Cordial Foundation Pvt. Ltd. , Represented By Its Executive Director N. Vijayan Unnithan v. Purushothama Bharathi, S/o. Late Mathew M Kuzhiveli
2023-11-28
A.BADHARUDEEN
body2023
DigiLaw.ai
JUDGMENT : This Miscellaneous Second Appeal has been filed under Section 58 of the Real Estate (Regulation and Development) Act, 2016 read with Section 100 of the Code of Civil Procedure, 1908 ('the Act’ hereinafter for convenience). The appellants herein are the respondents in complaint No.235/2022 on the files of the Kerala Real Estate Regulatory Authority, Thiruvananthapuram and the appellants in REFA No.1/2023 on the files of the Kerala Real Estate Appellate Tribunal, Ernakulam. The appellants impugn order in complaint No.235/2022 dated 15.12.2022 and the order of the Kerala Real Estate Appellate Tribunal in REFA No.1/2023 dated 15.09.2023. The respondent is the petitioner before the Regulatory Authority. 2. Heard the learned counsel for the appellants as well as the respondent in detail and the following substantial questions of law have been raised for consideration: (i) Whether the landowner, who executed an agreement to effect constructions in his property along with the property of the builder with covenant to share the built up area is an “allottee” as defined in Section 2(d) of the Act? (ii) Whether the landowner who executed an agreement with the builder to construct building in the property owned by both and has no direct involvement in the construction activities with the builder, falls under the definition of “promoter” as defined in Section 2(zk) of the Act? (iii) Whether builder in pursuance of such agreement is required to execute registered deed of conveyance in favour of the landowner whose property also partly given for such construction as defined in Section 17(1) of the Act, on completion of the project? 3. It is submitted by the learned Senior Counsel for the appellants that a joint venture development agreement was executed in between the appellants and the respondent and the copy of the same is Annexure-A. It is pointed out by the learned Senior Counsel appearing for the appellants that as per the terms of Annexure-A, it was agreed between the parties as to how the built area would be shared and the appellants are ready to give the built area as agreed. However, the contention raised by the respondent before the Regulatory Authority while seeking transfer of ownership of the commercial place and the apartments as per allotment letter, viz., a letter dated 18.02.2021 given by M/s.Cordial Foundation Private Limited to the respondent, is bad in law.
However, the contention raised by the respondent before the Regulatory Authority while seeking transfer of ownership of the commercial place and the apartments as per allotment letter, viz., a letter dated 18.02.2021 given by M/s.Cordial Foundation Private Limited to the respondent, is bad in law. It is also submitted that the appellate authority also not properly applied its mind while confirming the said order in the appeal preferred. 4. According to the learned counsel for the appellants, since the respondent, who had surrendered 30 cents of property as part of a joint venture agreement which has profit sharing conditions for the landowner, has direct involvement in the construction activities, who is a builder, would not fall within the category of 'allottee’, as defined under Section 2(d) of the Act and the builder thereof would not fall within the category of 'promoter’, as defined under Section 2(zk) of the Act. Therefore, the builder is not required to execute a registered deed of conveyance in favour of the landowner defined under Section 17(1) of the Act on completion of the said project. 5. Refuting this contention, the learned counsel for the respondent submitted that the appellants are duty bound to perform the terms of the agreement entered into between the appellants as well as the respondent and the sharing of built area as detailed in Annexure-A as such to be complied. It is submitted by the learned counsel for the respondent further that even though the construction overlaps to an extent of 85 cents of property, where 30 cents is owned by the respondent and the remaining property by the builder, with liberty to the builder to carry out the construction at the apartment with an agreement to share built up area of the apartment, defined under Section 2(d) of the Act and in such case, the builder occupies the status of 'promoter' and the beneficiary (the respondent, who shared 30 cents of property for the building construction) would occupy the status of 'allottee' for the said purpose, as defined under the Act. 6.
6. As regards to the use of the words 'joint venture' or 'collaboration' in the title to an agreement or even in the body of an agreement would not make the deed or agreement a 'joint venture' if there are no provisions in the agreement to share the control of the interest or enterprise and to share a liability for losses. In the decision reported in [2016 KHC 6499 : 2016 (4) KHC SN 14 : 2015(7) SCALE 267 : AIR 2016 SC 3488 : 2016 (8) SCC 429 ], Bunga Daniel Babu v. M/s. Sri Vasudeva Constructions & Ors., the Apex Court considered the use of the word 'joint venture' or 'collaboration' and also the definition of 'consumer' under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986. In the said case, the National Commission found that the complainant therein was not a consumer for the purpose of consumer protection. The Memorandum of Understanding entered into between the parties and the facts of the case had been dealt in paragraphs 2 and 3 as under: “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 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.
