Faqir Chand Gulati v. Uppal Agencies Private Ltd.

(2008) 10 SCC 345

Facts Faqir Chand Gulati v Uppal Agencies Case:

● FC Gulati (plaintiff-appellant) is a landowner who agrees with a builder, for construction
of an apartment building and for sharing of the constructed area (Ground floor to owner
& 1st and 2nd floor to builder).
● Builder after completion of the construction didn’t provide completion certificate and
C&D forms from MCD. Now, the MCD is threatening to demolish the construction
because of some deviations in it.
● Complaint to District Forum, State Commission & National Commission were dismissed
as they found the deal as a collaboration agreement, was in a joint venture or agreement
to collaborate; that the agreement contemplated “sharing” of constructed area, that is the
entire ground floor of the building by the landowner and the remaining area by the
builder; that the agreement did not have any element of hiring any services; and that,
therefore, the appellant was not a “consumer” and the builder was not a
“service-provider” under the CPA 1986.
● This appeal is by special leave against the decision of National Commission.

Contentions and Issues:

It relates to the question whether a landowner, who enters into an agreement with a builder, for
construction of an apartment building and for sharing of the constructed area, is a “consumer”
entitled to maintain a complaint against the builder as a service provider under the Consumer
Protection Act, 1986.

1. Whether the said deal makes the builder (respondent) a ‘service provider’ and the owner
(plaintiff) as a ‘consumer’?

Legal provisions
The terms “consumer”, “deficiency” and “service” defined in clauses (d), (g) and (o) of Section
2(1) of the Act as it stood at the time when the appellant approached the District Forum in 1994
are extracted below:

“2. (1)(d) “consumer” means any person who,- (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 person; * * *

(g) “deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature
and manner of performance which is required to be maintained by or under any law for the time
being in force or has been undertaken to be performed by a person in pursuance of a contract or
otherwise in relation to any service; * * *

(o) “service” means service of any description which is made available to potential users and
includes the provision of facilities in connection with banking, financing, insurance, transport,
processing, supply of electrical or other energy, board or lodging or both, housing construction,
entertainment, amusement or the purveying of news or other information, but does not include
the rendering of any service free of charge or under a contract of personal service;”

On the contentions raised, two questions arise for consideration:

(i) Whether on the facts and circumstances, a complaint under the Consumer Protection Act,
1986 is maintainable, in regard to the agreement dated 17-5-1991 between the parties

(ii) Whether a complaint is maintainable under the Act for a prayer seeking delivery of
completion certificate and C&D forms in regard to a building and whether the prayer for
completion certificate/C&D forms involves a prayer for rectification of the deficiencies in the
building so as to secure the completion certificate and C&D forms
The first question in fact involves examination of the following issue. When the owner of a plot
of land enters into an agreement with a builder for development of the property by construction
of a building and sharing the constructed area between the owner and the builder, and the
developer commits any breach either by failing to deliver the owner’s share of constructed area
or by constructing the building contrary to specifications, or by failing to fulfil the obligations
relating to completion certificate or amenities like water, electricity and drainage, whether the
owner can maintain a complaint under the Consumer Protection Act and whether in such
circumstances, the owner can claim that he is a consumer and the builder is the service provider

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

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. 21. This Court had occasion to consider the nature of
“joint-venture” in New Horizons Ltd. v. Union of India

Ratio and Decision:

1. The sharing of floors was a consideration which can’t be termed as ‘joint venture’. And
according to New Horizons Ltd. v. Union of India 1995 SCC of this Court, a joint venture is an
association of two or more persons to carry out a single business enterprise for profit, which is
governed by rules as partnerships.

2. The basic scheme of the agreement was that the builder should construct and deliver a house
(ground floor of the building) to the owner and if there was any deficiency in fulfilling the
obligations undertaken in connection with such construction, there would be a deficiency in
service; and that, therefore, where the term relating to construction off the ground floor for his
benefit is concerned, the builder (defendant-respondent) was a service provider and owner
(plaintiff-appellant) was a consumer.

Re: Second question

Under the agreement, the builder is required to construct the ground floor in accordance with the
sanctioned plan, and specifications and the terms in the agreement and deliver the same to the
owner. If the construction is part of a building which in law requires a completion certificate or
C&D forms (relating to assessment), the builder is bound to provide the completion certificate or
C&D forms. He is also bound to provide amenities and facilities like water, electricity and
drainage in terms of the agreement. If the completion certificate and C&D forms are not being
issued by the corporation because the builder has made deviations/violations in construction, it is
his duty to rectify those deviations or bring the deviations within permissible limits and secure a
completion certificate and C&D forms from MCD. The builder cannot say that he has
constructed a ground floor and delivered it and, therefore, fulfilled his obligations. Nor can the
builder contend that he is not bound to produce the completion certificate, but only bound to
apply for completion certificate.
The agreement, in fact, refers to the possibility of deviations and provides that if there are
deviations, the builder will have to pay the penalties, that is, do whatever is necessary to get the
same regularised. Even if such a provision for providing completion certificate or payment of
penalties is not found in the agreement, the builder cannot escape the liability for securing the
completion certificate and providing a copy thereof to the agreement, the builder cannot escape
the liability for securing the completion certificate and providing a copy thereof to the owner if
the law requires the builder to obtain completion certificate for such a building.

