Builder to pay additional taxes to Corporation on behalf of Home buyers

Dr Prem Lata Ex Member Consumer Forum; Head Legal VOICE

Synopsis

It’s a common grievance of home buyers that builder fails to complete the construction work including amenities as per plan and agreed terms. With the result occupancy certificate not issued by the concerned authorities, in some cases home buyers take possession under compelling circumstances with incomplete work and occupancy certificate still remains a problem. Here is a unique case decided by the Hon’ble Supreme Court on 11th January 2022 which gives a new dimension to the issue of fixing liability of the developer when occupancy certificate not provided to the home buyers.

Analysis 

It is two-fold deficiency on the part of builder – One for delay in possession due to incomplete construction and another for not obtaining completion certificate /occupancy certificate. This creates difficulties for the home buyers when it comes to the situation for paying extra taxes to the corporation because residents are not permitted by the corporation to occupy premises unless fit to reside. The case had come up before the Hon’ble Supreme Court with these facts in the matter of  Samruddhi Co-operative Housing Society Ltd V/S  Mumbai Mahalaxmi Construction Pvt.Ltd  against the order from NCDRC and was decided on 11th of Jan 2022

NCDRC had dismissed the complaint on 3rd  December 2018 on two grounds 

  • That it was barred by limitation 
  • That it was not maintainable since it was in the nature of a recovery proceeding and not a consumer dispute.
Therefore this appeal before Hon’ble Supreme Court 

Facts of the case 

Mumbai Mahalaxmi Construction Pvt. Ltd constructed Wings ‘A’ and ‘B of their project   . The members of the Samruddhi Co-operative Housing Society booked the flats in 1993 and got possession in 1997 without taking occupancy certificate from the municipal authorities. Flat owners were not eligible for electricity and water connections. Temporary water and electricity connections were granted by the authorities on request of residents of society consequently now they were 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.  The society filed a consumer complaint on 8 July 1998 before the State Consumer Disputes Redressal Commission (SCDRC) Mumbai seeking a direction to the respondent to obtain the occupation certificate. The SCDRC directed the respondent vide order dated 20 August 2014, to obtain an occupancy certificate within four months. The SCDRC also directed the respondent to pay, Rs. 1, 00,000/- towards reimbursement of extra water charges paid. The society filed an application for execution of the order of the SCDRC dated 20 August 2014. No Occupancy certificate was obtained in spite of State commission order. Society now filed a complaint 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.  NCDRC dismissed the complaint as above said for the reason time barred and also held matter is recovery suit, society is not a consumer under Consumer Protect Act

Supreme Court made the following observation 

That Complainant Society is entitled to file complaint on behalf of Home buyers under Section 2(1) (d) of the Consumer Protection Act for availing services in case of any deficiency or shortcoming or inadequacy in the quality of service  There has been a direct impact on the members of the appellant in terms of the payment of higher taxes and water charges to the municipal authority. 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  Sections 3 and 6 of the MOFA indicate that the promoter has an obligation to provide the occupancy certificate to the flat owners. Apart from this, the promoter must make payments of outgoings such as ground rent, municipal taxes, water charges and electricity charges till the time the property is transferred to the flat-owners. Where the promoter fails to pay such charges, the promoter is liable even after the transfer of property. .The society is currently pursuing the execution of the order of the SCDRC arising from that complaint.  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 Section 24A of the Consumer Protection Act 1986 provides two year period of limitation from the date of cause of action arises SC considered that since the cause of action is The failure to obtain the occupancy certificate in spite of Order by SCDRC dated 20 August 2014 and even after filing execution petition, it is continuation of wrong which has resulted in the levy of higher taxes on the members of the society.  Complainant Society adopted the correct course of litigation in demanding for indemnification of extra payments made due to the failure on the part of builder to obtain the occupancy certificate. And homebuyers continue to suffer the injury inflicted by the builder merely due to the delay in the execution of the order against them    The fact that society is currently pursuing the execution of the order of the SCDRC arising from that complaint, that itself does not preclude it from claiming compensation for the consequences which have arisen out of this continuing wrong.  Looking into the peculiar facts and circumstances Supreme Court allowed the appeal filed by the Society on behalf of Home buyers and held that the complaint is maintainable. SC direct the NCDRC to decide the case on and dispose the complaint within a period of three months from the date of this judgment.
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