproduce the  relevant

clauses from the MOU:-

“3. The apartments shall be shared by the owner and the builder in the proportion of 40% and 60% respectively  in the  built-up area including terrace rights  all  additional  constructions  in  the  said complex.   The  common  areas  shall  be  enjoyed jointly.  

xxxxx xxxxx

5. The builder shall commence construction and complete  the  same  within  a  period  of  nineteen months from the date of granting of approval for the plans  by  the  Municipal  Corporation, Visakhapatnam.  In case of non-completion of the constructions  in  the  complex  within  the  above mentioned time, builder should pay rent Rs.2,000/- per month for each flat in a 40% share of the owner.

xxxxx xxxxx

11. The  builder  shall  pay  a  sum  of  Rs.5  lakhs (Rupees five lakhs only) to the owner as interest free security deposit.  The security deposit of Rs.5 lakhs shall be refunded at the time of completion of the apartment by way of cash.  

xxxxx xxxxx

15. The owner hereby agrees that out of his 40% share in the built-up area of the Apartment complex to be given to him by the builder, the owner shall register  one  flat  of  his  choice  of  a  value  of

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Rs.6,00,000/- in the fourth floor of the said building in favour of the builder or his nominee towards the cost of the items set out in the specifications hereto attached agreed to be provided by the builder for the benefit of the owner in the apartments intended for the share of the owner.  In case the cost of the flat is found to be more or less than Rs.6 lakhs, then both parties shall adjust the difference by payment of the same by way of cash.”

21. On a studied scrutiny of the aforesaid clauses, it is clear

as  day  that  the  appellant  is  neither  a  partner  nor  a

co-adventurer.  He has no say or control over the construction.

He does not participate in the business.  He is only entitled to,

as per the MOU, a certain constructed area.  The extent of

area, as has been held in  Faqir Chand Gulati (supra) does

not make a difference.  Therefore, the irresistible conclusion is

that the appellant is a consumer under the Act.   

22. As  the  impugned orders  will  show,  the District  Forum

had allowed the claim of the appellant.  The State Commission

had  dismissed  the  appeal  holding  that  the  claim  of  the

appellant was not entertainable under the Act, he being not a

consumer  and the  said  order  has  been given the  stamp of

approval by the National Commission.  Therefore, there has to

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be  appropriate  adjudication  with  regard  to  all  the  aspects

except  the  status  of  the  appellant  as  a  consumer  by  the

appellate authority.  Consequently, the appeal is allowed, the

judgments and orders passed by the National Commission and

the State Commission are set aside and the matter is remitted

to the State Commission to re-adjudicate the matter treating

the appellant as a consumer.  We hereby make it clear that we

have not expressed any opinion on the merits of the case.  In

the  facts  and circumstances  of  the  case,  there  shall  be  no

order as to costs.  

                           ………...................J. [Dipak Misra]

New Delhi.         .............................J. July 22, 2016.    [N.V. Ramana]