The significance of obtaining a Completion Certificate and Fire Safety Clearance Certificate in the context of real estate transactions was clarified in a Supreme Court Judgement delivered by Justice Vikram Nath and Justice Prasanna Bhalachandra Varale on September 06, 2024.

The appellant filed the present Appeals under Section 23 of the Consumer Protection Act, 1986, read with Order XXIV of the Supreme Court Rules, to assail the correctness of the final judgement and order passed by the National Consumer Disputes Redressal Commission, as well as the order dated 30th October, 2023, passed on the Review Application No. 335/2023.

Dharmendra Sharma applied for a Super Deluxe 2 apartment in ADA Heights, Agra, in 2011 and was allotted Flat No. DT-1/1204. He opted to make the full payment of Rs. 56,54,000 and submitted cheques in October 2011. Despite a promise to hand over possession within six months, the construction was not complete by April 2012. In 2014, ADA offered possession but demanded an additional Rs. 3,43,178 for solar system, lease premium, and parking. Sharma inspected the site, found deficiencies, and requested corrections. ADA sent reminders for the balance amount, but Sharma sought a waiver of interest and confirmation of possession. After delays, Sharma made partial payments in 2019, yet ADA failed to provide possession or necessary certificates, prompting Sharma to file a complaint with the NCDRC in 2020, alleging deficiencies and unfair trade practices.

ADA admitted to delays but argued that possession was offered in 2014 and blamed Sharma for delayed payments. ADA also raised objections on the grounds of limitation and pecuniary jurisdiction. NCDRC rejected ADA's objections, ruling that ADA's demands fell within the permissible 10% price increase and that Sharma's payment delays justified denying him interest from the 2014 deposit date, though interest was granted from the complaint filing date in 2020. Sharma's review application was dismissed in 2023, and in the present appeals, Sharma sought interest from the date of deposit, while ADA maintained its arguments regarding limitation and precuniary jurisdiction.

The Supreme Court observed that 'the appellant’s key contention regarding the absence of the completion certificate and firefighting clearance certificate merits serious consideration'. This issue was brought up repeatedly by the appellant, who claims that these documents are necessary for a valid offer of possession. A developer is required to obtain these certificates prior to offering possession under Section 4(5) of the UP Apartment (Promotion of Construction, Ownership & Maintenance) Act, 2010 and Section 19(10) of the RERA Act, 2016. The appellant repeatedly requested these certificates from ADA, but ADA never did, rendering its offer of possession incomplete and legally invalid.

The Court accepted the judgement of Debashis Sinha v. R.N.R. Enterprise, 2020 SCC OnLine NCDRC 429 placed by the appellant, wherein it was held that possession offered without the requisite completion certificate is illegal, and a purchaser cannot be compelled to take possession in such circumstances.

The Court, with reference to the above-mentioned judgement, stated:

"This position is supported by other decisions, including Pioneer Urban Land and Infrastructure Ltd. (supra) and Treaty Construction (supra), where the absence of these certificates was found to constitute a deficiency in service.

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 court found that both parties had lapsed in their obligations. The appellant failed to remit the additional amount demanded by the ADA, despite paying the tentative price in 2012. Instead, they sought a waiver of the penal interest on the delayed payment, settling only on 04.06.2019. The ADA, despite making an offer of possession in 2014, did not fulfil its statutory obligations by providing the completion certificate and firefighting clearance certificate, which are essential for a valid and lawful offer of possession. The absence of these documents, which were not furnished before the NCDRC, invalidates the ADA's offer of possession.

The court ordered ADA to pay an additional amount of Rs. 15,00,000/- to the appellant, in addition to the 9% interest per annum deposited by the appellant from 11.07.2020 to the refund date. The entire amount should be provided within three months of the order. Additionally, the court has ordered the ADA to return a non-judicial stamp worth Rs. 3,99,100/- to the appellant. This compensation is in addition to the NCDRC's award.

The Court refrained from imposing exemplary costs on either party, recognising that "both have contributed to the situation at hand". The Court also noted that 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. The Civil Appeals were disposed of and the appeal filed by the ADA was dismissed as its primary arguments were regarding limitation and pecuniary jurisdiction, which were found to be without any merit.

Case Details: Dharmendra Sharma v. Agra Development Authority, 2024 INSC 667

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