Lucknow Development Authority

vs

M.K. Gupta

1994 AIR 787, 1994 SCC (1) 243

Case Commence By : Uttam Sangrame , Roll No. : 61

Class : LL.B 3 years 6th semester

Bench : R. M. Sahai (J)

Kuldip Singh (J)

Date Of Judgement : 05/11/1993

Fact of the case :

1) The main contention in this case is whether the Land Development Authorities and
Housing are covered by the 1986 Consumer Protection Act and any pre-1993 changes.

2) The Supreme Court heard the matter after conducting a thorough investigation. part 2(1)
(o), which discussed the definition of the consumer and the various other ambits that fall
under it, was the part that was primarily focused on in this case.

3) The Development Authority filed the lawsuit in order to find out if they qualified as
consumers under the terms of the act and, if so, whether they could make a claim against the
National Commission for the losses they had incurred as a result of the damaged goods, based
on the actual magnitude of those losses.

4) The Plaintiff experienced a significant loss in relation to certain goods, and as a result, they
sought compensation from the commission for their immediate damages.

5) However, they were not permitted to make a damage claim because the defendants argued
that Land Development and Housing were exempt from the Consumer Protection Act of 1986
and its pre-1993 revisions.
6) In this particular case, the court thoroughly examined the definition of the term
"consumer" and rendered a judgement that was both just and equitable to the individual who
had been harmed.

Points of law which are the discussed :

1) Does the National Commission have the authority to hold all statutory authorities
accountable for their actions and to grant damages?

2) Is the state liable for torts arising from its sovereign and non-sovereign functions?

3) Is it necessary to provide compensation for loss and harm even when those cases arise
from legally permitted actions that are carried out without any negligence?

4) Does an employee's bad faith behaviour make them completely liable for their actions?

5) If compensation must be determined based not only on the worth of the damaged items but
also on that value.

Rules:

According to the preamble, the Consumer Protection Act of 1986 was passed to safeguard
consumers' interests.

The common man is given the ability to purchase products and services that live up to the
quality claims made by the seller or provider, which is its overall purpose. The consumer is
allowed to make a claim for compensation in the event of any deficiencies by contacting the
appropriate state or federal agency. It shields the average man from wrongdoing on the part
of service providers and retailers. It enables the consumer to submit a complaint regarding
unfair business practices, restrictive business practices, defective goods, and subpar service.

Judgement

The judgement rendered by the court was just and gave the plaintiff justice for the
damages they had to endure. The Land Development Authority and the Housing Sector do
fall under the definition of the Consumer Protection Act of 1986, according to the court,
which also ruled that statutory boards like the State Commission, National Commission, and
District Commission are actually authorised to hear cases involving these sectors and that
plaintiffs are eligible to use services like banking and finance, among other things.

The Court also consulted a number of other significant cases related to this issue. The
primary goal of the consumer protection legislation is to give customers who have
experienced significant hardship justice by compensating them strictly and expeditiously.
Additionally, it was discovered that the 1993 amendments included builders, building, and
construction activities in their scope.

According to the appellants, they offer their clients services by giving them
somewhere to stay and opulent structures. However, the Supreme Court categorically rejected
this argument, holding that services refer to any type of activity carried out for the genuine
benefit of customers rather than the construction of structures or high-rise housing. Both
statutory and private authorities carried out all of these actions. While agreeing that the
change had no retroactive impact, the top court determined that the addition of "housing
development" was made out of a surplus of caution because housing was already a service
covered by the Act before the amendment. Similarly, in regards to the 1993 amendment's
insertion of the clause "avail," the court ultimately decided that the Commission had full
authority under the Act to grant compensation for "harassment and suffering caused to a
consumer," in addition to poor services. It was decided, using a number of case laws, that the
State is responsible for compensating a citizen for loss or harm sustained as a result of the
functionaries' arbitrary conduct. It is now established law that the State is responsible for
paying damages even when a person suffers loss or harm as a result of a lawful conduct.
Because sovereignty is vested in the people according to our constitution, there is no longer a
distinction between sovereign and non-sovereign functions when evaluating the liability of
the State. No State official may assert immunity, with the exception of thus, the top court
believed that all public leaders must answer for their deeds.

