Who Builds, Who Signs : Decoding Joint and Several Liability in JDA – GPA Disputes

In a recent decision under Section 67 of the Consumer Protection Act, 2019, the Supreme Court addressed a recurring question in joint development arrangements: whether landowners under a Joint Development Agreement and a General Power of Attorney (GPA) can be held jointly and severally liable along with the developer for delay in handing over possession to flat buyers.

The dispute arose from a project where landowners had executed a JDA with a developer in February 2012, followed by a GPA authorizing the developer to deal with the developer's share of the project. The developer obtained the sanctioned plan and began selling flats under Memoranda of Sale Agreements from July 2013 onwards, promising possession within 36 months. When the project remained incomplete well beyond the agreed timeline, the flat buyers approached the National Consumer Disputes Redressal Commission, which found deficiency in service and directed the developer to complete construction and pay interest at 6% per annum on the deposits made by the buyers.

The flat buyers filed a review petition seeking to hold the landowners jointly and severally liable which was partly allowed and held the landowners jointly and severally liable for completion of construction and for payment of delay compensation.

The landowners challenged the aforesaid order and the said order was set aside and the Commission was directed to dispose of the review petition after giving an opportunity of hearing to the contesting parties.

By an order, the Commission held that in view of the JDA and sale agreement, the landowners cannot be jointly and severally liable for the deficiency in service.

The controversy in the Hon’ble Supreme Court was inter alia confined to the extent the impugned orders hold the landowners not jointly and severally liable. The landowners argued that the GPA created a principal-agent relationship, making the landowners vicariously liable for the developer's defaults. The landowners countered that under the JDA, the entire obligation to construct and deliver possession rested with the developer, who had also indemnified them against any such liability. It was also contended that no relationship of principal and agent exists between the landowners and the developer and that the landowners are not signatories to the sale agreements.

The Court rejected the flat owners attempt to fasten joint and several liability on the landowners. Reading Clause 7 of the JDA and Clauses 2 and 3 of the GPA together, the Court held that the developer alone was responsible for construction, delivery of possession, and any delay arising therefrom. The indemnity clause in the JDA specifically protected the landowners from consequences of any breach between the developer and the buyers, and the flat owners had not alleged that the delay was attributable to any act or omission of the landowners.

At the same time, the Court upheld the Commission's direction that both the landowners and the developer were jointly responsible for transferring title and executing the sale deeds in favour of the flat buyers. This part of the order was treated as a legitimate consequence of the JDA and GPA structure, where the landowners' cooperation was necessary to give effect to the conveyances the developer had already committed to.

The decision draws a clear line between the obligation to construct and deliver possession, which lies with the developer, and the obligation to pass title, which requires the landowners' participation. The judgment also signals that consumer forums must examine the underlying contractual allocation of responsibility before extending joint and several liability beyond the party actually responsible for the default.