Madhuvihar Co-Op Hsg. Socl. And ... vs Jayantilal Investments, The ...
2006 Latest Caselaw 249 Bom

JUDGMENT

K.J. Rohee, J.

Page 0998

1. The judgment and decree dated 31st March, 2004, in L.C. Suit No. 4385/1997, passed by the Judge, City Civil Court, Greater Bombay gave rise to these two appeals. First Appeal No. 786/2004 has been preferred by the original plaintiffs, whereas first appeal No. 989 of 2004 has been preferred by original defendant No. 1.

2. The facts which are not in dispute for the purposes of the appeals can be stated thus: . Plaintiff No. 1 Madhu Vihar Co-operative Housing Society Ltd. (hereinafter referred to as the "Society") is registered on 20/1/1993 under Maharashtra Co-operative Societies Act, 1960. Plaintiff No. 2 to 6 (hereinafter referred to as the "flat purchasers") are some of the members of the said Society. Defendant No. 1 M/s Jayantilal Investment (hereinafter referred to as the "Promoter") is a partnership firm carrying on the business as builder/developer. Defendant No. 2 is the Municipal Corporation of Greater Bombay and is an authority under The Maharashtra Regional and Town Planning Act, 1966; The Urban Land (Ceiling and Regulation) Act, 1976 and The Development Control Regulations for Greater Mumbai, 1991 Defendant No. 3 is serving as Executive Engineer with defendant No. 2.

3. The land bearing CTS No. 1068/1 admeasuing 6071.00 sq. meters situated at Kandivali (West), Mumbai-400 067 is owned by Joseph Francis Mendes and Mrs. Juliet Wd/o Paul Cyprian Mendes. The promoter obtained the said land for construction and development. The said land was permitted to be developed under section 21 of the Urban land (Ceiling and Regulation) Act, 1976. On 21/10/1985 a plan for development of the said land was approved by the authority to commence the construction of the scheme known as "Madhu Virar". Some persons including plaintiff Nos. 2 to 6 entered into agreements with the promoter to purchase flats from the scheme. During construction revised plans were submitted by the promoter and were approved Page 0999 by the concerned authority. Accordingly 126 flats and 12 shops were constructed. On 12/4/1989, defendant No. 3 issued occupation certificate. The promoter delivered possession of the flats/shops to the purchasers.

4. In 1992 the promoter submitted another plan to the competent authority and the same was approved. The promoter started construction but subsequently, abandoned it.

5. According to the society, even after completion of the construction of the flats, the promoter did not take steps for forming co-operative society of the flat purchasers and in fact opposed the move of the flat purchasers for formation and registration of cooperative society. Ultimately, the society succeeded in registering itself on 20/1/1993. An appeal preferred by the promoter against registration was dismissed by an order dated 23/12/1995. Despite completion of the scheme and registration of the society, the promoter did not convey the title of the land and flats and shops thereon by executing sale deed in favour of the society. According to the Society its members had purchased the flats relying on the assurance given by the promoter in the brochure published by him assuring containing common amenities such as recreation ground, garden and open space. The promoter was bound to convey the suit property to the society. However, the promoter neglected to do so. The promoter is a mere trustee of the members of the society and has no right, title or interest in the suit property. As such he is not entitled to carry out further construction on the suit property by taking advantage of additional FSI/TDR. The promoter holds the suit property for and on behalf of the society and its members who are the beneficiaries. The promoter is trying to undertake further construction on the suit property and for that purpose he submitted latest plan to the competent authority, which was approved on 29/3/2001. The promoter is trying to take advantage of his own wrong by making additional construction on the suit property and with a view to get illegal monetary gain. The society, therefore, instituted the suit claiming following reliefs:

(a) Declaration that the promoter is holding the suit property for and on behalf of and for the benefit of the society and its members and is bound to convey or cause to convey title to them in accordance with Maharashtra Ownership of Flats Act, 1963 (hereinafter referred to as " MOFA" for brevity);

(b) Mandatary injunction directing the promoter to convey or cause to convey title of the suit property to the society under MOFA;

(b1) Declaration that the promoter is not entitled to carry on further construction on the suit property as per plan sanctioned on 29/3/2001 or otherwise;

(c) Permanent injunction restraining the promoter from making any construction on the suit property and interfering in any manner with enjoyment and possession thereon by the society and its members.

