Writ Petition No.2591 of 2004

22nd November, 2006

Petitioner Counsel: Mr. J. REIS,Mr. I. A. BAGARIA
Respondent Counsel: Mr. NIRANJAN PANDIT,Mr. V. MANNADIAR,Mannadiar & Co.

JUDGMENT

JUDGMENT :- The First Petitioner is a partnership firm which is carrying on the work of developing landed property comprising of CTS 159/A/1593 of Village Vadavali at Chembur, Mumbai. An entity by the name of Bombay Construction and Engineering Company Limited is the registered owner of the plot of land, having acquired right, title and interest under a consent decree dated 13th February, 1996 passed by this Court in a suit on the Original Side. The plot of land admeasures 5928.50 sq. mtrs. The First Petitioner entered into agreements with flat purchasers and it is common ground that all those agreements are in the same format of which a sample has been placed on the record of the Court. The flat purchase agreements record that a portion of the property described as the "retained property" was being developed by the owners, Bombay Construction and Engineering Company Private Limited. The owners had in turn entered into a Memorandum of Understanding on 10th April, 1996 with Kritika Properties and Developers Pvt. Limited ("Kritika") by which Kritika would be permitted to construct on the balance portion. In so far as the First Petitioner is concerned, the owners had permitted the First Petitioner to develop the retained property and to enter into agreements for the sale of flats on the construction carried out thereon. The agreements which the First Petitioner entered into with the flat purchasers inter alia recorded that the agreement between the owners with Kritika contained the following stipulation :

"(iii) At the absolute discretion of Owner, the Owner may form and get registered separate and independent societies of purchasers/ acquirers of flats, units, premises, etc. on the retained portion and balance portion. In the event of there being separate societies for each building the owner will execute a conveyance in favour of both societies or confederation thereof to be formed of said property."

2. The flat purchase agreements that were entered into by the Petitioner with all the individual purchasers contained several references to the obligation assumed by the First Petitioner to constitute a co-operative society of flat purchasers in the building to be constructed by the First Petitioner. The First Petitioner was authorized by the owner to construct a building consisting of a stilt and 18 floors. Clause 3(f) of the flat purchasers agreements provides as follows :

"3(f) The nature of the organisation to be constituted, of the purchasers/acquirers of the Flat, premises units etc. in the said building, and to which the title in respect of the said property is to be passed, in the manner set out hereunder, being a Co-Operative Housing Society to be governed by the provisions of the Maharashtra Co-Operative Societies Act, 1960 and to be formed in the manner set out hereunder;"

3. For the purposes of these proceedings it would not be necessary to advert to all the clauses of the flat purchaser agreements which contained a reference to the obligation of the First Petitioner to form a co-operative society. However, for the purposes of clarity, it would be sufficient to extract the provisions of clause 12 of the flat purchase agreements which provided as follows :

"12. Unless it is otherwise agreed to by and between the parties hereto, and for effecting and carrying out the intentions of this Agreement, after completion of the development of the entire property viz. said retained Property & said balance portion in all respects, but not otherwise, the Owner shall after the registration of two separate and independent society as aforesaid, cause to be transferred jointly to the said societies or confederation of the same (hereinafter referred to as "said confederation") the right, title and interest of the said Owner in respect of building on said retained property and Kritika in respect of buildings/structures constructed on said balance portion in the manner specified hereinafter and land thereto, by execution of necessary Deed/s of Conveyance (to the extent as may be permitted by the concerned authorities) such deeds and documents shall be prepared in keeping with the terms, conditions and provisions of this Agreement."

4. The Petitioners constructed a building on that portion of the land which is described as 'retained property' consisting of a stilt and 18 floors and comprising of a total of 34 flats. 27 out of 34 flat purchasers submitted an application before the Deputy Registrar in January, 2004 for the registration of a co-operative society under the provisions of the Maharashtra Co-operative Societies Act, 1960. The application was rejected by the Deputy Registrar on 16th February, 2004 and an appeal against that order came to be dismissed by the Divisional Joint Registrar on 15th June, 2004. The revision filed by the Fourth Respondent was allowed by the State Government and the Deputy Registrar was directed to register the society under the provisions of the Maharashtra Co-operative Societies Act, 1960. After the application for registration had been dismissed by the Deputy Registrar on 16th February, 2004, a declaration submitted by the Petitioners under Section 2 of the Maharashtra Apartment Ownership Act, 1970 was duly registered. The Petitioners in these proceedings under Article 226 of the Constitution have impugned the order of the revisional authority by which the rejection of the application for registration of a co-operative society was set aside and the society was directed to be registered.

