Whether the sale of plot with assurance of lay-out approvals, development of infrastructure/ amenities would be treated as service?

PJ/Case Laws/2012-13/1480

Case:- NARNE CONSTRUCTION P. LTD. VS UNION OF INDIA

Citation:-2013 29 S.T.R. 3 (S.C.)

Brief facts:- The short question that falls for determination in these appeals by special leave is whether the appellant-company was, in the facts and circumstances of the case, offering any ‘service’ to the respondents within the meaning of the Consumer Protection Act, 1986 so as to make it amenable to the jurisdiction of the fora established under the said Act. Relying upon the decision of this Court in Lucknow Development Authorityv. M.K. Gupta - (1994) 1 SCC 243, the High Court has answered the question in the affirmative and held that the respondents were ‘consumers’ and the appellant was a ‘service’ provider within the meaning of the Act aforementioned, hence amenable to the jurisdiction of the fora under the said Act.

In Lucknow Development Authority’s case (supra) this Court while dealing with the meaning of the expressions ‘consumer’ and ‘service’ under the Consumer Protection Act observed that the provisions of the Act must be liberally interpreted in favour of the consumers as the enactment in question was a beneficial piece of legislation. While examining the meaning of the term ‘consumer’ this Court observed:

“ ……… The word ‘consumer’ is a comprehensive expression. It extends from a person who buys any commodity to consume either as eatable or otherwise from a shop, business house, corporation, store, fair price shop to use of private or public services. In Oxford Dictionary a consumer is defined as, “a purchaser of goods or services”. In Black’s Law Dictionary it is explained to mean, “one who consumes. Individuals who purchase, use, maintain, and dispose of products and services. A member of that broad class of people who are affected by pricing policies, financing practices, quality of goods and services, credit reporting, debt collection, and other trade practices for which state and federal consumer protection laws are enacted.” The Act opts for no less wider definition.”

This Court further held that when a person applies for allotment of building site or for a flat constructed by development authority and enters into an agreement with the developer or a contractor, the nature of the transaction is covered by the expression ‘service’ of any description. The housing construction or building activity carried on by a private or statutory body was, therefore, held to be ‘service’ within the meaning of Clause (o) of Section 2(1) of the Act as it stood prior to the inclusion of the expression ‘housing construction’ in the definition of ‘service’ by Ordinance No. 24 of 1993.

Reasoning of Judgment:- The hon’ble Supreme Court while giving decision, highly relied on the High Court decision cited above.In the light of the above pronouncement of this Court the High Court was perfectly justified in holding that the activities of the appellant-company in the present case involving offer of plots for sale to its customers/members with an assurance of development of infrastructure/amenities, lay-out approvals etc. was a ‘service’ within the meaning of Clause (o) of Section 2(1) of the Act and would, therefore, be amenable to the jurisdiction of the fora established under the statute. Having regard to the nature of the transaction between the appellant-company and its customers which involved much more than a simple transfer of a piece of immovable property it is clear that the same constituted ‘service’ within the meaning of the Act. It was not a case where the appellant-company was selling the given property with all advantages and/or disadvantages on “as is where is” basis, as was the position in U.T. Chandigarh Administration and Anr. v. Amarjeet Singh and Ors. - (2009) 4 SCC 660. It is a case where a clear cut assurance was made to the purchasers as to the nature and the extent of development that would be carried out by the appellant-company as a part of the package under which sale of fully developed plots with assured facilities was to be made in favour of the purchasers for valuable consideration. To the extent the transfer of the site with developments in the manner and to the extent indicated earlier was a part of the transaction, the appellant-company had indeed undertaken to provide a service. Any deficiency or defect in such service would make it accountable before the competent consumer forum at the instance of consumers like the respondents.
Further, this Court in Bangalore Development Authority v. Syndicate Bank - (2007) 6 SCC 711, dealt with the nature of the relief that can be claimed by consumers in the event of refusal or delay in the transfer of the title of the property in favour of the allottees/purchasers and observed :
“Where full payment is made and possession is delivered, but title deed is not executed without any justifiable cause, the allottee may be awarded compensation, for harassment and mental agony, in addition to appropriate direction for execution and delivery of title deed.”

Suffice it to say that the legal position on the subject is fairly well-settled by the pronouncements of this Court and do not require any reiteration. The High Court has correctly noticed the said pronouncements and applied them to the facts of the case at hand leaving no room for them to interfere with the answer given by it to the solitary question raised by the appellant-company.

In the result, these appeals are hereby dismissed but in the circumstances without any order as to cost.

Decision:-Appeal Dismissed.

Comment:- The substance of this case is that sale of plot along with development amenities amounts to providing ‘service’ and is leviable to service tax.

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PJ/Case Laws/2012-13/1480

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