Flat Possession Must Include Completion Certificates, Says Supreme Court in Major Consumer Rights Case

The Supreme Court of India has ruled in favor of Dharmendra Sharma, a consumer who filed a complaint against the Agra Development Authority (ADA) for its failure to provide timely possession of a flat and relevant completion and firefighting certificates. The Court affirmed the National Consumer Disputes Redressal Commission (NCDRC)’s decision to refund the full amount paid by the appellant with 9% annual interest, and further awarded an additional ₹15 lakhs in compensation for the ADA's deficiencies. The ADA’s counter-appeal challenging the jurisdiction of the NCDRC and claiming limitation issues was dismissed.

Dharmendra Sharma, the appellant, applied for a flat in ADA’s "ADA Heights Taj Nagari Phase II" housing project in Agra in 2011. The flat, booked through a lottery system, was priced at ₹56.54 lakhs, which Sharma opted to pay in full. Despite ADA’s promise to deliver possession within six months, delays ensued. In February 2014, ADA issued an offer of possession but demanded additional charges, including for a solar system, lease premium, and covered parking, totaling ₹3.43 lakhs.

Sharma, upon visiting the site, found deficiencies in construction and raised concerns, withholding payment of the additional charges. Over the next several years, communication between the parties continued, with ADA issuing reminders and Sharma requesting a completion certificate and firefighting clearance certificate. ADA failed to provide these documents, leading Sharma to file a complaint with the NCDRC in July 2020, claiming deficiency in service and unfair trade practices.

ADA contended that Sharma’s complaint, filed six years after the offer of possession, was barred by limitation under Section 24A of the Consumer Protection Act, 1986, which mandates a two-year filing period. However, the Supreme Court upheld NCDRC’s decision, ruling that ADA’s acceptance of part payments in 2019 extended the limitation period, and thus the complaint was filed in time. ADA’s challenge to NCDRC’s pecuniary jurisdiction was also dismissed, as the total claim amount, including compensation for mental agony and loss of income, exceeded ₹1 crore.

A significant issue was ADA’s failure to produce the completion and firefighting certificates, which the appellant had repeatedly requested. The Court emphasized that under the Real Estate (Regulation and Development) Act, 2016 (RERA) and the Uttar Pradesh (Promotion of Construction, Ownership, and Maintenance) Act, 2010, possession can only be offered after obtaining these certificates. The absence of such documents rendered ADA’s offer of possession legally invalid.

The Court referred to its own precedents, stating, "Possession without completion and firefighting clearance certificates is illegal," affirming the appellant’s right to withhold acceptance until these certificates were provided.

While the Court acknowledged the appellant’s right to demand these certificates, it also noted that Sharma delayed payment of the additional ₹3.43 lakhs for five years (from 2014 to 2019), contributing to the delay in possession. The delay was attributed to Sharma’s repeated requests for waiver of interest on the balance payment, which the Court deemed understandable but contributory to the overall delay.

The Court balanced the obligations of both parties, stating that while ADA’s failure to provide the certificates was a major deficiency, Sharma’s delay in making payments could not be overlooked. The Court thus awarded compensation in recognition of ADA's lapses but also limited interest on the refund to the period from the filing of the complaint (July 2020) rather than from the original deposit in 2011.

Justice Vikram Nath, in his judgment, stated, “The absence of completion and firefighting certificates unquestionably vitiates the offer of possession made by the ADA. A valid offer of possession is contingent upon the provision of these statutory documents."

The Supreme Court’s decision in this case reinforces consumer rights under the RERA Act and related laws. By holding the ADA accountable for failing to meet statutory requirements before offering possession, the Court has emphasized the importance of transparency and compliance in real estate transactions. The award of ₹15 lakhs in compensation along with interest on the refund underscores the judiciary's firm stance against deficient services in the housing sector. ADA’s appeal challenging NCDRC’s jurisdiction and the timeliness of the complaint was dismissed, affirming the lower forum’s findings.

Date of Decision: September 6, 2024​.

Dharmendra Sharma v. Agra Development Authority