Samruddhi Co-operative Housing Society Ltd vs Mumbai Mahalaxmi Construction Pvt. Ltd
Samruddhi Co-operative Housing Society Ltd vs Mumbai Mahalaxmi Construction Pvt. Ltd
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No 4000 of 2019
Samruddhi Co-operative Housing Society Ltd. … Appellant
Versus
Mumbai Mahalaxmi Construction Pvt. Ltd. …Respondent
2
J U D G M E N T
Dr Dhananjaya Y Chandrachud, J
A Factual Background .................................................................................3
B Submissions of Counsel..........................................................................6
C Analysis.....................................................................................................9
D Conclusion ..............................................................................................17
PART A
3
A Factual Background
1 The appeal arises from a judgment and order of the National Consumer
Disputes Redressal Commission1 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
. 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.
1 “NCDRC” 2 “MOFA”
PART A
4
3 On 8 July 1998, the appellant instituted a consumer complaint before the
State Consumer Disputes Redressal Commission Mumbai3 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 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 nonissuance 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
3 “SCDRC” 4 CC No. 1329 of 2016
PART A
5
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
prescribed period of limitation under Section 24A of the Consumer Protection Act
1986.
6 By the impugned order, the NCDRC held that the complaint was barred by
limitation as:
(i) The members of the appellant booked the flats in 1993 and obtained
possession in 1997, which they have continued to enjoy since then. The
possession was obtained against the law as no occupancy certificate had
been provided by the respondent-builder;
(ii) The cause of action arose at the time when the appellant made efforts to
obtain individual water and electricity connections and the municipal
authorities ordered the members to pay higher charges. The complaint
should have been filed within two years of the accrual of the cause of
action;
(iii) Since the cause of action arose on the date when the municipal authorities
demanded payment of higher taxes and charges, the period of limitation
also commenced from this date and cannot be extended by the
communication between parties;
(iv) With respect to the claim that there was a continuing cause of action due
to non-availability of the occupancy certificate, no relief was sought by the
appellant in their complaint regarding the obtaining of an occupancy
PART B
6
certificate. The only relief which was sought is a refund of Rs. 2.60 crores
for payment of higher taxes.
7 On the merits of the dispute, the NCDRC observed that the complaint was
filed for refund of the excess amount paid by the appellant to the authorities. In
essence, the complaint was filed for recovery of this excess amount from the
respondent. The NCDRC held that the respondent was not the service provider of
the services for which the property tax or water charges were levied. Since these
services were provided by the municipal authorities, the NCDRC held that the
appellant would not fall under the definition of ‘consumer’ under Section 2(1)(d) of
the Consumer Protection Act 1986. Thus, the NCDRC dismissed the complaint
as being barred by limitation and as being not maintainable under the Consumer
Protection Act 1986.
B Submissions of Counsel
8 Mr Sunil Fernandes, counsel for the appellant, urged the following
submissions:
(i) There is a continuing cause of action in the present case as the
respondent has failed to provide the occupancy certificate;
(ii) Due to the failure of the respondent to obtain the occupancy certificate, the
members of the appellant have had to pay a 25% higher amount on
account of the property tax and an additional 50% towards the water
charges;
PART B
7
(iii) Under Section 6 of the MOFA, it is the duty of the builder to provide the
occupancy certificate to the society, which the respondent has failed to
fulfil;
(iv) Prior to the order of the SCDRC, the respondent offered to pay an amount
of Rs. 1 crore as a one-time settlement amount towards payment of the
extra charges or penalty incurred by the appellant for the increased
property tax and water charges;
(v) The offer of a one-time settlement had no relation to the complaint pending
before the SCDRC as the relief claimed before the SCDRC was for the
grant of an occupancy certificate and payment of penalty to the appellant
for excess charges and deficiencies;
(vi) When the residents started residing in the society’s premises, they had to
incur increased amount towards the property tax and water charges.
