Bombay High Court
Nirmala Pillai vs Shubham Builders on 7 May, 2024
Author: B. P. Colabawalla
Bench: B. P. Colabawalla
2024:BHC-OS:7461
10.CAAl.12654.2024.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION APPEAL (L) NO.12654 OF 2024
IN
COMMERCIAL ARBITRATION PETITION (L) NO.19952 OF 2023
Digitally WITH
signed by
SHRADDHA INTERIM APPLICATION (L) NO.12835 OF 2024
SHRADDHA KAMLESH
KAMLESH TALEKAR IN
TALEKAR Date:
2024.05.07 COMMERCIAL ARBITRATION APPEAL (L) NO.12654 OF 2024
18:16:24
+0530
IN
COMMERCIAL ARBITRATION PETITION (L) NO.19952 OF 2023
1. Nirmala A. Pillai
An adult, aged about 69 years,
Indian inhabitant, of Mumbai,
Occupation : Business, residing at
Flat No.B-5, Kanchan Villa
Co-operative Housing Society Limited,
Plot Nos.15 and 16, CTS No.479/C
and 480, 480/1 to 7,
Goraswadi, Malad (West),
Mumbai - 400 064.
2. Karthik R. Pillai
An adult, aged about 32 years,
Indian inhabitant, of Mumbai,
Occupation : Business, residing at
Flat No.B-6, Kanchan Villa
Co-operative Housing Society Limited,
Plot Nos.15 and 16, CTS No.479/C
and 480, 480/1 to 7,
Goraswadi, Malad (West),
Mumbai - 400 064.
3. Jayshree Vijaymohan Kertha
An adult, aged about 64 years,
Indian inhabitant, of Mumbai,
Occupation : Business, residing at
Flat No.B-3 & B-4, Kanchan Villa
Co-operative Housing Society Limited,
Plot Nos.15 and 16, CTS No.479/C
and 480, 480/1 to 7,
Goraswadi, Malad (West),
Mumbai - 400 064.
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4. Hobayya Kotian
An adult, aged about 79 years,
Indian inhabitant, of Mumbai,
Occupation : Business, residing at
Flat No.A-8, Kanchan Villa
Co-operative Housing Society Limited,
Plot Nos.15 and 16, CTS No.479/C
and 480, 480/1 to 7,
Goraswadi, Malad (West),
Mumbai - 400 064.
5. Leela Jacob
An adult, aged about 90 years,
Indian inhabitant, of Mumbai,
Occupation : Business, residing at
Flat No.B-2, Kanchan Villa
Co-operative Housing Society Limited,
Plot Nos.15 and 16, CTS No.479/C
and 480, 480/1 to 7,
Goraswadi, Malad (West),
Mumbai - 400 064.
6. K.K. Bhavsar
An adult, aged about 38 years,
Indian inhabitant, of Mumbai,
Occupation : Business, residing at
Flat No.B-12, Kanchan Villa
Co-operative Housing Society Limited,
Plot Nos.15 and 16, CTS No.479/C
and 480, 480/1 to 7,
Goraswadi, Malad (West),
Mumbai - 400 064.
7. Dhiraj V. UPadhyay
An adult, aged about 80 years,
Indian inhabitant, of Mumbai,
Occupation : Business, residing at
Flat No.B-134, Kanchan Villa
Co-operative Housing Society Limited,
Plot Nos.15 and 16, CTS No.479/C
and 480, 480/1 to 7,
Goraswadi, Malad (West),
Mumbai - 400 064. ..... Appellants /
Ori.Respondent Nos.2 to 7
Versus
1. Shubham Builders
A partnership firm duly registered
under the Indian Partnership Act
having its principal place of
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business at Hari Darshan B,
Ground Floor, Bhogilal Fadia
Road, Kandivali (West),
Mumbai 400 067.
