Abhanga Samata Co-Op Housing ... vs Parag S/O. Arun Binani
2021 Latest Caselaw 7392 Bom

                                                     AOST-7776-2021.odt


 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
         CIVIL APPELLATE JURISDICTION

    APPEAL FROM ORDER (ST) NO.7776 OF 2021
                      IN
       NOTICE OF MOTION NO.1589 OF 2020
                     WITH
    INTERIM APPLICATION (ST) NO.7780 OF 2021


Abhanga Samata Co-op. Housing
Society Ltd.,
A society registered under the
provision of Maharashtra
Co-op. Societies Act, having ofce
at L-2, Sunder Nagar, Ground Floor,
S.V.Road, Malad (West),
Mumbai 400 064                             ... Appellant

          Vs

1. Parag S/O. Arun Binani
of Mumbai, adult, Indian Inhabitant,
Residing at L-2/7, Abhanga Samata
Co-op. Housing Society Limited,
Sunder Nagar, S.V.Road, Malad (W),
Mumbai 400 064.


2. Arkade Developers Pvt. Ltd.
a Company incorporated under
Companies Act, 1956, having its
ofce at Arkade House,
Opp: Bhoomi Arkade, Near Children's
Academy, A.S.Marg, Ashok Nagar,
Kandivali (East), Mumbai- 400 101.  ... Respondents


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                                  ...

Mr. Girish Godbole, Senior Advocate, with Charul
Abuwalla and Mayank Vira I/by Dave & Co. for the
Appellant.

Mr. Ashok M. Saraogi for Respondent No.1.

Mr. Cyrus Ardeshir i/by Ms. Smita Sawant                          for the
Respondent No.2.

               CORAM : SANDEEP K. SHINDE J.
               RESERVED ON : APRIL 30, 2021.
               PRONOUNCED ON : MAY 7, 2021

JUDGMENT :

Heard. With consent of the learned counsel for

the parties, Appeal from Order is taken up for fnal hearing

at the admission stage.

2 At the instance of a solitary member of Abhang

Samata Co-operative Housing Society Ltd., the learned trial

Court vide order dated 19th March, 2021 (Impugned Order),

injuncted appellant/society from proceeding with the

process of re-development of its building. Appellant-society,

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seeks to challenge the impugned order under Section 104

read with Order 43(1)(2) of the Code of Civil Procedure,

1908 ('CPC' for short).

3 The facts, which have led the appellant to fle the

present appeal in brief are as under:

The appellant is a co-operative housing society

formed and registered under the provisions of the

Maharashtra Co-operative Societies, Act, 1960 ("MCS Act"

for short) and is owner of the land and the building which is

subject matter of this appeal, i.e., property bearing CTS

No.33 of 2014, Survey No. Plot-15 admeasuring about

2748.70 sq.mtrs. situated at Sunder Nagar, S.V.Road, Malad

(West), Mumbai 400 064 ('Property' for short). Respondent

No.1 (Plaintif) is a member of the society, who came to be

admitted to the membership in the year 2020. Respondent

no.2 is developer/builder, who has been appointed as ,

'developer' by the appellant/society for carrying out

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development of its property.

4 Respondent No.1 fled Short Cause Suit No.1240

of 2020 in the Court of City Civil Court, Dindoshi against the

society and the developer inter-alia, seeking declaration

that any arrangement made between the society and the

developer for the purpose of developing the subject

property is bad in law and is contrary to the provisions of

law on the ground that re-development process initiated,

violates guide-lines issued by the State vide its directives

under Section 79-A of the MCS Act. As also on the ground

that process of selection of developer itself, is vitiated by

fraud. Thus, pleaded, directives issued under Section 79-A

were not followed in its letter and spirit.

5 The learned trial Court vide the order dated 19 th

March, 2021 injuncted the society from proceeding with the

re-development.