These charges were levied on an annual basis and continue to be raised
due to the failure of the respondent to obtain an occupancy certificate;
(vii) The conduct of the respondent has been improper. The respondent has
not obtained the occupancy certificate even twenty four years after giving
possession and has not complied with the order of the SCDRC dated 20
August 2014. Due to the failure of the respondent to comply with the order
of the SCDRC, non-bailable warrants have been issued against the
respondent; and
(viii) Under the MOFA and the agreement to sell with the members of the
appellant, the respondent has an obligation to obtain the occupancy
certificate. Due to the deficiency in service, the members of the appellant
PART B
8
have had to make excess payment. Thus, the appellant is a consumer
under the Consumer Protection Act 1986.
9 Opposing these submissions, Mr Atul Babasaheb Dakh, appearing on
behalf of the respondent submitted that:
(i) When the construction of the project was completed in 1997, the
respondent applied for an occupancy certificate. However, the respondent
did not offer possession to the flat-purchasers;
(ii) The members of the appellant society took possession of their flats to
refurbish the interiors and to make suitable arrangements till the
occupancy certificate was issued. Instead, they started occupying the
premises and made arrangements for water and electricity by paying
additional charges;
(iii) The members of the appellant made unauthorized constructions due to
which there was a delay in obtaining the occupancy certificate;
(iv) The proposal for one-time settlement in 2014 did not pertain to the
additional property tax and water charges;
(v) In the consumer complaint filed by the appellant in 1998, the appellant had
raised the issue of excessive water charges and the SCDRC had directed
payment of Rs. 1,00,000/- to them. On 2 May 2016, the appellant society
received an amount of Rs. 11,55,885/- in the proceedings for execution of
the order dated 20 August 2014 of the SCDRC;
PART C
9
(vi) The complaint is barred by limitation as the cause of action arose in 1997
and the complaint was filed 18 years later;
(vii) The appellant’s failure to incorporate their present grievances in the prior
complaint before the SCDRC indicates relinquishment of their grievances;
(viii) Under Section 6 of the MOFA, the builder is entitled to pay all outgoing
charges till the grant of possession. The members of the appellant
received possession in 1997 and there is no claim for an amount due till
1997;
(ix) Section 12 of the MOFA provides that it is the liability of the flat purchasers
to pay municipal taxes and water and electricity charges;
(x) The respondent is not a service provider of water supply and has not
received any payment for water and property tax. Thus, the appellant is not
a consumer under the Consumer Protection Act 1986 and the complaint is
not maintainable; and
(xi) There is no privity of contract between the parties for payment of extra
charges in the absence of an occupancy certificate.
C Analysis
10 The crux of the appeal revolves around the maintainability of the complaint
and whether it is barred by limitation. 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
PART C
10
continued paying higher charges as the respondent failed to provide the
occupancy certificate.
11 Section 24A of the Consumer Protection Act 1986 provides for the period
of limitation period for lodging a complaint. A complaint to a consumer forum has
to be filed within two years of the date on which the cause of action has arisen. In
the instant case, the appellant has submitted that since the cause of action is
founded on a continuing wrong, the complaint is within limitation.
12 Section 22 of the Limitation Act 19635 provides for the computation of
limitation in the case of a continuing breach of contract or tort. It provides that in
case of a continuing breach of contract, a fresh period of limitation begins to run
at every moment of time during which the breach continues. This Court in
Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj
Sansthan6 elaborated on when a continuous cause of action arises. Speaking for
the three-judge Bench, Justice PB Gajendragadkar (as the learned Chief Justice
then was) observed that
“31. […] Does the conduct of the trustees amount to a
continuing wrong under Section 23? That is the question
which this contention raises for our decision. In other words,
did the cause of action arise de die in diem as claimed by the
appellants? In dealing with this argument it is necessary to
bear in mind that Section 23 refers not to a continuing right
but to a continuing wrong. It is the very essence of a
continuing wrong that it is an act which creates a
continuing source of injury and renders the doer of the
act responsible and liable for the continuance of the said
injury. If the wrongful act causes an injury which is
complete, there is no continuing wrong even though the
damage resulting from the act may continue. If, however,
a wrongful act is of such a character that the injury
caused by it itself continues, then the act constitutes a
5 “22. Continuing breaches and torts.—In the case of a continuing breach of contract or in the case of a
continuing tort, a fresh period of limitation begins to run at every moment of the time during which the breach or
the tort, as the case may be, continues.”
