Sukhsagar Co-Operative Housing ... vs State Of Maharashtra And Ors.
2004 Latest Caselaw 644 Bom

JUDGMENT

D.Y. Chandrachud, J.

1. Rule, returnable forthwith. The Learned A.G.P. appearing on behalf of respondents 1 to 3 waives service. Mr. Sakseria appearing on behalf of the fourth respondent waives service. By consent taken up for hearing and final disposal.

2. The petitioners have challenged in these proceedings under Article 226 of the Constitution, an order dated 3rd November, 2003 passed by the Minister for Co-operation of the Government of Maharashtra in the exercise of his revisional jurisdiction under the Maharashtra Co-operative Societies Act, 1960.

3. The dispute in the present case arises out of a scheme for redevelopment that has been approved by the Maharashtra Housing and Area Development Authority ("MHADA") in pursuance of the provisions of Development Control Regulation 33(7) of the Development Control Regulations for Greater Bombay, 1991. There is a property by the name of Ganjawala Compound, situated at Lamington Road, Mumbai-400 008, comprised of C.S. No. 249 and 1/249, admeasuring approximately 2453.19 sq.mtrs., which was acquired by MHADA under the provisions of Section 93(1) read with Section 41(1) of the Maharashtra Housing and Area Development Act, 1976.

4. The fourth respondent which is a Private Limited Company, submitted a proposal to the Government of Maharashtra for the development of the property and the State Government as well as MHADA permitted the developer to do so with an F.S.L of 2.00. An agreement for sale was entered into between MHADA and the fourth respondent on 18th August, 1994. Among the obligations which were cast upon the fourth respondent, was an obligation in Clause 3(e) of the Agreement to form a Co-operative Housing Society along with a minimum of 70% of the old occupiers of the existing building before the occupation of the reconstructed building on the property. The fourth respondent was required to rehouse all the occupiers and tenants of the existing building in the newly reconstructed building free of cost. The Municipal Corporation issued an I.O.D. on 3rd January 1995, Three buildings, Buildings 'A', 'B' and 'C' were proposed to be developed. Building C comprising of two wings, Wing C-1 and Wing 'C-2' was constructed by the fourth respondent comprising of tenements each admeasuring 200 sq.ft. for rehabilitating existing tenants and occupiers.

5. According to the fourth respondent, under the then existing policy, the fourth respondent had constructed tenements admeasuring 200 sq.ft. in area. Subsequently, the policy is stated to have changed and MHADA required the fourth respondent to provide a minimum area of 225 sq. ft. to each of the occupants and tenants. The fourth respondent in his affidavit in reply state that amended plans providing for a minimum area of 225 sq.ft. to each of the existing tenants and occupants were submitted. The tenants and occupants who were residing in Transit Camps had, in the meantime, been shifted to the newly constructed buildings 'C-1' and 'C-2'. After submitting amended plans, the fourth respondent allegedly requested the tenants occupying Buildings 'C-1' and 'C-2' to allow an alteration of the area of each tenement so as to enhance it to 225 sq.ft. The case of the fourth respondent is that though the occupants of Building 'C-2' co-operated, those in Building 'C-1' refused to do so, with the result that all the tenements in the rehabilitation component have not been enhanced in area to meet the requirement of 225 sq.ft. that has been imposed by MHADA. This, it must be noted is what is stated before the Court by the fourth respondent, and the correctness of these statements does not fall for adjudication in the absence of MHADA, the Municipal Corporation and the aforesaid occupants.

6. The petitioners before the Court represent the occupants of building 'B' comprising of Wing 'B-1 and Wing 'B-2', who have purchased residential premises in those two buildings. There is no dispute about the fact that each of the occupants in Wing 'B-1' and Wing 'B-2' has paid the full consideration to the fourth respondent towards the sale price of the residential premises. On 13th April, 2000, the fourth respondent applied for the grant of an Occupation Certificate in respect of Building 'B' to the Municipal Corporation. By its communication date 15th May, 2000, the Municipal Corporation declined to grant an Occupation Certificate inter alia on the ground that certain conditions stipulated in the I.O.D. have not been fulfilled, the most important among those is condition (L) which is to the following effect:

"(L) That the registered undertaking for forming Registered Co-op. Housing Society will not be submitted before C.C. and the Co-op. Society will not be got registered before Occupation/B.C.C. whichever is earlier."

