Can brand ambassadors be held liable for real estate project failures?

[ecis2016.org] We look at whether brand ambassadors can be held liable for cheating, in real estate projects that have failed, when his role is confined to just endorsing the project

In the recent past, a Delhi court discharged former cricketer Gautam Gambhir, of all counts in a cheating case, where he was a director and brand ambassador of a joint project of Rudra Buildwell Realty and HR Infracity. Nevertheless, the media trial in many such cases, leaves a lasting dent on the reputation of brand ambassadors. Whether it was MS Dhoni as the brand ambassador of Amrapali or BJP MP and former cricket player Gambhir, home buyers sometimes drag the celebrities, when the developer fails to honour his commitments.

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The debate has, hence, yet again gained ground about the role and limitation of brand ambassadors. It is all the more relevant in the context of Indian real estate, where lesser-known developers use celebrity appeal to gain acceptance among the masses.

•  Can the brand ambassador be held liable for cheating, when his role is confined to just endorsing the project?
•  Isn’t the celebrity that is on board with the developer as a director (even if it is only as sweat equity) responsible for endorsing an unworthy project?
•  Is it feasible for the celebrities to do their own due diligence, before endorsing a product?

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What is cheating and Section 420 in real estate?

From a legal standpoint, Section 415 of the Indian Penal Code defines cheating as: “Whoever, by deceiving any person, fraudulently or dishonestly, induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to ‘cheat’.” A dishonest concealment of facts is a deception within the meaning of this section.

Section 420 pertains to cheating and dishonestly inducing delivery of property: “Whoever cheats and thereby dishonestly induces the person de­ceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.”

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Liability or brand ambassadors in real estate

Aditya Pratap, an advocate at the Bombay High Court, explains that if a film star or celebrity endorses a project but does not know about the developer’s fraud, he cannot face civil or criminal liability. For Section 420 of the IPC to apply, there must be an ‘inducement’ to deliver property. Such an inducement can only be offered by the developer, not the star endorsing the product. Further, if the brand ambassador does not know about the shortcomings or fraud in the project committed by the developer, then, he or she cannot be held liable for the same. “It is important to note that in brand endorsement, the star is licensing his image, to be used along with the brand. He is not in any way marketing or selling the product. If the star states that the product is of good quality without knowing its defect, then, he cannot be held liable for defects found later,” Pratap explains.

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Madhurendra Sharma, a Supreme Court advocate, also agrees that the liability of failure lies with the promoters and not the brand ambassadors. If the responsibility is stretched to brand ambassadors, all the contractors, suppliers and marketing channels, etc., would be dragged into litigation. “The fact is that a celebrity has a mass appeal in general and media appeal in particular. So, more often than not the buyers, even if advised against by the lawyers, insist on adding the name of the brand ambassador in the complaint. The idea in most of such cases, is to make the case high profile and put undue pressure on the judiciary with simultaneous media trials. However, from a legal standpoint it is hard to get a conviction for the brand ambassadors,” says Sharma.

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Developers also maintain that it would be unfair to drag the brand ambassadors, into controversies with the delivery of the project. Aditya Kedia, MD, Transcon Developers, says that brand ambassadors are appointed by corporates, based on their popularity, to represent the brand in a positive light. They also create a pull factor for the buyers for walk-ins but, in the end, the buyer decides what is best for him. “It is a holistic brand exercise to get recognition in quick time. Since brand ambassadors are well-known faces, they help create a recall value for the brand. As purchasing a house is a one-time decision for many buyers, having a brand ambassador would help a project to stand out in advertisements. Controversies can affect both, brand ambassadors, as well as the product they are endorsing. Prospective buyers generally relate the product with the brand ambassador. Nevertheless, any unforeseeable controversy, would definitely dilute the brand,” says Kedia.

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(The writer is CEO, Track2Realty)

Source: https://ecis2016.org/.
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Source: https://ecis2016.org
Category: Lifestyle