6 AIR 1959 SC 798
PART C
11
continuing wrong. In this connection it is necessary to
draw a distinction between the injury caused by the
wrongful act and what may be described as the effect of
the said injury. It is only in regard to acts which can be
properly characterised as continuing wrongs that Section
23 can be invoked.”
(emphasis supplied)
The Court held that the act of the trustees to deny the rights of Guravs as
hereditary worshippers and dispossessing them through a decree of the court
was not a continuing wrong. Although the continued dispossession caused
damage to the appellants, the injury to their rights was complete when they were
evicted.
13 In CWT v. Suresh Seth7
, a two-judge Bench of this Court dealt with the
question of whether a default in filing a return under the Wealth Tax Act
amounted to a continuing wrong. Justice ES Venkataramiah (as the learned Chief
Justice then was) observed that:
“11. […] The distinctive nature of a continuing wrong is
that the law that is violated makes the wrongdoer
continuously liable for penalty. A wrong or default which
is complete but whose effect may continue to be felt even
after its completion is, however, not a continuing wrong
or default. It is reasonable to take the view that the court
should not be eager to hold that an act or omission is a
continuing wrong or default unless there are words in the
statute concerned which make out that such was the intention
of the legislature. In the instant case whenever the question
of levying penalty arises what has to be first considered is
whether the assessee has failed without reasonable cause of
file the return as required by law and if it is held that he has
failed to do so then penalty has to be levied in accordance
with the measure provided in the Act. When the default is the
filing of delayed return the penalty may be correlated to the
time-lag between the last day for filing it without penalty and
the day on which it is filed and the quantum of tax or wealth
involved in the case for purposes of determining the quantum
7 (1981) 2 SCC 790
PART C
12
of penalty but the default however is only one which takes
place on the expiry of the last day for filing the return without
penalty and not a continuing one. The default in question
does not, however, give rise to a fresh cause of action every
day. Explaining the expression “a continuing cause of action”
Lord Lindley in Hole v. Chard Union [(1894) 1 Ch D 293 : 63
LJ Ch 469 : 70 LT 52] observed:
“What is a continuing cause of action? Speaking
accurately, there is no such thing; but what is called a
continuing cause of action is a cause of action which
arises from the repetition of acts or omissions of the
same kind as that for which the action was brought.”
(emphasis supplied)
The Court further provided illustrations of continuous wrongs:
“17. The true principle appears to be that where the
wrong complained of is the omission to perform a positive
duty requiring a person to do a certain act the test to
determine whether such a wrong is a continuing one is
whether the duty in question is one which requires him to
continue to do that act. Breach of a covenant to keep the
premises in good repair, breach of a continuing
guarantee, obstruction to a right of way, obstruction to the
right of a person to the unobstructed flow of water, refusal
by a man to maintain his wife and children whom he is
bound to maintain under law and the carrying on of
mining operations or the running of a factory without
complying with the measures intended for the safety and
well-being of workmen may be illustrations of continuing
breaches or wrongs giving rise to civil or criminal liability,
as the case may be, de die in diem.”
14 In M. Siddiq v. Suresh Das8
, a Constitution Bench of this Court (of which
one of us (Justice DY Chandrachud) was a part) examined the precedents with
regards to a continuing wrong. The Court observed that:
“343. The submission of Nirmohi Akhara is based on the
principle of continuing wrong as a defence to a plea of
limitation. In assessing the submission, a distinction must
be made between the source of a legal injury and the
effect of the injury. The source of a legal injury is
founded in a breach of an obligation. A continuing wrong
arises where there is an obligation imposed by law,
8 (2020) 1 SCC 1
PART C
13
agreement or otherwise to continue to act or to desist
from acting in a particular manner. The breach of such an
obligation extends beyond a single completed act or
omission. The breach is of a continuing nature, giving
rise to a legal injury which assumes the nature of a
continuing wrong. For a continuing wrong to arise, there
must in the first place be a wrong which is actionable
because in the absence of a wrong, there can be no
continuing wrong. It is when there is a wrong that a
further line of enquiry of whether there is a continuing
wrong would arise. Without a wrong there cannot be a
continuing wrong. A wrong postulates a breach of an
obligation imposed on an individual, whether positive or
negative, to act or desist from acting in a particular manner.
