Lucknow Development Authority v. M.K. Gupta

Facts

Allottees of flats/houses constructed by development authorities complained of delay in delivery of possession and defaults by the authorities. The authorities contended that, being statutory bodies discharging public/statutory functions, they were not amenable to the Consumer Protection Act. The Supreme Court considered whether housing activity of such bodies is 'service' and the scope of compensation the fora may award.

Issues

• Whether housing construction and allotment by a statutory development authority is 'service' under Section 2(1)(o).
• Whether such an authority can be held liable for deficiency in service before consumer fora.
• Whether consumer fora can award compensation for harassment and mental agony, and whether errant officers can be made personally liable.

Arguments

The development authorities argued that their housing functions were statutory/sovereign and outside the Act, and that compensation could not be awarded against public bodies. The allottees argued that providing housing for a price is 'service' and that delay/defects amount to deficiency entitling them to compensation.

Held

The Court held that when a statutory authority undertakes construction and provides housing for consideration, it renders 'service', and any defect, delay or default is deficiency in service actionable under the Act, irrespective of whether the body is statutory, governmental or private. The fora have wide power to award compensation, which is of broad connotation and may cover harassment, mental agony and loss. The Court further indicated that the loss caused by mala fide or capricious acts of officers can ultimately be recovered from the erring officials, deterring arbitrary conduct.

Ratio decidendi

Housing construction/allotment for consideration by any body, including statutory development authorities, is 'service'; deficiency therein is actionable, and consumer fora may grant just compensation, including for harassment and mental agony.

Significance

The seminal authority bringing builders and development/housing authorities within consumer law and establishing the wide compensatory jurisdiction of consumer fora; consistently relied upon (e.g. Ghaziabad Development Authority v. Balbir Singh) and foundational for the large body of housing/builder deficiency cases.

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