Once Occupation Certificate Is Received, Developer Has No Justifiable Cause To Delay Conveyance In Favour Of Flat Buyers, Says Bombay HC [Read Judgment]

In a significant decision which could pave way for many homebuyers awaiting conveyance, the Bombay High Court has held that once full occupation certificate has been received by the developer, there was no justifiable cause for it not issuing any conveyance deed in favour of the purchasers of flats.

The order has been passed by a bench of Justice Indrajit Mahanty and Justice A M Badar in a case where the developer did not execute the conveyance deed in favour of the society of flat purchasers despite the expiry of five year period from the date of agreement forcing the purchasers to seek deemed conveyance.

As per Section 11 of MOFA, if a promoter fails to execute conveyance in favour of the cooperative society or the association of flat takers, the competent authority can receive application, conduct inquiry and issue a certificate certifying that it is a fit case for enforcing unilateral execution of conveyance deed conveying the right, title and interest of the promoter in the land and building in favour of the applicant, as deemed conveyance.

The court was hearing an appeal moved by the petitioner developer Mayfair Housing Private Limited challenging the order dated 31st May, 2018 passed by the Competent Authority constituted under Section 5A of The Maharashtra Ownership Flats (Regulations of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA), whereby, a certificate was granted to Respondent No.2­ Mayfair Kumkum Cooperative Housing Society comprising flat purchasers for effecting deemed conveyance of the suit land.

The developer said the order of the Competent Authority was premature as the agreement with all the purchasers had a clause (clause 8) stipulating the period of execution of conveyance deed as five years from the date of agreement.

It further claimed that the order did not take into consideration its entitlement to increase Floor Space Index (FSI).

The high court gave a wide interpretation when it calculated the five year period from the date of agreement. It noted that the petitioner had sold all flats between 2012 and 2015 and therefore the period of five years has to be calculated from 2012.

The court rejected the argument of the developer that the application for deemed conveyance and the consequent order was premature. The Developer had also submitted that the agreement submitted before the Competent Authority was of year 2015 but the court noted that the same was just an example as the first flat was sold in year 2012.

"Since admittedly, first Agreement was entered into between the Petitioner and member of Respondent No.2­ Society in 2012, plea advanced by the Petitioner that it was not obliged to effect Conveyance Deed in favour of Respondent No.2­Society, until the period of five years had lapsed, becomes wholly academic, since, by the date and time on which the impugned order came to be passed i.e. 31st May, 2018, period of more than 5 years had already lapsed from the date of the first Agreement that the Petitioner had entered into. Therefore, such a plea, in our considered view cannot be accepted as a ground for challenging the impugned order," said the court.

"…the Petitioner had received full occupation certificate in favour of the building on 4th September, 2014 and also the Petitioner had received completion certificate for the entire building on 16th September, 2014 and further the Petitioner also admitted that upon receiving full occupation certificate on 4th September 2014, possession of the premises had also been given in favour of the parties with whom Agreements had been entered into. Further, equally more importantly, the Petitioner had formed the Respondent No.2­Society on 12th December 2013. In other words, once full occupation certificate was received by the Petitioner and possession had been handed over to the members of Respondent No.2­society, there is no justifiable cause for having not issued the Conveyance Deed in favour of Respondent No.2­ Society and in any event the period of 5 years (if computed from the first date of Agreement of Sale, admittedly 2012) had already lapsed," observed the bench.

The bench refused to go into the aspect of "unfair trade practice" by the petitioner on the ground that clause (8) of the Agreement which entitled the Builder to deem conveyance of the land in favour of the society for a period of 5 years frustrated the attainment of the statutory intent which requires a builder/promoter to effect conveyance deed in favour of the society within four months of completion of the project.

On the issue of FSI, the bench noted, "Insofar as the present claim of FSI is concerned, it is submitted that the Petitioner relies upon the recent change in FSI as published by the Government of Maharashtra in the Urban Development Department dated 8th May, 2018.

"Clearly such reliance and or relevance are of no avail to the Petitioner, since the order impugned came to be passed on 31st May, 2018, whereas, the Development Control Regulations providing for amended FSI/TDR came to be issued on 13th November 2018, i.e. much thereafter".

The court also took into account the submission of the Society that FSI cannot be altered on the said land as it is situated in the funnel area and near to the airport where the maximum height of 41.720 meters was granted to the Petitioner by Airport Authority of India vide its letter dated 8th February 2010. Consequently, there is no possibility of either the Petitioner or even the Society to explicit any further FSI on the said land.

Read the Judgment Here