JOINT VENTURE, COLLABORATON 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.’

Says Supreme Court in latest judgment in Civil Appeal No. 944 of 2016 in the matter of Bunga Daniel Babu Versus M/S Sri Vasudeva Constructions & Ors by J Dipak Misra, on the issue of construction agreement between the landlord and the builder. We need to go back to the earlier decided case by the same Supreme Court and understand the difference between joint venture, collaboration agreement and hiring construction services.

In the matter of Faqir Chand Gulati Vs.Uppal Agencies Pvt. Ltd. & Anr Civil Appeal No . 3302 of 2005 SC Date of judgment: July 10, 2008 it was held by the 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.”

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.”

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

 

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