Landowners Not Liable for Delay Compensation Where Construction Obligation Lies with Developer Under JDA

Held:The Supreme Court held that where a Joint Development Agreement (JDA) expressly places the obligation of construction and delivery of flats upon the developer, the landowners cannot be held liable for delay compensation to flat purchasers merely because a General Power of Attorney was executed in favour of the developer. The existence of a GPA does not automatically create a principal–agent relationship making landowners liable for deficiencies in construction when the contractual arrangement clearly allocates such obligations exclusively to the developer and indemnifies the landowners against such liabilities.

Summary: The dispute arose from a housing project developed pursuant to a Joint Development Agreement dated 24.02.2012 between the landowners and the developer. The developer obtained the sanctioned plan and subsequently entered into sale agreements with flat buyers promising delivery of possession within 36 months, with an additional grace period of six months. The project, however, remained incomplete long after the expiry of the contractual period, leading the purchasers to file a consumer complaint alleging deficiency in service. The National Consumer Disputes Redressal Commission found the developer responsible for delay and directed completion of construction and payment of interest on the amounts deposited by the buyers. In review proceedings, an initial order holding the landowners jointly and severally liable was set aside by the Supreme Court for lack of hearing, and upon reconsideration the Commission held that liability for delay compensation rested solely with the developer. Before the Supreme Court, the appellants contended that the landowners were liable as principals since the developer acted under a GPA. The Court examined the clauses of the JDA and GPA and noted that the developer had the exclusive right and responsibility to undertake construction, enter into sale agreements, receive consideration and transfer possession, while the landowners were indemnified against liabilities arising from the developer’s acts. The Court therefore concluded that the delay in construction was attributable solely to the developer, though both the landowners and developer remained responsible for transferring title and executing sale deeds in favour of the purchasers.

Decision: The Civil Appeals were dismissed, the orders of the National Consumer Disputes Redressal Commission were upheld, and it was held that the developer alone is liable for payment of delay compensation while both the developer and landowners must complete the transfer of title and execution of sale deeds in favour of the purchasers.