According to the courts, those buying land in auctions have no right to expect sellers to provide them basic amenities.
The definition of a ‘consumer’ has been one of the most contentious issues before various consumer commissions and the courts. Hospitals and doctors were the first to protest that their patients were not consumers of a service. This was rejected by the Supreme Court. Lawyers have so far been presumed to be within the consumer law, but now there is an attempt to reinterpret the law to find an escape clause.
Public authorities providing housing also tried in vain to wriggle out of their liability towards consumers. In two major judgements, the Supreme Court asserted that they were providing services and if there is deficiency in service, they would be liable for compensation. Now comes an exception to the latter rule. If one buys a residential plot in an auction, one is not a consumer and there is no remedy available in the consumer law. In the judgement UT, Chandigarh Administration vs Amarjeet Singh, the Supreme Court ruled that buying a flat in a developed layout is different from auctioning a plot which is yet to be provided with basic amenitiess like power, roads and sewerage facilities. The buyer of the plot should take it on a ‘as is where is’ basis.
The estate authorities in this case had conducted an auction of a large number of residential and commercial plots and the highest bids were confirmed. Part payments were made according to the terms and conditions. However, the allottees complained after two years that the authorities had not provided them the basic facilities and, therefore, they had suffered heavy losses. They refused to pay the balance due and moved the consumer forum seeking provision of basic amenities before making further payments.
The authorities, on the other hand, said that they had not promised to develop the plots and it was not their responsibility under the terms and conditions of the auction. The auction of the sites involved neither sale of goods nor rendering any service. Therefore, the allottees were not consumers. The Union Territory (UT) Consumer Commission and the National Consumer Commission rescheduled the payments liberally in favour of the buyers. Therefore, the Chandigarh Administration appealed to the Supreme Court, reiterating its contentions. The court accepted the argument this time.
In the definitive judgement on the issue of housing delivered in 1993, Lucknow Development Authority vs M K Gupta, the Supreme Court had included the providers of housing in the consumer law. It had said: “If such authority undertakes to construct building or allot houses or building sites to citizens of a state either as amenity or as benefit, then it amounts to rendering of service and will be covered in the expression service. A person who applies for allotment of a building site or for a flat … is a potential user and the nature of the transaction is covered in the expression ‘service’.”
However, this ruling was not of help to those who purchased plots in an auction. According to the court, the development authority in the above case was providing a service, whereas in the Chandigarh case, there was neither hiring nor availing of services by the persons bidding at the auction. Nor is the seller a trader who sells or distributes goods. The consideration paid was for the site and not for any service. Therefore, the bidders were not consumers.
In a public auction of sites, a bidder can inspect the plots before the auction and see what kind of amenities are available. He is not under an obligation to offer a particular price. When there is no assurance of any facility or amenity, there was no question of the authorities becoming a service-provider, according to the court. “Once with open eyes a person participates in an auction, he cannot thereafter be heard to say that he would not pay the balance of the price on the ground that amenities were not provided.”
Close on the heels of the Chandigarh case, the Supreme Court also set aside the ruling of the National Commission in another case, Ludhiana Improvement Trust vs Shakti Cooperative House Building Society Ltd. Though the background to this case was different, it raised the question of whether the trust was liable for alleged ‘unfair trade practices’ in not handing over developed plots which were promised to a housing society. The state and national commissions had held that the trust had indulged in such unfair practice, but the Supreme Court set aside those rulings and freed the trust of the charge.
The Chandigarh case has carved out an exception in the general understanding of the consumer law that housing authorities have an obligation to provide infrastructure for the plots auctioned. Therefore, those buying land in an auction need to use a magnifying glass to read the terms and conditions. As the doors of the consumer forums have been shut to those participating in auctions, they have no option but to take recourse to the long and costly path to the civil courts.
