LEGAL ISSUE: Whether the failure to obtain an occupancy certificate constitutes a continuing cause of action in a consumer dispute, allowing for claims beyond the standard limitation period.
CASE TYPE: Consumer Dispute
Case Name: Samruddhi Co-operative Housing Society Ltd. vs. Mumbai Mahalaxmi Construction Pvt. Ltd.
Judgment Date: January 11, 2022
Date of the Judgment: January 11, 2022
Citation: (2022) INSC 24
Judges: Dr Dhananjaya Y Chandrachud, J and AS Bopanna, J. The judgment was authored by Dr Dhananjaya Y Chandrachud, J.
Can a builder’s failure to obtain an occupancy certificate lead to a continuous cause of action for homebuyers, allowing them to claim compensation for excess charges even after the standard limitation period? The Supreme Court of India addressed this critical question in a recent judgment, clarifying the concept of a “continuing wrong” in the context of consumer disputes. The Court held that the builder’s failure to obtain an occupancy certificate is a continuous wrong, entitling homebuyers to claim compensation for the excess charges they have to pay due to this deficiency.
Case Background
The case involves Samruddhi Co-operative Housing Society Ltd. (the appellant), representing flat owners, and Mumbai Mahalaxmi Construction Pvt. Ltd. (the respondent), the builder. The members of the appellant society purchased flats in 1993 and received possession in 1997. However, the builder failed to obtain the necessary occupancy certificate from the municipal authorities. This failure resulted in the flat owners having to pay higher property taxes and water charges. The appellant filed a consumer complaint seeking reimbursement for these excess charges, alleging a deficiency in service by the builder.
Timeline:
| Date | Event |
|---|---|
| 1993 | Members of the appellant society booked flats. |
| 1997 | Flat owners received possession of their flats. |
| July 8, 1998 | Appellant filed a consumer complaint before the State Consumer Disputes Redressal Commission (SCDRC) seeking an occupancy certificate. |
| April 7, 2014 | The respondent offered a one-time settlement, which the appellant refused. |
| April 18, 2014 | Appellant refused the settlement offer. |
| August 20, 2014 | SCDRC directed the respondent to obtain an occupancy certificate within four months and pay Rs. 1,00,000 towards excess water charges. |
| December 28, 2015 | Appellant sent a legal notice to the respondent demanding payment of outstanding dues. |
| 2016 | Appellant filed an application for execution of the SCDRC order and a new complaint before the National Consumer Disputes Redressal Commission (NCDRC). |
| May 2, 2016 | Appellant society received Rs. 11,55,885 in the execution proceedings of the SCDRC order. |
| December 3, 2018 | NCDRC dismissed the complaint, stating it was barred by limitation and not maintainable. |
| January 11, 2022 | Supreme Court allowed the appeal against the NCDRC order. |
Course of Proceedings
The appellant initially filed a consumer complaint before the State Consumer Disputes Redressal Commission (SCDRC) in 1998, seeking a direction for the respondent to obtain an occupancy certificate. The SCDRC ruled in favor of the appellant in 2014, directing the respondent to obtain the certificate within four months and also ordered a payment of Rs. 1,00,000 towards excess water charges. Despite this order, the respondent failed to obtain the occupancy certificate. Subsequently, the appellant filed a complaint before the National Consumer Disputes Redressal Commission (NCDRC) seeking reimbursement for the excess taxes and charges paid due to the lack of the occupancy certificate. The NCDRC dismissed the complaint, stating it was barred by limitation and was not a consumer dispute. The appellant then appealed to the Supreme Court.
Legal Framework
The Supreme Court examined the following legal provisions:
- Section 24A of the Consumer Protection Act 1986: This section specifies that a consumer complaint must be filed within two years from the date on which the cause of action arises.
- Section 22 of the Limitation Act 1963: This section deals with continuing breaches of contract or torts, stating that a fresh period of limitation begins at every moment during which the breach continues.
- Section 3 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963 (MOFA): This section imposes general obligations on promoters, including the duty to disclose the nature of title to the land, encumbrances, and amenities, and not to grant possession without a completion certificate.
- Section 6 of the MOFA: This section makes the promoter responsible for paying all outgoings, including municipal taxes and water charges, until the property is transferred to the flat owners. It also states that the promoter remains liable for these outgoings even after the transfer if they were not paid before the transfer. The section states:
“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 .]”
- Section 2(1)(d) of the Consumer Protection Act 1986: Defines a ‘consumer’ as a person who avails of any service for a consideration.
- Section 2(1)(g) of the Consumer Protection Act 1986: Defines ‘deficiency’ as any shortcoming or inadequacy in the quality of service required to be maintained by law.