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6                The facts discernible from the record are as

under:

Existing building of the society consists of four

units, viz. L1 to L4 having ground plus 3 / 4 upper foors,

occupied by the existing members of the society. Out of

said four existing buildings, L1 and L2 consists of 16 fats

each and L3 and L4 consists of 14 fats each. Existing

buildings being 45 year old, its, structural audit was done

by M/s. Arvind Singh Consultant Pvt. Ltd., and

recommended substantial repairs. However, cost of such

repairs, renovation and improvements was found, not

workable and, therefore, members explored the possibility

of re-development of the said property through reputed

developers. The society, therefore, in its Special General

Body Meeting (SGM) held on 1st November, 2015 by

requisite majority, decided to re-develop the property by

demolishing the existing buildings. Admittedly, respondent

no.1 (plaintif) was not a member of the society in the year

2015. The Special General Meeting decided to appoint

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architect and Project Management Consultant ('PMC') to

carry out re-development in accordance with directives

issued under Section 79-A of the MCS Act. Thereafter, M/s.

Strut Consultants Pvt. Ltd. were appointed in November,

2015. PMC, submitted its feasibility report on 14 th

December, 2018. Pursuant to which, the appellants/society

opted for open tender process; in response thereto, three

developers submitted their proposals, i.e., M/s. Mayfair

Housing; Balaji Land Makers LLP and Arkade Developers

Pvt. Ltd. (Respondent No.2 herein). It appears from the

pleadings, the proposals were placed before the members

in Special General Body Meeting held on 29 th September,

2019 and the existing members, who attended the meeting

unanimously accepted the proposal of the respondent no.2.

Whereafter respondent no.2 submitted fnal ofer dated 30 th

April, 2019 of the appellants. Thereupon, in the Special

General Body Meeting dated 6th October, 2019, resolution

was passed for appointing respondent no.2 as 'developer'

and in pursuant thereto, letter dated 5 th November, 2019

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was issued to the Deputy Registrar of the Co-operative

Societies for conducting the meeting for approving

appointment of developer, as per the directives issued

under Section 79-A of the MCS Act.

7 In Special General Body meeting held on 8 th

December, 2019, appointment of respondent no.2 as a

'developer' was duly approved by the authorised ofcer

Class-II (Co-operative Societies). It is evident from the letter

dated 9th December, 2018 of the ofce of the Deputy

Registrar.

8 Pursuant to the said approval, appellant/society

vide letter dated 19th December, 2019 confrmed,

appointment of respondent no.2 as 'developer'. Since, after

appointment, draft development agreement, was circulated

amongst members including plans of proposed building of

the society for their considerations/suggestions. It is

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society's case that draft development agreement, POA and

plans of the proposed buildings were approved in the

Special General Body Meeting dated 8th November, 2020 on

the basis of consent letters given by majority members of

the society. Following that secretary, chairman and

treasurers, committee members were authorised to

execute, development agreement and POA on behalf of the

society.

9 On 22nd December, 2020, development

agreement was registered with the Sub-Registrar duly

executed by and between the appellant/society and 39

existing members (out of 51) as confrming parties and

respondent no.2 herein, therein referred to as developer.

10 It may be stated that out of 51 members of the

society and 60 fats in the existing buildings, 39 existing

members executed the development agreement as

confrming parties in respect of their 48 fats.

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                                                         AOST-7776-2021.odt




SUIT



11              Plaintif instituted the suit on 27 th October, 2020

seeking declaration that arrangement made between the

society and the developer for re-development of the

property is contrary to the provisions of the law and,

therefore, society be restrained from proceeding with the

re-development on the basis of said arrangements.

12 The learned Trial Judge vide impugned order

dated 19th March, 2021 restrained the appellants/society

from proceeding with the re-development. Aggrieved by it,

society has preferred this appeal.

