1. Builder's failure to obtain occupancy certificate — Claim for reimbursement of excess municipal taxes and charges — Maintainability and limitation under Consumer Protection Act 1986. (Para 1 , 2 , 4 , 7 )
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2022 Supreme(SC) 90
SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, A.S. BOPANNA, JJ.
Samruddhi Co-operative Housing Society Ltd. - Appellant
Versus
Mumbai Mahalaxmi Construction Pvt. Ltd. - Respondent
Civil Appeal No 4000 of 2019
Decided on : 11-01-2022
Advocates appeared:
For the Appellant(s) :Sunil Fernandes, Advocate
For the Respondent(s):Atul Babasaheb Dakh, Advocate
For the Appellant(s) :Sunil Fernandes, Advocate
For the Respondent(s):Atul Babasaheb Dakh, Advocate
IMPORTANT POINT
Consumer Complaint – Limitation – Failure of respondent to obtain occupation certificate is a deficiency in service on part of Builder and constitutes continuing cause of action.
Headnote:
(A) Consumer Protection Act, 1986 – Section 24-A[Consumer Protection Act, 2019 – Section 69] – Limitation Act, 1963 – Section 22 – Consumer Complaint – Limitation – Continuing cause of action – Continuing wrong in present case is failure to obtain occupancy certificate – Owing to failure of respondent to obtain certificate, there has been direct impact on members of appellant in terms of payment of higher taxes and water charges to municipal authority – This continuous failure to obtain an occupancy certificate is a breach of obligations imposed on respondent under MOFA and amounts to a continuing wrong – Appellants are entitled to damages arising out of this continuing wrong and their complaint is not barred by limitation. (Paras 18 and 19)
(B) Consumer Protection Act, 1986 – Section 2(1)(d) [Consumer Protection Act, 2019 – Section 2(11)] – Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963 – Sections 3 and 6 – Consumer Complaint – Maintainability – Respondent was responsible for transferring title to flats to society along with occupancy certificate – Failure of respondent to obtain occupation certificate is a deficiency in service for which respondent is liable – Members of appellant society are well within their rights as ‘consumers’ to pray for compensation as a recompense for consequent liability (such as payment of higher taxes and water charges by owners) arising from lack of an occupancy certificate. (Paras 18 and 22)
Facts of the case:
Present appeal arises from a judgment and order of the National Consumer Disputes Redressal Commission dated 3rd December 2018. The complaint was filed by the appellant for refund of the excess taxes and charges paid the appellant to the municipal authorities, due to the alleged deficiency of service of the respondent. By the impugned order, the NCDRC dismissed the complaint on the ground that it was barred by limitation and that it was not maintainable since it was in the nature of a recovery proceeding and not a consumer dispute.
Findings of Court:
Failure to obtain the occupancy certificate has resulted in the levy of higher taxes on the members of the appellant society repeatedly by the municipal authorities. Despite the order of 20 August 2014, the respondent has failed to obtain the occupancy certificate. This has resulted in a situation where the appellant, despite having followed the correct course of litigation in demanding the furnishing of an occupancy certificate, will continue to suffer the injury inflicted by the respondent merely due to the delay in the execution of the order against the respondent. Rejecting the complaint as being barred by limitation, when the demand for higher taxes is made repeatedly due to the lack of an occupancy certificate, is a narrow view which is not consonance with the welfare objective of the Consumer Protection Act 1986.
Result : Appeal allowed.
Legal Category Hierarchy
- consumer law
- civil law
- real estate law
Table of Contents
2. Continuing cause of action versus barred by limitation — Status of flat purchasers as consumers — Liability of builder to obtain occupancy certificate under MOFA. (Para 8 , 9 )
3. Distinction between continuing injury and continuing wrong — Failure to obtain occupancy certificate as a breach of continuing statutory and contractual obligations. (Para 10 , 12 , 13 , 14 , 18 , 19 )
4. Breach of a continuing duty to obtain an occupancy certificate constitutes a continuing wrong and a deficiency in service under the Consumer Protection Act 1986. (Para 14 , 18 , 22 )
