Builder's Failure To Obtain Occupation Certificate Is A 'Deficiency In Service' Under Consumer Protection Act: Supreme Court

The Supreme Court observed that the failure of a builder to obtain occupation certificate is a deficiency in service under Consumer Protection Act 1986.

The flat purchasers 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 bench comprising Justices DY Chandrachud and AS Bopanna observed.

In this case, the complaint was filed by  Samruddhi Co-operative Housing Society Ltd for refund of the excess taxes and charges paid to the municipal authorities, due to the alleged deficiency of service of the builder- Mumbai Mahalaxmi Construction Pvt. Ltd. The complainant contended that due to the failure of the builder to obtain the occupancy certificate, its members have had to pay a 25% higher amount on account of the property tax and an additional 50% towards the water charges.

he National Consumer Disputes Redressal Commission (NCDRC) 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. According to NCDRC, the Housing society is not a 'consumer' under the provisions of the Consumer Protection Act as they have claimed the recovery of higher charges paid to the municipal authorities from the builder.

In appeal, the bench noted that Sections 3 and 6 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) imposes an obligation on builder to provide the occupancy certificate to the flat owners. Apart from this, the promoter must make payments of outgoings such as ground rent, municipal taxes, water charges and electricity charges till the time the property is transferred to the flat-owners. Where the promoter fails to pay such charges, the promoter is liable even after the transfer of property. The court thus observed:

"It is evident that there was an obligation on the respondent to provide the occupancy certificate and pay for the relevant charges till the certificate has been provided. The respondent has time and again failed to provide the occupancy certificate to the appellant society. For this reason, a complaint was instituted in 1998 by the appellant against the respondent. The NCDRC on 20 August 2014 directed the respondent to obtain the certificate within a period of four months. Further, the NCDRC also imposed a penalty for any the delay in obtaining the occupancy certificate beyond these 4 months. Since 2014 till date, the respondent has failed to provide the occupancy certificate. 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 MOFA and amounts to a continuing wrong. The appellants therefore, are entitled to damages arising out of this continuing wrong and their complaint is not barred by limitation."

The court observed that rejection of the complaint as being barred by limitation, when the demand for higher taxes is made repeatedly due to the lack of an occupancy certificate, is a narrow view which is not consonance with the welfare objective of the Consumer Protection Act 1986. While holding that the complaint was maintainable, the bench observed:

Section 2(1)(d) of the Consumer Protection Act defines a 'consumer' as a person that avails of any service for a consideration. A 'deficiency' is defined under Section 2(1)(g) as the shortcoming or inadequacy in the quality of service PART D 17 that is required to be maintained by law.

"In the present case, 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"

In this regard, the bench referred to the following decisions viz. Wing Commander Arifur Rahman Khan & Others v. DLF Southern Homes Private Limited & Others (2020) 16 SCC 512 and Pioneer Urban Land Infrastructure Limited v. Govindan Raghavan (2019) 5 SCC 725 and Treaty Construction v. Ruby Tower Cooperative Housing Society Ltd. (2019) 8 SCC 157

Click Here To Read/Download Judgment