Real estate developer can't offer flat without completion & valid firefighting clearance certificates: Supreme Court

New Delhi: The Supreme Court has said an offer made by a real estate developer to a home buyer to take possession of a flat without completion and firefighting clearance certificates would not be considered as a valid one. 

It underscored absence of these certificates would amount to deficiency in service under the Consumer Protection Act.

A bench of Justices Vikram Nath and Prasanna Bhalachandra Varale directed Agra Development Authority to pay Rs 15 lakh compensation to Dharmendra Sharma due to its inability to provide certificates for completion and firefighting clearance, when it offered the flat in 2014, and even during the proceedings before the consumer commission.

Dealing with appeals arising out of a direction by the National Consumer Disputes Redressal Commission to refund the flat amount, the bench said the appellant’s key contention regarding the absence of the completion certificate and firefighting clearance certificate merits serious consideration. 

"The appellant consistently raised this issue, asserting that a valid offer of possession cannot be made without these documents," the bench noted.

Section 4(5) of the UP Apartment (Promotion of Construction, Ownership & Maintenance) Act, 2010 and Section 19(10) of the RERA Act, 2016 mandate that a developer must obtain these certificates before offering possession, it said.

"Despite the appellant's repeated requests, ADA failed to produce these certificates, rendering its offer of possession incomplete and legally invalid," the bench said.

The court opined that the appellant has rightly cited relevant precedents to bolster this argument, particularly in Debashis Sinha Vs R N R Enterprise (2023) that possession offered without the requisite completion certificate is illegal, and a purchaser cannot be compelled to take possession in such circumstances.

Absence of these certificates was also found to constitute a deficiency in service, it pointed out.

"In the present case, the ADA's failure to provide the required certificates justifies the appellant’s refusal to take possession. This strengthens the appellant’s claim for additional compensation to compensate for the delay caused by ADA’s breach of its statutory obligations," the bench said.

In the case, the bench found that both parties have exhibited lapses in their respective obligations. 

It pointed out the appellant, despite having paid the tentative price of Rs 56.54 lakh in 2012, failed to remit the additional amount of Rs 3,43,178, as demanded by the ADA, even after being repeatedly reminded. 

Instead, the appellant persistently sought a waiver of the penal interest on the delayed payment, eventually settling the amount only on June 04, 2019, a significant delay that cannot be overlooked and that too without the interest component which had further accrued over a period of about five years, the bench said.

"On the other hand, the ADA, despite making an offer of possession in 2014, did not fulfil its statutory obligations by providing the requisite completion certificate and firefighting clearance certificate, both of which are essential for a valid and lawful offer of possession. The absence of these documents, which were also not furnished before the NCDRC, unquestionably vitiates the offer of possession made by the ADA," the bench said.

In its recent judgment, therefore, apart from the refund of the entire amount deposited by the appellant at the rate of 9% interest per annum from July 11, 2020 till the date of refund, the court directed the ADA to pay an additional amount of Rs 15 lakh to the appellant and also return the non-judicial stamp worth Rs 3,99,100 back to the appellant, within three months.

In the case, the bench said, it refrained from imposing any exemplary costs on either party, recognising that both have contributed to the situation at hand. It also noted that the ADA, being a civic body tasked with serving the public and operating on a non-profit basis, should not be unduly penalised in a manner that could impede its functioning.