Delay in delivery of possession and defective construction in the flat makes builder liable to pay compensation #Compensation

In the judgment as passed by the Supreme Court in Lucknow Development Authority vs. M.K. Gupta [Dated 05.11.1993, reported as AIR 1994 SC 787 = 1994 SCC (1) 243] the Court dealt with the issues engulfing consumers who puts in their hard earned money to make their dream of having own house a reality, but suffers in some way or the other at the hands builders – private or government. The holding arrived at in this matter can certainly be considered as timeless ratio and worth including in this category.

The question posed before the Hon’ble Apex Court was to determine as to whether the statutory authorities such as Lucknow Development Authority or Delhi Development Authority or Bangalore Development Authority etc. constituted under State Acts to carry out planned development of the cities in the State are amenable to Consumer Protection Act, 1986 in the event of they being questioned for any act or omission relating to housing activity like delay in delivery of possession of the houses to the allottees, non-completion of the flat within the stipulated time, or defective and faulty construction etc.

The above issue was contested on the ground that the above named local authorities or government bodies develop land and construct houses in discharge of their statutory function, therefore, they could not be brought under the ambit of the provisions of Consumer Protection Act, 1986 (Act) otherwise it would vitally affect their functioning as official bodies.

The Apex Court while rejecting the above argument held that Act requires service provider to be more objective and caretaking more so when it renders public services.

When private undertakings are taken over by the Government or corporations are created to discharge functions which otherwise are to be discharged by State, the inherent objective is to provide better, efficient and cheaper services to the people. Thus, any attempt to exclude services offered by statutory or official bodies to the common man would go against the letter and spirit of the Act and hence the government or semi-government body or a local authority is as much within the purview of the Act as any other private body rendering similar services.

The second issue raised in the present matter was to determine if housing construction or building activity carried on by a private or statutory body was service within the meaning of clause (o) of Section 2 of the Act as it stood prior to inclusion of the expression ‘housing construction’ in the definition of “service” by Ordinance No. 24 of 1993.
It was held that the entire purpose of widening the definition was to include:
• Day to day buying and selling activity undertaken by a common man;
• All such activities which are otherwise not commercial in nature yet they assumes a character in which some benefit is conferred on the consumer.

Construction of a house or flat is for the benefit of person for whom it is constructed. He may do it himself or hire services of a builder or contractor. The latter being for consideration is service as defined in the Act.
Similarly when a statutory authority develops land or allots a site or constructs a house for the benefit of common man it amounts to service in the same way as is rendered by a builder or contractor. The one is contractual service and other statutory service.

If the service turns out to be defective or contrary to what was represented, the same would amount to unfair trade practice as defined in the Act. Any defect in construction activity would mean or amounts to denial of comfort and service to a consumer.

Further, when there is a delay in delivering the possession of a property i.e. beyond the stipulated period, the delay so caused also amounts to denial of service. Such disputes or claims fall under the category of deficiency in rendering of service of particular standard, quality or grade, as defined in Section 2(r) (ii) as unfair trade practice.
If a builder of a house uses substandard material in construction of a building or makes false or misleading representation about the condition of the house there again it amounts to denial of the facility or benefit against which a consumer is entitled to claim compensation/ value under the Act.

In an instance where the contractor or builder undertakes to erect a house or flat and there is a leaking roof in the flat, or a cracking wall or substandard floor, the consumer can accuse the contractor of denial of service.
On the other side, when a statutory authority, like those named above, undertakes to develop land and comes out with a housing scheme, it in discharge of statutory duty is actually rendering service to the society in general and individual in particular or in other words it is a service to the citizens amounting to rendering of service covered in the expression ‘service made available to potential users’.

A person who applies for allotment of a building site or for a flat constructed by the development authority or enters into an agreement with a builder or a contractor is a potential user and nature of transaction is covered in the expression ’service of any description’. Accordingly, any service unless it is free of charge or under a constraint of personal service is included in it.

Since housing activity is a service it was covered in the clause as it stood before the year 1993.
The consumer is entitled to claim and empowers the Commission to redress any injustice done to him and accordingly to award not only value of the goods or services but also to compensate a consumer for injustice suffered by him.