Mumbai, Jan 15: Emphasising that homebuyers cannot be left in limbo without an occupation certificate (OC) for years, the Bombay High Court has upheld an arbitral award imposing potential damages of nearly Rs 129 crore on Lotus Logistics and Developers Pvt. Ltd. for failing to secure an OC for a redeveloped housing society in Andheri (West).
While refusing to interfere with the award, the court granted the developer a last, time-bound opportunity to obtain the OC and avoid the massive financial liability.
Dispute over redevelopment
The dispute relates to the redevelopment of Evertop Apartments Co-operative Housing Society on J.P. Road. Under a development agreement executed in 2008, the developer had promised 58 members 52% additional carpet area and completion of the project within 30 months, along with monthly compensation in case of delay.
The society later alleged that the developer not only defaulted on these commitments but also altered sanctioned plans to divert built-up area to the sale component, leaving the members’ building without an OC.
Arbitral award details
By an arbitral award dated August 16, 2024, a sole arbitrator directed the developer to amend plans and procure an OC for ‘A’ wing in accordance with the original sanctioned plan of September 17, 2008.
In the alternative, the developer was directed to regularise the “open to sky ducts” shown in later plans. If neither course was successful, the tribunal ordered the developer to pay damages of Rs 128.98 crore, besides compensation for delay, shortfall in area, unpaid rent and property taxes.
Developer challenges award
The developer challenged this before the High Court, contending that since the society had terminated the development agreement in October 2015, it could not seek specific performance.
Senior advocate Janak Dwarkadas, appearing for the developer, contended that directing procurement of an OC after termination was “patently illegal” and contrary to settled principles of contract law.
Court rejects plea
Justice Sandeep Marne rejected this argument, pointing out that the developer itself had made a statement before the court in 2015 that it would obtain the OC.
“Having driven the society in the direction of specific performance by making a solemn statement before this Court, the developer cannot now turn around and contend otherwise,” the court observed in a detailed 101-page judgment.
Conduct termed deceitful
The court was particularly critical of the developer’s conduct, recording that it had acted in a “blatantly deceitful manner” by modifying plans in 2009 and 2011 to show ‘open to sky ducts’ inside members’ flats, thereby shifting built-up area to the sale building.
This resulted in the society’s building being constructed in violation of the last sanctioned plan and denied an OC. “The members are deprived of their right to lawfully use and occupy their flats,” the judgment noted.
Damages upheld, time extended
Upholding the damages, the court said the Rs 128.98-crore award operated as a deterrent to ensure compliance. “If no consequences are imposed, the developer would conveniently not secure the occupation certificate, as seen for the last 14 years,” it remarked.
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Considering that residents’ primary concern was securing the OC rather than recovering money, the court extended the timelines fixed by the arbitral tribunal, granting the developer up to nine months to obtain regularisation and the OC. It clarified that failure to do so would revive the liability to pay damages with interest at 8% per annum.
The arbitration petition was accordingly dismissed, and the arbitral award largely upheld.
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