The Supreme Court has in Sammruddhi Co-operative Housing Society Ltd. Versus Mumbai Mahalaxmi Construction Pvt. Ltd.1("Samruddhi Co-op") while reiterating its pro-consumer stance and giving a wide ambit to the term 'consumer' under Section 2(1)(d) of the Consumer Protection Act, 1986 ('the Act'), has held that a failure to provide an Occupancy certificate by the Builder is a deficiency in service under the Act. The Court has further held that repeated demand by Municipal authorities as a consequence of the Builder to obtain an Occupancy certificate, would be construed as a continuing breach resulting in a fresh period of limitation.
A bench comprising of Justices DY Chandrachud and AS Bopanna was hearing an appeal from the NCDRC wherein the NCDRC had dismissed a complaint on the ground of limitation and ousted the complainant therein from the ambit of the term 'consumer' under Section 2(1)(d) of the Act.
The Appellant booked the flats being sold by the Respondent (Builder) in 1993 and obtained possession in 1997; however, the Respondent had failed to obtain an occupancy certificate for the apartments constructed. Due to this, the members of the Appellant had to pay extra charges to obtain electricity and water.
On 8th of July 1998, the Appellant herein filed a complaint before the State Consumer Disputes Redressal Commission (Mumbai) [SCDRC] seeking a direction that the Respondent (Builder) must obtain an occupancy certificate.
Post the initiation of a complaint before the SCDRC, the Respondent came up with a one-time settlement offer, however, the Appellant rejected the same. Subsequently the SCDRC pronounced an order directing the Respondent to obtain an occupancy certificate within a period of four months and also pay the Appellant a sum of Rs. 1,00,000/- to cover the additional costs that were borne by the Appellant. This order was however passed on 20th August 2014.
On December 28th 2015, the Appellant sent a legal notice to the Respondent claiming a sum of Rs. 3,56,42,257. The Respondent however did not comply with such notice and prompted the Appellant to initiate an execution proceeding for the order pronounced by the SCDRC. The Appellant also filed a complaint before the NCDRC seeking payment of Rs. 2,60,73,475/- as reimbursement of excess charges and tax paid by the members of the appellant due to the deficiency in service of the respondent and Rs. 20,00,000/- towards the mental agony and inconvenience caused to the members of the appellant.
The NCDRC held that the complaint was barred by limitation as:
- The members of the Appellant booked the flats in 1993 and obtained possession in 1997, which they have continued to enjoy since then. The possession was obtained against the law as no occupancy certificate had been provided by the Respondent-builder;
- The cause of action arose at the time when the Appellant made efforts to obtain individual water and electricity connections and the municipal authorities ordered the members to pay higher charges. The complaint should have been filed within two years of the accrual of the cause of action;
- Since the cause of action arose on the date when the municipal authorities demanded payment of higher taxes and charges, the period of limitation also commenced from this date and cannot be extended by the communication between parties;
- With respect to the claim that there was a continuing cause of action due to non-availability of the occupancy certificate, no relief was sought by the Appellant in their complaint regarding the obtaining of an occupancy certificate. The only relief which was sought is a refund of Rs. 2.60 crores for payment of higher taxes. 2
The NCDRC also observed that the complaint in essence was filed for the recovery of an amount from the Respondent. The NCDRC held that the Respondent was not the service provider of the services for which the property tax or water charges were levied. Since these services were provided by the municipal authorities, the NCDRC held that the Appellant would not fall under the definition of 'consumer' under Section 2(1)(d) of the Act. Thus, the NCDRC dismissed the complaint as being barred by limitation and as being not maintainable under the Act.
Decision of the Supreme Court
The essential question for determination before the Supreme Court for determination was the maintainability of the Complaint due to the limitation period. The Court interpreted Section 24 A of the Act in light of Section 22 of the Limitation Act, 1963. Section 24A of the Act provides that a consumer complaint must be filed with two years. Moreover, Section 22 of the Limitation Act, 1963, provides that in case of a continuing breach of contract or continuing tort, a fresh period of limitation begins to run at every moment of time during which the breach or tort continues. The Supreme Court then proceeded to analyse the present set of facts in light of the judgement of the constitution bench in M. Siddiq v. Suresh Das3, wherein the Supreme Court had observed as follows:
"343. The submission of Nirmohi Akhara is based on the principle of continuing wrong as a defence to a plea of limitation. In assessing the submission, a distinction must be made between the source of a legal injury and the effect of the injury. The source of a legal injury is founded in a breach of an obligation. A continuing wrong arises where there is an obligation imposed by law, agreement or otherwise to continue to act or to desist from acting in a particular manner. The breach of such an obligation extends beyond a single completed act or omission. The breach is of a continuing nature, giving rise to a legal injury which assumes the nature of a continuing wrong. For a continuing wrong to arise, there must in the first place be a wrong which is actionable because in the absence of a wrong, there can be no continuing wrong. It is when there is a wrong that a further line of enquiry of whether there is a continuing wrong would arise. Without a wrong there cannot be a continuing wrong. A wrong postulates a breach of an obligation imposed on an individual, whether positive or negative, to act or desist from acting in a particular manner. The obligation on one individual finds a corresponding reflection of a right which inheres in another. A continuing wrong postulates a breach of a continuing duty or a breach of an obligation which is of a continuing nature. [...]
Hence, in evaluating whether there is a continuing wrong within the meaning of Section 23, the mere fact that the effect of the injury caused has continued, is not sufficient to constitute it as a continuing wrong. For instance, when the wrong is complete as a result of the act or omission which is complained of, no continuing wrong arises even though the effect or damage that is sustained may enure in the future. What makes a wrong, a wrong of a continuing nature is the breach of a duty which has not ceased but which continues to subsist. The breach of such a duty creates a continuing wrong and hence a defence to a plea of limitation."
The Supreme Court further relied on Sections 3 & 6 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 and concluded that the Respondent was indeed liable and obligated to ensure an occupancy certificate was provided to the members of the Appellant. The court held that the Builders are legally liable to bear expenses such as municipal taxes and water charges, which are consequential to their the failure to procure an occupancy certificate.4
In light of the above, the Supreme Court held that that the failure to obtain an occupancy certificate was a continuous wrong, since it resulted in the levy of higher taxes on the members of the appellant society repeatedly by the municipal authorities. Thus, the Court held that the Appellant's complaint was not barred by limitation.
The Supreme Court overruled NCDRC while categorically observing that rejection of the complaint by NCDRC on the ground of limitation despite a continuous wrong was a narrow view which was not in consonance with the welfare objective of the Act. The Supreme Court further clarified the ambit of Section 2(1)(d) of the Act by holding that the members of the Appellant were indeed 'consumers' under the definition of the Act and were well within their right to claim reimbursement of the additional costs incurred by them due to the fault of the Respondent.
The Supreme Court in its judgement in Samruddhi Co-op has laid down valuable guidance in interpreting continuing cause of action. The Court has in effect clarified that repeated demand by the Municipal authorities due to failure to obtain an occupancy certificate would be deemed to a continuing breach and not a continuing injury. Thus, a fresh limitation period will start at every instance of demand of tax by the authorities.
1. Civil Appeal 4000 of 2019
2. 2022 SCC Online SC 35, Para 6
3. (2020) 1 SCC 1
4. 2022 SCC Online SC 35, Para 17
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