7. The Municipal Corporation has in the circumstances, declined to grant an Occupation Certificate in respect of Building 'B' to the fourth respondent claiming that the fourth respondent is in breach of the obligation to provide tenements admeasuring 225 sq.ft. in the rehabilitation component of the scheme.

8. An application for the registration of a Co-operative Housing Society of flat owners in Building 'B' comprising therein Wing 'B-1' and Wing 'B-2', was submitted by the petitioners on 20th November, 2002. This was opposed by the fourth respondent who claimed that there were unpaid dues of the flat purchasers. Now, it is common ground that the dues which the fourth respondent claims to be outstanding are not in respect of the sale price payable under the original agreements between the developer and the flat purchasers, but towards other charges such as those on account of the payment of security charges and water charges. A registration certificate was granted to the petitioners by the Deputy Registrar, Co-operative Societies, D-Ward, on 11th February, 2003. Initially the fourth respondent filed an appeal in which the Divisional Joint Registrar passed an ex-parte order staying the order of the Deputy Registrar. That was challenged in revision and the Divisional Joint Registrar was directed to grant the petitioners a hearing in the matter. By an order dated 12th September, 2003, the Divisional Joint Registrar set aside the registration certificate. That order was impugned in revision before the State Government and by the impugned order dated 3rd November, 2003, the Minister for Co-operation rejected the revision application. The petitioners are aggrieved by the order of the revisional authority and have moved this Court under Article 226 of the Constitution.

9. Counsel appearing on behalf of the petitioners has urged that the order passed by the revisional authority is ex-facie contrary to law. The revisional authority, it is submitted, relied upon the ipse dixit of the developer that there were outstanding dues of the flat purchasers without any verification and has proceeded on an unsustainable premise that it is the prerogative of the builder to register a Co-operative Housing Society. Moreover, it was urged that the finding of the revisional authority that since the entire development is being carried out under one composite scheme and since the entire project was not complete, an individual society could not be registered, is incorrect. In calculating the minimum number of members required to submit a proposal for registration, the revisional authority proceeded on the basis that the total number of flats in the scheme as a whole was 172 and then came to the conclusion that at least 60% of the total number of the total number of occupants had not come together to form a Co-operative Society. This, it was urged, was a manifestly incorrect application of law. Since Building 'B' is an independent and self contained building, the total number of occupants of that building must be taken into account for deciding upon the minimum number of occupants. Finally, it is submitted that the revisional authority observed that the Society is not economically viable and sound without any basis or foundation whatsoever. Insofar as the absence of an Occupation Certificate is concerned, it has been urged that the registration of the Co-operative Society under Section 9 of the Maharashtra Co-operative Societies Act, 1960 has nothing to do with an occupation certificate since registration does not ipso facto confer upon the Society a right of occupation until an Occupation Certificate is granted by the Municipal Corporation in accordance with law. Hence, it was urged that the revisional authority was in error in taking this as a ground for rejecting the application for registration. Finally, it was urged that the fourth respondent cannot be heard to object to the registration, particularly since it is the default of the fourth respondent which has contributed to a situation where the Municipal Corporation has declined to grant an occupation certificate.

10. On the other hand, Counsel appearing on behalf of the fourth respondent has urged submissions in support of the order passed by the revisional authority contending that the developer was under an obligation not to submit a proposal for forming a Co-operative Housing Society until the occupation certificate has been received. Counsel appearing on behalf of the fourth respondent urged that unless and until an occupation certificate was granted by the Municipal Corporation, the developer could not form a Co-operative Housing Society and in that event, no Co-operative Society could have been registered at the behest of the petitioners. The A.G.P. appearing on behalf of the State has urged that there are inter se disputes between the petitioners and the fourth respondent and in that view of the matter, the revisional authority was justified in affirming the view of the Divisional Joint Registrar setting aside the certificate of registration.