In the end, it was determined that the Supreme Court's decision had upheld the actual
principles of the Rule of Law. Given the severity of the plaintiffs' losses, the court's decision
supplied the serious justice that was required by them. The court had established a very high
bar by directing the Lucknow Development Authority to fix their compensation sum and all
other items from the relevant authorities. Anybody should respect the plaintiff's right to speak
up anytime they experience injustice, until and until something more serious occurs.

Analysis:

The objective of the Act and the legislative institution that supported it have been
thoroughly considered in the judgement. It has stated that the enactment was a step in the
right direction for the welfare of society in general and for giving the common man a tool to
pursue his rightful entitlements in particular. The supreme court's decision has carried out an
extensive review of the different definitions provided in the Act, including those for
"consumer," "service," "trader," and "unfair trade practises," among others.
The authorities, namely the district forum, the state Commission, and the National
Commission, were competent to hear complaints from consumers for any defect or deficiency
in relation to construction activity against a private builder because they were carrying out
building or construction activity that was covered by the act before the amendment of 1993,
whether they were statutory authorities or private builders. The bigger question of whether
public entities fall under the Act's purview has been thoroughly examined by the court.

The appellant had contended that public bodies could not be liable to the Act's
requirements because they develop land and build homes in the course of carrying out their
statutory duties. It was suggested that expanding the scope of the Act to include statutory
authorities would have a significant impact on how the official bodies functioned. The
appellant's perspective was rejected by the top court. It was determined after evaluating the
Act's definition of "service" that any service that is made available to potential customers
falls under its purview. Court further ruled that amenities offered to a customer in connection
with banking, insurance, etc. are included in the concept of "service." All of these tasks are
completed by the highest court correctly ruled that there is no reason to assume that
authorities established by statutes are exempt from the Act's application if there is no stated
or inferred indication to the contrary. The highest court came to the conclusion that public
bodies should submit to the Act rather than claiming exclusion so that their actions and
inactions are reviewed and held accountable for the well-being of society. On behalf of one
appellant, it was asserted that while the 1993 amendment did not clearly say that it had a
retroactive effect, the inclusion of the term "housing construction" therein proves that the Act
did not apply to the appellant before the change.

The Supreme Court found that the addition of "housing construction" was made out
of a surplus of caution because housing as a service was already included in the Act before
the amendment, even if it agreed that the amendment had no retroactive impact. Similarly,
the supreme court decided that the word "avail" was inserted to the Act in the 1993
amendment only to remove any doubt that a consumer is someone who not only hires but also
utilises any facility for payment.

In the end, the court determined that the Commission had full authority under the
Act to grant compensation for a customer's suffering and harassment in addition to for subpar
services. It was determined, using a number of case laws, that the State is responsible for
compensating a citizen for loss or harm sustained as a result of the functionaries' arbitrary
conduct. It is now established law that the State is responsible for paying damages even when
a person suffers loss or harm as a result of a lawful conduct. Because sovereignty is vested in
the people according to our constitution, there is no longer a distinction between sovereign
and non-sovereign functions when evaluating the liability of the State. Only one state
employee may assert immunity.

CONCLUSION

In a sense, the supreme court has upheld the rule of law with this decision. By ruling that the
Commission was within its authority to seek damages for harassment, the average citizen has
gained power. This ruling ought to serve as a warning to public authorities not to take the
populace for granted. It will serve as a check on the use of authority in an arbitrary and
capricious manner. The supreme court has established guidelines by directing the Lucknow
Development Authority to determine liability and seek compensation from the defaulting
employees. Why should the tax payer be burdened with the responsibility to pay
compensation when the same has arisen as a result of some's inaction or negligence when the
public authority's money is the tax payer's money.