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 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 06.06.2009 and 27.06.2009. These claims were repudiated by the respondents vide communications dated 17/07/2009 and 16/08/2009.” 7. After adjudicating the above case, where the specific understanding between the parties is to the effect that the builder would make construction in the plots owned by the landowner and to share the apartments so constructed in the proportion 40 : 60 between them, interpreting the status of the landowner as a consumer, the Apex Court held as under: “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 context, we may usefully refer to the recent pronouncement in Punjab Universit v. Unit Trust of India and Others, 2014 KHC 3846 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 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 complainant 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 venture, as has been explained in Faqir Chand Gulati (supra). 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. 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 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 readjudicate 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.” 8.
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.” 8. In the decision reported in [ (2008) 10 SCC 345 ], Faqir Chand Gulati v. Uppal Agencies (P) Ltd. & Anr., referred by the Member of the Appellate Tribunal also, the Apex Court considered 2 questions and answered as under: “(i) 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, and (ii) whether a complaint against the builder is maintainable under the Consumer Protection Act for a prayer seeking delivery of completion certificate and C&D forms (pertaining to building assessment) issued by the municipal corporation in respect of the said 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 stated more broadly amounted to 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 fulfill 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. Answering both the questions in the affirmative, allowing the appeal with costs of Rs.25,000 and remitting the matter to the District Forum for disposal afresh, the Supreme Court Held: There is no dispute or doubt that a complaint under the Consumer Protection 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 the present case is 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. 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. 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. In the instant case, there are various terms in the agreement between the appellant and first respondent which militate against the same being a “joint venture”. Firstly, there is a categorical statement in the said agreement that the agreement shall not be deemed to constitute a partnership between the owner and the builder. The landowner is specifically excluded from a management and is barred from interfering with the construction in any manner and the builder has the exclusive right to appoint the architects, contractors and subcontractors for the construction. The builder is entitled to sell its share of the building as it deemed fit, without reference to the landowner. The builder undertakes to the landowner that it will construct the building within 12 months from the date of sanction of building plan and deliver the owner's share to the landowner.
The builder is entitled to sell its share of the building as it deemed fit, without reference to the landowner. The builder undertakes to the landowner that it will construct the building within 12 months from the date of sanction of building plan and deliver the owner's share to the landowner. The builder alone is responsible to pay penalties in respect of deviations and for payment of compensation under the Workmen's Compensation Act in case of accident. Secondly, there is no community of interest or common/joint control in the management, nor sharing of profits and losses. The landowner has no control or participation in the management of the venture. The requirement of each joint venturer being the principal as well as agent of the other party is also significantly absent. Such an agreement is not a joint venture, as understood in law. 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.” 9. Going by the above decisions, the distinctive feature to find a joint venture or collaboration is that both parties should have say and control over the construction. Further both parties should participate in the business, invest money for the construction and running the business and both parties must agree to share the profit and liability for the losses. Even though the terms 'promoter' or 'allottee' were not considered by the Apex Court in the above decisions since the said decisions were rendered before introduction of the RERA Act, 2016, the terms 'promoter' and 'allottee' should be interpreted from the provisions of the Act with reference to the terms of the agreement. 10. It is at this juncture, Annexure-A, copy of agreement entered into between the appellants and the respondent with nomenclature “joint venture agreement” required to be addressed. As per Annexure-A, the respondent agreed to hand over possession of schedule A property to the appellants for development and to construct a multi-storied residential apartment cum commercial complex on or before 01.03.2013, for which the respondent would have to hand over all the title deeds of his property and also to execute an irrevocable power of attorney in favour of the appellants to carry out the terms of the agreement.