2. Kanchan Villa Co-operative
Housing Society Limited
A housing society registered under
the provisions of the Maharashtra
Co-operative Societies Act, 1960
and having its registered office at
Plot Nos.15 and 16, CTS No.479/C
and 480, 480/1 to 7, Goraswadi,
Malad (West), Mumbai 400 064. ....Respondents
Ms Aspi Chinoy, Senior Advocate a/w. Piyush Shah, Shanay Shah,
Dishang Shah, Hetta Sagar, Shivam Desai, Advocates for the
Appellants/Applicants.
Mr. Karl Tamboly a/w. Shrey Fatterpekar i/b. Jay Vakil, Advocates
for Respondent No.1.
Mr. Sarosh Bharucha a/w. Anuj Desai, Pankaj Pandeya i/b Smit
Nagda, Advocates for Respondent No.2.
CORAM : B. P. COLABAWALLA &
SOMASEKHAR SUNDARESAN, JJ.
RESERVED ON : APRIL 24, 2024
PRONOUNCED ON : MAY 07, 2024
JUDGMENT :
(PER : Somasekhar Sundaresan, J)
1. The challenge in this Commercial Arbitration Appeal under
Section 37 of the Arbitration and Conciliation Act, 1996 ("the Act"), is to an
order dated 4th April, 2024 ("Impugned Order") passed by a learned Single
Judge of this Court in Commercial Arbitration Petition (Lodging)
No.19952 of 2023.
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2. The Impugned Order has granted relief to Shubham Builders
("Developer", the Petitioner therein), under Section 9 of the Act, directing
seven members ("Appellants", Respondent Nos. 2 to 8 therein) of Kanchan
Villa Co-operative Housing Society Limited ("Housing Society",
Respondent No.1 therein) to vacate their respective flats and garages as
identified in the Impugned Order.
3. Having heard the parties at length, we are convinced that the
Appeal is without merit for the reasons set out in this judgement.
4. At the heart of the challenge by the Appellants is their contention
that the Development Agreement between the Housing Society and the
Developer is not backed by a legally-valid approval by the Housing
Society's members. The genesis of the controversy was the objection of the
Appellants that the approval given for appointment of the Developer at a
Special General Body Meeting held on 5 th May, 2013 was infirm owing to
the positive votes of four of the members in favour of selecting the
Developer for carrying out the redevelopment, being invalid. According to
them, these four members ought to have been physically present on 5 th
May, 2013 at the meeting, for their consent to be valid. The meeting of 5 th
May, 2013 was an adjourned meeting, and these four members who had
been present in the original scheduled meeting on 28 th April, 2013, sent
their written and express approval of the appointment.
Factual Matrix :
5. The parties have been engaged in litigation drawn out over the past
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eleven years. The approval of the Developer on 5 th May, 2013 has been
variously upheld and set aside in the course of the flow of the dispute. To
cut a long story short, the Appellants argue that when consent granted at
the Special General Body Meeting held on 5th May, 2013 stood set aside, it
naturally follows that, with it, the substratum of the Development
Agreement stood undermined. Their argument is that a fresh process of
tendering for selection of a Developer would be required to consider the
redevelopment of the building of the Housing Society.
