Societies read this for members not vacating the flats for Re-development of the society building

SUIT (LODGING) NO. 229 OF 2010

M/s. Jasmina Constructions Pvt. Ltd. ...Plaintiffs.
Mandapeshwar Kripa Co-operative Housing Society Limited & Ors: Defendants
Mr. Rajiv Narula with Mr. Basant Trilokani i/by M/s. Jhangiani Narula & Associates for the Plaintiffs
Mr. S. U. Kamdar, Sr. Counsel with Mr. Vinay Deshpande with Ms. Meenakshi Mhapeukar i/by M/s. Shamim & Co. for Defendant No.

1. Mr. Ajay M. Talreja for Defendant No. 8
Mr. Deepak S. Jadhav for Defendant Nos. 2, 3, 4 & 6

Dated: 5th March, 2010

Leave granted.
The Plaintiffs, who are Builders and Developers, claiming binding and enforceable rights against the Defendants, in view of a Development Agreement dated 3rd January, 2009 and a Supplementary Agreement dated 4th January, 2009 and also praying for specific performance of the same against Defendant No.1 Society and all necessary orders to complete the construction and to perform their obligation even against Defendant Nos. 2, 3, 4, 6 and 8, for the reliefs of injunction and also for appointment of Receiver to take possession of the flats from them for the agreed development.

Defendant No.1 is a Co-operative Housing Society, registered under the provisions of Maharashtra Co-operative Societies Act, 1960 (for short, "the Act"). The Society is the owner of the land situated at Village Mandapeshwar, Tq. Borivli, bearing Survey No. 23, 23A, admeasuring 5960.46 sq. meters. On the said land there exists “A” type and “B” type buildings having 5 wings consisting of total 84 flats, which were in use, occupation and possession of the members of the Society comprising of 84 members, out of which some of the Defendants are now objecting for redevelopment.

All the members in the General Body Meeting have unanimously resolved to redevelop the dilapidated buildings/ flats by demolishing the same and by utilizing the FSI and by loading of Transferable Development Rights (TDR) by constructing the new buildings for the members of the Society. This resolution of 20/05/2007 was objected by only one person at the relevant time.

Based upon the same, the Society invited tenders for the proposed demolition of the existing buildings and the development, on 14/02/2008. The Plaintiffs got the technical commercial bid from the Society on 05/03/2008. After considering the proposals/ offers given by the Plaintiffs on 01/05/2008, the members of the General Body of Defendant No.1 Society, unanimously resolved appointment of Plaintiffs and thereby, also authorized executive committee to execute the Redevelopment Agreement with the Plaintiffs. Accordingly, the Society issued Letter of Intent to the Plaintiffs on 11/05/2008. The Society also addressed a letter on 29/08/2008 to the Assistant Commissioner, Borivli describing the deteriorating condition of the building. Apart from other members, Defendant Nos. 2 to 7 has also executed irrevocable consent terms on 09/10/2008.

Sometime in January, 2009, the Final Development Agreement was executed between the Plaintiffs and the Society and also executed deeds of confirmation cum declaration. It has been duly registered. Defendant Nos. 4, 5 and 6 by letter dated 23/04/2009 informed to the Society their willingness to surrender their respective rights in the flat, if the Plaintiffs pay the current market price and a lump sum amounts for the settlement of the objection/dispute. The Plaintiffs by letter dated 28/10/2009, pointed out to Defendant No.1 Society the demand of lump sum consideration of Defendant Nos. 2 to 6 of Rs.25,00,000/ (Rupees twenty five lakh only).

Defendant Nos. 2 to 6, on 09/11/2009, as demand could not be fulfilled, filed the dispute before the Co-operative Court against the Society and the Plaintiffs and thereby challenged to the Development Agreement and further that the meeting so held and the resolution/ decision so taken are not binding upon them. There was no application for interim relief as taken out by the Defendants immediately.

The Deputy Registrar, Co-operative Societies, Mumbai by letter dated 31/12/2009, observed that the work of development was in accordance with the procedure prescribed and there is no irregularity.

On 04/01/2009, a supplementary agreement executed between the Society and the Plaintiffs regarding the further terms and conditions pursuance to the basic Development Agreement. The Plaintiffs got the plan approved in July, 2009 and subsequently amended the plans on 01/01/2010. The Plaintiffs and Society have executed a deed of Rectification on 05/08/2009.

Out of 84 members, 77 members of the Society have vacated their respective premises for the redevelopment. The Plaintiffs have already entered upon the property and demolished the two wings comprising of the members who have vacated their respective flats. The work is in progress. Defendant Nos. 5 and 7 have settled the matter on 15/02/2010 and agreed to vacate their respective flats.

There is no dispute that the Plaintiffs have incurred and invested huge amount approximately Rs. 8.5 Crores till the date, for the purpose of purchasing TDR, security deposit, Bank Guarantee and by depositing cheques towards the rent, brokerage, transportation charges etc. of 77 members.