ARGUMENTS:

13 Mr. Godbole, the learned Senior Counsel for the

appellant, submitted that the process of re-development

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had commenced in 2015 and it fnally translated into

registered Development Agreement executed in December,

2020. It is submitted through out, the society has

maintained complete transparency and there is no

suppression of facts in the entire process. Mr. Godbole,

submitted pleadings as, to 'fraud' are as vague, as possible

and material particulars of the 'fraud' have not been

pleaded at all. It is submitted that after considering the

structural audit report, majority of members after due

discussion, had resolved to demolish the existing buildings

and to construct new buildings with the assistance of

Project Management Consultants. Mr. Godbole submitted all

the decisions were taken in the Special General Body

Meetings of the Society and such decisions taken by the

majority, of the members bind the descending members,

unless it is shown that re-development scheme is

sanctioned by fraud, misrepresentation or by collusion. Mr.

Godbole, thus, submitted that decisions taken in

accordance with the principles of democracy cannot be

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displaced for asking, as has been done in the case in hand.

Mr. Godbole further submitted that the learned Judge ought

to have considered that there is clear consent of the

majority members for re-development of the project and in

absence of any evidence of fraud, the trial Court ought not

to have interfered with the decision of re-development

taken by the society. It is submitted that the learned Trial

Judge has not recorded fndings either as to prima-facie

case, balance of convenience and/irreparable loss, before

granting the injunction. Mr. Godbole, the learned Senior

Counsel further submitted, that the trial Court has failed to

notice that the reliefs sought by the plaintif were rendered

infructuous by virtue of execution of registered

development agreement entered into between the

appellant and majority members of the society. It is

submitted that since majority members have consented for

re-development process and accepted the development

agreement, no prejudice, losses, damages were caused to

the plaintif/respondent no.1. Mr. Godbole also submitted

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that the learned Judge has failed to appreciate that the

directives issued under Section 79A of the MCS Act are

directory and not mandatory. Besides, Mr. Godbole

submitted that the learned trial Court ignored the settled

position of law in the matter of re-development of the co-

operative housing societies pronounced by this Court in

following cases,

(1) M/s. Maya Developers v. Neelam R. Thakkar of this

Court in Notice of Motion (L) No.834 of 2015;

(2) Girish M. Mehta and Anr. v. Mahesh S. Mehta and Anr.

2010(2) Mh.L.J. 657;

(3) Kamgar Swa Sadan Co-operative Hsg. Society Ltd.

v. Divisional Joint Registrar of this Court in Writ Petition

No.6701 of 2013;

(4) Vikram Delite CHS Ltd. v. Mrs. Meenakshi C. Shah and

Ors. in Notice of Motion (L) No.1341 of 2016;

(5) Harsha CHS Ltd. v. Kishandas S. Rajpal and Ors. of this

Court in Writ Petition No.10285 of 2009;

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Mr. Godbole by relying upon the aforesaid judgments and

on the facts of the case, submits that the impugned order

passed by the trial Judge is illegal, arbitrary and bad in law

and, therefore, same be quashed and set aside.

14 Mr. Cyrus Ardeshir, learned counsel for the

respondent no.2/developer, adopts the arguments of Mr.

Godbole and would also submit that, out of 51 members (60

fats), 39 members (48 fats) have signed the development

agreement. He submits, four more members have agreed

to sign development agreement. He submits that 40 fats

have been vacated by the respective members to whom

the alternate accommodation has been provided at

developer's cost. It is submitted that about 7-8 members

are in search of alternate accommodation. The learned

counsel has invited my attention to the photographs of the

buildings, to contend that major damage is caused to the

structure of the buildings, which are 45 year old. The

learned counsel would further submit that IOD has been

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received on 11th February, 2021 besides, the NOC from fre

department dated 16th January, 2021. He would submit on

8th February, 2021, the Corporation has approved the

building plans. The learned counsel has taken me through

the IOD, NOC and the approved plan, which are part of the

record. The learned counsel, therefore, submits that the

subsequent development, i.e., execution of the

development agreement by majority members, sanction of

buildings plans, IOD have rendered the prayers, in the suit

infructuous. He, therefore, submits that the impugned order

be quashed and set aside.