A prayer for completion certificate and C&D forms cannot be brushed aside by stating that the
builder has already applied for the completion certificate or C&D forms. If it is not issued, the
builder owes a duty to make necessary application and obtain it. If it is wrongly withheld, he
may have to approach the appropriate court or other forum to secure it. If it is justifiably
withheld or refused, necessarily the builder will have to do whatever that is required to be done
to bring the building in consonance with the sanctioned plan so that the municipal authorities can
inspect and issue the completion certificate and also assess the property to tax. If the builder fails
to do so, he will be liable to compensate the complainant for all loss/damage. Therefore, the
assumption of the State Commission and the National Commission that the obligation of the
builder was discharged when he merely applied for a completion certificate is incorrect.

3. Appeal allowed. The appellant’s complaint is held to be maintainable. The District Forum is
directed to consider the matter on merits and dispose of the matter under law, within six months
of receipt of this order.

Indian Medical Association v. V. P. Shantha

Facts of Indian Medical Association v VP Shantha Case:

● These appeals, special leave petitions and the writ petition raise a common question, viz.,
whether and, if so, in what circumstances, a medical practitioner can be regarded as
rendering ‘service’ under section 2(1)(o) of the Consumer Protection Act, 1986.
 ● Connected with this question is whether the service rendered at a hospital/nursing home
can be regarded as ‘service’ under section 2(1)(o) of the Act. Various High Courts have
considered these questions and by the National Consumer Disputes Redressal
Commission.

Contentions and Issues:

Whether we can regard a service rendered by a medical practitioner of the hospital as
‘service’ under section 2(1)(o) of CPA 1986?

Ratio and Decision:

S.C. AGRAWAL, J

(1) Service rendered to a patient by a medical practitioner (except where the doctor renders
service free of charge to every patient or under a contract of personal service), by way of
consultation, diagnosis, and treatment, both medicinal and surgical, would fall within the ambit
of ‘service’ as defined in section 2(1)(o) of the Act.

(2) The fact that medical practitioners belong to the medical profession and are subject to the
disciplinary control of the Medical Council of India and/or State Medical Councils made up
under the Indian Medical Council Act would not exclude their services from the ambit of the
Act.

(3) A “contract of personal service” has to be distinguished from a “contract for personal
services”. In the absence of a relationship of master and servant between the patient and
medical practitioner, the service rendered by a medical practitioner to the patient cannot
be service rendered under a ‘contract of personal service’. Such service is service rendered
under a “contract for personal services” and is not covered by the exclusionary clause of the
definition of ‘service’ contained in section 2(1)(o) of the Act.

(4) The service rendered by a medical officer to his employer under the contract of
employment would not be ‘service’ as defined in section 2(1)(o) of the Act.
(5) Service rendered free by a medical practitioner attached to a hospital/nursing home or a
medical officer employed in a hospital/nursing home where such services are rendered free to
everybody, would not be ‘service’ as defined in section 2(1)(o) of the Act. The payment of a
token amount for registration purposes only at the hospital/nursing home would not alter the
position.

(6) Service rendered at a non-government hospital/nursing home where no charge is made from
any person availing of the service and all patients (rich and poor) are given free service — is not
‘service’ as defined in section 2(1)(o) of the Act. The payment of a token amount for registration
purposes only at the hospital/nursing home would not alter the position.

(7) Service rendered at a non-government hospital/nursing home where charges are required to
be paid by the persons availing of such services falls within the purview of the expression
‘service’ as defined in section 2(1)(o) of the Act.

(8) Service rendered at a non-government hospital/nursing home where charges are required to
be paid by persons who can pay and persons who cannot afford to pay is rendered service free
would fall within the ambit of the expression ‘service’ as defined in section 2(1)(o) of the Act
irrespective of the fact that the service is rendered free to persons who are not in a position to pay
for such services. Free service would also be ‘service’ and the recipient a ‘consumer’ under the
Act.

