Recently, the Hon'ble Supreme Court of India (“SC”), in the case of Samruddhi Co-operative Housing Society Ltd. (“Appellant”) vs. Mumbai Mahalaxmi Construction Pvt. Ltd.1 (“Respondent”) has held that a real estate builder is under an obligation to provide the occupancy certificate (“OC”) to flat owners and failure to do so amounts to deficiency of service.
A complaint2 was filed by the Appellant before the National Consumer Disputes Redressal Commission (“NCDRC”) for refund of the excess taxes and charges paid by the Appellant to the municipal authorities, as its members had to pay a 25% higher amount on account of the property tax and an additional 50% towards the water charges, due to the deficiency of service of the Respondent on account of the failure of the builder to obtain the OC.
The Appellant contended that there is a continuing cause of action as the Respondent has failed to provide the OC. Not only as per Section 6 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963 (“MOFA”) but also under the agreement to sell with the members of the Appellant, it is the duty of the builder to provide the OC to the Appellant society. Due to the deficiency in service, the members of the Appellant have had to make excess payment. Thus, the Appellant is a consumer under the Consumer Protection Act 1986 (“CP Act”).
The Complaint was opposed by the Respondent on the ground, amongst others, that complaint is barred by limitation as the cause of action arose in 1997 and the complaint was filed 18 years later and that the Respondent is not a service provider of water supply and has not received any payment for water and property tax. Thus, the Appellant is not a consumer under the CP Act and the complaint is not maintainable.
By the order dated 3 December 2018 (“Impugned Order”), the NCDRC dismissed the complaint on the ground that it was barred by limitation and it was not maintainable as Respondent was not the service provider. NCDRC also held that the Appellant would not fall under the definition of ‘consumer' under Section 2(1)(d) of the CP Act.
The Appellant filed an appeal, against the Impugned Order, before the SC wherein the issues before the SC were:
(a) Whether the Complaint filed by the Appellant was barred by limitation (“Issue 1”);
(b) Whether the Complaint filed by the Appellant was maintainable (“Issue 2”).
3. ISSUE 1: Whether the Complaint filed by the Appellant was barred by limitation?
Answering the question in the negative, the SC held that the complaint was filed within limitation on the following grounds:
- Referring to Section 3 and 6 of MOFA, SC observed that there was an obligation on the Respondent to provide the OC and pay for the relevant charges till the certificate has been provided.
- Relying on various judgements passed by the SC i.e. Balakrishna Savalram Pujari Waghmare vs. Shree Dhyaneshwar Maharaj Sansthan3, CWT vs. Suresh Seth4 and M. Siddiq vs. Suresh Das5, SC discussed when does a continuous cause of action arises and what is a continuous wrong. SC observed that a continuing wrong occurs when a party continuously breaches an obligation imposed by law or agreement counts and the continuing wrong in the present case is the failure to obtain the OC.
- SC observed that rejection of the complaint as being barred by limitation, when the demand for higher taxes is made repeatedly due to the lack of an OC, is a narrow view which is not in consonance with the welfare objective of the CP Act.
- SC observed that owing to the failure of the Respondent to obtain the OC, 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. The SC observed that failure to obtain an OC is a continuous failure and therefore a breach of the obligations imposed on the respondent under the MOFA which amounts to a continuing wrong and therefore the complaint is not barred by limitation.
4. ISSUE 2: Whether the Complaint filed by the Appellant was maintainable?
Answering the question in the affirmative, the SC held that the complaint was maintainable on the following grounds:
- The SC relied on the decisions passed in Wing Commander Arifur Rahman Khan & Others vs. DLF Southern Homes Private Limited & Others6 and Pioneer Urban Land Infrastructure Limited vs. Govindan Raghavan7, which have held that the failure to obtain an OC or abide by contractual obligations amounts to a deficiency in service.
- The SC observed that the failure of the respondent to obtain the occupation certificate is a deficiency in service for which the respondent is liable.
- Keeping in mind Section 2(1)(d) of the CP Act which defines a ‘consumer' as a person that avails of any service for a consideration and ‘deficiency' which is defined under Section 2(1)(g) of the CP Act as the shortcoming or inadequacy in the quality of service, the SC held that 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 OC and allowed the appeal holding that the Complaint is maintainable.
5. INDUSLAW VIEW
The SC ruling would benefit numerous co-operative housing societies who are yet to receive the OCs for their buildings as this ruling defines a society as a consumer. This judgement will provide relief to the allotees/ homebuyers who are forced to take possession of their flats and start living due to delay on part of the builder to get all clearances from the authorities and the homebuyers can seek compensation from the builders for not obtaining the requisite approvals.
1 Judgement dated 11.01.2022 passed in Civil Appeal No.4000 of 2019
2 CC No. 1329 of 2016
3 AIR 1959 SC 798
4 (1981) 2 SCC 790
5 (2020) 1 SCC 1
6 (2020) 16 SCC 512
7 (2019) 5 SCC 725
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