Homebuyer Can't Be Compelled To Accept Possession Without Occupancy Certificate Obtained By Builder : Supreme Court

The Supreme Court on Friday (February 20) reiterated that homebuyers cannot be compelled to accept possession of a property in the absence of an Occupancy Certificate. Such a failure by the developer, the Court held, constitutes a statutory deficiency in service, entitling consumers to receive compensation from the developers.

“Obtaining such certificate is a statutory pre-condition integral to lawful delivery of possession.”, observed a bench of Justices BV Nagarathna and R Mahadevan, while dismissing a real estate developer's appeal who had delayed in obtaining an occupancy certificate and possession of the flat to the Respondents' home buyers.

The Court rejected the developer's attempt to offer possession on an “as is where is” basis without securing the Occupancy Certificate.

Background

The disputes arose out of consumer complaints filed by homebuyers in the “Parsvnath Exotica” project at Sector 53, Gurgaon. The buyers had entered into Flat Buyer Agreements between 2007 and 2011 and paid almost the entire sale consideration.

Under the agreements, possession was to be delivered within 36 months from commencement of construction, with a six-month grace period. However, possession was not handed over within the stipulated or extended time.

The NCDRC, by orders dated July 30, 2018 and November 21, 2019, directed the developer to:

• Complete construction and obtain the Occupancy Certificate.

• Hand over possession within a time-bound schedule.

• Pay compensation by way of simple interest at 8% per annum from specified cut-off dates till actual delivery of possession.

• Bear increased stamp duty arising after the agreed dates.

• Pay litigation costs of Rs 25,000 in each cas  

The developer challenged these directions before the Supreme Court, arguing that the NCDRC had exceeded its jurisdiction by granting compensation beyond what was stipulated in the agreement.

Affirming the NCDRC's findings, the judgment authored by Justice Mahadevan observed that there was a deficiency of service on the part of the developer in timely handing over the possession and ownership of the flats to the Respondents, justifying the grant of compensation under the Consumer Protection Act, despite the contract denying the same.

“The power of the consumer fora to grant just and reasonable compensation for deficiency in service is traceable to the statute and cannot be curtailed by contractual terms which operate to the detriment of the consumer. The award therefore represents a legitimate and permissible exercise of statutory jurisdiction.”, the court observed.

“In the instant case, the delay in completion and handing over of possession is not disputed. Such failure constitutes deficiency in service. The NCDRC has examined the facts, assessed the extent of delay and its impact on the complainants, and determined compensation in the exercise of its powers conferred under the Act.”, the court said, endorsing NCDRC's findings.

Referencing Ghaziabad Development Authority v. Balbir Singh, (2004) 5 SCC 65, the court said that there's no rigid formula for the grant of compensation and depends upon the nature and extent of the loss suffered.

“Where possession is eventually delivered, compensation may ordinarily be lower since the allottee receives the benefit of appreciation; however, where refund alone is directed, compensation may be higher as the allottee is deprived of both possession and escalation in value. Compensation may include pecuniary loss as well as mental agony resulting from deficiency in service.”, the court endorsed Ghaziabad Development Authority v. Balbir Singh decision.

Also, the Court cited Bangalore Development Authority v. Syndicate Bank, (2007) 6 SCC 711, where it was held that “where possession is not delivered within the stipulated or reasonable time without justifiable cause, the allottee is entitled to refund with reasonable interest and in appropriate cases, additional compensation depending upon the facts. Compensation is not uniform and must be moulded in light of the nature of delay, conduct of the authority, and extent of harassment suffered.”

The reference can also be made to the case of Samruddhi Cooperative Housing Society Ltd v. Mumbai Mahalaxmi Construction (P) Ltd, (2022) 4 SCC 103, where it was held that “failure to obtain the requisite Occupancy Certificate constitutes deficiency in service, entitling consumers to seek compensation.”

“The jurisprudence that emerges is clear: compensation under the Act is remedial and protective in character. Detailed mathematical ascertainment of market decline is not a sine qua non; what is required is that the award be just, reasonable and proportionate to the delay, deprivation and hardship established on record.”, the court held.

Accordingly, the appeal was dismissed, and it was ordered:

“The appellant is directed to obtain the requisite Occupancy Certificate and hand over possession to the respondents in C.A. Nos. 5289 of 2022 and 5290 of 2022 within a period of six months from the date of this judgment. Till such time, the appellant shall continue to pay compensation as determined by the NCDRC without any default. In the event the appellant is unable to obtain the Occupancy Certificate within the said period on account of bona fide causes not attributable to it, liberty is granted to approach the NCDRC for appropriate consideration, limited to the issue of interest for the period subsequent to the time stipulated in this judgment.”

Cause Title: PARSVNATH DEVELOPERS LTD. VERSUS MOHIT KHIRBAT

Citation : 2026 LiveLaw (SC) 178

Click here to download judgment

Appearance:

For Appellant(s) : Mr. Jayant Muthraj, Sr. Adv. Mr. Rajesh P., AOR Mr. Deeptanshu Jain, Adv.

For Respondent(s) :Mr. Saurabh Mishra, Sr. Adv. Mr. Parmanand Yadav, Adv. Ms. Divya Jyoti Singh, AOR Ms. Ankita Singh, Adv. Mr. Himanshu Shekhar, AOR Mr. M.l. Lahoty, Adv. Mr. Anchit Sripat, Adv. Mr. Arvind Kumar, Adv. Ms. Siddhi Bohra, Adv.