The Supreme Court (“the Court”) in the case of Samruddhi Co-operative Housing Society Limited v. Mumbai Mahalaxmi Construction Private Limited, has ruled on the failure of the promoter to obtain occupation certificate amounting to a deficiency in service under the Consumer Protection Act, 1986.
Background:
In the instant case, the appellant is a housing society and the respondent had constructed flats and entered into agreements to sell the same in accordance with the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963 (“MOFA”). Members of the appellant were granted possession of the flats in 1997. The respondent failed to obtain occupancy certificate, as a result of which the members of the appellant had to pay excess taxes and charges for electricity and water connections. On July 8, 1998, a consumer complaint was instituted before the State Consumer Disputes Redressal Commission Mumbai (“SCDRC”) seeking a direction to compel obtaining of the occupation certificate by the respondent. A one-time settlement offer was made by the respondent in 2014 which was refused by the appellant, being lower than the amount owed by the respondent. SCDRC in its order dated August 20, 2014 directed the respondent to obtain an occupancy certificate and pay Rs. 1,00,000 (Rupees one lac) towards reimbursement of extra water charges paid. A legal notice was sent by the appellant in 2015 demanding payment of outstanding dues to the extent of Rs. 3,56,42,257 (Rupees three crore fifty six lac forty two thousand two hundred fifty seven) and the respondent failed to comply with the demand.
Subsequently, the appellant filed a complaint before the National Consumer Disputes Redressal Commission (“NCDRC”) seeking reimbursement of excess charges and tax paid to the tune of Rs. 2,60,73,475 (Rupees two crore sixty lac seventy three thousand four hundred seventy five) and further damages for mental agony and inconvenience. It was contended by the appellant that the complaint was not barred by limitation since payment of excess water usage charges and the non-issuance of occupancy certificate were continuing causes of action. Further, it was contended that the cause of action arose when the one-time settlement offer was made by the respondent and again when the respondent failed to comply with the legal demand notice.
In this respect, NCDRC observed that the possession was obtained against the law as no occupancy certificate had been provided. NCDRC held that the complaint was barred by limitation since the cause of action arose earlier, when efforts were made, post obtaining possession in 1997,=to obtain water and electricity connections and municipal authorities demanded payment of higher taxes and charges. The same could not be extended by communication between parties. Further, it was observed that since no relief was sought regarding the obtaining of occupancy certificate, the claim of continuing cause of action due to non-availability of the occupancy certificate could not be entertained.
NCDRC also opined that since the respondent was not the service provider of the services for which the property tax or water charges were levied, the appellant would not fall under the definition of ‘consumer’ under Section 2(1)(d) of the Consumer Protection Act, 1986.
Judgement:
This order by NCDRC has been challenged before the Court and the primary issue in the instant case is the maintainability of the petition and if it is barred by limitation. Section 24A of the Consumer Protection Act, 1986 provides for a limitation period of 2 (two) years from the date on which the cause of action has arisen for lodging a complaint. Sections 3 and 6 of MOFA were analysed by the Court to determine if there had been a continuous breach of an obligation imposed by law. Section 3 of MOFA imposes an obligation on the promoter to not grant possession of a flat until a completion certificate is given by the local authority. This responsibility has also been captured in the agreement to sell between the members of the appellant and the respondent. Further, Section 6 of MOFA provides as follows:
“A promoter shall, while he is in possession and where he collects from persons who have taken over flats or are to take over flats sums for the payment of outgoings even thereafter, pay all outgoings (including ground rent, municipal or other local taxes, on income taxes, water charges, electricity charges, revenue assessment, interest on any mortgage or other encumbrances, if any), until he transfers the property to the persons taking over the flats, or to the organisation of any such persons, where any promoter fails to pay all or any of the outgoings collected by him from the persons who have taken over flats or are to take over flats, before transferring the property to the persons taking over the flats or to the organisation of any such persons, the promoter shall continue to be liable, even after the transfer of the property, to pay such outgoings and penal charges (if any) to the authority or person to whom they are payable and to be responsible for any legal proceedings which may be taken therefor by such authority or persons.” (emphasis supplied)
The Court was of the view that MOFA obligated the promoter to provide the occupancy certificate and pay for the relevant charges including ground rent, municipal taxes, water charges and electricity charges till the certificate is provided. Thus, the continuous failure of the respondent to obtain an occupancy certificate was found by the Court to tantamount to a continuous breach of the obligations imposed on the respondent under MOFA. Further, it was observed that even though the continuous wrong was in respect of failure to obtain the occupancy certificate, and no prayer for supply of occupancy certificate was made, it would not preclude the appellant from claiming compensation for the consequences which have arisen out of this continuing wrong. Appropriate action had been taken for execution of order of SCDRC in respect with the continuous wrong and the appellant despite having followed the correct course of litigation, was suffering due to delay in the execution of the order against the respondent. Hence, the claim was held to not be barred by limitation.
The Court further observed that failure to obtain an occupancy certificate or to abide by contractual obligations amounts to a deficiency in service under Section 2(1)(g) of the Consumer Protection Act, 1986. The respondent here was liable for transferring title to the flats to the society along with the occupancy certificate and the failure to do the same, was a deficiency in service for which the respondent was liable.
Please find a copy of the judgment here.
This update has been contributed by Nidhi Arya (Partner) and Astha Singhania (Associate).
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