5. Three submissions have been urged in support of the Petition before the Court. The first and the principal submission is that under Section 10(2) of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, there is an embargo on the registrar of cooperative societies registering a co-operative society where the promoter has submitted the property to the Maharashtra Apartment Ownership Act, 1970 by executing and registering a declaration as provided by that Act. Hence, it was urged that once the promoters had executed and registered such a declaration on 8th March, 2004, there was an absolute prohibition on the registration of the co-operative society by virtue of the provisions of Section 10(2) of the Act of 1963. The second submission that was urged was that the revisional authority has erred in applying the requirement that a minimum of 60% of the flat purchasers should join in the proposal for the registration of a society to the building that forms the subject matter of the proposed registration and it was the submission of the Petitioners that since there was a composite project for the development of three buildings, 60% must be regarded as a proportion for the total number of tenements of all the three buildings put together. Thirdly, it was urged that the revisional authority had transgressed the limits of the revisional jurisdiction by appreciating the facts. These submissions would now fall for determination.

6. While considering the first submission that has been urged on behalf of the Petitioners, it would at the outset be necessary to have regard to some of the relevant provisions of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963. Section 2(c) of the Act defines the expression "promoter" to mean inter alia a person who constructs or causes to be constructed a block or building of flats, or apartments for the purpose of selling some or all of them to other persons, or to a company, co-operative society or other association of persons. Section 3 prescribes the general liabilities of a promoter and requires a promoter in all transactions with persons intending to take or taking one or more of such flats to give or produce information and documents which the section requires to be disclosed. Section 4 requires a promoter before accepting any sum of money as advance, which shall not be more than 20% of the sale price to enter into a written agreement for sale with flat purchasers and to have the agreement registered. The agreement is required by the statute to be in the prescribed form and under sub-section (1-A), the agreement is to contain the particulars which are enunciated therein. Among the particulars is the liability of the promoter to construct the building in accordance with the plans and specifications approved by a local authority, the indication of a date by which possession has to be handed over, the extent of the carpet area of the flat and the price of the flat including the proportionate price for the common areas and facilities. For the purposes of the present proceedings, it would be necessary to advert to sub-clause (v) of clause (a) of sub-section (1-A) of Section 4 under which the agreement has to disclose the precise nature of the organisation to be constituted of the persons who have taken or are to take the flats. The agreement must also disclose the nature, extent and description of the limited common areas and the facilities and the percentage of undivided interest in common areas and facilities appertaining to the flat agreed to be sold. Section 10 prescribes the obligation of the promoter to form a co-operative society or a company and is as follows :

"10. Promoter to take steps for formation of co-operative society or company.

[(1)] As soon as a minimum number of persons required to form a Co-operative society or a company have taken flats, the promoter shall within the prescribed period submit an application to the Registrar for registration of the organisation of persons who take the flats as a Co-operative society or, as the case may be, as a company; and the promoter shall join, in respect of the flats which have not been taken, in such application for membership of a co-operative society or as the case may be, of a company. Nothing in this section shall affect the right of the promoter to dispose of the remaining flats in accordance with the provisions of this Act.

(2) If any property consisting of building or buildings is constructed or to be constructed [and the promoter submits such property to the provisions of the Maharashtra Apartment Ownership Act, 1970, by executing and registering a Declaration as provided by that Act] then the promoter shall inform the Registrar as defined in the Maharashtra Co-operative Societies Act, 1960, accordingly; and in such cases, it shall not be lawful to form any co-operative society or company."

The provisions of Section 10 would indicate that a promoter is under an obligation as soon as, that is to say, immediately upon the minimum number of persons being required to form a co-operative society taking up flats to submit an application to the registrar for the registration of the organisation of persons who take flats, as a co-operative society or, as the case may be, as a company. The promoter is under an obligation to join in the membership of the co-operative society in respect of the flats which have not yet been taken, but his entitlement to dispose of the remaining flats is protected. Sub-section (2) of Section 10 then stipulates that if any property consisting of a building is constructed or to be constructed and the promoter had submitted such property to the provisions of the Maharashtra Ownership Apartment Act, 1970 by executing and registering a declaration, the promoter shall inform the registrar, and in such cases it shall not be lawful to form a co-operative society or a company.

