A win or a loss for a litigant is a win for justice.

A regular practitioner of law in the Hon’ble Bombay High Court is most likely aware that a number of suits filed pertain to disputes arising out of Development Agreements executed between property developers / builders and co-operative housing societies. The disputes can be broadly classified into two categories :

1.    Despite majority members having approved the appointment of a builder and the society having executed a Development Agreement, a group of minority members refuse to vacate their premises thereby stalling the entire process of redevelopment.

2.    A builder having commenced redevelopment commits breach of the Development Agreement by failing to complete the redevelopment or varies the development plans for example by changing the areas for Recreational Ground, alters the allotment of parking to the existing members or continues to develop the balance areas on the plot without obtaining the informed consent of the existing flat purchasers or housing society.

Recently, I had the opportunity to represent two separate housing societies in each of the above mentioned category of disputes. Both disputes were heard by His Lordship the Hon’ble Justice N.J. Jamadar. To cut a long story short, a housing society in the first category of dispute succeeded and failed in the second category of dispute. In orders issued in both cases, the learned judge has for sound and valid reasons applying the relevant laws explained the rationale for  grant of relief to one society and of refusal of relief to another society.

A. In the first category of dispute, I appeared as Counsel for Shree Trimurti Co-operative Housing Society Limited located at 17th Road Khar (West) Mumbai. The broad facts are as follows:

On 18 October 2015, in the presence of the authorized Officer appointed by the Deputy Registrar, Co-op. Societies, a Special General Body Meeting of the Society was held. 13 out of 16 members of the society attended the said meeting. Offers of four shortlisted developers were considered. The society, inter alia, resolved to appoint Evershine Builders Pvt. Ltd. for redevelopment of the society premises. Due to change in MCGM rules and post negotiations, eventually, a Development Agreement came to be executed between the Evershine Builders and the Society on 6 February 2018. In the meanwhile, 6 members opposed the appointment of Evershine Builders and alleged that the terms of the Development Agreement were to the detriment of the members.

Due to the refusal of the minority members to vacate their premises, Evershine Builders filed a suit in the Hon’ble Bombay Court (Interim Application No.3375 Of 2021 In Suit No.81 Of 2021) for a declaration that the minority members are bound by the Development Agreement and they have no right to oppose the redevelopment and/or refuse to vacate their respective individual flats and a mandatory order directing them to forthwith vacate their respective flats, and handover the quiet, vacant and peaceful possession thereof. By way of interim relief, Evershine Builders prayed for the appointment of the Court Receiver to take possession and custody of the Society’s property, including the flats in the possession of the minority members, and handover the same to Evershine Builders.

The minority members not only opposed the grant of interim relief to Evershine Builders but counter sued and filed a suit seeking declarations that the Development Agreement dated 6 February 2018 is void, bad in law and without any authority and the same be declared null, unenforceable and is not binding upon the minority members and sought cancellation of the Development Agreement.

After several rounds of hearings, the Learned Judge by an Order dated 20 October 2023 granted relief to Evershine Builders. In the Order, the Learned Judge upheld my submission that the Society has taken the decisions in adherence to the principle of co-operative democracy. The Learned Judge also upheld my submission that any deviation from the directives issued by the State Government under Section 79A of the Act, even if assumed to have taken place, does not vitiate the said decisions. The decisions cited by me of the Hon’ble Bombay High Court in the cases of M/s. Maya Developers V/s. Neelam R. Thakkar & Ors (2016 SCC Online 6947) , Harsha Co-op. Hsg. Soc. Ltd. & Ors. V/s. Kishandas S. Rajpal and Ors.( WP No.10285 of 2009), and Kamgar Seva Sadan Co-op. Hsg. Soc. Ltd. V/s. Divisional Joint Registrar, Co-op. Housing Soc. And Ors.( 2018(6) Mh.L.J. 769) found favor with the Learned Judge. The Order directs the minority members to hand over possession of their premises to Evershine Builders failing which the Court Receiver, High Court Bombay would stand appointed with power to forcibly evict them.