15 Mr. Saraogi, the learned counsel for the

respondent no.1, has taken me through the plaint and the

replies fled by the society and the developer. He submits

that the society has not maintained the transparency in the

process and procedure, undertaken for re-development. He

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submitted, the guide-lines issued under Section 79A of the

MCS Act were not followed at all. Mr. Saraogi submits, the

various meetings were either attended by non-members

and/or meetings proceeded without requisite quorum.

Submission is that, various resolutions passed in the Special

General Body Meetings were illegal and not enforceable. He

submits that appellants had not invited tenders and,

therefore, entire process was undertaken in secret way for

the reasons best known to the ofce bearers of the society.

Mr. Saraogi, therefore, supports the impugned order.

REASONS:

16 It is not in dispute that the redevelopment

process began in the year 2015 and at the material time,

the respondent no.1-Plaintif, was not a member of the

society until 2020. It is evident that appellant/society upon

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perusing the structural audit report, took conscious decision

that the cost of the repairs, renovation being not feasible,

members explored the prospects, of redevelopment of the

property through reputed developers. Evidently, in

consultation with PMC in Special General Body Meeting

held on September, 2019, the proposals/tenders/bids were

discussed by the members. After, which, society passed a

resolution in the SGM dated 6th October, 2019 and

appointed respondent no.2, as 'developer'. On 5 th

September, 2019, Deputy Registrar was requested to

attend the meeting to verify and ensure compliance of

directives under Section 79A of the MCS Act. Minutes of the

meeting dated 8th December, 2019 shows that the meeting

was attended by the 36 members and the proceedings were

conducted in presence of Mr. Sanjay Rokde, ofcer from the

ofce of Deputy Registrar. Resolution Nos.2 and 4 show that

the society had received three quotations from M/s. Mayfair

Housing, M/s. Balaji Land Makers LLP and M/s. Arcade

Developers (Respondent No.2), Resolution further shows

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that Special General Body Meeting was held on 26 th

September, 2019 wherein respondent no.2 was short-listed

and selected as 'developer', of the society.

. Resolution No.4 passed in the General Body

Meeting dated 8th September, 2019 reads as under:

"4. To fnally select the developer for re- development along with Terms and Conditions and to approve the quotation.

Mr. Sanjay Rokade informed general body to approve the quotation presented by Mr. Zuben Chheda of M/s. Arkade Developer.

General body unanimously accepted and approved the quotation of M/s. Arkade Developer, which was already passed in society special general body meeting held on 29.09.19.

. Resolution No.5 reads as under:

"5. To take on record the consent of the selected Re-developer.

Mr. Sanjay Rokade informed general body that consent of members will be required by raising their hands in front of video shooting in which votes will be counted.

General Body gave their consent by raising their hands for M/s. Arkade Developer by majority, while one member Ms. Naina Shetty did not give her consent for M/s. Arkade Developer.

Mr. Sanjay Rokade informed general body that 99% of members have voted in favour of M/s. Arkade Developer for society redevelopment and passed following resolution:

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"Resolved that general body by majority selected M/s. Arkade Developer for society redevelopment."

17 It is noticeable from the record that since 2015,

the society had held more than four Special General Body

Meetings, wherein diferent resolutions were passed to

further the re-development process. It shows,

decisions/resolutions, were passed by the General Body and

not by the managing committee. Additionally, all these

resolutions were acted upon and none of its members has

challenged it, within the stipulated period. Admittedly,

respondent/plaintif has not challenged resolutions before

the appropriate forum but attempted to challenge it in the

subject suit in the most uncertain terms, saying/describing

it as "some arrangement" between the society, developers

and members. Plaintif prays decree in following terms:

"Clause A : that it be declared that any arrangement made interse between the Defendants for the purpose of redevelopment of the property being property bearing CTS No. 33/14 Survey No. Plot - 15 admeasuring about 2748.70 sq. mtrs situated at Sunder Nagar, S.V.