The Plaintiffs, pursuance to the basic requirements of the consent terms of all the members at the relevant time, and the unanimous resolution in their favor and duly signed and registered documents, proceeded and acted in full swing without any obstruction and objection of anybody except Defendant Nos. 2, 3, 4, 6 and 8.

·        The Plaintiffs procured licenses from the State Archeology Department, which were required for the reconstruction of the buildings within 45 days which was a condition precedent in appointing Plaintiffs as developers
·         The Plaintiffs obtained NOC from the Public Housing Department and removed the reservation, which was required
·             The Plaintiffs has paid scrutiny fees for deduction of TDR;
·             The Plaintiffs has obtained CFO concession;
·            The Plaintiffs applied for and obtained copies of the PR Card, DP remarks, conveyance in favor of the Society, copies of the original building plans, etc.;
·          The building plans were prepared and submitted to the Defendant No.1 Society for its approval; Defendant No.1 Society has approved the building plans submitted by the Plaintiffs and the Municipal Corporation of Greater Mumbai has sanctioned the building plans; the Plaintiffs have obtained the IOD;
·             The Plaintiffs has appointed Architects for the redevelopment project;
·          The Plaintiffs has paid a sum of Rs.11,00,000/ to Defendant No.1 Society towards corpus fund, a sum of Rs. 2,64,00,000/ to members of Defendant No.1 Society and a sum of Rs.25,00,000/ towards security deposit;
·     Out of Rs.5,60,00,000/, a sum of Rs.2,64,00,000/ has been distributed amongst 75 members who have vacated their respective flats and handed over possession of the same to the Plaintiffs;
·     The Plaintiffs has commenced demolition of 2 out of the 5 buildings belonging to the Society, which are to be reconstructed;
·             The Plaintiffs has purchased total TDR required for the entire project from the open market, obtained development rights certificate and has loaded TDR of 1,350 square meters required for the Defendant No.1;
·          The Plaintiffs has paid transportation/ shifting charges to members who have vacated their respective flats;
·         The Plaintiffs has paid to each of the members who have vacated their respective flats, monthly compensation for 11 months to enable them to secure temporary alternate accommodation and balance postdated cheques aggregating to 1,47,51,000/;
·           Defendant No.1 has given possession and Plaintiffs has entered upon the property and started demolition;
·          The Plaintiffs has paid 2 months brokerage charges to the members who have vacated their respective flats for the purpose of acquiring temporary alternate accommodation.

A Division Bench of this Court in Saraswat Co-operative Bank Ltd. Mumbai, V/s. Chandrakant Maganlal Shah & Ors., 2002 (Supp.) Bom.C.R.539= 2001 (1) Mh. L.J. 581, has observed that if a case is made out, the Court can appoint Court Receiver under Order 40 of the Civil Procedure Code (for short, CPC) or pass the order of attachment before judgment as envisaged under Order 38 of the CPC or such other interlocutory stage itself.

The Apex Court in Rajendran & Ors V/s. Shankar Sundaram & Ors 2008 (2) SCC 724 has observed that prima facie opinion at the interlocutory stage is sufficient to pass an order, under Order 38 of the CPC.

In similarly situated matter, though the proceedings were not under Arbitration Act, I have passed the order and appointed the Receiver with a view to complete the project by taking possession for the time being from the tenants with further directions to provide them all facilities as agreed by the Developer. That was also a case of temporary dispossession to complete the project.

In the present case, it is not in dispute that the General Body of the Society which is supreme has taken a conscious decision to redevelop the suit building. The General Body of the Society has also resolved to appoint the Respondent No.1 as the Developer. Those decisions have not been challenged at all. The Appellants, who were members of the Society at the relevant time, are bound by the said decisions.

The Appellants in the dispute filed before the Co-operative Court have only challenged the Resolution dated 27/4/2008, which challenge would merely revolve around the terms and conditions of the Development Agreement. As a matter of fact, the General Body of the Society has approved the terms and conditions of the Development Agreement by overwhelming majority.

Merely because the terms and conditions of the Development Agreement are not acceptable to the Appellants, who are in minuscule minority (only two out of twelve members), cannot be the basis not to abide by the decision of the overwhelming majority of the General body of the Society. By now it is well established position that once a person becomes a member of the Co-operative Society, he loses his individuality with the Society and he has no independent rights except those given to him by the statute and Byelaws.

The member has to speak through the Society or rather the Society alone can act and speaks for him qua the rights and duties of the Society as a body. The member of Society has no independent right qua the Society and it is the Society that is entitled to represent as the corporate aggregate.

The Court also observed that the stream cannot rise higher than the source. Suffice it to observe that so long as the Resolutions passed by the General Body of the Respondent No.2 Society are in force and not overturned by a forum of competent jurisdiction, the said decisions would bind the Appellants. They cannot take a stand alone position but are bound by the majority decision of the General Body.