6. In this context, a brief overview of the facts would be instructive and
may be summarized thus :
(i) On 16th June 2011, a public notice was issued by the Housing
Society inviting offers for redevelopment;
(ii) On 28th April, 2013, a Special General Body Meeting was held
to select one out of three short-listed developers. At this
meeting the selection was decided to be made by a ballot,
with voting to be held on 5th May, 2013;
(iii) On 5th May, 2013, after polling, the Housing Society
passed a resolution selecting the Developer. At that time,
such a resolution required approval of 75% of the members
(subsequently, the law would change it to a requirement of a
simple majority) and it was the case of the Housing Society
that 12 members attended physically and voted in favour of
selecting the Developer while four members had given their
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written consent on the earlier occasion, i.e., on 28 th April
2013;
(iv) On 7th May 2013, the Deputy Registrar for Co-
operative Societies issued a letter intimating the Registrar
about the selection of the Developer in his presence in
compliance with applicable law;
(v) On 29th May, 2014, a Development Agreement was executed
between the Housing Society and the Developer. The
Development Agreement recited that the Developer had been
selected at the Special General Body Meeting held on 5 th May,
2013, which premise is being assailed as being inaccurate
due to subsequent developments;
(vi) Some of the Appellants filed a Revision Application
No. 192 of 2014 impugning the Deputy Registrar's
confirmation dated 7th May, 2013. By an order dated 19th
September, 2014, the Divisional Joint Registrar allowed this
Revision Application and set aside the letter dated 7 th May,
2013 issued by the Deputy Registrar, and also ruled that the
Housing Society was at liberty to organize another Special
General Body Meeting to select the Developer in accordance
with the guidelines governing redevelopment of the Co-
operative Housing Society;
(vii) The Housing Society challenged the order of the
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Divisional Joint Registrar in Revision Application No. 632 of
2014 before the Minister for Co-operation, Marketing and
Textiles. On 30th September, 2014 this Revision Application
was allowed and the order of the Divisional Joint Registrar
dated 19th September, 2014 was set aside, restoring the
confirmation issued on 7th May, 2013;
(viii) Some of the Appellants filed Writ Petition No. 12266
of 2015, which eventually came to be disposed of by consent
of the parties vide order dated 4th February, 2016. The parties
agreed that by consent, both the orders namely, the order of
the Divisional Joint Registrar dated 19th September, 2014
and the Minister's order dated 30th September, 2014 shall
stand set aside. The Revision Application No. 192 of 2014
was restored to the file of the Divisional Joint Registrar, who
was to decide the same afresh in accordance with law, after
affording an opportunity of being heard to all the parties. A
three-month deadline was stipulated, pending which status-
quo was to be maintained;
(ix) On 2nd May, 2016, the Divisional Joint Registrar came
to dismiss the Revision Application No. 192 of 2014 which
was the original challenge to the confirmation dated 7th May,
2013 issued by the Deputy Registrar;
(x) A Revision Application No. 590 of 2016 came to be filed
before the Minister, to challenge the decision of 2 nd May,
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2016. The then Minister, vide order dated 14th June, 2017 set
aside the order of the Divisional Joint Registrar dated 2 nd
May, 2016, and thereby the letter of confirmation dated 7 th
May, 2013;
(xi) The aforesaid order dated 14 th June, 2017 of the
Minister was challenged by the Housing Society in Writ
Petition No. 6407 of 2018 before this Court and the same is
pending;
(xii) Over two years later, on 28 th July, 2019, another
Special Body General Meeting was held where it was resolved
that the appointment of the Developer be terminated;
(xiii) On 8th March, 2020, yet another Special General Body
Meeting of the Housing Society was held at which the earlier
resolution of 28th July, 2019 was "cancelled and withdrawn"
to thereby "continue with M/s. Shubham Builders as the
Developer for the redevelopment of Kanchan Villa".
Pertinently, this meeting was chaired by Ms.Nirmala Pillai,
who is Appellant No. 1, and the resolution was passed with a
majority of 14 out of 23 members;
(xiv) On 4th October, 2021, the Housing Society issued a
notice for holding a Special General Body Meeting on 10 th
October, 2021 to discuss, adopt and approve the revised
Development Agreement and to restart development of the
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building;
(xv) On 10th October, 2021, the Special General Body
Meeting resolved to adopt and approve the revised draft and
approved the execution of the Development Agreement; and
(xvi) On 30th December, 2021, a Supplementary
Development Agreement was executed. Its recitals set out the
history of conflicts and flow of proceedings that preceded the
Supplementary Development Agreement and effected
adjustments to the original entitlements in order to deal with
changes in law, in particular, the development regulations
and implications of a road setback. There were changes to
commercial terms of the Development Agreement, which
have been summarized in the Impugned Order under Appeal.