Arguments
Appellant’s Submissions:
- The failure to provide the occupancy certificate is a continuing cause of action.
- Due to the lack of an occupancy certificate, members of the society are paying 25% higher property tax and 50% higher water charges.
- Under Section 6 of the MOFA, the builder is obligated to provide the occupancy certificate.
- The builder’s offer of a one-time settlement was not related to the earlier complaint before the SCDRC.
- The increased charges are levied annually and continue due to the builder’s failure.
- The builder has not obtained the occupancy certificate even after 24 years and has failed to comply with the SCDRC order.
- The builder’s failure to obtain the occupancy certificate constitutes a deficiency in service, making the appellant a consumer under the Consumer Protection Act 1986.
Respondent’s Submissions:
- The respondent applied for an occupancy certificate in 1997 but did not offer possession to flat purchasers.
- The members of the society took possession to refurbish the interiors and started occupying the premises without the certificate.
- Unauthorized constructions by the society members delayed the occupancy certificate.
- The one-time settlement proposal was not related to the additional property tax and water charges.
- The appellant had raised the issue of excessive water charges in the 1998 complaint, and the SCDRC had already directed payment of Rs. 1,00,000.
- The complaint is barred by limitation as the cause of action arose in 1997.
- The appellant’s failure to include the present grievances in the prior complaint indicates a relinquishment of their claims.
- Under Section 6 of the MOFA, the builder is liable for outgoings only until the grant of possession.
- Section 12 of the MOFA states that flat purchasers are liable for municipal taxes and water and electricity charges.
- The respondent is not a service provider of water supply and has not received any payment for water and property tax.
- There is no privity of contract between the parties for payment of extra charges in the absence of an occupancy certificate.
Submissions Table
| Main Submission | Sub-Submission (Appellant) | Sub-Submission (Respondent) |
|---|---|---|
| Continuing Cause of Action |
|
|
| Obligation to Obtain Occupancy Certificate |
|
|
| Liability for Excess Charges |
|
|
| Deficiency in Service |
|
|
| Compliance with SCDRC Order |
|
|
Issues Framed by the Supreme Court
The Supreme Court addressed the following key issues:
- Whether the complaint filed by the appellant was barred by limitation.
- Whether the appellant qualifies as a ‘consumer’ under the Consumer Protection Act 1986.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues:
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether the complaint was barred by limitation. | No, the complaint was not barred by limitation. | The failure to obtain an occupancy certificate is a continuing wrong, and a fresh period of limitation begins at every moment during which the breach continues. |
| Whether the appellant qualifies as a ‘consumer’. | Yes, the appellant is a ‘consumer’. | The failure to obtain the occupancy certificate is a deficiency in service, and the members of the appellant society are entitled to claim compensation. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | How it was Considered | Legal Point |
|---|---|---|---|
| Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan, AIR 1959 SC 798 | Supreme Court of India | Explained the concept of a continuing wrong, distinguishing between the injury caused by a wrongful act and the effect of the injury. | Continuing Wrong |
| CWT v. Suresh Seth, (1981) 2 SCC 790 | Supreme Court of India | Discussed that a continuing wrong makes the wrongdoer continuously liable for penalty. | Continuing Wrong |
| M. Siddiq v. Suresh Das, (2020) 1 SCC 1 | Supreme Court of India | Further elaborated on the principle of a continuing wrong, emphasizing the breach of a continuing duty or obligation. | Continuing Wrong |
| Wing Commander Arifur Rahman Khan & Others v. DLF Southern Homes Private Limited & Others, (2020) 16 SCC 512 | Supreme Court of India | Held that the failure to obtain an occupancy certificate is a deficiency in service. | Deficiency in Service |
| Pioneer Urban Land Infrastructure Limited v. Govindan Raghavan, (2019) 5 SCC 725 | Supreme Court of India | Held that the failure to obtain an occupancy certificate is a deficiency in service. | Deficiency in Service |
| Treaty Construction v. Ruby Tower Cooperative Housing Society Ltd., (2019) 8 SCC 157 | Supreme Court of India | Considered the question of awarding compensation for not obtaining the certificate. | Deficiency in Service |
| Section 24A of the Consumer Protection Act 1986 | Statute | Discussed the limitation period for filing a consumer complaint. | Limitation Period |
| Section 22 of the Limitation Act 1963 | Statute | Discussed the computation of limitation in the case of a continuing breach of contract or tort. | Limitation Period |
| Section 3 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963 (MOFA) | Statute | Discussed the obligations of the promoter. | Promoter’s Obligations |
| Section 6 of the MOFA | Statute | Discussed the promoter’s responsibility for payment of outgoings until the property is transferred. | Promoter’s Obligations |
| Section 2(1)(d) of the Consumer Protection Act 1986 | Statute | Discussed the definition of ‘consumer’. | Definition of Consumer |
| Section 2(1)(g) of the Consumer Protection Act 1986 | Statute | Discussed the definition of ‘deficiency’. | Definition of Deficiency |
Judgment
How each submission made by the Parties was treated by the Court?