B.   In the second category of dispute, I appeared as Counsel for Mithila Apartment Co-operative Housing Society Limited located at City Survey No. 369- B (Part) of village Malad, Taluka Borivali, Mumbai. The broad facts are as follows:

Nahachal Laloochand Pvt. Ltd., (Nahalchand) had floated a scheme of construction of buildings for residential purposes on a parcel of non-agricultural land being Survey No.63, City Survey No. 369- B (Part) of village Malad, Taluka Borivali, Mumbai, admeasuring about 7365.90 Sq.mtrs ("the suit land"). Nahalchand constructed the building (Mithila) and the occupation certificate was granted on 19th June, 1986. Nahalchand had executed agreements for sale in favour of the flat purchasers in accordance with the provisions of the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 ("MOFA, 1963"). In the year 1987 the flat purchasers of Mithila building formed themselves into for Mithila Apartment Co-operative Housing Society Limited.

Under the terms of the agreement for sale Nahalchand was obligated to convey the title of the suit land to Mithila after the Society was formed. Nahalchand did not discharge its statutory obligation under the provisions of MOFA, 1963 to convey title. Instead of conveying the title of the suit land in favour of Mithila Society, Nahalchand went on constructing additional buildings over the suit land in breach of the obligations under the MOFA, 1963. In the process, the Nahalchand constructed three more buildings namely Koshal, Avanti and Takshashila. A L.C. Suit No. 11 of 2021 was filed before the City Civil Court, Borivali Division in which several interim applications were filed for grant of injunctive relief against Nahalchand and MCGM. These interim applications were rejected by an Order dated 16 March 2023. Consequently, an Appeal From Order No. 447 of 2023 was filed before the Hon’ble Bombay High Court.

In the suit, it is the claim of Mithila Society that Nahalchand unlawfully and unjustifiably availed the FSI, fungible FSI and TDR pertaining to the suit land, which vested in Mithila Society.

The pivotal question that arose for adjudication is whether the further construction and development by Nahalchand post, the construction of Mithila is in consonance with the agreement of sale between Nahalchand and flat purchasers of Mithila, and in conformity with the provisions of MOFA, 1963.

By an order dated 6 October 2023, His Lordship the Hon’ble Justice N.J. Jamadar rejected the application of Mithila Society. The Learned Judge agreed with the approach of the Learned Trial Judge i.e., to reject the application of Mithila Society on the sole ground of long and inordinate delay. The Learned Judge held that where a party chooses not to prosecute its rights for over 30 years and substantial development has been carried out by the other party with resultant third-party rights, the balance of convenience tilts in favour of the party which carries out the development. In the event of injunction as prayed for by the plaintiffs, even limited to restraining Nahalchand from creating third-party rights and/or dealing with or disposing of the units in the building AA-Takshashila which has been granted occupation certificate, by the planning authority, it would surely cause irreparable loss to Nahalchand.  The Learned Judge relied upon a Division Bench Judgement of this Hon’ble Court in the case of Ferani Hotels Private Limited and Others Vs. Nusli Neville Wadia and Others (2013 (3) Bom.C.R.669) more particularly the observations in paragraph Nos. 32 and 33.

The substantial issues raised by me at the hearing were rejected on the ground that they can only be decided at the stage of trial. These issues were :

(i)            The consent for further development by the promoter ought to be an “informed consent” of the flat purchasers. A promoter cannot be permitted to reap the benefits, which accrue upon the additional FSI/fungible FSI etc. being granted, subsequently, as the title to the land on which the building stands statutorily vests in the organization of the flat purchasers.

(ii)         This Hon'ble Court in the case of Malad Kokil Co-operative Housing Society Ltd and Others Vs. Modern Construction Co. Ltd and Others (2013 (2) Bom. C.R. 414) after adverting to the provisions contained in Section 4 of MOFA, 1963 and Clause 4 of Form-V, as it then stood, held that after the registration of the Society, the residual FSI would have been available to the Society in respect of land on which the building was constructed.