Verdict

Liabilities of Landowners under Joint Venture Agreements with Builders

In Supreme Court of India, Civil Appellate Jurisdiction
Civil Appeal Nos. 3642-3646 of 2018

Akshay & Anr ………….  Appellant 
v/s
Aditya & Ors  …………… Respondents

Recently, the Supreme Court pronounced a verdict which has far reaching consequences for landowners and property builders bound by Joint Venture Agreements. The verdict provides great relief for property buyers as they can now hold even the landowners liable for non-performance on the part of the builders.

A look at the highlights of the Judgment:

Facts & Background

  1. Akshay (Appellant), a land-owner, entered into Joint Venture Agreement (JVA) with one of the Respondents Gladstone Mahaveer Infrastructure Pvt Ltd (GMIPL) for development of apartments. He also executed an Irrevocable Power-of-Attorney (IPA) in favour of the GMIPL, on 6th July 2013. Immediately thereafter, GMIPL entered into agreements for sale of property with buyers  one of whom was Aditya (Respondent).
  2. On 12th August 2014, Akshay sent letter of revocation of IPA to GMIPL.
  3. GMIPL delayed/defaulted on completion and handing over of the properties to the buyers/Respondents.   
    The buyers/Respondents complained to Maharashtra State Consumer Disputes Redressal Commission (State Commission) based on which State Commission held that the Akshay and GMIPL are jointly liable for completion of the property development and handing over the same to the buyers/Respondents. The State Commission also directed GMIPL to pay penalty to the buyers/Respondents for harassment.
  4. Aggrieved by the State Commission’s orders, Akshay appealed to the National Consumer Disputes Redressal Council (NCDRC) for relief. NCDRC too dismissed the appeal upholding the order passed by the State Commission.
  5. Aggrieved by the NCDRC order, Akshay submitted an appeal before the Hon’ble Supreme Court.

Issues in this case

  1. Whether the Landowners (Akshay) can be held liable for the Builder’s (GMIPL) non-performance towards the Buyers (Aditya)?
  2. Whether the JVA and IPA made with GMIPL are valid even after their cancellation by the Appellants?

Analysis and Judgement
Issue 1:
State Commission in its order observed that the cancellation of JVA with GMIPL by the Landowners/Appellants was done only after GMIPL had concluded Sale Agreements with the Buyers/Respondents one whom was Aditya. This JVA was very much valid and operative at the time of conclusion of these Sale  agreements. As such, the Landowners/Appellants are jointly responsible, along with GMIPL, for the execution of the SAs with the Buyers/Respondents.

If the Appellants’ prayer for discharge from the JVA are accepted, then the interests of the  Buyers/Respondents will be jeopardised for no fault of theirs, since they had invested in the property based on the JVA that was very much valid and operative at that time.  

Issue 2: 
The Supreme Court observed that Akshayrevoked the IPA vide letter dated 12th August 2014. In the letter, it was  expressly stated that Akshay shall not be responsible for the actions of GMIPL “henceforth” (meaning after the said letter). This automatically implies that they shall be responsible for sale agreements with the Buyers/Respondents which GMIPL had entered into very much prior to their date of the letter of revocation.

The apex Court further observed that while Akshay revoked the IPA with GMIPL, he did not expressly revoke or withdraw from the JVA with GMIPL. The JVA, therefore, continued to be in force even after revocation of the IPA. 

There was also no specific action taken by Akshay against GMIPL for alleged non-compliance of the terms and conditions under the JVA.  

Both the State Commission and the NCDRC had dismissed the appeal of the Appellants based on the above analysis. The Supreme Court concurred with the orders passed by the state and National consumer commission and accordingly dismissed the appeal of Akshay.

This verdict by the Supreme Court has provided clarity on the role and responsibility of both landowners and builders in JVAs. The verdict has now provided an additional avenue for redressal for prospective property Buyers in that they can now hold not only the builders but also the landowners liable for non-performance.

For full text of the Judgement:
https://api.sci.gov.in/supremecourt/2018/9347/9347_2018_14_109_55099_Judgement_29-Aug-2024.pdf

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