Failure of Construction Company to obtain occupancy certificate, amounts to ‘deficiency in service’ for which consumer complaint is maintainable: SC

Read Judgment: Samruddhi Co-operative Housing Society Ltd. V. Mumbai Mahalaxmi Construction Pvt. Ltd. 

Pankaj Bajpai

New Delhi, January 12, 2022: Observing that a continuing wrong occurs when a party continuously breaches an obligation imposed by law or agreement, the Supreme Court has opined that the members of Samruddhi Co-operative Housing Society (Appellant) are well within their rights as ‘consumers’ to pray for compensation as a recompense for the consequent liability arising from the lack of an occupancy certificate by Mumbai Mahalaxmi Construction Pvt. Ltd. (Respondent).

A Division Bench of Justice Dr. D.Y. Chandrachud and Justice A.S. Bopanna observed that the respondent was responsible for transferring the title to the flats to the society along with the occupancy certificate, and hence its failure to obtain the occupation certificate is a deficiency in service for which the respondent is liable. 

Going by the background of the case, a complaint was filed by Appellant for refund of the excess taxes and charges paid by the appellant to the municipal authorities, due to the alleged deficiency of service of Respondent. The NCDRC however dismissed the complaint on the ground that it was barred by limitation and that it was not maintainable since it was in the nature of a recovery proceeding and not a consumer dispute. The NCDRC held that the cause of action arose when the municipal authorities asked the appellant to pay higher charges in the first instance and thus, a complaint should have been filed within two years of the accrual of the cause of action. 

The appellant however, argued that the cause of action is of a continuing nature, since members of the appellant have continued paying higher charges as the respondent failed to provide the occupancy certificate.

After considering the submissions, the Apex Court found that Section 24A of the Consumer Protection Act,1986 provides for the period of limitation for lodging a complaint, and a complaint to a consumer forum has to be filed within two years of the date on which the cause of action has arisen.

“Section 3 of the MOFA imposes certain general obligations on a promoter. These obligations inter alia include making disclosures on the nature of title to the land, encumbrances on the land, fixtures, fittings and amenities to be provided, and to not grant possession of a flat until a completion certificate is given by the local authority. The responsibility to obtain the occupancy certificate from the local authority has also been imposed under the agreement to sell between the members of the appellant and the respondent on the latter”, observed the Court.

Speaking for the Bench, Justice Chandrachud noted that owing to the failure of the respondent to obtain the certificate, there has been a direct impact on the members of the appellant in terms of the payment of higher taxes and water charges to the municipal authority. 

This continuous failure to obtain an occupancy certificate is a breach of the obligations imposed on the respondent under the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963 and amounts to a continuing wrong, and the appellants therefore, are entitled to damages arising out of this continuing wrong and their complaint is not barred by limitation, added the Bench.  

The Apex Court therefore allowed the appeal against the order of the NCDRC, holding that the complaint is maintainable.