Flat owners triumph on occupation certificate compensation

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Flat owners triumph on occupation certificate compensation
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In Samruddhi Co-operative Housing Society Ltd v Mumbai Mahalaxmi Construction Pvt Ltd, the Supreme Court confirmed that flat purchasers are entitled as consumers to apply for compensation for the failure of the builder to obtain an occupancy certificate. Members of the above-mentioned society had to pay 25% higher property tax and an additional 50% towards water charges because of the lack of a certificate.

The appellant applied to the National Consumer Disputes Redressal Commission (NCDRC) for a refund of the excess taxes and charges paid to the municipal authorities, and for compensation for the mental anguish and inconvenience caused to society members by the respondent builder’s deficiency of service.

The NCDRC dismissed the application on the grounds that it was barred by limitation, and that it was not maintainable since the respondent was not a service provider against which the property tax and water charges were levied. Consequently, the appellant was not within the definition of a consumer under section 2(1)(d) of the Consumer Protection Act, 1986. Furthermore, according to the NCDRC, the complaint amounted to recovery proceedings and not a consumer dispute.

Before the Supreme Court, the appellant contended that the cause of action was a continuous one arising from the respondent’s failure to obtain the occupation certificate from the municipal authorities during the 24 years after giving possession. As the individual flat owners were not eligible for electricity and water connections because of the absence of the occupation certificate, they had to arrange temporary water and electricity connections, which resulted in higher taxes and water charges.

In addition to arguing that it was not a service provider, the respondent contended it had applied for an occupation certificate after the completion of the project in 1997, and had not offered possession to the flat purchasers. It further argued that the members of the society took possession of their flats to refurbish the interiors and to make suitable arrangements.

However, they occupied the premises and undertook unauthorised construction, leading to the delay in obtaining an occupancy certificate. The respondent also argued that the complaint was barred by limitation, as any cause of action arose in 1997 and the complaint was filed 18 years later.

The Supreme Court held that sections 3 and 6 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 provide that the promoter must provide the occupancy certificate to the flat owners. The promoter must also pay outgoings such as ground rent, municipal taxes, water charges and electricity charges up until the time the property is transferred to the flat owners. Where the promoter fails to pay such charges, it is still liable, even after the transfer of property.

The court held that under these provisions the respondent had to provide the occupancy certificate and pay the relevant charges until the certificate was provided. As regards limitation, the court held that section 22 of the Limitation Act, 1963 applied. The section provides for the computation of limitation in cases of continuing breaches of contract or tort; a fresh period of limitation begins to run at every moment during which the breach continues.

The Supreme Court held that the respondent was responsible for transferring the title to the flats to the housing society, and for obtaining and transferring the occupancy certificate. The failure of the respondent to obtain the occupation certificate was a deficiency in service for which the respondent was liable.

Thus, the members of the appellant society were entitled as consumers to apply for compensation for consequent liabilities, such as the payment of higher taxes and water charges, caused by the failure to supply the occupancy certificate.


The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.

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