Pinnacle Court says the builder is liable to pay damages for occupation certificate delay

The Supreme Court of India was hearing a case filed by Samruddhi Co-operative Housing Society Ltd of Mumbai, which moved the national consumer commission in 2016 for a refund of excess taxes and charges to the tune of ₹2.6 crore paid to municipal authorities due to the failure of the developer, Mumbai Mahalaxmi Construction Pvt Ltd, to obtain an occupation certificate for the flats.

A bench, headed by justice Dhananjaya Y Chandrachud, said that a homebuyer shall come under the definition of “consumer” under the consumer protection law since the failure of a builder to obtain an occupation certificate is to be held as a “deficiency in service” under the legislation.

The court said the two-year cut-off set under the Consumer Protection Act, 1986, for seeking remedy may not be applicable as such a relief can be demanded even after that citing the doctrine of “continuing wrong”.

The NCDRC had 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 the petitioner society, the builder failed to take steps to obtain the occupation certificate from the municipal authorities. In the absence of the occupation certificate, individual flat owners were not eligible for electricity and water connections, it said.

An occupancy certificate, issued by the local authorities, certifies that a building is fit for occupation and has been constructed as per the approved plan and in compliance with local laws. It is required to apply for water, sanitation, and electricity connections.

Bench Striking out the NCDRC order and telling it to consider the matter afresh, Justice Chandrachud, who authored the judgment, said Section 22 of the Limitation Act, 1963, provided for the computation of the cut-off period for seeking legal remedy if there was a continuing breach of contract.

“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 said in a recent order.

Finally, the bench underscored that owing to the failure of the developer to obtain the certificate, there has been a direct impact on the members of the society in terms of the payment of higher taxes and water charges to the municipal authority.