Occupancy Certificate Is Statutory Recognition Of Lawful Occupation, Not Mere Procedural Formality: Karnataka REAT

The Karnataka Real Estate Appellate Tribunal has recently held that an Occupancy Certificate (OC) is not a mere procedural formality and its date can be relevant in deciding when a project can be treated as lawfully completed.

“Therefore, the issuance of an occupancy certificate by the competent authority is not a mere procedural formality; rather, it is a statutory recognition that the building is permitted to be occupied in accordance with the applicable local laws and has the requisite civic infrastructure. Consequently, while determining the period of delay and the consequential liability of the promoter, the date and legal effect of the occupancy certificate issued by the competent authority assume significance. This version also leaves room to distinguish between lawful occupation pursuant to the OC,” the tribunal observed.

A Bench comprising Chairperson Justice J.M. Khazi and Judicial Member Santhosh Kumar Shetty N. made the observation while deciding a dispute over Casa Grande Garden City Builders Pvt. Ltd.'s “Casa Grande Lorenza” project in Bengaluru.

The tribunal held that the developer could not rely on an OC issued on January 28, 2022 as evidence of compliant completion before August 5, 2025, as there was no material establishing when violations subsequently noticed in the project had been rectified.

The dispute concerned Flat C-305, which Virupakshappa Irappa Bagewadi had agreed to purchase for ₹67,20,532 under an agreement dated May 7, 2019. Possession was due by October 15, 2020. Bagewadi ultimately paid ₹71,52,237.

The developer obtained the OC from the Bruhat Bengaluru Mahanagara Palike (BBMP) on January 28, 2022. It later issued a termination notice alleging that ₹4,97,164 remained unpaid.

Bagewadi disputed the claim. His brother, acting as his power-of-attorney holder, also approached BBMP, which cancelled the OC on July 1, 2023.

The developer challenged the cancellation before the Karnataka high court. On August 23, 2025, the high court set aside BBMP's order after noting that BBMP had stated in an August 5 affidavit that there were no deviations in the project at that point. It also left Bagewadi free to pursue his grievance before the appropriate forum.

Meanwhile, Karnataka RERA had directed the developer to pay delay interest from October 15, 2020 to January 28, 2022 and hand over possession. Both sides challenged that order before the appellate tribunal.

The tribunal rejected the developer's claim that Bagewadi had defaulted on payments. It relied on receipts showing payment of ₹71,52,237 and a February 2, 2021 email, produced by the developer itself, in which Bagewadi's power-of-attorney holder stated that there was no balance due.

The tribunal then examined the effect of the OC.

It noted that Section 19(10) of the RERA Act requires an allottee to take physical possession within two months of the OC. Section 2(zf) defines an OC as a certificate permitting occupation under local laws and referring to civic infrastructure such as water, sanitation and electricity.

The tribunal found that the developer had acknowledged that certain violations existed and were subsequently corrected. However, the record did not establish when the corrections were made.

“In the absence of any material establishing that the violations had been rectified prior to 05.08.2025, we find no justification to presume that the Occupancy Certificate had become operative or valid prior to that date merely because it had originally been issued on 28.01.2022,” it ruled.

The tribunal therefore recognised the benefit of the OC for determining lawful and compliant possession only from August 5, 2025, rather than retrospectively from January 28, 2022.

It also held that proceedings before other forums do not automatically extend delay interest unless they have a direct and legally sustainable bearing on the promoter's obligation to complete and hand over the unit.

The tribunal noted that Karnataka RERA had granted a nine-month COVID-19 extension followed by another 12-month extension at the developer's request. The final date for completion and possession was July 15, 2022.

It consequently directed the developer to pay delay interest at SBI MCLR plus 2% per annum on ₹71,52,237 from July 16, 2022 to August 5, 2025.

The developer's appeal was dismissed, and Bagewadi's appeal was partly allowed. The developer was directed to pay the interest and execute the registered sale deed and hand over possession within 30 days. In default of payment, the principal amount would carry further interest at the same rate from the date of judgment until realisation.

For Promoter (M/s Casa Grande Garden City Builders Pvt. Ltd.): Advocate Sujatha H.H.

For Allottee (Virupakshappa Irappa Bagewadi): GPA Holder Shashidhar Irappa Bagewadi.

For Karnataka Real Estate Regulatory Authority: Advocate I.S. Devaiah.