7. Rules are framed under the Act of 1963 and the Maharashtra Ownership Flats (Regulation of the Promotion of Construction etc.) Rules, 1964 inter alia provide in Rule 8 the period for submission of an application for registration of a co-operative society or company of flat purchasers. Rule 8 provides as follows :

"8. Period for submission of application for registration of co-operative society or company of Flat purchasers. Where a co-operative society or a company of persons taking the flats is to be constituted, the promoter shall submit an application to the Registrar for registration of the co-operative society or the company as the case may be, within four months from the date on which the minimum number of persons required to form such organisation have taken flats.

Where the apartment takers propose to submit the apartments to the provisions of the Maharashtra Apartment Ownership Act, 1970, by executing Declarations and Deeds of Apartments as required by that Act, the promoter shall inform the Registrar as defined in the Maharashtra Co-operative Societies Act, 1960, as soon as possible after the date on which all the apartment owners (being not less than five) have executed such Declaration and Deeds of Apartment."

Finally, it would be material to note the provisions of the Maharashtra Apartment Ownership Act, 1970 more specifically Section 2 thereof. Section 2 of the Act of 1970 provides that the Act shall apply only to property, the sole owner or all of the owners of which submit the same to the provisions of the Act by duly executing and registering a declaration as therein after provided. Section 4 of the Act stipulates that each apartment together with its undivided interest in the common areas and facilities appurtenant to such apartment shall for all purposes constitute heritable and transferable immovable property within the meaning of any law for the time being in force. The contents of a declaration are provided for in Section 11 of the Act.

8. The provisions of sub-sections (1) and (2) of Section 10 of the Maharashtra Ownership Flats Act, 1963 must be given a harmonious construction. Under sub-section (1) the promoter is under an obligation to submit an application for the registration of a co-operative society or, as the case may be, a company immediately upon the minimum number of persons required to form a co-operative society or a company taking up flats. Sub-section (2) on the other hand recognizes that under the provisions of the Maharashtra Apartment Ownership Act, 1970 the promoter is entitled to submit such a property to the provisions of the aforesaid Act by executing and registering a declaration. Upon the promoter informing the registrar accordingly sub section (2) stipulates that it shall not be lawful to form a co-operative society or a company. The provisions of sub section (1) of Section 10 must be read in the context of Section 4 under which the agreement which a promoter enters into with flat purchasers is required to contain particulars in regard to the precise nature of the organisation to be constituted of the persons who have taken or are to take flats. Once the agreement that is entered into with flat purchasers spells out the precise nature of the organisation and the promoter has held himself down to an obligation to constitute a co-operative society, the promoter must as a consequence take all the necessary steps as required by sub-section (1) of Section 10 to submit an application for the registration of a co-operative society. Where the promoter has failed to fulfill this statutory obligation it would be manifestly unlawful on his part to defeat the compliance of the provisions of sub-section (1) of Section 10 either by opposing an application by the requisite number of flat purchasers for the registration of a co-operative society or obviate such an application by submitting a declaration under the Maharashtra Apartment Ownership Act, 1970. If the promoter has to submit the property to the provisions of the Act of 1970, the agreements entered into under Section 4 of the Maharashtra Ownership Flats Act, 1963 must specifically spell out that the promoter intends to do so, so as to place every individual flat purchaser on notice of the organisation by which the flat purchasers would be governed.

9. In the present case the agreements that were entered into by the First Petitioner with the individual flat purchasers leave no manner of doubt that those agreements were entered into on the express representation that a co-operative society of the flat purchasers was to be formed. Clause 3(f) places the matter beyond doubt by stipulating that a co-operative housing society would be formed under the provisions of the Maharashtra Co-operative Societies Act, 1960 of all the purchasers of flats and units in the building. In fact, the agreements contemplated that while the First Petitioner was being empowered by the owners to develop a building on what was described as the retained land, Kritika would be developing the land which is described as the balance land. Clause 12 of the agreements stipulates that after two separate and individual societies are registered, the owners would cause to be transferred jointly to those societies or to a confederation thereof the right, title and interest of the owners in respect of the building on the retained land and in respect of the building constructed by Kritika on the balance portion.

