Landlord not liable for delay in construction by the developer in Joint Development agreement.
Key Issue :Whether landowners are also liable along with Builder for Deficiencies in flat constructions
Different opinion expressed by courts based on the facts of the cases
Case in hands :Sriganesh Chandrasekaran & Others Versus M/S Unishire Homes LTD & Others (Supreme court )
Decided on 20 Feb 2026
Head Notes from the judgment
- “Landowners cannot be held jointly and severally liable with the developer for deficiency in service arising from construction delays if the obligation to construct rests solely with the developer under the JDA and the General Power of Attorney (GPA)”
- “The developer’s right to enter into sale agreements and undertake construction for their share of the property, coupled with indemnity clauses protecting landowners from the developer’s breaches, shifts the liability for delay compensation exclusively to the developer.”
- Principal and Agent Relationship – General Power of Attorney – Held: “The execution of a GPA by landowners in favor of a developer to facilitate sale agreements and title transfers does not automatically make the landowners liable for the developer’s specific failures in construction, especially when no acts or omissions are attributed to the landowners regarding the delay”
- “While landowners are not liable for construction delay compensation, they remain jointly responsible with the developer to ensure the transfer of title and execution of sale deeds in favor of the flat buyers ”
Appeals dismissed
Facts of the case:
Landowners entered into a Joint Development Agreement (JDA) with the developer on 24.02.2012 and executed General Power of Attorney (GPA) in Favor of the developer. On 21.02.2013, the developer obtained the sanctioned plan and a construction licence.
The developer executed the Memoranda of Sale Agreements with the flat buyers. Under the Sale Agreements, the developer agreed to handover the possession of flats within 36 months ,time expired on 24.08.2016. The grace period of six months also expired on 24.02.2017. However, the project remained incomplete.
The Home Buyers filed a Complaint before the Commission on 18.08.2017 alleging deficiency in service and unfair trade practices. By judgment and final order dated 19.10.2023, the Commission found deficiency in service due to delay of more than 2 years in handing over the possession of the flats. The developer was directed to complete the construction of the flats allotted to the appellants, obtain occupancy certificate and handover the possession of the flats within three months from the date of the order. The developer was further directed to pay interest @ 6% per annum on the amount deposited by the home buyers from the due date of possession as per their respective agreements till the date of offer of possession, within six weeks, failing which delay interest would carry interest @ 9% per annum.
The landowners were not held liable for delay, as the obligation to complete the construction rested solely with the developer However, the landowners and the developer were directed to transfer the title of the property in question and proceed with the execution of the sale deed in favour of the Buyers.
In any case, the issue with regard to joint and several liability of the landowners and the developer has to be decided in the facts of each case.
Earlier cases decided by Supreme Court
Case title: Akshay & Anr. V. Aditya & Ors Civil Appeal Nos.3642-3646/2018 Decided on 29 th August, 2024.
Facts of the case:
Landowners, and builder Glandstone Mahaveer Infrastructure Pvt. Ltd had entered into a Joint Venture Agreement(JVA) for building flats and selling them subsequently
Supreme court held
“A revocation of power of attorney executed between landowners and builder for developing their land would not absolve the landowners from being jointly and severally liable along with the builder in a consumer case for deficiency of service where Landowners are also liable along with Builder for Deficiencies in Flat Constructions”
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Case Law :Faqir Chand Gulati Vs. Uppal Agencies Pvt. Ltd. & Anr Civil Appeal No . 3302 of 2005 SC
Date of judgment: July 10, 2008
Supreme Court HELD:
“A land owner, who enters into an agreement with a builder, for construction of an Apartment Building and for sharing of the constructed area, is a `consumer’ entitled to maintain a complaint against the builder as a service-provider under the Consumer Protection Act, 1986.”
- A contract for construction of an apartment or house for the consumer, in accordance with the specifications and in terms of the contract is a contract for service.