(d) Direction to the promoter to render accounts of the money received from the purchasers of the flats/shops held in trust by him;

(e) Permanent injunction restraining the promoter from alienating/incumbering/creating third party rights into the suit property;

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(f) Direction to the promoter to remove all the building materials/articles from the suit property;

(f1) Declaration that the sanction dated 29/3/2001 by the Corporation for further construction on the suit property is bad in law and null and void;

(g) Direction to the competent authority to revoke the sanction dated 29/3/2001;

(h) Permanent injunction restraining the promoter to carry out any work of development on the suit property.

6. The promoter resisted the suit by filing written statement as well as additional written statements. The promoter submitted that some flat purchasers have not paid full consideration of the flats purchased by them. They have also not paid other dues for registration of the society and for maintenance. Hence, it is not possible for the promoter to finalise the accounts. The promoter repeatedly informed the members of the proposed society for outstanding amount due to them, but they did not pay the same. The members of the society without fulfilling their obligations under the agreement for sale and without consent of the promoter got society registered behind his back. There were disputes amongst the members of the society about formation of society.

7. The promoter further submitted that the development of the entire property is not complete and in the absence of completion of the development of the entire property the promoter is not in a position to execute the conveyance at this stage. The promoter submitted that he is aware of his obligations under MOFA and he would do the needful on completion of the development of the entire property.

8. The promoter further submitted that the area of recreation ground and open space in the amended plan is in conformity with the rules and regulations. There has been no reduction in the recreation ground and in fact the amenities by way of garden and open spaces for recreation have increased rather than reduction therein. The promoter submitted that the construction of the new building is a part of the development of the original lay out and the promoter is entitled to undertake additional construction under section 7A of MOFA. The plan sanctioned by the Corporation is strictly as per the Acts and Rules applicable. The promoter has provided 20% garden and recreation spaces, as required under the rules. The approval of the plan is perfectly legal. The promoter submitted that he has every right to develop the suit property by utilising balance/further FSI/TDR.

The promoter further submitted that he is liable to convey the suit property to the society after completion of entire development of the property and receipt of full consideration and other amounts receivable under the agreements from the flat/shop purchasers. The flat purchasers have defaulted the payment of the outgoings. The promoter denied that he is merely a trustee of the members of the society and that he has no right, title or interest in or upon the suit property. The promoter denied that he is Page 1001 not entitled to carry out further construction on the suit property by utilising FSI/TDR. The promoter submitted that the society is not entitled for any relief.

10. The promoter further submitted that the suit is barred by limitation and is liable to be dismissed on that ground alone.

11. The promoter lastly submitted that the suit is liable to be dismissed for want of statutory notice under section 527 of the Bombay Municipal Corporation Act, 1888.

12. The defendant Nos. 2 and 3 have not filed written statements.

13. On the above pleadings of the parties the learned trial Judge framed the necessary issues. The parties led oral as well as documentary evidence in support of their respective contentions. Upon considering the evidence led by the parties, the learned trial Judge held that the promoter is bound to convey and transfer the suit property under MOFA but granted 3 years time for the said purpose from the date of judgment. The learned trial Judge found that the promoter is entitled to recover amount from the society and its members and directed that the Commissioner be appointed for taking accounts under Order 20 Rule 16 of Civil Procedure Code. The learned Judge held that the society failed to prove that the promoter is not entitled to proceed with further construction on the suit property, as per the plan approved on 29/3/2001. The learned trial Judge held that the suit is not barred by limitation. The learned trial Judge held that the suit is tenable though no notice under section 427 of the B.M.C. Act was served on the Corporation. Thus the learned trial Judge partly decreed the suit in favour of the society. As stated earlier both the Society as well as the Promoter have challenged the said judgment and decree.

14. I have heard Shri Mahendra Ghelani, Advocate for the Society; Shri V.A. Thorat, Senior Counsel for the Promoter and Shri J.J. Xavier, Advocate for the Corporation at considerable length.