7. It will be seen that the fortunes of the Housing Society have
fluctuated with the flow of time and change of office-bearers of the
Managing Committee and the parties have been locked in litigation for
over a decade.
Contentions :
8. At the heart of the challenge in this Appeal is the contention that the
Special General Body Meeting held on 8 th March, 2020 is not a valid
approval for the redevelopment since the Housing Society ought to have
started the tender process afresh. According to the Appellants, the
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Housing Society ought to have conducted a fresh process for selection of a
Developer in compliance with the applicable guidelines and directions
issued under Section 79A of the Maharashtra Co-operative Societies Act,
1960 and rules made thereunder ("79A Requirements"). According to Mr.
Aspi Chinoy, Learned Senior Counsel representing the Appellants, such a
meeting would require the Housing Society to first call for bids by way of a
tender, short-list potential candidates for the development and then pick a
developer as was sought to be done in the first instance on 28 th April, 2013
and 5th May, 2013. According to the Appellants, without such process,
although the resolution passed on 8th March, 2020 was indeed backed by
14 out of 23 members (the requisite majority), the resolution was infirm
because it could not validate the old Development Agreement dated 29 th
May, 2014, which had come to be terminated and cancelled.
9. The Appellants also argue that the Development Agreement
contains a recital that the Developer had been selected on 5 th May, 2013,
but since that selection had been subjected to a challenge which ultimately
ended with the Minister's decision dated 14th June, 2017, setting aside the
confirmation letter dated 7th May, 2013, the selection of the Developer had
come to an end. According the Appellants, Writ Petition No. 6407 of 2018
having been filed, with pleadings on oath asserting that the said decision of
a Minister amounted to a cancellation of the appointment of the
Developer, it would not be possible to construe the old Development
Agreement as being capable of revival.
10. Mr. Karl Tamboly, Learned Counsel for the Developer, and Mr.
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Sarosh Bharucha, Learned Counsel for the Housing Society, in turn, argue
that the stance of the Appellants is wholly misconceived apart from being
inequitable. They point out that the Special General Body Meeting of the
Housing Society held on 8th March, 2020, resolving to continue with the
Developer for redevelopment of the building was chaired by none other
than Appellant No.1, where she backed the very process that is now being
challenged. Besides, they submit, that the first principles of how co-
operative society functions are based on democratic principles and the will
of the majority cannot be lightly held up by a dissenting minority. They
point out that 16 members have already vacated their residences and the
Developer has been paying transit rent since March 2023. The Appellants
alone have been holding out, jeopardizing the interests of all members,
they argue, canvassing that the Learned Single Judge exercised judicial
discretion in a reasonable manner, directing the Appellants to vacate, and
that does not call for interference in appeal. They also submit that time
and again, Courts have held that the 79A Requirements are directory in
nature, and are indicative guidelines. They are not meant to be read like
hidebound mandatory requirements, in a manner that the interests of
members of the Housing Society are undermined on technical grounds
rather than be protected on substantive grounds.
Analysis and Findings :
11. We have heard the Learned Counsels at some length. We have also
perused the papers and proceedings and the Impugned Order. The crux of
the allegations of the Appellants is that the resolution of 5 th May, 2013 was
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invalid due to the four advance written approvals not counting as votes of
members present and voting. Their argument is that the current status of
the challenge to that resolution is that the approval of that resolution is
considered to be bad in law. Therefore, they argue, while the Housing
Society may indeed rectify that infirmity, since there is a substantial
change over time, the entire selection process must be conducted afresh.
12. We are not inclined to interfere with the decision of the Learned
Single Judge. We find that the alleged infirmity in the resolution dated 5 th
May, 2013 namely, that members have to be physically present and voting
for their vote to count, for all intent and purposes has been rendered moot.