(11) Service rendered by a medical practitioner or hospital/nursing home cannot be service

rendered free if the person availing of the service has taken an insurance policy for medical
care where under the are borne by the insurance company and such service would fall within
the ambit of ‘service’ as defined in section 2(1)(o) of the Act because he has paid for the
insurance policy.

(12) Similarly, where, as a part of the conditions of service, the employer bears the expenses of
medical treatment of an employee and his family members dependent on him, the service
rendered to such an employee and his family members by a medical practitioner or a
hospital/nursing home would not be free and would constitute ‘service’ under section 2(1)(o) of
the Act.
J.J. Merchant v. Srinath Chaturvedi, AIR 2002 SC 2931

Neena Aneja v. Jai Prakash Associates Ltd., (2022) 2 SCC 161

Medicos Legal Action Group v. Union of India, 2021 SCC OnLine Bom 3696

Laxmi Engineering Works v. P.S.G. Industrial Institute

Brief Facts

Laxmi Engineering Works (appellant) placed an order for supply of PSG 450 CNC Universal
Turning Central Machine with the respondent. The respondent took 6 extra months to deliver.
Once it was delivered and installed, several defects of the machine came into light.

The appellant brought this to the notice of the respondent who sent people to repair. However,
the repair was not satisfactory and the machine broke down again. The appellant then filed a case
against the respondent in the Consumer forum.

The respondent succeeded in the lower forum on the grounds of appellant not being covered
under the definition of the consumer as given under section 2 (d) of the Consumer Protection
Act, because Appellant bought the machines for commercial purposes.

The plaintiff filed an appeal in the SC to challenge the forum’s decision.

Issue before the Court

What is the meaning and ambit of the expression for any commercial purpose as used in section
2(d) of the Consumer Protection Act,1986?

Decision of the Court

SC held the following-

● The explanation added by The Consumer Protection (Amendment) Act 50 of 1993

(replacing Ordinance 24 of 1993) with effect from 18.6.1993 is clarificatory in nature
and applies to all pending proceedings.
● The purpose for which an individual has purchased goods and if it is for commercial
purpose or within the meaning of the definition of consumer given in Section 2(d) of
the Act is always a question of fact which will have to be decided in the circumstances
of every case individually.
● An individual who purchases goods to use them by himself, and only for the purpose of
earning his livelihood, by means of self-employment falls within the scope of definition
of consumer under the Act.

Further, it was added (in agreement with the consumer forums decision) that after observing the
nature and character of the machine bought by the appellant. It can be concluded that this does
not fall under goods which the appellant purchased to use by himself, exclusively for the purpose
of earning his livelihood by means of self-employment. Therefore, the appeal was dismissed
without any costs.

Lucknow Development Authority v. M.K. Gupta

Facts of the Case

M.K. Gupta filed a case before the District Forum with the allegation that the Lucknow
Development Authority (LDA) was not handing over the possession of his flat even after
payment of the entire amount to it. The District Forum did not agree with LDA’s plea that
consumer redressal authorities have no jurisdiction over construction activity and accordingly
directed them to hand over possession of the flat to Mr Gupta as he had made the full payment
and had completed all the formalities.
LDA appealed to the State Commission which directed the LDA to pay interest on the deposit
made by Mr Gupta and hand over possession of the flat after completing construction or pay the
estimated cost of deficient and incomplete construction. LDA approached the National
Commission and raised the question of jurisdiction, which was overruled and the appeal
preferred was dismissed. The National Commission then directed the LDA to pay Rs. 10,000 as
compensation for causing harassment, mental torture and agony to Mr Gupta. The LDA brought
the case before the Supreme Court.

Issues Raised
Whether statutory authorities like the Lucknow Development Authority (LDA) constituted under
the State Act and carrying on activities pertaining to planned development are amenable to the
jurisdiction of the Consumer Protection Act? Whether functionaries of a statutory body, while
performing duty capriciously and causing harassment to the allottees, should personally
compensate them?

Outcome
The Supreme Court in this case held that when a statutory body like LDA uses substandard
material in construction or makes misleading representation about the condition of the house, it
is denial of facility or benefit to a consumer and also harassment. Therefore, the Supreme Court
directed that LDA shall fix responsibility of the officers for such deficient service and causing
harassment to consumer and as such the Rs. 10,000/- awarded by the Commission shall
be recovered from such concerned officers proportionately from their salaries. The LDA was
also ordered to pay Rs. 5,000/- to the Consumer. The Apex court further held that all the services
are covered within the purview of the Consumer Protection Act except services rendered under
the contract of service and gratuitously.Consequently, housing construction by a statutory body
qualifies as a “SERVICE” under the Consumer Protection Act, 1986 and the employees of such
statutory bodies would be personally liable to pay compensation for deficiency of services.