15. Shri Mahendra Ghelani, the learned Counsel for the Society, submitted that before purchase of flats, the prospective buyers including plaintiff Nos. 2 to 6 contacted the Promoter. The documents, brochure and lay out plan were shown to them relating to "Madhu Vihar" scheme. Special features like well developed garden with water fountain and lawns, Badmington Court, separate amusement facility for children and equipments were shown in the brochure. The prospective buyers were made to believe that besides 137 tenements, no other tenements would be constructed. They were also made to believe that enough space for garden with water fountain, lawns and Badgminton Court would be left. Relying on these assurances, the prospective buyers were tempted to purchase flats in the said scheme and accordingly they entered into agreements with the promoter to purchase various flats.

16. The tenements were constructed, garden was raised and after obtaining occupation certificate the flat purchasers were placed in possession of the respective flats. In this connection Shri Ghelani pointed out that admittedly 0.98% FSI has been consumed. Shri Ghelani submitted that after adequate number of persons required to form the Co-operative Housing Society had entered into agreement with the promoter, it was the statutory obligation of the promoter under Section 10 of MOFA to take Page 1002 steps for formation of cooperative society within a period of 4 months under Rule 8 of MOFA. However, the promoter neglected to do so. Ultimately, the flat purchasers formed co-operative society at their own and made an application to the concerned authority for registration of the society. Surprisingly, this move on the part of the flat purchasers was opposed by the promoter. Ultimately, the flat purchasers succeeded in getting society registered on 20/1/1993. Shri Ghelani pointed out that the appeal preferred by the promoter against the order was also rejected. Shri Ghelani further submitted that after co-operative society of the flat purchasers was registered, it was the statutory obligation of the promoter under section 11 of MOFA to convey title to the society and to execute all relevant documents in accordance with the agreement within 4 months from 21/1/1993 under Rule 9 of MOFA. However, the promoter failed to discharge his statutory obligation.

17. Shri Ghelani further submitted that instead of discharging his statutory obligations, the promoter floated new scheme and started construction on the land reserved for garden and lawn. The Society protested this move and the promoter abandoned the construction. Thereafter, the society instituted the present suit against the promoter. However during the pendency of the suit the promoter again submitted a plan for construction of a new scheme and the competent authority approved the same on 29/3/2001. Shri Ghelani submitted that the said approval is illegal and on the basis of it the promoter cannot be permitted to construct on the land bearing CTS No. 1068/1 admeasuring 6071.00 sq. meters.

18. Shri Ghelani submitted that there has to be a scheme or project of development in the layout in order to attract the provisions of section 7A of MOFA. The promoter never suggested that there would be phase-wise development of the land. In such circumstances, the provisions of Section 7A of MOFA would not apply.

19. Shri Ghelani submitted that the promoter is bound by the contents of brochure and he cannot say that it is not the part of the agreement.

20. The learned Senior Counsel Shri V.A. Thorat for the promoter, on the other hand submitted that upto 12/4/1989 changes were made in the plan as many as 4 times and they were approved by the competent authority. The flat purchasers never objected to the said changes in the plan. Thereafter, 3 plans were approved between 20/5/1992 and 26/11/1994. However, the construction had to be abandoned because of some internal difficulties of the promoter. Thereafter last plan was approved by the competent authority on 29/3/2001 and the promoter intends to undertake construction as per the said approved plan.

21. Shri Thorat fairly conceded that it is the statutory obligation of the promoter to take steps for formation of the co-operative society of the flat purchasers, as well as to convey title in favour of the society by executing relevant documents in accordance with the agreements. However, it can be done only after completion of the scheme, since the scheme has not been completed as yet, no liability can be fastened on the promoter to convey title and execute documents in favour of the society. Shri Thorat submitted that Page 1003 the promoter is ready and willing to convey title and to execute documents in favour of the society after completion of the scheme.

22. Shri Thorat, submitted that neither the brochure is part of the agreement nor the contents of the brochure are reflected in the agreement. Shri Thorat submitted that the promises alleged to have been given by the promoter are frozen in the agreement and now the society cannot travel beyond the terms of the agreement. Shri Thorat pointed out that even no schedule is attached to the agreement in respect of the common facilities alleged to have been promised by the promoter to the flat purchasers.

23. Shri Thorat submitted that the society cannot divest the promoter of his title to the land till the promoter conveys the title thereof to the society. Shri Thorat submitted that there is no automatic divesting of the title of the promoter.

