No occupancy certificate from the builder — Supreme Court says the society can still claim

Your members have lived in the building for years, perhaps decades. The builder never obtained the occupancy certificate. Every year the society pays property tax and water charges at inflated rates, and the electricity and water connections remain temporary. The committee wonders whether it is too late to do anything, or whether the limitation period ran out long ago.

The case in brief

In Samruddhi Co-operative Housing Society Ltd. v. Mumbai Mahalaxmi Construction Pvt. Ltd. (Civil Appeal No. 4000 of 2019), the Supreme Court of India, by Dr Dhananjaya Y Chandrachud and A.S. Bopanna, JJ, ruled on 11 January 2022. The builder had constructed Wings A and B under agreements to sell governed by the Maharashtra Ownership Flats Act, 1963 (MOFA). Members booked flats in 1993 and took possession in 1997. The builder never obtained the occupancy certificate (OC), so only temporary electricity and water connections existed, arranged through the society's own efforts. The members paid property tax 25% above the normal rate and water charges 50% above the normal rate.

The society had filed a consumer complaint in 1998 asking for a direction to obtain the OC. On 20 August 2014 the State Commission directed the builder to obtain it within four months and awarded Rs 1,00,000 for extra water charges. In 2016 the society filed a fresh complaint before the NCDRC, claiming Rs 2,60,73,475 as reimbursement of excess charges and tax, plus Rs 20,00,000 for mental agony. On 3 December 2018 the NCDRC dismissed it as time-barred and not maintainable, calling it a recovery proceeding and not a consumer dispute. The society appealed. The Supreme Court framed the question as maintainability and limitation: was the complaint within the two-year period under section 24A on the basis of a continuing wrong?

What the court decided

The Court allowed the appeal. It drew the familiar line between a continuing wrong and the continuing effects of a completed wrong. A continuing wrong occurs when a party continuously breaches an obligation imposed by law or agreement. The Court noted that MOFA places duties on the promoter, including not handing over possession until the completion certificate is given, that the agreement to sell also required the OC, and that section 6 of MOFA makes the promoter pay the outgoings until the property is transferred. It held that the builder was obliged to provide the occupancy certificate and pay the relevant charges till it was provided, and that the higher taxes and water charges flow directly from that failure. In its words:

> "This continuous failure to obtain an occupancy certificate is a breach of the obligations imposed on the respondent under the MOFA and amounts to a continuing wrong." (para 18)

So, on these facts, where the promoter had still not obtained the occupancy certificate, the complaint was not barred by limitation. The Court also held that failure to obtain the OC is a deficiency in service and that the members were well within their rights as consumers to pray for compensation for the consequences, such as higher taxes and water charges. It rejected the NCDRC's reasons, saying that the society's earlier complaint and its execution did not preclude a claim for compensation, and that treating the complaint as time-barred was a narrow view not in consonance with the welfare objective of the Consumer Protection Act, 1986.

The Court decided maintainability and limitation. It did not award any money. It held the complaint maintainable and sent it back to the NCDRC to decide on merits, in light of its observations, within three months.

Why it matters for your society

Many societies assume that a claim over inflated tax and water bills died years ago, the moment the first higher bill arrived. This ruling shows that, where the promoter's duty to obtain the OC is still unperformed, the failure can be treated as continuing, so the clock is not simply counted from the first bill. It also shows that a claim for the financial consequences of the missing OC can be brought before a consumer forum, and that an earlier complaint for obtaining the OC does not shut the door on a later claim for compensation.

What your committee should do

1. 1Establish the facts. Pull out the agreements to sell, the possession dates, and every communication about the OC, and confirm whether the OC has in fact been issued.
2. 2Document the loss. Collect property tax and water bills and compare them with the normal rates, so that the excess paid year by year can be shown.
3. 3Take advice from the society's advocate on whether the facts match this case, in particular whether the promoter's obligation remains unperformed.
4. 4Keep conveyance in view. Under Model Bye-law 154, the committee, with the approval of the General Body, takes the necessary steps for Conveyance or Deemed Conveyance, examines the deed in consultation with the Society's Advocate, and places it before the General Body for approval. The status of the OC should be on that file.
5. 5Put the builder on written notice, place the matter before the General Body, and do not let further years pass without acting.

Limits of this ruling

This was a decision on maintainability and limitation only. The Supreme Court did not decide whether any compensation is payable or how much, and it did not endorse the Rs 2.6 crore claim. The builder's defences were left open, including its allegations about unauthorised construction by members, relinquishment, and the liability of purchasers for taxes and charges under section 12 of MOFA, which the Court did not apply. The effect of the builder's 2014 settlement offer was also not decided. Finally, the ruling was given under the Consumer Protection Act, 1986 and MOFA, 1963. It does not decide how the same claim would run under later statutes. Take legal advice on your own facts before relying on it.