At the meeting held on 8th March, 2020, it appears that the Housing
Society, as a collective, had resolved to move on with the redevelopment by
cancelling the earlier decision to terminate the selection of the Developer.
After that date, another Special General Body meeting was held on 10 th
October, 2021 to approve the Supplementary Agreement, which too was
approved by the requisite majority. Notably, it was Appellant No. 1 who
chaired and steered the Special General Body meeting held on 8 th March,
2020 to cancel the earlier cancellation of the selection of the Developer. In
our opinion, the flow of resolutions of the Housing Society, variously
approving and cancelling the selection of the Developer, demonstrates the
ebb and flow of governance of the Housing Society, applying democratic
principles. The course of governance of a co-operative society, with
members convincing one another and moulding their stance, and passing
resolutions to take decisions that they believe serves the best interests of
the collective, is evident from the material brought on record. The
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majority has been able to convince one another to pass a fresh resolution,
without the controversy of whether the approving majority is present and
voting. In that process, they have also collectively decided to modify the
Development Agreement by executing the Supplementary Agreement to
deal with a road setback and the implications of regulatory changes. In
short, the majority, this time without the controversy of whether all
approving members are present to be validly counted, have addressed the
need for redevelopment that has been mired for a decade in disputes.
What is important to note is that the resolution of 8 th March, 2020 and 10th
October, 2021 have neither been challenged by the Appellants nor have
they been set aside, by any appropriate forum.
13. As is typical of members of housing societies, conflicts among
members could lead to varying positions being adopted from time to time,
and even the same member changing one's position. For example,
Appellant No. 1 steered the decision in 2020 to move forward and put the
controversy behind, but is now of a different view. While she may be
entitled to not be hostage to a view once taken, one must see if the luxury
of the members changing their stance from time to time is in conflict with
any requirement of law. Where the dissenting members allege there is
such a violation of legal requirements, one must examine what is the best
course of action to balance competing interests.
14. The Housing Society points out that in the past decade, the building
has suffered material deterioration in its physical state. The learned
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counsel for the Housing Society and the Developer have tendered
photographs of portions of the building to emphasize the need for urgent
redevelopment. The Learned counsel for the Housing Society has also
tendered minutes of another General Body Meeting held on 28 th
December, 2020 to show that the changes in the Development Control
Regulations 2034 necessitated revisions to the entitlements of the
members under the Development Agreement and that the members have
engaged constructively to deal with the revised situation and have taken a
collective decision in their best judgement of their best interests.
15. We note that while the building may not be in a state of imminent
collapse, it is evident that the inability to move on with the redevelopment
would indeed lead to material deterioration. It is for the members who are
affected by this state of affairs to come together and re-arrange their
positions to take the best decision as a collective. The learned Single Judge
has noted that a majority of 16 members have decided that progressing
with the redevelopment in terms of the Development Agreement as
modified by the Supplementary Agreement is the best course of action and
in their best interests. This is the wisdom of the Housing Society acting
through a majority. This majority of 16 members has walked the talk, and
vacated their residences, and handed over possession to the Developer
while the minority is holding up the redevelopment, now demanding a
fresh conduct of the selection process all over again. Meanwhile, the
Developer is going out of pocket by paying transit rent to those who have
vacated, without being able to commence work of redevelopment since the
dissident members are refusing to vacate. We note that the minority
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cannot be said to be minuscule (eight out of 24) but equally, the majority
that has taken a conscious decision cannot be wished away without any
substantive violation of law on account of their action.
16. We have reviewed the table of comparison between the terms of the
Development Agreement as originally executed and as amended by the
Supplementary Development Agreement, extracted in the Impugned
Order. That table brings out the reduction in benefits available to the
members, and shows that there is a shrinkage of benefits (as compared
with what was originally envisaged) to the members. The members would
still get a larger area of residential units as compared with what they
currently have in the Housing Society. The shrinkage is evidently an
erosion of their interests flowing from the disunity and the intermittent
change in regulations and circumstances while they were locked in internal
conflict. Now the members have come to a majority view that they must
cut their losses and move forward. A majority of the members in their
wisdom have applied their mind to such a situation, and have come to a
view, that continuing with the development is in their best interests. The
Learned Single Judge was right in taking the view that it would not be
open to a court to substitute its wisdom for the wisdom of members of the
Housing Society, or to discard such collective wisdom, at the instance of a
dissenting minority, without sound legal reasons.
