Consumer Law | For Lapse On Part Of Developer, Landowners Who Are In No Way Concerned With Construction Cannot Be Held Liable: Supreme Court

“Mere Execution Of GPA Does Not Fasten Liability For Deficiency In Service Arising From Construction Delay”, In a decisive ruling that will significantly impact real estate disputes arising out of Joint Development Agreements, the Supreme Court has held that landowners cannot be made jointly and severally liable for delay compensation when the obligation to construct and deliver flats rests exclusively with the developer.

Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe dismisssed appeals filed under Section 67 of the Consumer Protection Act, 2019. The Court upheld the National Consumer Disputes Redressal Commission’s finding that liability for delay in handing over possession was attributable solely to the developer under the terms of the Joint Development Agreement dated 24.02.2012 and the General Power of Attorney executed in its favour.

The judgment draws a crucial distinction between contractual allocation of obligations under a JDA and abstract principles of principal-agent liability.

Six-Year Delay And The Fight Over “Joint And Several” Liability

The landowners had entered into a Joint Development Agreement with the developer on 24.02.2012 and executed a General Power of Attorney authorising the developer to undertake construction, enter into sale agreements and execute conveyances in respect of its share.

The developer obtained sanctioned plans in February 2013 and executed Memoranda of Sale Agreements with flat purchasers from July 2013 onwards, promising possession within 36 months, extendable by six months. The extended deadline expired on 24.02.2017. Yet the project remained incomplete for years.

The buyers approached the NCDRC alleging deficiency in service due to delay exceeding six years. The Commission directed the developer to complete construction and pay interest at 6% per annum on the amounts deposited. However, it held that landowners were not liable for delay compensation.

The flat buyers challenged this finding, arguing that the landowners and developer were jointly and severally liable.

“Principal And Agent” Argument Rejected By The Court

Before the Supreme Court, the appellants contended that by executing the GPA, the landowners had created a principal-agent relationship and therefore must bear responsibility for the developer’s defaults.

The Court rejected this sweeping submission. It emphasized that liability cannot be imposed merely on theoretical notions of agency when the contractual framework clearly allocates responsibilities.

The Bench examined Clause 7 of the JDA, which provided mutual indemnities. Clause 7.4 specifically protected the landowners, stating that in the event of breach between the developer and purchasers, “the FIRST PARTY/OWNERS shall not be liable for any consequences thereof” and that the developer “shall always indemnify and keep indemnified the FIRST PARTY/OWNERS.”

Clauses 2 and 3 of the GPA authorised the developer to enter into sale agreements, receive consideration and execute conveyances in respect of its 64% share.

On a conjoint reading of the JDA and GPA, the Court held that the responsibility for construction and delivery vested entirely with the developer.

“Construction Has To Be Carried Out By The Developer”

The Court made a categorical finding that became the fulcrum of the ruling:

“On a conjoint reading of the JDA and the GPA, it is evident that, in respect of the flats falling in developer’s share, the developer has the right to enter into sale agreements, undertake construction, receive consideration, transfer possession and convey title. The construction has to be carried out by the developer.”

Significantly, the delay concerned flats falling within the developer’s share. There was no allegation that delay occurred due to any act or omission on the part of the landowners.

In a strong observation shielding landowners from blanket liability, the Court held:

“For the lapse on the part of the developer, the landowners, who are in no way concerned with the construction, cannot be held liable for deficiency in service, particularly when the developer has indemnified them against acts of commission or omission in construction.”

The Court further clarified that “mere execution of GPA does not fasten liability for deficiency in service arising from construction delay.”

Joint Responsibility Survives Only For Transfer Of Title

While absolving landowners of liability for delay compensation, the Supreme Court affirmed that both landowners and developer are jointly responsible for ensuring execution of sale deeds and transfer of title.

“The landowners are undoubtedly jointly responsible with the developer to ensure transfer of title to the appellants,” the Court observed, upholding the NCDRC’s direction requiring both parties to execute conveyances.

Thus, although landowners cannot be made to pay for construction delay, they cannot avoid participation in completing title transfer formalities.

Precedents Distinguished As Fact-Specific

The appellants relied on earlier Supreme Court orders to support joint and several liability. However, the Bench noted that in Akshay & Anr., the developer alone had been held liable for delay compensation, which in fact supported the respondents’ stand.

Other cited decisions did not adjudicate the precise issue of joint and several liability between landowners and developers. The Court reiterated that such liability “has to be decided in the facts of each case.”

Appeals Dismissed, Contractual Allocation Prevails

Dismissing the appeals, the Supreme Court reaffirmed that in real estate projects governed by a Joint Development Agreement, liability for deficiency in service must be determined strictly in accordance with the contractual allocation of obligations.

Where construction and delivery obligations are exclusively vested in the developer, and landowners are indemnified against the developer’s acts or omissions, landowners cannot be saddled with delay compensation merely because they executed a GPA.

The ruling reinforces a critical principle for consumer and real estate jurisprudence — that contractual structure governs liability, and “joint and several” responsibility cannot be presumed in the absence of a clear contractual foundation.

Date of Decision: 20 February 2026