5. Appeal allowed — Complaint held maintainable — NCDRC directed to decide the dispute on merits. (Para 23 )
6. What constitutes a continuing wrong for the purpose of calculating limitation?
A continuing wrong arises from a breach of an obligation imposed by law or agreement to continue acting or desist from acting in a particular manner. It requires a breach of a continuing duty, rather than a completed act where only the resulting damage or effect continues. (Para 12 , 14 )
7. Does the failure to obtain an occupancy certificate constitute a continuing wrong?
Yes. Because the promoter has a statutory obligation under MOFA and a contractual obligation to provide an occupancy certificate, the continuous failure to obtain this certificate is a breach of a continuing duty, which constitutes a continuing wrong. (Para 15 , 16 , 17 , 18 )
8. Is a flat purchaser considered a consumer when seeking compensation for excess taxes caused by a builder's failure to obtain an occupancy certificate?
Yes. The failure to obtain an occupancy certificate or abide by contractual obligations is a deficiency in service. Therefore, flat purchasers are consumers entitled to seek compensation for consequent liabilities, such as higher taxes, arising from such deficiency. (Para 21 , 22 )
JUDGMENT :
Dr. Dhananjaya Y. Chandrachud, J
| A. Factual Background .................................................................................3 |
| B. Submissions of Counsel..........................................................................6 |
| C. Analysis.....................................................................................................9 |
| D. Conclusion ..............................................................................................17 |
A Factual Background
1. The appeal arises from a judgment and order of the National Consumer Disputes Redressal Commission1[“NCDRC”] dated 3 December 2018. The complaint was filed by the appellant for refund of the excess taxes and charges paid the appellant to the municipal authorities, due to the alleged deficiency of service of the respondent. By the impugned order, the NCDRC dismissed the complaint on the ground that it was barred by limitation and that it was not maintainable since it was in the nature of a recovery proceeding and not a consumer dispute.
2. The appellant is a co-operative housing society. The respondent constructed Wings ‘A’ and ‘B’ and entered into agreements to sell flats with individual purchasers in accordance with the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 19632[“MOFA”]. The members of the appellant booked the flats in 1993 and were granted possession in 1997. According to the appellant, the respondent failed to take steps to obtain the occupation certificate from the municipal authorities. In the absence of the occupation certificate, individual flat owners were not eligible for electricity and water connections. Due to the efforts of the appellant, temporary water and electricity connections were granted by the authorities. However, the members of the appellant had to pay property tax at a rate 25% higher than the normal rate and water charges at a rate which was 50% higher than the normal charge.
3. On 8 July 1998, the appellant instituted a consumer complaint before the State Consumer Disputes Redressal Commission Mumbai3[“SCDRC”] seeking a direction to the respondent to obtain the occupation certificate. On 7 April 2014, the respondent made an offer of a one-time settlement to the appellant, which the appellant refused by a letter dated 18 April 2014 as it was allegedly lower than the amount owed by the respondent. By its judgment and order dated 20 August 2014, the SCDRC directed the respondent to obtain an occupancy certificate within four months. The SCDRC also directed the respondent to pay, inter alia Rs. 1,00,000/- towards reimbursement of extra water charges paid.
4. On 28 December 2015, the appellant sent a legal notice to the respondent demanding the payment of outstanding dues in an amount of Rs. 3,56,42,257/- . The respondent failed to comply with the demand. Thereafter, the appellant filed an application for execution of the order of the SCDRC dated 20 August 2014. The appellant also filed a complaint4[CC No. 1329 of 2016] 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.
5. Before the NCDRC, the appellant claimed that the complaint was not barred by limitation as the payment of excess water usage charges and the non-issuance of occupancy certificate is a continuing cause of action. Even otherwise, the cause of action was stated to have arisen on 7 April 2014, when the respondent allegedly acknowledged its liability and agreed to pay an amount of Rs. 1 crore in settlement. The cause of action was also alleged to have arisen on 15 December 2015, when the respondent failed to pay the amount demanded by the appellant. Thus, the complaint was, according to the appellant, filed within the