24. Shri Thorat strongly refuted the allegations that the promoter wanted to encroach upon the garden land by making construction as per the plan approved on 29/3/2001, Shri Thorat submitted that there is no reduction in the land meant for garden. Shri Thorat pointed out that in fact in fresh plan sanctioned by the Corporation on 29/3/2001 there is no reduction in the space kept to be open. On the other hand there has been increase in the space to be left open.

25. Shri Thorat further submitted that the promoter has every right to utilise the unconsumed FSI and TDR under Section 7A of MOFA.

26. Shri Thorat lastly submitted that the flat owners occupied the respective flats in the year 1989 and the society was registered in the year 1993. The suit however has been instituted in the year 1997. Thus, the same is barred by limitation and is liable to be dismissed.

27. Shri Xavier, the learned Counsel for the Corporation adopted the arguments made on behalf of the promoter.

28. I have carefully considered the above submissions. I have also gone through the record and proceedings of the lower Court in L.C. Suit No. 4385/1997 with the able assistance of the learned Counsel for the parties.

29. The following points arise for my determination and I record my findings thereon as under:

(1) Whether 'Madhu Vihar' was the only scheme or project of development in layout on the piece of land bearing CTS No. 1068/1 and admeasuring 6071.00 meters situated at Kandivali (West), Mumbai?....Yes.

(2) Whether on completion of " Madhu Vihar" on 12/4/1989 and registration of the society on 20/1/1993, an implied/ quasi trust is created in favour of the society the beneficiary of which are the flat purchasers?....Yes.

(3) Whether the promoter is liable to convey title and execute all relevant documents therefor, in accordance with the agreements in favour of the society?....Yes.

(4) Whether the promoter is entitled to make additional construction on the piece of land bearing CTS No. 1068/1 and admeasuring 6071.00 sq. meters under the provisions of Section 7-A of MOFA?.... No.

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(5) Whether the suit is barred by limitation? .... No.

(6) What order? .... As per order below.

30. According to Shri Thorat, the learned Sr. Counsel for the promoter, the promoter had purchased certain land for development. "Madhu Vihar" Scheme was floated on certain part of the said land and the rest of the part of the said land is yet to be developed. As such the promoter is entitled to use unconsumed FSI as well as TDR and till completion of the entire scheme the promoter is not obliged to convey title and execute relevant documents in favour of the society.

31. Shri Ghelani on the other hand urged that the promoter floated Madhu Vihar scheme on specific portion of land; the promoter published a brochure in which amenities to be provided in Madhu Vihar were specified; the special features there of included well developed garden with water fountain, lawns and badmington Court. Even annexure "C" to the agreement for sale specifically mentions the amenities of garden and recreation space. The construction started some time in the year 1985 and it was completed in 1989. The possession of the flats was also handed over to the flat purchasers, even the society started maintaining the garden. It was the statutory obligation of the promoter to formulate society of the flat purchasers and to convey title to the society. However, the promoter avoided to do so and now wants to take advantage of his own wrong by utilising the garden land for construction of new building.

32. in this respect Shri Thorat pointed out that the brochure was not the part of the agreement and hence it cannot be said the flat purchasers were misled by the promoter. I am unable to appreciate this submission because though the brochure is not part of the agreement, there is specific mention for maintenance of garden and recreation spaces. This clearly shows that the promoter as well as the flat purchasers fully knew that there would be a garden and recreation spaces meant for the use of the flat purchasers. Hence, though specifically the brochure was not part of the agreement it can be so treated.

33. It is important to note that the promoter purchased the land by sale deed dated 28th August, 1980 that piece/parcel of vacant agricultural land bearing survey No. 1/A Hissa No. 1,2,4 CTS 1068 area 2 acres 9 gunthas= 9003.95 sq. meters of village Kandivali. The promoter floated Madhu Vihar Scheme on the plot marked as CTS No. 1068/1 admeasuring 6071.00 sq. meters. This clearly shows that CTS No. 1068/1 admeasuring 6071.00 sq. meters is a separate piece of land out of survey No. 1-A and " Madhu Vihar" is the scheme/project for development in the said layout. The scheme in the said layout was completed with the construction of the flats, the shops and the garden.