The appellants were set at liberty to envisage and finalise the plan for the construction and to process the same and to obtain necessary approval or exemption, as the case may be. The respondent authorised the appellants to approach and to do all the works on behalf of the respondent in corporation office, town planning office, electricity and water authority, revenue department etc. to complete the construction. The appellants also were authorised to make additions, deletions and alterations in the plans and alteration of the plan and as demanded by the sanctioning authorities and also in construction as it deems fit without materially affecting the entitlement of the landowner. It was agreed further that the appellants shall consume or utilize the existing full F.A.R of 2.75, if subsequently the F.A.R available in respect of the said property to be developed and the increase in FAR will be allotted to the respondent at the rate of 40%. 11. Cost of construction was agreed to be borne by the appellants alone and the respondent only would render assistance for the construction. 12. The vital area of Annexure-A agreement is sharing of built area. The same is as extracted hereunder: “SHARING OF BUILT AREA It is agreed that the BUILDER shall construct modern multi-storied Super Luxury residential apartment cum commercial complex with the specifications described in Annexure II, the BUILDER hereby agrees to construct and handover the possession and occupation of 14,345 sq.ft of super built up area out of which 2000 sq.ft commercial area + 3,000 sq.ft residential area (to be converted as commercial area) totally 5,000 sq.ft and balance 9,345 sq.ft super built up area as super luxiry apartment which includes share of common areas to the landowner. One car parking for each apartment and for commercial area car parking will be provided as per KMB Rules. Four car parking will be reserved for visitors of the apartment dwellers outside in front of the building. If the Government increases the FAR, 40% of the increased area based on the approved plan must be given to the Land Owner.
One car parking for each apartment and for commercial area car parking will be provided as per KMB Rules. Four car parking will be reserved for visitors of the apartment dwellers outside in front of the building. If the Government increases the FAR, 40% of the increased area based on the approved plan must be given to the Land Owner. The remaining area other than mentioned above (60%) shall be the absolute property of the BUILDER, who shall be entitled to hold, sell, enter into agreements to sell, mortgage, gift, lease, and alienate or otherwise dispose of the same or any part thereof in any manner whatsoever along with proportionate undivided share of land will be proportionate to the super built area retained by the BUILDER on the land and the BUILDER shall be entitled to collect all income, gains, capital appreciation and benefits of all kinds and description accruing arising of flowing there from.” 13. The Regulatory Authority as well as the appellate Tribunal found after analysing the agreement between the parties with reference to the various provisions of the Act that the land owner, the respondent herein, is an allottee entitled to get the built up area in terms of Annexure-A and the appellants as promoter under the Act.. 14. In this connection, the definition of the terms 1) 'development', 2) 'real estate project' 3) 'development works', 4) 'promoter' and (5) 'allottee', provided under Section 2(s), 2(zn), 2(t), 2(zk) and 2(d) respectively shall be read together. Section 2(s) defines “development” with its grammatical variations and cognate expressions, means carrying out the development of immovable property, engineering or other operations in, on, over or under the land or the making of any material change in any immovable property or land and includes re-development. Section 2(zn) defines “real estate project” as the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartments, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto. Section 2(t) defines “development works” as the external development works and internal development works on immovable property.
Section 2(t) defines “development works” as the external development works and internal development works on immovable property. Section 2(zk) defines “promoter” as, (i) a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or (ii) a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or (iii) any development authority or any other public body in respect of allottees of – (a) buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or (b) plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or (iv) an apex State level co-operative housing finance society and a primary co-operative housing society (iv) an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or (v) any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or (vi) such other person who constructs any building or apartment for sale to the general public. Section 2(d) defines the term 'allottee' as 'allottee' in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the promoter, and includes the person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent. 15.
15. In Annexure-A agreement, there is no covenant that the respondent herein has any active role in the matter of construction, investment of money, profit sharing or loss sharing and what is agreed upon in precise terms in between the appellants and the respondent is sharing of the built up area since the respondent has surrendered his property having an extent of 30 cents in the project constructed in a total extent of 85 cents of property (55 cents belong to the appellants) in anticipation of the built up area in return. Therefore, it has to be held that even though 30 cents of property in the project is the property owned by the respondent, his status is not that of a builder or a promoter and being a person entitled to get built up area shared as per Annexure-A agreement, his status is as that of allottee and the stature of the appellants as that of promoter. Therefore, the appellants are bound to register deed of conveyance in relation to the built up area as per Annexure-A in favour of the respondent. Finding so, it is held that the orders impugned herein do not arrant interference at the hands of this Court. Accordingly, this Miscellaneous Second Appeal must fail and is hence dismissed. All the interlocutory orders stand vacated and all the interlocutory applications pending in this Appeal stand dismissed.