Failure of a builder to obtain occupation certificate is a deficiency in service under Consumer Protection Act 1986.

The Supreme Court recently in Samruddhi Co-operative Housing Society Ltd. Versus Mumbai Mahalaxmi Construction Pvt. Ltd.1 reiterated that the flat-purchasers are well within their rights as 'consumers' to pray for compensation as due to the failure of the builder to obtain the occupancy certificate, the members of the society had to pay a 25% higher amount on account of the property tax and an additional 50% towards the water charges.

The Appellants had filed a complaint before the National Consumer Disputes Redressal Commission (NCDRC) for refund of the excess taxes and charges paid to the municipal authorities and compensation for the mental agony and inconvenience caused to the members of the society due to the alleged deficiency of service of the Respondent Builder. The NCDRC had dismissed the complaint on the ground that it was barred by limitation and that it was not maintainable since the Respondent was not a service provider for which the property tax and water charges were levied and consequently would not fall under the definition of ‘consumer’ under Section 2(1)(d) of the Consumer Protection Act 1986. Furthermore, according to the NCDRC, the complaint was in the nature of a recovery proceeding and not a consumer dispute.

The Appellant contended that the cause of action was a continuous one that arose since the Respondent had failed to obtain the occupation certificate from the municipal authorities 24 years subsequent to giving possession. The Appellants further contended that the individual flat owners were not eligible for electricity and water connections, due to the absence of the occupation certificate and thus had to avail of temporary water and electricity connections by paying higher taxes and water charges.

Over and above the argument that the Respondent was not a service provider, the Respondent contended that they had applied for an occupation certificate after the completion of the project in 1997 and had not offered possession to the flat-purchasers. It was further contended that the members of the Appellant took possession of their flats to refurbish the interiors and to make suitable arrangements but instead, they started occupying the premises and made unauthorized constructions due to which there was a delay in obtaining the occupancy certificate. The Respondent further contended that the complaint was barred by limitation as the cause of action if any arose in 1997 and the complaint was filed 18 years later.

The Division Bench observed that Sections 3 and 6 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 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. Thus, the Bench held that based on these provisions, it was 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. As regards the issue of limitation, the Bench observed that Section 22 of the Limitation Act, 1963 would apply in the present case which provides for the computation of limitation in the case of a continuing breach of contract or tort and states that a fresh period of limitation begins to run at every moment of time during which the breach continues.

Thus, the Hon’ble Apex Court reiterated that 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 were 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.

1. Civil Appeal No 4000 of 2019

By - Lakshmi Raman