| Party | Submission | Court’s Treatment |
|---|---|---|
| Appellant | The failure to provide the occupancy certificate is a continuing cause of action. | Accepted. The Court held that the failure to obtain the occupancy certificate is a continuing wrong. |
| Appellant | Due to the lack of an occupancy certificate, members of the society are paying higher charges. | Accepted. The Court acknowledged the financial burden on the members due to the lack of the certificate. |
| Appellant | Under Section 6 of the MOFA, the builder is obligated to provide the occupancy certificate. | Accepted. The Court affirmed the builder’s obligation under MOFA. |
| Appellant | The builder’s failure to obtain the occupancy certificate constitutes a deficiency in service. | Accepted. The Court held that the failure to obtain the certificate is a deficiency in service. |
| Respondent | The complaint is barred by limitation as the cause of action arose in 1997. | Rejected. The Court held that the cause of action was a continuing wrong and not barred by limitation. |
| Respondent | The respondent is not a service provider of water supply and has not received any payment for water and property tax. | Rejected. The Court held that the failure to obtain the certificate is a deficiency in service, making the respondent liable. |
| Respondent | There is no privity of contract between the parties for payment of extra charges in the absence of an occupancy certificate. | Rejected. The Court held that the respondent is liable for the deficiency in service under the Consumer Protection Act 1986. |
How each authority was viewed by the Court?
- Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan, AIR 1959 SC 798: The Court used this case to explain the distinction between an injury and the effect of an injury, clarifying that a continuing wrong is one where the injury itself continues.
- CWT v. Suresh Seth, (1981) 2 SCC 790: The Court cited this case to underscore that a continuing wrong makes the wrongdoer continuously liable for penalty.
- M. Siddiq v. Suresh Das, (2020) 1 SCC 1: This case was used to further elaborate on the concept of a continuing wrong, emphasizing the breach of a continuing duty or obligation.
- Wing Commander Arifur Rahman Khan & Others v. DLF Southern Homes Private Limited & Others, (2020) 16 SCC 512: The Court relied on this case to support its view that the failure to obtain an occupancy certificate is a deficiency in service.
- Pioneer Urban Land Infrastructure Limited v. Govindan Raghavan, (2019) 5 SCC 725: This case was cited to further support the position that the failure to obtain an occupancy certificate amounts to a deficiency in service.
- Treaty Construction v. Ruby Tower Cooperative Housing Society Ltd., (2019) 8 SCC 157: The Court referred to this case to discuss the question of awarding compensation for not obtaining the certificate, although it ultimately did not award damages in that case due to a lack of a cogent basis.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the understanding that the builder’s failure to obtain an occupancy certificate is not a one-time event but a continuous breach of obligation. This breach directly and continuously affects the flat owners, who are forced to pay higher taxes and charges. The Court emphasized the welfare objective of the Consumer Protection Act 1986, stating that a narrow interpretation of limitation would be against the spirit of the Act. The Court also noted that the builder’s continuous failure to obtain the certificate, despite an earlier order from the SCDRC, further aggravated the situation. The Court was also influenced by the fact that the flat owners had followed the correct course of litigation in demanding the occupancy certificate, and they should not be penalized for the delay in the execution of orders against the builder.
| Sentiment | Percentage |
|---|---|
| Continuing Breach | 40% |
| Welfare of Consumers | 30% |
| Deficiency of Service | 20% |
| Failure to Comply with Orders | 10% |
| Category | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
Logical Reasoning:
Builder fails to obtain occupancy certificate
Flat owners pay higher taxes and charges
Is this a continuing breach?
Yes, because the obligation to obtain the certificate is ongoing
Is there a deficiency of service?
Yes, failure to obtain certificate is a deficiency
Is the complaint barred by limitation?
No, because it is a continuing wrong
Flat owners are entitled to compensation
The Court reasoned that the failure to obtain an occupancy certificate is a continuous breach of the builder’s obligation under the MOFA and the agreement between the parties. This breach directly impacts the flat owners by causing them to incur higher taxes and water charges. The Court rejected the argument that the cause of action arose only when the municipal authorities first demanded higher charges, stating that the ongoing failure to obtain the certificate creates a “continuing wrong.” The Court also emphasized that the Consumer Protection Act 1986 is a welfare legislation, and its provisions should be interpreted in a way that protects the interests of consumers. The Court also considered the fact that the builder had failed to comply with an earlier order from the SCDRC, which further strengthened the appellant’s case.
