The National Consumer Disputes Redressal Commission (“NCDRC” / “Commission”) recently held a developer jointly and severally liable for failing to obtain an Occupation Certificate (“OC”) for over eighteen years after handing over possession. In Tirupati Devi Cooperative Housing Society Ltd. v. M/s Raja Construction Company, the Commission awarded Rs. 6 crores in compensation while directing the developer to secure the OC within twelve months.

The dispute arose from a Redevelopment Agreement dated 14 March 2005 between the complainant Society, comprising 33 members occupying 25 flats in an Apartment in Mumbai and the Developer. Possession was handed over from June 2008 onwards but the sanctioned plans, OC, and new water connections were never provided. An RTI application filed in August 2011 revealed that the developer had constructed 32,170 sq. ft. against the sanctioned 21,424 sq. ft., a deviation of approximately 45%. The 12th floor in the B Wing was found to be entirely illegal. Despite a BMC notification dated 6 January 2012, permitting regularisation of up to 35% additional FSI, the developer failed to pay the requisite premium or pursue the OC diligently.

Contractual Obligations and the Developer's Failure

The Commission placed significant weight on the express obligations undertaken by the developer. Clause 11.3 required certified copies of sanctioned plans to be handed over before construction. Clause 11.7 stipulated that any additional TDR/FSI would belong exclusively to the society. Clause 34 cast a specific obligation to obtain the OC and new water connection within 24 months. Clause 38 provided for compensation of Rs. 1 lakh per month in case of delay. The Commission rejected the developer's defence that members had undertaken illegal constructions impeding the OC, observing that the developer had, with open eyes, constructed a far larger area and pocketed revenues from eight free-sale flats. Having handed over possession without the OC, the developer could not take shelter behind post-handover alterations by the members.

Maintainability and Continuing Cause of Action

The Commission overruled preliminary objections on limitation and maintainability. Relying on Samruddhi Cooperative Housing Society Ltd. v. Mumbai Mahalaxmi Construction (P) Ltd., (2022) 4 SCC 103, it held that the failure to hand over legally valid possession after obtaining the OC is a continuing cause of action. The society itself was competent to maintain the complaint, with individual affidavits of 25 members and contemporaneous resolutions already on record.

Quantification of Compensation

While the Commission agreed that the claim of Rs. 71 crores towards loss of area was misconceived and the overall claim of over Rs. 100 crores was excessive, it held that quantification could not limit its power to award fair relief. Applying the principles in Ghaziabad Development Authority v. Balbir Singh and Chief Administrator, HUDA v. Shakuntala Devi, compensation was computed as follows:

Delay compensation at 1.5 times the stipulated rate of Rs. 1 lakh per month, for 218 months from June 2008 to August 2026, amounting to Rs. 3,24,00,000/-.
An additional Rs. 26 lacs for the absence of municipal water connection and additional municipal taxes.
A further Rs. 2,50,00,000/- to account for the constant threat of demolition arising from the absence of the OC.

The total compensation was fixed at Rs. 6 Crores with simple interest at 8% per annum in case of default beyond three months. The developer was also directed to pay litigation costs of Rs. 10 lacs and to obtain the OC within twelve months. Liability was cast jointly and severally on the firm and its partners.

Key Takeaways

The judgment carries important lessons for both developers and housing societies:

For developers, the obligation to obtain the OC is non-delegable and any attempt to monetise construction beyond the sanctioned plan will be viewed seriously, particularly when possession is handed over without the certificate.

For societies, the decision reaffirms that the failure to obtain an OC constitutes a continuing deficiency in service, entitling them to compensation even years after possession. The ruling also signals that consumer forums are willing to step beyond contractual delay compensation where the developer has actively profited from unauthorised construction and exposed the members to the constant threat of demolition.

OC Delay: Society Wins Rs 6 Crore from Builder