SC: Builders Cannot Force Homebuyers to Take Possession Without OC

• Possession without Occupancy Certificate is unlawful, says Supreme Court

• Developers liable to pay compensation for delay

• NCDRC’s powers cannot be restricted by builder-buyer agreements

Supreme Court of India has ruled that a developer cannot compel buyers to take possession of a flat unless a valid Occupancy Certificate (OC) has been obtained. The Court described the OC as a “statutory pre-condition” for lawful possession and said its absence amounts to a clear deficiency in service.

The judgment came in the case of Parsvnath Developers Ltd v. Mohit Khirbat, where the developer challenged compensation orders passed in favour of homebuyers.

What the Court Said?

A bench of Justices BV Nagarathna and R Mahadevan rejected the builder’s attempt to offer possession on an “as is where is” basis without securing the Occupancy Certificate. The Court emphasised that obtaining the OC is mandatory under law and cannot be bypassed through contractual clauses.

The Court further clarified that consumer forums have statutory authority to award “just and reasonable compensation” under the Consumer Protection Act. This power, it said, cannot be curtailed by terms in a flat buyer agreement that are unfavourable to consumers.

Background of the Dispute

The case arose from complaints filed by buyers in the “Parsvnath Exotica” project in Sector 53, Gurgaon. The buyers had signed agreements between 2007 and 2011 and paid almost the full sale consideration.

Under the contract, possession was to be delivered within 36 months, with a six-month grace period. However, the developer failed to hand over possession within the agreed timeline and had not obtained the Occupancy Certificate.

The National Consumer Disputes Redressal Commission (NCDRC) had earlier directed the developer to:

• Complete construction and obtain the Occupancy Certificate

• Hand over possession within a fixed timeframe

• Pay 8% simple interest as compensation until possession

• Bear increased stamp duty costs

• Pay litigation costs of ₹25,000 per case

The developer appealed these directions before the Supreme Court, arguing that compensation beyond the agreement terms was excessive.

Supreme Court Upholds Compensation

Dismissing the appeal, the Court confirmed that delay in completion and failure to secure the Occupancy Certificate clearly constituted deficiency in service.

The bench relied on earlier landmark rulings such as:

• Ghaziabad Development Authority v. Balbir Singh

• Bangalore Development Authority v. Syndicate Bank

• Samruddhi Cooperative Housing Society Ltd v. Mumbai Mahalaxmi Construction Pvt Ltd

The Court reiterated that compensation depends on the nature of loss, delay, and hardship suffered. If possession is eventually delivered, compensation may be lower. However, where refund is ordered, higher compensation may be justified since buyers lose both possession and potential appreciation in property value.

Importantly, the Court noted that compensation may include financial loss as well as mental agony caused by prolonged delays.

Final Directions

The Supreme Court directed the developer to obtain the Occupancy Certificate and hand over possession within six months. Until then, compensation as ordered by the NCDRC must continue without default.

If the Occupancy Certificate cannot be secured for genuine reasons beyond the developer’s control, the builder may approach the NCDRC only to seek limited relief regarding interest for the extended period.

Why This Matters for Homebuyers

This ruling strengthens the rights of flat buyers across India. It clearly establishes that:

• A flat without an Occupancy Certificate is not legally ready for possession.

• Builders cannot hide behind contractual clauses to avoid compensation.

• Consumer forums have wide powers to protect buyers from unfair practices.

For homebuyers, the judgment reinforces a simple but powerful principle: lawful possession begins only after statutory approvals are in place.

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