Court finds Gram Panchayat competent authority for occupancy certificates within Local Planning Areas but invalidates certificates issued on architects' false completion claims; leaves RERA applicability open for determination
In a landmark judgment delivered on October 6, 2026, the Karnataka High Court dismissed the writ petition filed by Raffles Residency Private Limited challenging the cancellation of occupancy certificates for 33 villas in its project situated within the jurisdiction of Samethanahalli Gram Panchayat, Hosakote Taluk. The Court upheld the cancellation order dated January 10, 2023, after recalling its earlier order of December 11, 2023, which had restored the certificates.
The Court extensively examined the complex statutory framework governing building permissions and occupancy certificates in areas that fall within Gram Panchayat limits but also lie within notified Local Planning Areas under the Karnataka Town and Country Planning Act, 1961 ("KTCP Act"). It was held that while the Planning Authority under the KTCP Act governs the master plan, zoning regulations, and issues commencement certificates for building developments, the power to issue occupancy certificates vests solely with the Gram Panchayat under the Karnataka Gram Swaraj and Panchayat Raj Act, 1993 ("Gram Swaraj Act"). The KTCP Act does not confer the authority to issue occupancy certificates on Planning Authorities.
Significantly, the Court found that the Gram Panchayat in this case had not adopted the Karnataka Panchayat Raj (Zilla Panchayat, Taluk Panchayat and Gram Panchayat Control of Erection of Buildings) Model Bye-laws, 2015, which set out detailed procedures for issuing occupancy certificates. Despite this, the Gram Panchayat possessed incidental statutory powers under Section 64 of the Gram Swaraj Act to regulate building erection and verify completion for occupancy certificate issuance. However, it was emphasized that such powers must be exercised lawfully and with proper verification.
The core factual findings revealed grave irregularities in the issuance of the occupancy certificates between September 2016 and May 2017. The certificates were issued based on incomplete inspections and on architects' completion certificates that did not reflect the actual state of construction. The inspection report preceding issuance was superficial, merely listing villa numbers and extent of construction without any technical scrutiny or verification against sanctioned plans. Moreover, photographs uploaded in the Panchayat's software were generic promotional images, not actual site photographs, indicating a lack of due diligence.
Critically, contemporaneous documents from the petitioner itself, including a letter dated May 12, 2017, to BESCOM, acknowledged that 41 of the villas remained incomplete, contradicting the claim of full completion relied upon for occupancy certificates. Additionally, a substantial construction-linked loan of Rs. 100 crores was sanctioned in March 2018, well after certificates were issued, evidencing ongoing incomplete works. The first sale deed for any villa was executed only in September 2018, and possession was delivered in November 2018, further undermining the assertion of completion by 2017.
The Court held that the petitioner had suppressed these material facts during the earlier writ proceedings, resulting in an order that was obtained by misrepresentation and suppression of material documents. In accordance with settled Supreme Court precedents, such suppression amounted to fraud on the Court and warranted recall of the earlier order restoring the occupancy certificates. The cancellation order was therefore revived and upheld.
The Court clarified that despite cancellation of these occupancy certificates, the question whether the project qualifies as an "ongoing project" under the Real Estate (Regulation and Development) Act, 2016 ("RERA") remains open and must be adjudicated by the Real Estate Regulatory Authority (RERA) in the pending proceedings before it. The High Court refrained from making any conclusive finding on RERA applicability, emphasizing that mere existence or cancellation of occupancy certificates is not determinative.
The judgment also addressed the applications by purchasers of other villas in the same project to be impleaded, recognizing their interest as proper parties since the petitioner relied on the occupancy certificates and the High Court's earlier orders before RERA to challenge the regulatory authority's jurisdiction, potentially prejudicing purchasers' rights.
To prevent future irregularities, the Court issued detailed directions including:
- Joint inspection and verification by Gram Panchayat and Planning Authority before issuing occupancy certificates, with mandatory technical opinion;
- Completion of pending works and clearance of tax dues by the petitioner within stipulated timelines;
- Investigation into the role of officials and architects responsible for the issuance of occupancy certificates without proper verification, with appropriate action to be taken;
- Adoption of the Model Bye-laws by Gram Panchayats to ensure uniform procedure;
- Implementation of Unified Land Management System and Court Case Monitoring System for better oversight and transparency.
This judgment underscores the importance of strict compliance with statutory and procedural requirements in issuing occupancy certificates and the consequences of misrepresentation, particularly in the real estate sector where the interests of purchasers are paramount.
Bottom Line:
Building and planning laws - Occupancy Certificate for project within Gram Panchayat area falling in Local Planning Area - Gram Panchayat is competent authority to issue Occupancy Certificate, Planning Authority is not - However, where Model Bye-laws were not adopted and no proper inspection/verification of completion was undertaken, Occupancy Certificates issued on architect's incorrect completion certificate and misrepresentation are invalid - Order restoring such Occupancy Certificates, obtained by suppression of material facts, liable to be recalled - Cancellation/withdrawal of Occupancy Certificates upheld - Question whether project is an "ongoing project" under RERA left open for determination by RERA.
Statutory provision(s):
Karnataka Gram Swaraj and Panchayat Raj Act, 1993 Section 64, Section 316(2); Karnataka Town and Country Planning Act, 1961 Sections 4-A, 15; Karnataka Panchayat Raj (Zilla Panchayat, Taluk Panchayat and Gram Panchayat Control of Erection of Buildings) Model Bye-laws, 2015 Rules 12 and 13; Real Estate (Regulation and Development) Act, 2016 Section 3
Raffles Residency Private Limited v. State of Karnataka, (Karnataka) : Law Finder Doc Id # 2995542
