Failure of builder to obtain occupancy certificate is deficiency in service: Supreme Court

The Supreme Court has held that the failure of the builder to obtain occupation certificate for flats is a deficiency in service for which it is liable [Samruddhi Co-operative Housing Society Ltd vs Mumbai Mahalaxmi Construction Pvt Ltd]..A Bench of Justices DY Chandrachud and AS Bopanna ruled that it is the "responsibility" of the builder to transfer the title to the flats to the appellant Samruddhi Co-operative Housing Society Ltd. (appellant) along with the occupancy certificate, and a failure in doing so would entitle members of the society (homebuyers) as 'consumers' to seek compensation for any consequent liability they face. "The respondent was responsible for transferring the title to the flats to the society along with the occupancy certificate. The failure of the respondent to obtain the occupation certificate is a deficiency in service for which the respondent is liable. Thus, the members of the appellant society are well within their rights as ‘consumers’ to pray for compensation as a recompense for the consequent liability (such as payment of higher taxes and water charges by the owners) arising from the lack of an occupancy certificate," the Court ruled..The top court was dealing with a case where purchasers had bought properties being developed by the respondent-builder, Mumbai Mahalaxmi Construction Pvt Ltd in 1993, of which possession was granted in 1998. However, since there was no occupancy certificate obtained by the builder, the water and property tax charges were substantially higher than the market rate. They had first moved the State Consumer Dispute Redressal Commission (SCDRC) seeking the occupancy certificate and compensation. The SCDRC directed the builder to obtain the occupancy certificate within three months, and also ordered it to pay the excess charges incurred by the residents. Upon non-compliance, the society members moved the National Consumer Disputes Redressal Commission (NCDRC) seeking not only enhanced compensation for mental agony but also excess charges. However, the NCDRC dismissed the plea stating that it was barred by limitation since the cause of action arose at the time when the appellant made efforts to obtain individual water and electricity connections and the municipal authorities ordered the members to pay higher charges. The complaint should have been filed within two years of the accrual of the cause of action, the NCDRC said.On the merits of the plea, the NCDRC said that the residents were not "consumers" under the Consumer Protection Act, since the builder was not liable to provide water and electricity but it was the municipal authorities which were responsible for the same.The NCDRC judgment was in appeal before the Supreme Court. .The top court held that the "builder was responsible for transferring the title to the flats to the society along with the occupancy certificate." "The failure of the respondent to obtain the occupation certificate is a deficiency in service for which the respondent is liable. Thus, the members of the appellant society are well within their rights as ‘consumers’ to pray for compensation as a recompense for the consequent liability (such as payment of higher taxes and water charges by the owners) arising from the lack of an occupancy certificate," the judgment said..The top court termed the aspect of not obtaining the occupancy certificate on part of the builder a "continuing wrong.""A continuing wrong occurs when a party continuously breaches an obligation imposed by law or agreement. Undoubtedly, the continuing wrong in the present case is the failure to obtain the occupancy certificate. Against this act of the respondent, the appellant society has taken appropriate action by filing a complaint before the consumer forum. The appellant is currently pursuing the execution of the order of the SCDRC arising from that complaint. However, that itself does not preclude it from claiming compensation for the consequences which have arisen out of this continuing wrong," the Court said..The matter was, therefore, remanded to the NCDRC to be decided on merits and disposed of in three months. Advocate Sunil Fernandes appeared for the appellant-society while advocate Atul Babasaheb Dakh appeared for the respondent-builder..[Read Judgment]