In the case of Lucknow Development Authority vs M.K. Gupta on 5 November 1993, the Supreme Court of India was confronted with a significant question of law. The issue was whether statutory authorities such as the Lucknow Development Authority, Delhi Development Authority, or Bangalore Development Authority, which were constituted under State Acts to carry out planned development of cities, were amenable to the Consumer Protection Act, 1986. The question arose in the context of housing activities such as delays in delivering possession of houses to allottees, non-completion of flats within the stipulated time, or defective and faulty construction.
The court was also asked to consider whether the housing activity carried out by the statutory authority or private builder or contractor came within the purview of the Act only after its amendment by the Ordinance No. 24 in 1993, or if the Commission could entertain a complaint for such violations even before.
The court, in its judgment, held that the Consumer Protection Act, 1986, applies to both private and public bodies providing services. It emphasized that the Act aims to protect the economic interests of a consumer, understood in a commercial sense as a purchaser of goods and in a larger sense as a user of services. The court further stated that any defect in construction activity would be a denial of service to a consumer. When possession of property is not delivered within the stipulated period, the delay so caused is a denial of service. Such disputes or claims are not in respect of immovable property, but rather deficiency in rendering service of a particular standard, quality, or grade.
The court also clarified that a government or semi-government body or a local authority is as much amenable to the Act as any other private body rendering similar service. The court stated that the entire argument founded on being statutory bodies does not appear to have any substance. A development authority while developing the land or framing a scheme for housing discharges statutory duty, the purpose and objective of which is service to the society in general and individual in particular.
The court concluded that housing construction is a service and was covered in the clause as it stood before 1993. The court also held that the Consumer Protection Act, 1986, applies to any service except when it is free of charge or under a contract of personal service.