11. In deciding this matter, it would, at the outset, be necessary to advert to the relevant provisions of the Maharashtra Co-operative Societies Act, 1960. Section 2(16) of the Act defines the expression "housing society" to mean a society, the object of which is to provide its members with open plots for housing, dwelling houses or flats; or if the open plots, the dwelling houses or flats are already acquired, to provide its members common amenities and services. Thus the definition in Section 2(16) comprehends two situations : one where the object of the society is to provide its members with open plots, dwelling houses or flats but these are yet to be realised; and the second where the premises have already been acquired. The first part of the definition brings within the fold of the expression, a society whose object is to provide its members with residential accommodation of the nature specified therein. The society is formed with the object of providing its members dwelling units, an object which will be pursued by the society. By Section 4 of the Act, a society, which has its objects the promotion of the economic interests or general welfare of its members or of the public, in accordance with co-operative principles or a society established with the object of facilitating the operation of any such society, may be registered under the Act. The proviso to Section 4 lays down that no society shall be registered if it is likely to be economically unsound, or the registration of which may have an adverse effect on development of the co-operative movement, or the registration of which may be contrary to the policy, directives which the State Government may issue. Under Section 6, a society to be registered has to consist of at least ten persons or such higher number of persons as the Registrar may determine from time to time. Each of such persons must be qualified to be a member under the Act and must reside in the area of operation of the society. Under Section 9, the Registrar is under a duty to register the society within two months of the receipt of the application if he is satisfied that the proposed society has complied with the provisions of the Act or rules or any other law for the time being in force, or with the policy directives issued by the State Government under Section 4 and that the proposed bye-laws are not contrary to the Act or to the rules. By Sub-section (3), the Registrar is required to communicate his decision where he refuses to register the proposed society together with reasons to the person making the application.

12. In the present case, there can be absolutely no dispute about the position that the society which is sought to be registered meets the definition of a housing society under Section 2(16) of the Act. There can be no gainsaying the fact that the society for which registration has been sought is a society which is formed with the object to provide its members with residential flats. In fact, it is an admitted position that there are 42 flats comprised in Buildings 'B-1' and 'B-2', Counsel appearing on behalf of the petitioners states that 26 flat purchasers joined together in submitting an application for registration of the society on 23rd September 2002. Hence, more than ten persons as mandated in Section 6 have joined together in submitting an application for registration. The revisional authority was of the view that the application for registration was, however, liable to be rejected and it is those reasons that must be considered by the Court. The revisional authority noted that the developer had lodged his objection before the Deputy Registrar and made a statement that he is willing to register the Society provided all the flat purchasers "pay the legal dues of the builder as per the agreement executed between him and the flat purchasers." Having merely recorded this statement, the revisional authority immediately entered the finding that "from this factual aspect, it is very clear that the flat purchasers ... have not paid the legal dues of the ... builder". Ex-facie the entire approach of the revisional authority was misconceived. Now, even before this Court, it is an admitted position that the sale price for the purchase of each one of the residential flats has been paid by the flat purchasers to the developer in Wing 'B-1' and Wing 'B-2'. The dispute between the developer and the flat purchasers was in relation to the payment of incidental charges such as security expenses, water charges and other dues. The fourth respondent may take such steps as are open in law for the recovery of those outstanding dues. However, the revisional authority was manifestly in error in accepting the ipse dixit of the builder. The revisional authority, as indeed all other authorities that exercise functions under the Act, is required to determine whether the conditions for the registration of a Co-operative Society prescribed in the Act have been fulfilled. The revisional authority has trespassed into an area which is extraneous to its jurisdiction. Above all, it is evident that the revisional authority has merely accepted the contention of the developer that the dues payable by the flat purchasers are outstanding. Having said this, the revisional authority then records that it is the prerogative of the builder to register a Co-operative Housing Society. In this connection it would be instructive to advert to the provision of Section 10 of the Maharashtra Ownership Flats Act, 1963. Section 10 provides that as soon as a minimum number of persons required to form a co-operative society have taken flats, the promoter shall within the prescribed period submit an application to the Registrar for registration of the organisation of persons who take the flats inter alia as a Co-operative Society. Under Section 11, the promoter is under an obligation to take all necessary steps to complete his title and convey to the organisation of persons, who take flats, which is registered either as a cooperative society or as a company, his right, title and interest in the land and building to the aforesaid body by executing all required documents in that behalf. The expression 'promoter' in the Act is defined under Section 2(c) to mean a person who constructs or causes to be constructed a block or building of flats or apartments inter alia for the purpose of selling them to a co-operative society. Section 13 provides that any promoter who, without reasonable excuse, fails to comply with or contravenes the provisions inter alia of Sections 10 or 11 shall, on conviction, be punished with imprisonment for a term which may extend to three years or with fine or with both. The revisional authority seems to have regarded it as the prerogative of a builder to register a Co-operative Housing Society. The expression prerogative is clearly misplaced for it is the obligation and, a solemn statutory obligation, of the builder to do so. The Minister converts an obligation of the builder into a right - a right which enables him to exclude a genuine attempt of the flat purchasers to register the society when the builder is in breach of his obligation. This approach does manifest disservice to the provisions of law. Builders' obligations involve duties and liabilities. These cannot be regarded as builders' rights, allowing them to ride rough shod over the legitimate claims and entitlements of the community. Where the promoter is in breach of his obligations, it will be far fetched to contend that a society cannot be registered on the application of the flat purchasers themselves.

