The Supreme Court recently ruled on a crucial real estate dispute, dismissing a set of five appeals filed against the judgment of the National Consumer Disputes Redressal Commission (NCDRC). The case revolved around landowners and a developer engaging in unfair trade practices and deficiency in service, leading to liability concerns. The ruling upheld the decisions of both the State Commission and NCDRC, reinforcing the principle of joint liability in real estate projects involving joint venture agreements.
Background of the Case
The dispute arose when landowners (appellants) entered into a Joint Venture Agreement (JVA) with a developer (Respondent No. 2) for developing a real estate project. They also granted an Irrevocable Power of Attorney (IPA) to the developer, authorizing them to undertake necessary transactions.
Subsequently, Respondent No. 2 executed sale agreements with multiple buyers (complainants), promising possession of properties upon completion of construction. However, delays and disputes over liability led the complainants to file a consumer complaint, seeking:
- A declaration that both the landowners and the developer were jointly responsible for completing the project.
- Possession of the purchased properties.
- Compensation for mental agony and harassment due to delays.
State Commission’s Ruling
The State Commission ruled in favor of the complainants and held both the landowners and the developer liable for the project’s completion. Key directives included:
- Completion of construction within six months of receiving full payment.
- Execution of sale deeds to transfer ownership rights.
- Compensation for harassment caused due to delays.
The decision reinforced that landowners cannot absolve themselves of liability merely by delegating responsibilities to a developer.
NCDRC’s Decision
The landowners challenged the State Commission’s order before the NCDRC, arguing that they had revoked the Power of Attorney and should not be held accountable for the developer’s failures. However, the NCDRC dismissed their appeals, emphasizing:
- The JVA and Power of Attorney were valid and in effect when the developer signed agreements with the complainants.
- Any subsequent revocation of the Power of Attorney could not negate prior commitments made under the agreement.
- If landowners were allowed to evade liability, it would severely impact consumers who had entered into agreements in good faith.
Supreme Court’s Ruling
The Supreme Court upheld the NCDRC’s findings and dismissed the landowners’ appeals. The Court made the following key observations:
- The Irrevocable Power of Attorney was in place when the developer entered into agreements with the complainants, establishing a binding obligation.
- The appellants’ claim that they had revoked the Power of Attorney did not absolve them of liability since the JVA was still in force.
- The statement by the appellants that they were “not liable henceforth” implied that they were still accountable for actions taken under the Power of Attorney before its revocation.
- The Supreme Court found no justification to interfere with the NCDRC’s decision, reaffirming the joint liability of the landowners and the developer.
Key Takeaways from the Judgment
- Landowners remain liable in joint ventures – Even if a developer manages a project, landowners cannot evade responsibility simply by revoking a Power of Attorney.
- Consumer rights protection – The ruling ensures that consumers purchasing real estate are not left vulnerable to disputes between landowners and developers.
- Enforceability of agreements – Agreements signed under an active JVA and Power of Attorney remain legally binding.
- Courts prioritize consumer interests – The Supreme Court reinforced that contractual obligations cannot be unilaterally avoided, especially when consumers rely on these agreements.
Conclusion
The Supreme Court’s ruling serves as a landmark decision in real estate disputes, ensuring that landowners involved in joint ventures with developers cannot escape liability through technicalities. The judgment reinforces consumer protection, enforcing obligations under real estate agreements and preventing developers and landowners from shifting blame.
For buyers, this ruling provides legal clarity—ensuring that they can hold both landowners and developers accountable for delays and deficiencies in real estate projects. It also acts as a deterrent against unfair trade practices, ensuring that real estate transactions remain transparent and fair.