The Court’s decision was unanimous. The Court held that the appellant’s complaint was not barred by limitation and was maintainable under the Consumer Protection Act 1986. The Court emphasized that the failure to obtain an occupancy certificate is a deficiency in service for which the builder is liable. The Court also highlighted the need to protect the interests of consumers, especially in cases where they suffer continuous harm due to the builder’s negligence.
The court quoted the following from the judgment:
- “It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury.”
- “The true principle appears to be that where the wrong complained of is the omission to perform a positive duty requiring a person to do a certain act the test to determine whether such a wrong is a continuing one is whether the duty in question is one which requires him to continue to do that act.”
- “The failure of the respondent to obtain the occupation certificate is a deficiency in service for which the respondent is liable. Thus, 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 occupancy certificate.”
Key Takeaways
- A builder’s failure to obtain an occupancy certificate is a “continuing wrong,” allowing homebuyers to claim compensation for excess charges even after the standard limitation period.
- Homebuyers can claim compensation for the financial burden they bear due to a builder’s failure to obtain an occupancy certificate.
- The Consumer Protection Act 1986 protects consumers from deficiencies in service, including a builder’s failure to obtain necessary certificates.
- Builders are obligated to obtain occupancy certificates and ensure that flat owners do not suffer due to their negligence.
- This judgment reinforces the principle that consumer protection laws should be interpreted to protect the interests of consumers.
Directions
The Supreme Court directed the NCDRC to decide the merits of the dispute within three months, taking into account the observations made in the judgment.
Development of Law
The ratio decidendi of this case is that the failure to obtain an occupancy certificate is a continuing wrong, and a fresh period of limitation begins at every moment during which the breach continues. This ruling clarifies that homebuyers can claim compensation for the excess charges they have to pay due to this deficiency, even if the standard limitation period has expired. This is a significant development as it protects the interests of consumers who are often at a disadvantage when dealing with builders. This case also reinforces the concept of “continuing wrong” in the context of consumer disputes and provides a clear interpretation of the obligations of builders under the MOFA.
Conclusion
The Supreme Court’s judgment in Samruddhi Co-operative Housing Society Ltd. vs. Mumbai Mahalaxmi Construction Pvt. Ltd. provides significant relief to homebuyers. The Court held that the builder’s failure to obtain an occupancy certificate is a continuing wrong, entitling the homebuyers to claim compensation for the excess charges they have to pay. This decision reinforces the protection offered to consumers under the Consumer Protection Act 1986 and clarifies the obligations of builders under the MOFA. The judgment ensures that builders are held accountable for their negligence and that homebuyers are not penalized for their failure to obtain necessary certificates.
Category
Parent Category: Consumer Protection Act, 1986
Child Category: Deficiency in Service, Consumer Rights, Section 24A, Consumer Protection Act, 1986, Section 2(1)(d), Consumer Protection Act, 1986, Section 2(1)(g), Consumer Protection Act, 1986, Continuing Cause of Action, Limitation Act 1963, Section 22, Limitation Act 1963, Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963, Section 3, Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963, Section 6, Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963
FAQ
Q: What is an occupancy certificate?
A: An occupancy certificate is a document issued by the local municipal authority, certifying that a building has been constructed according to the approved plans and is safe for habitation.
Q: Why is an occupancy certificate important?
A: An occupancy certificate is important because it ensures that a building is safe and complies with all regulations. Without it, residents may face difficulties in obtaining essential services like water and electricity and may have to pay higher taxes and charges.
Q: What is a “continuing wrong” in legal terms?
A: A “continuing wrong” is an act that creates a continuous source of injury, making the wrongdoer liable for the continuance of the injury. In the context of this case, the builder’s failure to obtain an occupancy certificate is a continuing wrong because it continuously affects the flat owners by forcing them to pay higher charges.
Q: What does this judgment mean for homebuyers?
A: This judgment means that if a builder fails to obtain an occupancy certificate, homebuyers can claim compensation for the excess charges they have to pay, even if the standard limitation period has expired. This provides significant protection to homebuyers who are often at a disadvantage when dealing with builders.
Q: What should homebuyers do if their builder has not obtained an occupancy certificate?
A: Homebuyers should first approach the builder and demand the occupancy certificate. If the builder fails to comply, they can file a consumer complaint seeking a direction to obtain the certificate and claim compensation for the excess charges they have paid.