The obligation on one individual finds a corresponding
reflection of a right which inheres in another. A continuing
wrong postulates a breach of a continuing duty or a breach of
an obligation which is of a continuing nature. […]
Hence, in evaluating whether there is a continuing wrong
within the meaning of Section 23, the mere fact that the effect
of the injury caused has continued, is not sufficient to
constitute it as a continuing wrong. For instance, when the
wrong is complete as a result of the act or omission
which is complained of, no continuing wrong arises even
though the effect or damage that is sustained may enure
in the future. What makes a wrong, a wrong of a
continuing nature is the breach of a duty which has not
ceased but which continues to subsist. The breach of
such a duty creates a continuing wrong and hence a
defence to a plea of limitation.”
(emphasis supplied)
15 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
PART C
14
the agreement to sell between the members of the appellant and the respondent
on the latter.
16 Section 6 of the MOFA make the promoter responsible for payments of
outgoings till the property is transferred. Section 6 reads as follows:
“A promoter shall, while he is in possession and where he
collects from persons who have taken over flats or are to take
over flats sums for the payment of outgoings even thereafter,
pay all outgoings (including ground rent, municipal or other
local taxes, on income taxes, water charges, electricity
charges, revenue assessment, interest on any mortgage or
other encumbrances, if any), until he transfers the property to
the persons taking over the flats, or to the organisation of any
such persons, [where any promoter fails to pay all or any
of the outgoings collected by him from the persons who
have taken over flats or are to take over flats, before
transferring the property to the persons taking over the
flats or to the organisation of any such persons, the
promoter shall continue to be liable, even after the
transfer of the property, to pay such outgoings and penal
charges (if any) to the authority or person to whom they
are payable and to be responsible for any legal
proceedings which may be taken therefor by such
authority or persons.]”
(emphasis supplied)
17 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 .
PART C
15
18 Based on these provisions, 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.
Since 2014 till date, the respondent has failed to provide the occupancy
certificate. Owing to the failure of the respondent to obtain the certificate, 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.
19 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. We
are unable to subscribe to the view of the NCDRC on both counts. Undoubtedly,
the continuing wrong in the present case is the failure to obtain the occupancy
certificate. Against this act of the respondent, the appellant society has taken
appropriate action by filing a complaint before the consumer forum. The appellant
PART C
16
is currently pursuing the execution of the order of the SCDRC arising from that
complaint. However, that itself does not preclude it from claiming compensation
for the consequences which have arisen out of this continuing wrong. The 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.
20 We shall now briefly advert to the finding of the NCDRC on the merits of
the dispute. 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.
21 Section 2(1)(d) of the Consumer Protection Act defines a ‘consumer’ as a
person that avails of any service for a consideration. A ‘deficiency’ is defined
under Section 2(1)(g) as the shortcoming or inadequacy in the quality of service
PART D
17
that is required to be maintained by law. In its decisions in Wing Commander
Arifur Rahman Khan & Others v. DLF Southern Homes Private Limited &
Others9 and Pioneer Urban Land Infrastructure Limited v. Govindan
Raghavan10, this Court has held that the failure to obtain an occupancy
certificate or abide by contractual obligations amounts to a deficiency in service.
In Treaty Construction v. Ruby Tower Cooperative Housing Society Ltd.11,
the Court also considered the question of awarding compensation for not
obtaining the certificate. In that case, the Court declined to award damages as
there was no cogent basis for holding the appellant liable for compensation, and
assessing the quantum of compensation or assessing the loss to the members of
the respondent society.
22 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.
D Conclusion
23 For the above reasons, we allow the appeal against the order of the
NCDRC dated 3 December 2018 and hold that the complaint is maintainable. We
direct the NCDRC to decide the merits of the dispute having regard to the
9 (2020) 16 SCC 512 10 (2019) 5 SCC 725 11 (2019) 8 SCC 157
PART D
18
observations contained in the present judgment and dispose the complaint within
a period of three months from the date of this judgment.
24 Pending applications, if any, shall stand dismissed.
……….….....................................................J.
[Dr Dhananjaya Y Chandrachud]
…..….….....................................................J.
[AS Bopanna]
New Delhi;
January 11, 2022
Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले
Comments
Post a Comment