13. The revisional authority has thereafter, proceeded to form the view that the entire development was carried out as one composite unit comprising of three buildings for whom common amenities and facilities would have to be provided. This, in my view, is clearly an extraneous consideration insofar as the registration of the petitioner-Society is concerned. It is undoubtedly correct that the scheme which has been sanctioned by MHADA for the redevelopment of the property is under Regulation 33(7) of the Development Control Regulations for Greater Bombay; 1991. Similarly, it may well be that a total 172 flats is envisaged for being constructed as part of the entire project. However, the revisional authority was in error in holding that it would not be possible to get an individual society registered for a building on the specious consideration that there are common facilities which cannot be identified as being allotted to any particular building. The redevelopment scheme postulates two components, the first being the rehabilitation component under which the existing tenants and occupiers are to be rehoused. The second component, the free sale component, namely, Building 'B' comprising of wing 'B-1' and wing 'B-2', is clearly a separate and identifiable building. Hence, it cannot be suggested that the registration of a Co-operative Society for the purchasers of flats in Wing 'B-1' and Wing 'B-2' cannot be allowed and that these flat purchasers must form a part of a Co-operative Society comprising of all flats that form a part of the project as a whole. No such restriction has been placed statutorily by Regulation 33(7) or in Annexure-3 which lays down the guidelines applicable to such a scheme under the Development Control Regulations. In fact, the agreement which was entered into by MHADA with the fourth respondent provides in Clause 3(e) that the fourth respondent is to form a Co-operative Housing Society along with a minimum of 70% of the old occupiers of the existing building before the occupation of the reconstructed building. The flat purchasers of the free sale component cannot compulsorily be required to join in the formation of one Co-operative Society together with all the other components of the scheme. There is nothing in law to prevent such flat purchasers from forming their own Co-operative Society. In the circumstances, the revisional authority was not justified in holding that the proposal for registration is required to be rejected on the ground that 60% of the total number of 172 flats had not joined in submitting the application for registration.

14. The revisional authority has proceeded to observe that the society represented by the petitioners would not be economically viable. Here again, besides a bald statement, there is absolutely no reason or foundation for the aforesaid inference. Why a society comprising of 42 flat purchasers of Building 'B' in Wing 'B-1 and Wing 'B-2' would not be viable has not been spelt out in the order of the revisional authority and there is no justifiable reason for holding that such a society will not be viable or sound. Bald statements do not make good reasons.