Road, Malad (W), Mumbai - 400 064 is bad in

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law and contrary to the facts of the case and contrary to the provision of law and the Defendants have no rights to act upon the same in any manner whatsoever."

Therefore, without frst challenging primary decisions, i.e.,

various resolutions passed by the General Body, plaintif in

the most uncertain terms seeks to challenge the,

'arrangement' arrived at between the society and the

developer. In my view, this is fundamental defect in suit and

it goes to the root of the matter. However, the learned trial

Judge, failed to notice the same. Be that as it may, it is

noticeable that at every stage of re-development process,

members of the society had participated and, therefore, all

the decisions were taken on the wishes of the majority

members of the society. To say, meeting dated 8 th

December, 2019 was attended by 36 persons/members out

of 51. Thus, in consideration of the material on record, it is

to be held that the appellant/society's decision to re-

develop the building was with the consent of the majority

members of the society and decision, has been, acted upon Shivgan

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and culminated into registered development agreement as

stated above, signed by 39 members as consenting

parties.

18 Thus, it is to be held that the society has not

suppressed any material from its members in process of re-

development. In fact, the plaintif could not show prejudice,

and/or irreparable loss, if any caused to him in the process

of re-development undertaken by the society. On the

contrary, plaintif would be benefted in terms of the

development agreement as other members, who have

consented for re-development. Therefore, in my view, the

plaintif could not establish prima-facie case, for granting

temporary injunction. It is well settled that for grant of

temporary injunction, three factors have to be satisfed,

which are, prima-facie case, balance of convenience and

irreparable loss. All these factors were, completely ignored,

by the learned trial Judge in exercise of the powers under

Order 39 Rules 1 and 2 of the CPC. As such impugned order

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is not sustainable in law.

19 In so far as reasoning in order is concerned, it is

apparent that the learned trial Judge while granting

temporary injunction was impressed by the following

factors:

(a) That the society has not, created web-site on the

internet as required under the directives issued under

Section 79A of the MCS Act;

(b) That the society did not invite tenders for re-

development of the society by issuing notices or

advertisement in diferent news-papers;

( c ) Resolutions were passed in Special General Body

Meeting in absence of 1/5 members of the society ;

(d) Society did not produce written consent letters from

the members of the society;

(e) There was no video recording of the meetings;

(f) That the authorised members were not present in the

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meeting.

20 Thus, it seems, the learned trial Court was of the

opinion that the guide-lines under Section 79A of the MCS

Act being not followed in, its' letter and spirit, it vitiated the

entire process of redevelopment. However, the learned trial

Court failed to notice, that the alleged irregularities, if any

crept in, the Special General Meeting dated 8 th December,

2019 cannot ipso-facto nullify the resolutions passed by

General body from time to time since 2015. As such, the

irregularities noted by the learned trial Judge cannot

displace the decisions taken by the majority members of

the society. Even otherwise, the fndings recorded by the

learned trial Court as noted above, are contrary to the

evidence on record. The learned trial Court held that the

video recording was not done; however, the plaintif admits

in his letter dated 13th January, 2020 that he had seen DVD

of the meeting. Be that as it may, non-creation of the web-

site cannot be a reason to stall the re-development process.

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Even otherwise, the learned trial Court has failed to

appreciate efect of the subsequent developments/events,

i.e., execution and registration of the development

agreement and various permissions granted by the

Planning Authority have rendered the suit infructuous. As a

matter of record, though the development agreement was

executed and registered, during the pendency of the suit,

plaintif did not amend the plaint and challenged the

Development Agreement.