34. From the facts of this case, it is apparent that the promoter neglected to take steps for formation of co-operative society within the period of 4 months as prescribed under Rule 8 of MOFR . The flat purchasers had to move concerned authority for registration of the society which was opposed to by the promoter. Ultimately, the society was registered on 20/1/1993. It Page 1005 was obligatory on the part of the promoter to convey the title to the society and execute the conveyance within 4 months from the date of registration under Rule 9 of MOFR. However, the promoter neglected todo so on the ground that the scheme was incomplete.

35. As pointed out above, " Madhu Vihar" scheme was in fact completed, the possession of the flats was handed over to the flat purchasers and they started maintaining the garden. During all this period implied/quasi trust has been created the beneficiary of which are the flat purchasers and the society and the promoter is the trustee. It may be noted that an express trust is created under the Indian Trust Act 1882. The provisions of express trust can also be usefully applied in case of implied/quasi trust. A trustee under implied trust cannot for himself or for another set up any title to the trust property adverse to the interest of the beneficiary. Such trustee also cannot use or deal with the property for his own profit. The learned trial Judge lost sight of this vital aspect of the case and arrived at a wrong conclusion.

36. Section 7 of MOFA imposes a prohibition on the promoter to the effect that after plans and specification of the building are disclosed or furnished the flat purchasers, the promoter shall not make any alterations in the structure described therein, in respect of the flats or any other alterations or additions in the structure of the building without previous consent of that person. Section 7A however, clarifies that this prohibition will not apply in respect of the construction of any other additional building or structure constructed or to be constructed under a scheme or the project of development in the layout. Section 7A was inserted in MOFA Act by amendment in the year 1986. Construction of "Madhu Vihar" scheme in the present case started in the year 1985 and was completed in the year 1989. In the meanwhile, there were changes in the plans as many as 4 times. However, no additional building like the one proposed in the plan approved on 29/3/2001 was included in the plans between 1985 and 1989. In the absence thereof the promoter is not entitled to derive any advantage from section 7A of MOFA. Consequently, he is not entitled to construct additional building in the land bearing CTS No. 1068/1 admeasuring 6071.00 sq. meters. Needless to explain that the promoter is not restrained from proposing construction on another land besides the land bearing survey No. 1068/1 admeasuring 6071.00 sq. meters. Section 7A of MOFA would not apply in the facts and circumstances of the present case and the promoter will not be able to take advantage of the said provision. Consequently, he is not entitled to make further/additional construction as stated earlier.

37. Shri Ghelani submitted that the trial Court has not considered the following judgments which are in favour of the society and against the promoter.

(1) Runwal Investments Pvt. Ltd. v. Runwal Plaza Co-operativer Housing Society Ltd CA 4874/1994 with A.O. 1116/1994.

(2) Sai Prasad Commercial Premises Co-operative Society Ltd. v. Lal K. Bijalani and Ors. 1997 VI LJ 159.

(3) Ravindra Mutenja and Ors. v. Bhavan Corporation and Ors. 2003 (3) All M.R. 521.

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38. A careful perusal of the above decisions would show that they are decisions on interim order in which existence of prima-facie case or balance of convenience etc. are considered and as such they are not helpful to the case of promoter.

39. Shri Thorat submitted that the provisions of Section 7A of MOFA override the terms of the agreement and it cannot be said that the promoter is trying to take advantage of his own wrong.

40. Shri Thorat put heavy reliance on the following cases in support of his submissions that Section 7A of MOFA entitles the promoter to construct additional building on the suit land.

41. In Mohatta Nagar Co-operative Housing Society Ltd. v. Vishram Khimji & Sons 1994 (1) BCR 444 the builder had already submitted the plans for construction of two buildings and the plot was subsequently sub-divided. Thus on facts Mohtta Nagar case would not apply to the present case.

42. The decision Harsharansingh Pratapsingh Gujral and Ors. v. Lokhandwala Builders is the decision on Notice of Motion in a suit before the High Court. Secondly, agreement therein showed that the flat purchasers were aware that the plot had to be developed in the phased manner and thirdly, all the agreements were not registered and the flat owners were not able to register themselves as a Co-operative Society. Thus, on facts Harsharansingh's case would not apply to the present case.