15. On behalf of the fourth respondent, it was sought to be urged that the Municipal Corporation has not issued an occupation certificate in respect of Wing 'B-1' and Wing 'B-2' because the tenements which have been provided by the fourth respondent to rehouse the existing occupiers do not admeasure 225 sq.ft. Hence, it was sought to be urged that unless an occupation certificate is received, it is not lawfully open to the members of the petitioner-Society to occupy their flats in violation of the provisions of Section 353-A of the Bombay Municipal Corporation Act, 1888. It was sought to be urged that under Section 9 of the Maharashtra Co-operative Societies Act, 1960, the Registrar is entitled to satisfy himself that a proposed Society has complied with any other law for the time being in force. Moreover, it was sought to be urged that the expression, "who reside in the area of operation of the society" in Section 6 must necessarily mean the requirement of lawful residence and since the members of the society are not entitled to lawfully reside in the flats in dispute, registration could not have been granted. The submission has to be only stated to be rejected. The expression "who reside in the area of operation of the society" indicates that the persons who join in the formation of the Society must reside in that local area wherein the society will operate. The residence which has been adverted to therein does not refer to the proposed residence, in the case of a Co-operative Housing Society, in the flats which would be allotted to the members of the society upon its formation. Similarly, the satisfaction of the Registrar in Section 9 of the Act that a proposed society has complied with the provisions of any other law far the time being in force, obviously refers to a law for the time being in force in relation to the registration of the Society. It is, in my view, no part of the Registrar's function to decide upon whether in respect of the construction carried out by the builder or developer the members of the Society are entitled to an occupation certificate under Municipal Law. The question as to whether the construction is in accordance with building regulations and if so, whether an occupation or completion certificate should be granted, does not lie within the province of the Registrar. These are matters which are to be considered by the Planning Authority, in the present case, by the Bombay Municipal Corporation. The registration of a Society does not carry with it, a recognition as regards the lawfulness of the construction in which members of the Society claim an entitlement to occupy residential premises. The registration of the society does not impinge upon the statutory powers of the Municipal Corporation, to determine whether an occupation certificate should be granted. The Municipal Corporation will decide that issue in accordance with the Building Regulations and Bye-laws. Insofar as the question of registration is concerned, the revisional authority was in error in setting aside the certificate of registration on the ground that the Municipal Corporation has not granted an occupation certificate. Undoubtedly, if any person has occupied a residential flat in violation of the provisions of Section 353-A of the Bombay Municipal Corporation Act, 1888, it would be open to the Competent Authority to take such steps as are necessary in accordance with law to deal with such an infraction. The formation of the society, however, cannot be thwarted on that ground. Indeed, the formation and registration of a Co-operative Society of flat purchasers is essential, for, it is the flat purchasers who are truly interested in ensuring due compliance by the builder of his obligations under the scheme sanctioned under Regulation 33(7). The Municipal Corporation as in the present case, may decline to grant an occupation certificate if the developer has not complied with his obligations under the scheme. However, the formation of a Co-operative Society will in fact, enure to the benefit of those beneficially entitled to rights under the scheme because it would enable the flat purchasers to take recourse to the remedies open in law to ensure due compliance by the developer of his obligations under the scheme. Therefore, as a matter of principle, it is impossible to accept the correctness of the submission that has been urged on behalf of the fourth respondent.

16. In these circumstances, I am of the view that the Divisional Joint Registrar and, in revision, the Minister for Co-operation acted outside the purview of their jurisdiction in setting aside the certificate of registration. The certificate of registration has been set aside for extraneous reasons which cannot pass muster. The petition, therefore, has to be allowed and is accordingly allowed. Rule is made absolute in terms of prayer Clauses (a) and (b) by quashing and setting aside the impugned orders dated 12th September 2003 and 3rd November 2003 and by directing the first, second and third respondents to restore the certificate of registration granted to the petitioners. The fourth respondent shall pay costs of the petitioners quantified at Rs. 5,000/-.

17. Parties be given copies of this order duly authenticated by the Associate/Personal Secretary of this Court.