21 In so far as the settled position in law in the

matter of re-development of the co-operative society is

concerned, it may be stated that the trial Court ignored the

judgments of this Court with cryptic comments, either by

saying that facts in the cited judgments were diferent than

the case in hand. In fact, ratio laid down in the judgments

were squarely applicable to the facts of the case in hand. In

Harsha Co-operative Housing Society Ltd. (Supra),

the learned Single Judge of this Court has held in paragraph

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11 as under:

"11 The reliance upon the Government Notifcation is itself misplaced. When the members of the co-operative housing society which, under law of co-operation, decides by a majority of 11:1 members that the society premises be developed in a particular fashion by a particular developer, it would be contrary to principles of democracy by which the society is governed, for the sole dissenting member to interfere and require a procedure, not required by the majority of the members to be followed which would only consume time and the counter-productive. The Government Resolution would be required to be followed by the society where the members are unable to come to any decision by a resolution of their own."

22 In the case of Maya Developers (Supra), the

learned Single Judge of this Court in paragraph 85 has held

thus;

"85. Apart from the decision in Girish Mulchand Mehta107 in regard to the majority principle, Mr. Kapadia cites Supreme Mega Construction LLP v Symphony Co-operative Housing Society Ltd & Ors.108 In paragraph 7 of this decision, Mr. Justice Gupte in terms held that substantial compliance with the very same 2009 Directive under Section 79A was sufcient. An earlier decision, that of R. D. Dhanuka J in Bharat Infrastructure & Engineering Pvt.

Ltd. v Park Darshan Co-operative Housing Society Ltd & Ors.109 puts the controversy beyond the pale. In paragraph 19, the Court expressly negatived the submission that this very 2009 Directive does not bind the third party, viz., Maya Developers; they Shivgan

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cannot be read into the agreement between the society and the developer. While this was in the context of an arbitration clause, it nonetheless tells us that this Directive is not of the kind of mandatory nature that Mr. Pai makes it out to be. Further, Bharat Infrastructure in the very next paragraph reafrms the principle that the General Body is the supreme authority, and that the view of the majority will bind."

.                  These,          two   cited   judgments,        afrm          and

declare that; that

(i)        General body is supreme;

(ii)       View of majority will bind minority;

(iii) Directives under Section 79A of the MCS Act are

not mandatory and its sufcient compliance is sufcient;

(iv) Directives under Section 79A of the MCS Act, do

not bind the third party;

(v) Decisions taken in accordance with the principles

of democracy cannot be interfered with or displaced,

unless it is shown, that same were sanctioned by fraud

or misrepresentation.

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23 In the case in hand, the learned trial Court,

(i) ignored the law settled by this Court, in relation to

re-development of the co-operative housing societies;

(ii) did not record fndings on factors, like prima-facie

case; balance of convenience and irreparable loss; and

failed to

(iii) appreciate; nature of directives issued under

Section 79A of the MCS Act;

(iv) ignored the vague pleadings and uncertain

prayers;

(v) did not notice, absence of pleadings in support of

allegations of 'fraud and suppression'.

(vi) ignored subsequent events and its efect;

(vii) validity of subsisting resolutions of General Body in

relation to 'redevelopment' project passed since 2015,

which have not been questioned and challenged;

(viii) efect of the resolutions being acted upon and

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24 Thus, in consideration of the facts of the case,

plaintif has neither made out a prima-facie case nor

could show as to how redevelopment, would cause loss

to him nor could establish, re-development project if

implemented would cause inconvenience to him.

25 In view of the facts and for the reasons stated,

appeal is allowed and the impugned order dated 19 th

March, 2021 in Notice of Motion No.1589 of 2020 in

Short Cause Suit No.1240 of 2020 passed by the learned

Judge, City Civil Court, Bombay is quashed and set

aside.

26 Appeal is allowed in the aforesaid term and

disposed of.

27 Since the appeal itself has been disposed of,

nothing survives in the civil application therein and the

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same is also disposed of.

28 Mr. Saraogi's request to stay the order is

hereby declined.

(SANDEEP K. SHINDE, J.)

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