The Supreme Court in the recent case of Venkataraman Krishnamurthy & Or. v. Lodha Crown Buildmart Pvt. Ltd. has held that a Part Occupancy certificate cannot constitute a proper delivery of possession and is not equivalent to an Occupancy certificate.

BRIEF FACTS:

The appellants intended to purchase an apartment in a building to be constructed by the respondent-company at New Cuffe Parade, Wadala, Mumbai. The parties executed Agreement to Sell dated 29 November 2013 (“Agreement”). The sale consideration was fixed at Rs 7,55,50,956/-. As per the payment schedule, this sale consideration was to be paid in four sets of ‘application money’, and the balance amount, being Rs 5,83,53,615/-, was to be paid on initiation of fit outs. As per the Agreement, possession of the apartment was to be delivered to the appellants for fit outs by 30 June 2016 or, with a grace period of one year, by 30 June 2017.

CONTENTION OF THE PARTIES:

The Appellants alleged that the respondent-company had not delivered possession of the apartment for fit outs by the said date and that they had terminated the Agreement, the appellants approached the National Consumer Disputes Redressal Commission (“NCDRC”). Their prayer was for refund of the amount paid by them with compound interest thereon @ 18% p.a. along with compensation for the harassment, mental agony and torture suffered by them, apart from litigation costs.

The respondent-company, however, asserted that it had received the Occupation Certificate for the appellants’ apartment on 8 June 2017, which was well before the expiry of the grace period, and it had called upon the appellants by e-mail on the very same day to make the balance payment in order to initiate the possession process. However, the same was a part occupancy certificate. The respondent company also claimed that the Appellants were trying to get out of bearing the additional burden of the newly introduced Goods and Service Tax payable by them in relation to the subject transaction.

ISSUES FOR CONSIDERATION:

1. Whether the Appellants have a right to terminate the agreement when there is a clear delay on part of the Respondent in this factual matrix?
2. Whether a Part Occupancy Certificate obtained by the developer constitutes a valid offer of possession?

HELD:

The Part Occupancy Certificate was not equivalent to a full Occupancy Certificate and did not constitute proper delivery of possession. Therefore, the Respondents were in the wrong for claiming that the Appellants had failed to take possession.  It was also held that the NCDRC had overstepped its jurisdiction by not strictly interpreting the Agreement’s terms and introducing its own logic instead of following the Agreement’s provisions. The order was also reprimanded for suggesting that the appellants might continue with the Agreement despite clear delay on part of the Respondent company. The Supreme Court further held that the appellants were fully within their rights to terminate the Agreement as per Clause 11.3, which allowed termination within 90 days after the grace period expired.  The court rejected the company's claim that the appellants were trying to avoid tax liability. Therefore, the court set aside the NCDRC's order while directing the respondent company to refund Rs 2,25,31,148. The refund was directed to be made in 12 equal monthly instalments along with interest to be paid at 12% per annum from the date of receipt.

MHCO COMMENT:

The Supreme Court has been mindful in admonishing the NCDRC for overstepping their authority. This is a progressive step in ensuring that authorities ensure that they pass orders which uphold equity and justice. The court has also upheld the basic tenet of interpretation by reminding the Courts that they cannot rewrite or substitute their own interpretation of commercial terms when there exists an explicit contract in place.

This update was released on 03 Dec 2024.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

Legal Update Team
MANSUKHLAL HIRALAL & COMPANY
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