The Supreme Court on January 11 has said that the failure of a real estate developer to obtain an occupation certificate is a ‘deficiency in service’ under the Consumer Protection Act 1986 and that homebuyers are within their rights as ‘consumers’ to demand compensation for high charges incurred by them.
“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,” the bench comprising Justices DY Chandrachud and AS Bopanna observed.
The bench was hearing a case wherein the complaint was filed by Samruddhi Co-operative Housing Society Ltd of Mumbai 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 buyers had said that they had to pay a 25 percent higher amount on account of the property tax and an additional 50 percent towards the water charges due to the builder’s failure to obtain an occupancy certificate.
Members of the Mumbai society had booked units in 1993 and were given possession of their units in 1997 but the builder had not taken steps to obtain an occupation certificate from the municipal authorities. As a result, the flat buyers were not eligible for an electricity and water connection and had to shell out property tax at a rate 25 percent higher than the normal rate and water charges at a rate which was 50 percemt higher than the normal charge
The National Consumer Disputes Redressal Commission (NCDRC) had earlier dismissed the complaint filed by homebuyers on the ground that it was barred by limitation and that it was not that it was in the nature of a recovery proceeding and not a consumer dispute. It had also said that the housing society was not a ‘consumer’ under the provisions of the Consumer Protection Act as they had claimed the recovery of higher charges paid to the municipal authorities from the builder.
The Supreme Court bench in its order observed that Sections 3 and 6 of the MOFA indicate that the promoter has an obligation 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.
“Based on these provisions, 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 delay in obtaining the occupancy certificate beyond these 4 months. Since 2014 till date, the respondent has failed to provide the occupancy certificate,” it said.
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 order said.
The bench has allowed the appeal against the order of the NCDRC dated December 3, 2018, and hold that the complaint is maintainable. “We direct the NCDRC to decide the merits of the dispute having regard to the observations contained in the present judgment and dispose the complaint within a period of three months from the date of this judgment,” the order noted.
The Supreme Court had in the Bangalore Development Authority vs Syndicate Bank also held that failure to register title deeds is a deficiency of service on the part of the builder. No registration can be done and consequently, possession cannot be handed over if an occupation certificate is not obtained. Therefore, the Supreme Court has taken note of the plight of homebuyers and has rightly held that failure to obtain OC is a deficiency of service, said advocate Kumar Mihir.
This will also help thousands of homebuyers who are forced to take possession by the builders even when the projects are not complete and OC/CC has not been issued for the same by the competent authority, he added. Source: moneycontrol.com