43. Bhuvaraha Maithreyan v. Municipal Corporation, Pune 2003 (105-3) Bom. L.R. 803 is revisional order in respect of the common order of interim injunction. It was held by the learned Single Judge of this Court that the flat purchasers had no right to obstruct the construction being carried out by the builder/developer, because prima facie case for grant of interim relief was not made out by the flat purchasers. The learned Single Judge directed the matter to proceed on merit. This there was no decision on merit.

44. Mr. Sudhir Shetty and Anr. v. Mr. Dharma V. Desle Appeal No. 844 of 2003, Arbitration Petition No. 171 of 2003 arose out petition by flat purchasers. The Lower Court restrained the developer from doing any construction on the plot reserved for recreational ground. The Division Bench of this Court held that the said order cannot be sustained. It was observed by the Division Bench that in view of Section 7A of MOFA no permission from the flat purchasers for shifting erstwhile area reserved for recreation ground was necessary. The Division Bench did not find any merit in the case of flat purchasers. Again it is an interim order and what weighed with the Division Bench is that no irreparable loss would be caused to one flat purchaser. It may be noted that the said order was subject to the award and with no equity in favour of the developer. Hence, it would not be helpful to the promoter in the present case.

45. Shri Thorat was fair enough not to dispute the jurisdiction of the Civil Court to deal with the present matter. In Kalpita Enclave Co-operative Housing Society Ltd. v. Kiran Builders , the learned Single Judge of this Court dealt with the jurisdiction of Civil Court under MOFA in Page 1007 details. The said ruling was followed by another learned Judge of this Court in Khatri Builders v. Mohammed Farid Khan 1992 (1) Bom. Cr. 305. In the latter case it was held that the provisions of Section 7A of MOFA are not attracted to the facts of the said case.

46. Shri Thorat submitted that the trial Court has wrongly decided the issue of limitation. According to Shri Thorat the possession of the flats was delivered to the flat purchasers in 1989, the society was registered in the year 1993, whereas, the suit has been instituted in the year 1997, as such even under the residual article 113 of the Limitation Act the suit is barred by limitation.

47. On the other hand according to Shri Ghelani by way of this suit the society wants to seek mandatary injunction against the promoter to abide by the statutory obligations cast on him by MOFA. Since the promoter has avoided to convey title and to execute necessary documents in favour of the society, there is a breach of statutory obligation which gives continuing cause of action to the society against the promoter and as such there is no question of the suit having been barred by limitation. I fully endorse the contentions made by Shri Ghelani and hold that the suit is not barred by limitation.

48. In this respect it was also pointed out by Shri Ghelani that in fact the promoter pleaded that cause of action for conveying title and executing necessary documents in favour of the society does not arise. What the promoter pleaded was that the suit is a premature suit. This is contrary to the submissions made on behalf of the promoter that the suit is barred by limitation.

49. It was urged by Shri Ghelani that the trial Judge should not have granted three years time to the promoter for conveying title and for executing necessary documents in favour of the society, because as per the statute conveyance of title and execution of the documents is to be effected within 4 months from the date of registration of the society. The period of 4 months has elapsed long back and there was no justification on the part of the learned trial Judge to grant 3 years for that purpose. I find considerable force in the submission. It may be noted that the learnd trial Judge has not assigned any reason as to why three years time was needed for conveying title and executing necessary documents by the promoter in favour of the society. The learned trial Judge could have directed the promoter to convey title and to execute necessary documents in favour of the society forthwith.

50. In view of the above discussion I pass the following order.

(A) First Appeal No. 786 of 2004 is allowed.

(B) First No. 989 of 2004 is dismissed.

(C) The promoter is directed to convey title and execute all the relevant documents in respect of "Madhu Vihar" Scheme in CTS No. 1068/1 admeasuring 6071.00 sq. meters situated at Kandivali (West), Mumbai in favour of society (i.e. Respondent No. 1) forthwith.

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(D) The Promoter is hereby permanently restrained from making any construction over the suit land bearing CTS No. 1068/1 admeasuring 6071.00 sq. meters situated at Kandivali (West), Mumbai.

(E) The direction by the trial Court about rendering of accounts by the promoter and about appointment of Commissioner for that purpose is confirmed.

(F) Parties are directed to bear their own costs. On the request of Shri Vaibhav A. Sugdare, the learned Counsel for the promoter, the operation of the order is stayed for six weeks. C.C. expedited.