Notably, the Appellants have not challenged the Resolutions passed by the General Body of the Society to redevelop the property and more so, to appoint the Respondent No.1 as the Developer to give him all the redevelopment rights. The property rights of the Appellants herein in the portion (in respective flats) of the property of the Society cannot defeat the rights accrued to the Developer and/or absolve the Society of its obligations in relation to the subject matter of the Arbitration Agreement.

We have no hesitation in taking the view that since the Appellants were members of the Society and were allotted flats in question in that capacities at the relevant time are bound by the decision of the General Body of the Society as long as the decision of the General Body is in force. As observed earlier, the Appellants have not challenged the decisions of the General Body of the Society which is supreme, in so far as redevelopment of the property in question or of appointment of the Respondent No.1 conferring on him the development rights.

The contesting Defendants/Members are unable to make statement and/or not ready to provide security in case the suit is dismissed but the project is halted at this stage at their instance. Therefore, in view of above facts, as well as, law so referred, the Court is empowered to pass appropriate order, even at the interlocutory stage including appointing the Receiver under Order 38 and Order 40 of the CPC.

In the present case, based upon the majority members, the consent terms as well as the resolution, the parties have already acted upon and proceeded further in view of the valid permission and sanction and registered documents as referred above.

The averments made in the suit as well as in notice of motion, objection so raised by filing dispute on the allegations of fraud and misrepresentation now at this stage is again a matter of trial and details. Those aspects just cannot be gone into at this stage in such fashion merely on the basis of the averments so raised as noted, the conduct of the parties, therefore, also place important role while assessing the necessary elements as contemplated under the CPC before passing any such order.

There is no dispute with regard to the stages/steps taken by the parties read with the investment already made and the fact that the everybody is waiting for the project to complete within a stipulated time and as early as possible so that the members can take and reoccupy the newly premises and/or they can occupy, as early as possible, with all the facilities.

The basic consents and the unanimous resolution as passed and duly registered documents as executed, now just cannot be restored back at the instance of such 4 or 5 Defendants/members. It is not the case that they will be deprived of their rights and the possession permanently. The whole object and purpose of this project is always to get the new premises on the same plot subject to the terms and conditions. Once the premises/ project are completed, all the members will reoccupy the same with the facilities. Therefore, this temporary dispossession to complete the project, in my view, cannot be treated as permanent dispossession as sought to be contended and basically on the ground of fraud and misrepresentation as alleged.

Even if, some allegations are taken note of, still that itself cannot be the reason to halt the project in such fashion, especially when majority of the members and the society till today and even otherwise willing to proceed and continue with the project as already agreed. Therefore, merely disputes have been raised by the some of the Defendants and the same is pending, that itself is the present facts and circumstances cannot be the reason to overlook the basic purpose and object of the project to complete.

The Plaintiffs have filed this suit based upon the agreed and unanimous resolution and registered documents and specially when both the parties proceeded and acted accordingly since so many months. The agreement itself shows that it is not a simple agreement of development. The Plaintiffs has right in the property also, in view of the agreement itself, subject to the conditions so agreed.

Such right just cannot be overlooked at the instance of 5 contesting Defendants. In my view, the Plaintiffs has a right, and basically when it is supported by the Society as well as the majority of the members, to file such suit and for such reliefs as claimed in notice of motion. The challenge to the right and/or entitlement of the Plaintiffs to file such suit and/or to take for such motion for the above reason is unsustainable. There is a legal right to file such suit for appropriate reliefs, so claimed. The suit cannot be dismissed and ad-interim relief just cannot be refused, merely because of objections by 5 members by filing the dispute in the Co-operative Court and raising issue even of the jurisdiction of this Court, pending the dispute before the cooperative Court.

Therefore, considering the above judgments including the Supreme Court to pass appropriate order even at interlocutory stage if the case is made out and in the situation like this where whole object and purpose to complete the project within the prescribed period specially when majority of the members have consented and already vacated the premises and the Plaintiffs have already invested huge amount as recorded above, and provided all necessary alternate accommodation and the facilities and as this dispossession is only for the temporary period till the construction and/or completion of the project, therefore, it is just and convenient and it is in the interest of justice and as this Court is empowered to pass such order and the balance of convenience and equity also lies in favor of the Plaintiffs. Therefore following order:

However, it is made clear that 8 weeks time is granted to vacate the premises voluntarily to these 5 contesting Defendants. No coercive steps should be taken by the Plaintiffs and/or the receiver till this date. It is also made clear that the Plaintiffs and the Society, subject to agreement, will provide all the facilities including payment of rent/ occupation charges as given and provided to the other members. If these members vacate the premises voluntarily, the Plaintiffs to provide/ pay them the necessary amount as agreed. If they do not, then Receiver to take steps in accordance with law and the Plaintiffs to deposit the requisite amount with the Court Receiver towards the compensation/occupation charges.

It is made clear that the Plaintiffs will pay the amount regularly and provide all the facilities as agreed, till the permanent alternate accommodation is handed over to these Defendants in the new building, in question, as agreed.

The Notice of Motion is allowed in above terms. No costs.

Published in interest of Public

- Courtesy Adv. R. P. Rathod.