- There is a consideration/payment for such service of construction, flowing from the landowner to the builder .It is sometimes in the form of sale of an undivided share in the land and permission to construct and own the upper floors to adjust the value builder spends for construction. But the important aspect is the availing/hiring of services of the builder by the land-owner for a house construction for a consideration and if there is deficiency in service in regard to construction, the dispute raised by the land owner will be a consumer dispute.
- If the construction is part of a building which in law requires a completion certificate or C&D forms (relating to assessment), the builder is bound to provide the completion certificate or C&D forms. He is also bound to provide amenities and facilities like water, electricity and drainage in terms of the agreement. If the builder fails to do so, he will be liable to compensate the complainant for all loss/damage.
Case Law title : Bunga Daniel Babu Versus M/S Sri Vasudeva Constructions & Ors Civil Appeal No. 944 of 2016,Decided on 22.07.2016
Law Point :Joint venture, collaboration agreement for construction whether services under consumer
‘The words ‘joint venture’ or ‘collaboration’ in the title of an agreement or even in the body of the agreement will not make the transaction a joint venture, if there are no provisions for shared control of interest or enterprise and shared liability for losses. We need to understand the difference between joint venture, collaboration agreement and hiring construction services.
Says Supreme Court on the issue of construction agreement between the landlord and the builder.
The words used in the agreement are ‘Collaboration agreement’ and due to this word courts below i.e. State Commission and National Commission held the entire project as commercial purpose and out of the purview of consumer protection act
But Supreme Court did not agree and observed that there was no commercial purpose involved, it was simply a contract for construction and hiring of services by the landlord from a builder.
Factual matrix of the case is-
Land owner entered into a Memorandum of Understanding (for short “the MOU”) with the builder on 18.07.2004 for development of his land by construction of a multi-storied building, with elevator facility and parking space. Construction was to be completed within 19 months from the date of approval of the plans by the Municipal Corporation and in case of non-completion within the said time, a rent of Rs. 2000/- per month for each flat was to be paid to the appellant. It should have been completed by 18.12.2005.flats were handed over to the occupants only on 30.03.2009, resulting in delay of about three years and three months. Hence complaint before the District Forum .The District Forum appreciating the placing reliance on the decision of the Court in Faqir Chand Gulati (supra) came to hold that the transaction between the parties could not be termed as a joint venture, the complainant came under the definition of Consumer under. As a result of different views Of State Commission and National Commission, matter came before Supreme Court.
SC Holds
“ to appreciate the heart of the dispute, we think it apposite to x-ray the definition of the term “consumer’ An agreement between the owner of a land and a builder, for construction of apartments and sale of those apartments so as to share the profits in a particular ratio may be a joint venture, if the agreement discloses an intent that both parties shall exercise joint control over the construction/development and be accountable to each other for their respective acts with reference to the project. Contracts entered for mutual benefit and profit and in such a contract, they are not “service providers” to the landowners.”
But the facts of the case were not so. What is required to be scrutinized whether there is any joint venture agreement between the appellant and the respondent? The MOU that was entered into between the parties even remotely does not indicate that it is a joint 26 venture, as has been explained in Faqir Chand Gulati (supra). The owner hereby agrees that out of his 40% share in the built-up area of the Apartment complex to be given to him by the builder, the owner shall register one flat of his choice of a value of 27 Rs.6, 00,000/- in the fourth floor of the said building in favour of the builder or his nominee towards the cost of the items
It is actually consideration for construction but not an arrangement of sharing profit and was in no way joint venture The Court ruled that the title or caption or nomenclature of the instrument/document is not determinative of the nature and character of the instrument/document, though the name usually gives some indication of the nature of the document and, therefore, the use of the words ‘joint venture’ or ‘collaboration’ in the title of an agreement or even in the body of the agreement will not make the transaction a joint venture, if there are no provisions for shared control of interest or enterprise and shared liability for losses. The only point considered by the state commission and national commission for considering the case under joint venture was the words used collaboration agreement and sale of four flats by the complainant which is clarified by the court it is actually consideration for construction but not an arrangement of sharing profit and was in no way joint venture.
Hence, we appreciate that it is the actual facts and not the title of the agreement which determines the nature of contract.
Dr Prem Lata
