1. Introduction

The case of Treaty Constructions And Another (S) v. Ruby Tower Co-Op. Hsg. Society Ltd. And Others (S), adjudicated by the National Consumer Disputes Redressal Commission (NCDRC) in New Delhi on March 7, 2018, marks a significant development in consumer protection within the real estate sector. This case centers around the obligations of builders under the Maharashtra Ownership Flats (Regulation of Promotion, Sale, Management, and Transfer) Act, 1964 (MOFA), particularly regarding the acquisition of completion and occupancy certificates before conveying possession to purchasers.

The primary parties involved are Treaty Constructions (Appellants) and Ruby Tower Co-Op. Hsg. Society Ltd. along with its members (Respondents). The core issues revolve around incomplete construction works, non-acquisition of necessary certificates, and the consequent financial obligations of the builder towards the society.

2. Summary of the Judgment

The shareholders of Ruby Tower Co-Op. Hsg. Society Ltd. had purchased flats constructed by Treaty Constructions between 1994 and 2002. Despite completing the construction, the developer failed to obtain the completion and occupancy certificates, leading to disputes over incomplete interior works and financial losses incurred by the society in completing these works independently.

The society sought reimbursement of approximately ₹1 crore spent on residual construction, demanding Treaty Constructions to execute the conveyance deed and obtain the necessary certificates. The State Consumer Disputes Redressal Commission (State Commission) initially ruled in favor of the society, ordering the builder to reimburse ₹26.25 lakhs and execute the conveyance deed within 90 days, failing which penalties would apply.

Treaty Constructions appealed against this decision, arguing that the society's president had unilaterally handled financial transactions, rendering the reimbursement claim baseless. Additionally, the builder contended that the claim exceeded the State Commission's jurisdiction based on MOFA provisions.

The NCDRC, after a detailed examination, modified the State Commission's order. It upheld the requirement for the builder to obtain the occupancy certificate and execute the conveyance deed while adjusting the reimbursement amount to ₹28 lakhs, along with imposing penalties for non-compliance.

3. Analysis

3.1 Precedents Cited

The judgment extensively references prior cases to establish the legal framework governing builder obligations and consumer rights:

• Ambrish Kumar Shukla & Ors. v. Ferrous Infrastructure Pvt. Ltd. (2016): Emphasized the mandatory nature of obtaining occupancy certificates before executing conveyance deeds.
• Vaibhav Development Corporation and Others v. Suryodaya Cooperative Housing Society (2013): Reinforced the necessity of compliance with MOFA provisions and the illegality of contractual clauses contravening statutory mandates.
• Harshad Chiman Lal Modi Vs. DLF Universal and Anr. (AIR 2005 SC 4446): Highlighted the procedural requirement to raise jurisdictional objections at the earliest stages of litigation.

These precedents collectively underline the judiciary's stance on upholding statutory obligations over contractual terms that may infringe upon consumer protections.

3.2 Legal Reasoning

The NCDRC's decision hinged on the interpretation and enforcement of MOFA provisions. Key aspects of the legal reasoning include:

• Obligation to Obtain Certificates: Under Section 3 of MOFA, builders are required to secure completion and occupancy certificates before handing over possession to purchasers. Failure to do so constitutes an unfair trade practice.
• Invalidity of Contravening Contract Clauses: The agreement's Condition No.42, which allowed builders to alter FSI with no repercussions to purchasers, was deemed contradictory to MOFA. Such clauses that undermine statutory provisions are unenforceable.
• Pecuniary Jurisdiction: The NCDRC dismissed the appellants' argument regarding the State Commission's lack of jurisdiction based on MOFA, referencing the Supreme Court's guidance that jurisdictional objections must be raised promptly and are invalid if deferred to the merits stage.
• Liability for Unfulfilled Commitments: Despite the appellants contesting the ₹26.25 lakhs reimbursement claim, their admission of a ₹25 lakhs promise in a 2003 meeting established liability for that amount.

The court balanced the builder's defense against the society's claims by scrutinizing the veracity of financial transactions and the adherence to statutory duties, ultimately holding the builder accountable for non-compliance with MOFA.

3.3 Impact

This judgment has far-reaching implications for the real estate sector and consumer protection mechanisms:

• Strengthening Consumer Rights: Reinforces consumers' rights to legal possession and title of property, ensuring builders comply with statutory obligations.
• Non-Enforceability of Unfair Contractual Terms: Establishes that clauses in agreements which contravene statutory provisions like MOFA are invalid, safeguarding purchasers from exploitative terms.
• Enhanced Accountability of Builders: Imposes financial penalties and mandates timely compliance with legal requirements, incentivizing builders to adhere to regulatory standards.
• Judicial Precedent: Provides a clear stance for future cases involving similar disputes, aiding lower tribunals and commissions in decision-making processes.

Overall, the judgment serves as a deterrent against non-compliance and promotes transparency and fairness in real estate transactions.

4. Complex Concepts Simplified

4.1 Maharashtra Ownership Flats Act (MOFA)

MOFA, enacted in 1964, regulates the promotion, sale, management, and transfer of flats in Maharashtra. It aims to protect the interests of flat purchasers by ensuring transparency and accountability from builders.

4.2 Occupancy Certificate (OC)

An Occupancy Certificate is a regulatory document issued by municipal authorities, certifying that a building is safe for occupation and complies with all building codes and regulations. It is mandatory before granting possession to buyers.

4.3 Completion Certificate (CC)

The Completion Certificate signifies that the construction of the building complies with all the building plans and regulations. It is a prerequisite for securing the Occupancy Certificate.

4.4 Floor Space Index (FSI)

FSI, also known as Floor Area Ratio (FAR), is a measure that determines the maximum allowable floor space that can be built on a given piece of land. It is regulated by municipal authorities to control urban density and infrastructure load.

5. Conclusion

The NCDRC's judgment in Treaty Constructions And Another (S) v. Ruby Tower Co-Op. Hsg. Society Ltd. And Others (S) underscores the paramount importance of statutory compliance in real estate transactions. By mandating builders to obtain necessary certificates before possession, the court fortified consumer protection mechanisms, ensuring that purchasers are not left vulnerable to incomplete or non-compliant constructions.

Additionally, the invalidation of contractual clauses that conflict with MOFA serves as a protective barrier against unfair trade practices. This judgment not only holds builders accountable but also sets a clear precedent for future cases, promoting a more transparent and equitable real estate market.

Ultimately, this decision reinforces the judiciary's role in upholding legislative mandates, safeguarding consumer interests, and fostering trust in the real estate sector.