17. There is a plethora of judgments on how a dissenting minority must
not hold up the will of the majority in the context of redevelopment of old
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buildings managed by a Housing Society. In this context, it has been held
that the 79A Requirements are directory and not mandatory - even
assuming they are violated, they would be capable of cure and remedy
instead of rendering the outcome of the alleged violation, illegal ab initio.
In the interest of brevity, we are not extracting from such judgments,
particularly since the Impugned Order notes them with approval. We
agree that there is no case made out for us to interfere with the exercise of
discretion by the Learned Single Judge. We find no infirmity warranting
such interference.
18. In the result, the Appeal fails and is hereby dismissed. As stated in
our order dated 24th April, 2024, by consent of the parties we had heard
the Appeal itself for final disposal instead of adjudicating just the interim
application for stay. For the reasons stated above, the Appeal stands
dismissed at the admission stage.
19. Since the Appeal is dismissed, the status quo order passed on 24th
April, 2014 is hereby vacated.
Costs :
20. We note that these proceedings deal with a commercial dispute.
Therefore, as a matter of law, we are required to address the issue of costs.
Taking all circumstances into account, including the nature of the dispute,
the length of time invested in the dispute, the nature of the allegations, the
time and expense spent on the litigation, and the impact on the members
of the Housing Society, we are convinced that "costs must follow the
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event".
21. We called for costs incurred in this Appeal. The Developer has
submitted costs in the sum of Rs. 4,60,500/-. The Housing Society has not
submitted its costs. Taking into account the nature of the litigation, and
balancing it with the age of the Appellants, we grant total costs in the sum
of Rs. 4,50,000, which shall be borne by the Appellants equally. The costs
shall be paid to the Developer and the Housing Society, in equal shares
within a period of four weeks from today. The costs awarded to the
Housing Society, shall be distributed equally to the 16 members who have
vacated their residential premises. If these costs are not paid as directed
above, the Housing Society and the Developer may recover the same as
arrears of land revenue under the provisions of the Maharashtra Land
Revenue Code, 1966. The concerned authorities shall act and recover the
costs on production of an authenticated or digitally signed copy of this
order.
22. Since the Appeal is disposed of, any pending applications filed
therein are also disposed of accordingly.
23. This order will be digitally signed by the Private Secretary/Personal
Assistant of this Court. All concerned will act on production by fax or
email of a digitally signed copy of this order.
[SOMASEKHAR SUNDARESAN, J.] [B.P. COLABAWALLA, J.]
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1. At this stage, and after the order was pronounced, the learned
Advocate appearing on behalf of the Appellants submitted that two weeks
time be granted to the Appellants to vacate their respective premises and
that the Appellants do not wish to challenge the order passed by us today.
To this effect, the Advocate for the Appellants has also tendered to the
Court scanned copies of letters written by each of the Appellants to their
Advocate stating that they do not intend to prefer any Appeal to challenge
this order and hence kindly give them time to vacate. The scanned copies
of those letters, tendered to the Court today, are taken on record and
marked "X-1" to "X-7" respectively.
2. In the light of the stand taken by the Appellants, we direct that the
Appellants shall vacate their respective premises on or before 21 st May,
2024 and handover vacant and peaceful possession to Respondent No.1-
Developer. If the Appellants fail to do the same, the consequences set out
in the Impugned Order shall automatically follow.
[SOMASEKHAR SUNDARESAN, J.] [B.P. COLABAWALLA, J.]
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