One of the biggest achievements for an individual in life is to own a house. It is not just a personal space owned by the individual but is a crucial investment as well. As such, if there is something that can compromise their investment and create some uncertainty in terms of whether the house bought by the individual is legal or not, it can cause a lot of distress and dissatisfaction to the individual.
One of the things that may compromise the ownership of a property is the failure of the developer in obtaining a ‘No Objection Certificate’ (NOC) from the land-owning authority of the concerned city/state. The question that arises in such a scenario is –
whether a property owner’s occupation certificate be cancelled due to the developer’s failure in obtaining an NOC from the concerned land-owning authority.
What is an Occupancy Certificate?
According to the Real Estate Regulation and Development Act, 2016, an Occupancy Certificate (‘OC’) is a certificate issued by the concerned authority, where the authority permits the occupation of any property as provided under local laws that carries the provisions for civic infrastructures like electricity, sanitation and water.
An OC is the legal document that allows the construction of a building within the meaning of the local law. An OC confirms that the building plan complies with the relevant building laws approved by the competent authorities within 30 days after the application. An OC certifies that the construction of a building has been constructed as per the approved plans and in compliance with the relevant laws of the state.
An OC can be granted by the local civic authorities of the relevant area. In accordance with the provisions of Section 11(4)(b) of the Real Estate (Regulation and Development) Act, 2016 allottees can only occupy the building once the developer receives an OC from the relevant local authority. Applications for connections for water and electricity can only be made once the place is fit for occupancy by people. Thus, allottees can get civic amenities like water and electricity once they receive the OC.
What is the view of the Bombay High Court?
The Division Bench of the Bombay High Court, while addressing the matter of
M/s. Satra Plaza Premises Co-Operative Society Limited vs. Navi Mumbai Municipal Corporation and Ors., held that the addition of a condition in the objection certificate by the Navi Mumbai Municipal Corporation (NMMC) to obtain an NOC from the City and Industrial Development Corporation (CIDCO) was unlawful. In addition, it deemed that this move by the CIDCO did not fall under the ambit of any power granted to them by any laws. It further put an end to the Municipal Commissioner’s order pertaining to the annulment of OC and the revised Commencement Certificate (CC) due to not obtaining of NOC.
Thus, we can infer from this judgement that the OC cannot be cancelled on the basis of failure of obtaining the NOC from land owning authority by the developer. However, there were several instances in Greater Noida in which the OC was cancelled and the bona fide allottees were left with no other option but to approach the court. Further, it was an established principle that the NOC is a prerequisite and thus if the developer has evaded this and there is no other medium of recovery from developer than the land-owning authority can cancel the occupancy certificate of the building.
What is the view of the Supreme Court?
The Supreme Court (SC) in the matter of
Samruddhi Co-Operative Housing Society Ltd. vs. Mumbai Mahalaxmi Construction Pvt. Ltd. has inter alia held that a failure on the part of the builder to give the OC to flat owners is considered to be a deficiency of service under the Consumer Protection Act, 1986.
In the aforementioned case the SC tried to settle down the dispute by giving the status of consumer to the extravagant buyers. Thus, now the buyer can seek remedy under the Consumer Protection Act, 2019 as the apex court considered the non-obtainment of NOC as deficiency of service on the part of the developer/ builder. Thus, the flat buyer can approach the appropriate consumer redressal forum to seek remedy against the developer.
Builder’s Failure to Provide Occupancy Certificate is a Deficiency of Service
The Supreme Court discussed the laws related to persistent causes of action. The apex court referred to the matter of
M. Siddiq vs. Suresh Das, where it had held that when a party has been constantly breaching its contractual or legal obligations, it shall be referred to as ‘continuing wrong’. The Court found that under the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management, and Transfer) Act, 1963 and the contract signed by the Appellant and the Respondent, the Defendant was obligated to obtain the OC from the relevant municipal authorities.
In addition, the Court also emphasized Section 6 of the Maharashtra Ownership Act, under which developers are required to pay taxes related to the charges for property and civic infrastructures until the OC has been obtained. The Court stated that the Respondent had continuously disregarded and neglected their responsibility of obtaining the OC, which constitutes as an enduring offense. It held that the cause of action could, therefore, be said to be ongoing as well. As such, as per the Court, the complaint was not barred by limitations.
The Court thereafter discussed the aspect of whether the appellant could be considered a consumer in accordance with the Consumer Protection Act, 1986. According to the Act, anyone who receives some service in exchange for compensation would be considered a consumer. The Court relied on its older judgments of the case of
Wing Commander Arifur Rahman Khan & Ors. vs. DLF Southern Homes Pvt. Ltd. and the matter of
Pioneer Urban Land Infrastructure Ltd. vs. Govindan Raghavan, where it had held that the builder’s failure in procuring OC or in fulfilling their responsibilities under the relevant contracts could be considered a deficiency in providing service. As such, in the present case, the Court stated that considering the Respondent had failed to obtain the OC and provide it to the Appellant, the act would constitute a failure in providing service. Therefore, as a result of the Respondent’s wrongdoings, the Appellant and members had the right, as consumers, to recover any utility expenses or property taxes paid by them on the Respondent’s behalf.
Conclusion
Considering the various judgments of different courts, it can be deemed that the developer’s failure to obtain an NOC from the land-owning authority could not be considered a failure on the buyer’s part, who purchased the concerned property from such a developer. It would amount to a failure on the developer’s part and, therefore, such a developer would be obligated to compensate for any amount paid by the buyer on the developer’s behalf.
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