Case at a Glance
Buyers in the ‘City of Dreams’ project in Sector 116, Mohali took possession and registered sale deeds, but the developers never obtained an Occupancy Certificate. The State Commission, Chandigarh found deficiency in service. Deciding a large batch of appeals, the NCDRC held that “Physical occupation and lawful possession are distinct” and that failure to obtain the OC is a deficiency, but reduced the delay interest to 4% a year until the OC is obtained. It upheld a 30% refund of maintenance charges and a 70% cap until compliance, set rules on open parking, and gave buyers the option of a full refund with 9% interest.
Credo Assets Pvt. Ltd. and Singla Builders and Promoters Pvt. Ltd. developed ‘City of Dreams-1’ and ‘City of Dreams-2’ in Sector 116, Mohali, with 1,248 units. In the lead case, a 3 BHK flat was allotted and an agreement signed on 3 July 2018 for ₹37,94,129, with possession promised by 31 December 2020 and on obtaining the OC. A sale deed was registered on 20 August 2021 and possession offered in October 2021, but no OC had been obtained.
On 29 February 2024 the State Commission, UT Chandigarh partly allowed 21 complaints. It ordered the developers to give each buyer an open-surface parking space, rectify seepage and cracks and obtain the OC within three months, failing which 6% interest would run; to refund 30% of maintenance charges and charge only 70% until compliance; and to pay ₹75,000 compensation and ₹35,000 costs per complainant. The developers appealed, arguing that only the OC was pending for administrative reasons and that parking had been provided; buyers sought more, including stretcher-sized lifts and enhanced compensation.
The Key Question Before the Court
Is a developer who hands over flats without obtaining an Occupancy Certificate deficient in service, and what relief should buyers who are already living there receive?
Possession Without an OC Is Not Lawful Possession
Relying on Samruddhi Co-operative Housing Society v. Mumbai Mahalaxmi Construction Pvt. Ltd., (2022) 01 SC CK 0021 and Parsvnath Developers Ltd. v. Mohit Khirbat, (2026) 02 SC CK 1791, the Commission held that the failure to obtain the OC was a deficiency in service. A sale deed or physical handover “cannot, by itself, substitute a statutory certificate required for lawful occupation of the building”, and “possession without an Occupancy Certificate cannot be forced upon the respondents.” But since the buyers were living in the flats, it reduced the 6% interest to 4% simple, by reference to Arifur Rahman Khan v. DLF Southern Homes Pvt. Ltd., (2020) 08 SC CK 0026
On maintenance, the Commission said “Complainants cannot be required to bear the entire maintenance charges as though there were no deficiencies”, but a total exemption would be unjust since they used the common services; the 30% refund and 70% cap were upheld, distinguishing Madhusudan Reddy R. v. VDB Whitefield Development Pvt. Ltd., which involved mere paper possession. The demand for stretcher-sized lifts failed because “A subsequent amendment to building regulations cannot, in the absence of any express provision,” apply retrospectively to a 2018 agreement. On parking, buyers who voluntarily took covered parking in writing were not owed open parking, but where covered parking was separately charged without voluntary substitution, buyers could opt for open parking and a refund.
What the Court Actually Held
- Handing over flats without an Occupancy Certificate is a deficiency in service; the developers must pay 4% simple interest on deposits from the offer of possession until the OC is obtained.
- The 30% refund of maintenance charges and the cap of 70% of maintenance until compliance were upheld.
- Each buyer is entitled to open-surface parking, except where covered parking was voluntarily accepted in writing or given free in substitution; where covered parking was separately charged, the buyer may opt for open parking and a refund with 9% interest.
- Buyers unwilling to continue may seek a full refund with 9% simple interest by written notice within 60 days, payable within 60 days of notice, with 12% on default; stretcher-lift claims failed and no costs were ordered.
Why This Judgment Matters
- Many Indian homebuyers live in projects without an OC; this ruling recognises that as a continuing deficiency with a monetary remedy.
- It sets a practical formula for maintenance charges where the developer has not fully performed.
- The refund option gives buyers a way out years after taking possession.
What Should Advocates Take Away From the Judgment?
For Homebuyers
- A registered sale deed does not cure the absence of an OC; you can still claim relief.
- Keep records of maintenance charges paid; partial refunds may be available.
- If you want to exit, the refund option must be exercised by written notice within 60 days of the order.
For Counsel
- Plead the OC deficiency separately from delay; it can attract interest until the OC is obtained.
- Gather written documents on parking substitution; they decide entitlement.
- Retrospective building rules will not be read into older agreements without an express provision.
Key Takeaways
- No OC is a deficiency in service even after sale deed and possession.
- 4% interest runs until the OC is obtained.
- Maintenance capped at 70% until compliance; 30% refund upheld.
- Buyers may opt for refund with 9% interest within 60 days.
Frequently Asked Questions
What is an Occupancy Certificate and why does it matter?
It is the statutory certificate permitting lawful occupation of a building. The NCDRC held that physical occupation without it is not lawful possession and that failing to obtain it is a deficiency in service.
Why was interest reduced from 6% to 4%?
Because the buyers were already living in their flats, the Commission considered 4% simple interest a reasonable measure until the OC is obtained.
What happened to the ₹75,000 compensation and ₹35,000 costs awarded by the State Commission?
The NCDRC’s operative directions do not expressly address those amounts; the directions summarised here are those set out in the order.
Conclusion
The NCDRC has drawn a firm line between handing over keys and delivering lawful possession. Developers who skip the Occupancy Certificate will pay for every month it remains pending, while buyers who stay are not let off maintenance entirely.
Practical takeaway: Homebuyers in projects without an OC should press a consumer claim for interest until the OC is issued and review maintenance charges; those who want out should act within the refund window.
For more judgments, legal opinions and case analysis, visit courtkutchehry.com