2022 (1) TMI 1404 - SC - Indian Laws

Developer's failure to obtain occupancy certificate creates continuing wrong, refund complaint not time-barred under MOFA

SC held that appellant's complaint against developer for refund of excess municipal taxes due to lack of occupancy certificate was maintainable and not ... Refund of the excess taxes and charges paid by the appellant to the municipal authorities - accrual of cause of action of continuing nature - lack of an occupancy certificate - complaint dismissed on the ground that it was barred by limitation - HELD THAT:- The NCDRC held that the cause of action arose when the municipal authorities asked the appellant to pay higher charges in the first instance and thus, a complaint should have been filed within two years of the accrual of the cause of action. The appellant however, has argued that the cause of action is of a continuing nature, since members of the appellant have continued paying higher charges as the respondent failed to provide the occupancy certificate. A continuing wrong occurs when a party continuously breaches an obligation imposed by law or agreement. Section 3 of the MOFA imposes certain general obligations on a promoter. These obligations inter alia include making disclosures on the nature of title to the land, encumbrances on the land, fixtures, fittings and amenities to be provided, and to not grant possession of a flat until a completion certificate is given by the local authority. The responsibility to obtain the occupancy certificate from the local authority has also been imposed under the agreement to sell between the members of the appellant and the respondent on the latter. It is evident that there was an obligation on the respondent to provide the occupancy certificate and pay for the relevant charges till the certificate has been provided. The respondent has time and again failed to provide the occupancy certificate to the appellant society. For this reason, a complaint was instituted in 1998 by the appellant against the respondent. The NCDRC on 20 August 2014 directed the respondent to obtain the certificate within a period of four months. Further, the NCDRC also imposed a penalty for any the delay in obtaining the occupancy certificate beyond these 4 months - 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. The appellants therefore, are entitled to damages arising out of this continuing wrong and their complaint is not barred by limitation. The NCDRC in its impugned order has held that the cause of action arose when the municipal authorities ordered the payment of higher taxes in the first instance. Further, the impugned order also states that the present complaint is barred by limitation as there is no prayer for supply of occupancy certificate - The NCDRC has held that the appellant is not a ‘consumer’ under the provisions of the Consumer Protection Act as they have claimed the recovery of higher charges paid to the municipal authorities from the respondent. Extending this further, the NCDRC has observed that the respondent is not the service provider for water or electricity and thus, the complaint is not maintainable. In the present case, the respondent was responsible for transferring the title to the flats to the society along with the occupancy certificate. 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. The NCDRC to decide the merits of the dispute having regard to the observations contained in the present judgment and dispose the complaint within a period of three months - the complaint is maintainable. Application dismissed. Issues Involved:1. Whether the complaint was barred by limitation.2. Whether the complaint was maintainable under the Consumer Protection Act 1986.3. Whether the respondent's failure to obtain an occupancy certificate constituted a continuing wrong.4. Whether the appellant qualifies as a 'consumer' under the Consumer Protection Act 1986.5. Whether there was a deficiency in service by the respondent.Detailed Analysis:1. Whether the complaint was barred by limitation:The NCDRC held that the complaint was barred by limitation, reasoning that the cause of action arose when the municipal authorities first demanded higher charges, and thus, the complaint should have been filed within two years of this initial demand. However, the appellant argued that the cause of action was of a continuing nature due to the respondent's failure to provide the occupancy certificate, which led to ongoing higher charges. The Supreme Court agreed with the appellant, citing Section 22 of the Limitation Act 1963 and relevant case law, concluding that the continuous failure to obtain the occupancy certificate constituted a continuing wrong. Therefore, the complaint was not barred by limitation.2. Whether the complaint was maintainable under the Consumer Protection Act 1986:The NCDRC dismissed the complaint as not maintainable, stating that the appellant was not a 'consumer' under Section 2(1)(d) of the Consumer Protection Act 1986, as the respondent was not the service provider for water or electricity. The Supreme Court disagreed, noting that the failure to obtain an occupancy certificate constitutes a deficiency in service. The appellant, having suffered due to this deficiency, qualifies as a 'consumer' and the complaint is maintainable.3. Whether the respondent's failure to obtain an occupancy certificate constituted a continuing wrong:The Supreme Court observed that under Sections 3 and 6 of the MOFA, the promoter (respondent) had an obligation to provide the occupancy certificate and pay relevant charges until the certificate was provided. The respondent's continuous failure to obtain the certificate, resulting in higher taxes and water charges for the appellant, constituted a continuing wrong. This ongoing breach of obligation justified the appellant's claim for damages and negated the limitation argument.4. Whether the appellant qualifies as a 'consumer' under the Consumer Protection Act 1986:The Supreme Court referenced Section 2(1)(d) of the Consumer Protection Act, which defines a 'consumer' as a person who avails of any service for consideration. The Court cited precedents where failure to obtain an occupancy certificate was deemed a deficiency in service. The appellant, affected by this deficiency, qualifies as a 'consumer' and is entitled to seek compensation for the resultant higher charges.5. Whether there was a deficiency in service by the respondent:The Supreme Court held that the respondent's failure to obtain the occupancy certificate was a clear deficiency in service. This deficiency led to the appellant incurring higher taxes and water charges, which the respondent was liable to compensate. The Court emphasized that the respondent's obligations under the MOFA were not fulfilled, thereby constituting a breach of service.Conclusion:The Supreme Court allowed the appeal, overturning the NCDRC's order. It held that the complaint was not barred by limitation, was maintainable under the Consumer Protection Act 1986, and that the respondent's failure to obtain the occupancy certificate constituted a continuing wrong and a deficiency in service. The NCDRC was directed to decide the merits of the dispute within three months, considering the observations made in this judgment. Pending applications were dismissed.