10. In the face of the solemn contractual obligation assumed by the First Petitioner, the right enuring to the benefit of the flat purchasers to associate themselves in the formation of a co-operative housing society was sought to be defeated by the Petitioners herein by submitting the property to a declaration under the Maharashtra Apartment Ownership Act, 1970. On behalf of the Petitioners, however, reliance was sought to be placed on Clause 6 of the individual flat purchase agreements under which a reference is made to the percentage of the undivided interest of the purchasers in the common areas and facilities to support the submission that this would contemplate a declaration under the Maharashtra Apartment Ownership Act, 1970. The submission cannot be accepted for the simple reason that the aforesaid provisions of Clause 6 are directly referable to sub clauses (vi) and (viii) of clause (a) of sub-section (1-A) of Section 4 of the Maharashtra Ownership Flats Act, 1963. Under those provisions as already noted the nature, extent and description of the common areas and facilities and percentage of undivided interest in the common areas and facilities appurtenant to the flat agreed to be sold has to be disclosed in the agreement of sale. Clause (vi) was therefore in compliance with the statutory obligation under Section 4(1-A) and has to be read in that context. Reference was then made to a supplementary agreement that was entered into by the First Petitioner with one flat purchaser, Gangadhar Agarwal. The occasion for the supplementary agreement was that the promoter had after the execution of the flat purchase agreement called upon the purchaser to pay a lump sum to meet the costs of maintenance of a gymnasium and swimming pool. In the supplementary agreement, the promoter agreed to transfer the one time deposit to a co-operative society, company or other body of flat owners of Kritika building. It is impossible to hold that the supplementary agreement which was confined to the payment of a lump sum deposit for a specified purpose could override the provisions of the main flat purchase agreement which was a statutory agreement entered into in pursuance of Section 4. Moreover, it is also common ground before the Court that such an agreement was entered into only with one flat purchaser. In these circumstances, the main submission that has been urged on behalf of the Petitioners on the basis of the provisions of Section 10(2) cannot be accepted. Before parting with this aspect of the matter, it would be material to note that both before the Deputy Registrar of Co-operative Societies as well as before the revisional authority, the First Petitioner reiterated its obligation to form a co-operative housing society and the only submission that was advanced was that such a society would be formed after the entire project is complete.

11. The submission that an inadequate number of persons have joined together in the formation of the co-operative society in the present case has no merit whatsoever. 27 out of 34 flat purchasers joined in the application for registration of the co-operative society. Section 6 of the Maharashtra Co-operative Societies Act, 1960 requires that a society cannot be registered unless it consists of atleast 10 persons. The requirement of the Act cannot be overridden by an administrative circular. Be that as it may, in any event 27 out of 34 flat purchasers would meet even the requirement of 60% which is stipulated under the policy directives of the State Government. Finally the last submission to the effect that the revisional authority had reappreciated the facts and has transgressed the limits of the revisional jurisdiction cannot be accepted. The Deputy Registrar had rejected the application for registration of a co-operative society on the ground that a minimum of 60% of the flat holders have not joined together in the application. This ex facie was erroneous. The Deputy Registrar allowed extraneous material on the record in his decision making, in that he came to the conclusion that since common amenities are to be provided for the flat holders of three buildings, the amenities could not be divided if the registration of the three buildings was to be made independently. The Divisional Joint Registrar affirmed the conclusion of the Deputy Registrar. As already noted above, the flat purchase agreements contained a specific provision in regard to the manner in which separate and independent societies would be formed of the purchasers of units in the building constructed on the retained land on the one hand and the balance land on the other. The manner in which the conveyance can be executed either to the respective co-operative societies or to a confederation of the societies is also spelt out in the agreements. The agreements also contained provisions in regard to the user of the common amenities. In this view of the matter, the issue of registration of a co-operative society could not have been derailed by a reference to considerations which had no bearing on the obligation of the promoter to form a co-operative society in accordance with law. For all these reasons, no case for interference under Article 226 has been made out. The Petition shall stand dismissed. The Petitioners shall pay costs quantified at Rs.10,000/- each to the State of Maharashtra and to the Fifth Respondent.

Petition dismissed.