Bombay High Court
Modern India Ltd vs Belvedere Court Condominium & Ors on 7 May, 2014
Author: Roshan Dalvi
Bench: Roshan Dalvi
(1) NMS 1484/13
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
Amk
NOTICE OF MOTION NO. 1484 OF 2013
IN
SUIT NO. 711 OF 2013
Modern India Ltd. .. Plaintiff
Vs.
Belvedere Court Condominium & Ors. .. Defendants
Mr. D. D. Madon, Sr. Advocate a/w. Mr. Akshay Patil, Mr. Rohan Dakshini,
Mr. Vineet Unnikrishnan i/b M/s. Federal & Rashmikant for the
Plaintiff/Applicant.
Mr. Zal Andhyarujina a/w. Ms. Duhita Lewis, Mr. Jariwala, Ms. Jyoti Ghag
i/b Thakore Jariwala & Associates for the Defendants.
CORAM : MRS. ROSHAN DALVI, J.
Date of reserving the Order : 30 th
APRIL, 2014.
Date of pronouncing the Order : 7 th
MAY, 2014
.
ORDER
1. The plaintiff has challenged the resolution passed by defendant No.1 in the Special General Meeting held on 23.09.2012 and 23.03.2013 and sought an injunction against the defendants from acting upon those resolutions. The plaintiff also seeks restraint upon levy of charges, fees, contributions and non occupancy charges sought from the plaintiff. The Notice of Motion is for the relief of injunction against similar acts. The defendants have essentially opposed the grant of injunction from acting upon the resolution which came to be passed in the meeting held on 23.03.2013. The plaintiff's legal right in respect of the reliefs claimed would have to be considered.
2. The plaintiff developed the suit property and put up ::: Downloaded on - 07/05/2014 23:52:17 ::: (2) NMS 1484/13 construction of a building consisting of Ground + 39 upper floors comprising 78 apartment. The plaintiff has sold 71 apartments under individual deeds of apartments and retained 7 apartments which the plaintiff desires to sell. The plaintiff formed a condominium under Maharashtra Apartments Ownership Act, 1970 and submitted a declaration submitting the same to the provisions of the Act under Section 2 thereof.
The declaration specifies inter alia that the administration of the condominium in accordance with Bye-laws annexed thereto.
3. Clauses 5 & 6 of the Bye-laws relate to members and new members of defendant No.1 association, the relevant parts of which run thus:
5. MEMBERS OF THE ASSOCIATION:
(a) All persons who own and/or have purchased from the Grantors (plaintiff) any residential unit in "Belvedere Court" and which has been submitted to the provisions of the said Act;
(b) The Grantor who has retained the ownership of certain units which will belong to them and their successors in-title.
All the above persons shall automatically be members of the Association .... ....
6. NEW MEMBERS OF ASSOCIATION:
All subsequent Purchasers or subsequent owners of any residential apartment in "Belvedere Court" (i.e. persons other than the members mentioned in clause (5), shall prior to purchasing the residential apartment, make an application to the Board to be accepted as a member of the Association. Such application for membership shall be accompanied with all information as required by the Board. Upon the Association in Special Meeting approving the membership of the subsequent purchaser-applicant and upon the purchaser-applicant becoming the lawful owner of the residential apartment, the Board shall include such purchaser-applicant as a member of the Association......
4. Clause 5 of the Bye-laws shows the Members of the ::: Downloaded on - 07/05/2014 23:52:17 ::: (3) NMS 1484/13 Association. They are:
(a) persons who have purchased their residential units from the plaintiff (shown as the grantor therein) and who owned those units (defendants and other such members) and
(b) the grantor who has retained ownership of certain units which will belong to the grantor or its successor-in-title (plaintiff).
71 out of 78 flats having been sold, 71 members fall under clause 5(a). The remaining 7 members fall under clause 5(b) as they are excepted from Clause 6. 71 members are the purchasers of those 71 flats. All of these are members of the condominium. Under clause 5 they would automatically be the Members of the Association.
5. Clause 6 relates to the New Members of the Association or subsequent purchasers and subsequent owners of residential flats in defendant No.1. These are required to make an application to the Board to be accepted as a Member of the Association prior to purchasing any residential apartments. Their membership had to be approved in a Special Meeting. This did not apply to the persons mentioned in Clause 5.
6. Chapter VIII containing Clauses 61 & 62 relate to Transfers, the relevant parts of which run thus:
CHAPTER VIII TRANSFERS, ETC.
61. Notice to Association: An owner who transfers mortgages or demises his unit, shall within 30 days of the date of the document notify in writing the Association through the Manager, if any, or the president of the Board (in the event there is no Manager) the name and address of his mortgagees, lessee or transferee along with a true copy of the concerned document of Mortgage or transfer or Lease ::: Downloaded on - 07/05/2014 23:52:17 ::: (4) NMS 1484/13 ...........
62. (a) Since the Condominium has been formed even before the sale by the Grantors of a substantial portion of flats/units in the said building "Belvedere Court" (that is a substantial block of unsold premises remain with the Grantors) and since, the formation of such Condominium expeditiously is to complete the title of the Unit holder, till the time the Grantors sell/transfer the respective Unit, the Grantors shall be liable to pay/contribute only the Municipal Taxes at actuals in respect of the respective unsold Unit and a token sum of Rs.11/- (Rupees Eleven) per month towards the general outgoings/maintenance in respect of the respective unsold Units.
7. The transfer by an owner of his unit is, therefore, absolute under Clause 61. Upon such transfer notice thereof has to be given to the Association so that the name of the transferee is recorded under Clause 61 above.
Because the plaintiff formed the condominium before all the flats came to be sold by plaintiff and whilst 7 flats remained to be sold to complete the title of defendant No.1, the plaintiff was to contribute only the actual monthly taxes and a token of Rs.11/- for each of the flat remaining unsold until they were sold. For same reason, though not expressly specified, Clause 6 relating to subsequent purchasers excludes the plaintiff which exclusion would be in respect of the last 7 flats remaining unsold.
8. Chapter X containing Clause 67 (a) & (b) related to amendment of the Bye-laws, the relevant parts of which run thus:
CHAPTER X AMENDMENTS TO PLAN OF APARTMENT OWNERSHIP 67 (a) Amendment of Bye-laws: These Bye-laws (except bye-
laws Nos.6, 12, 26 (b)(i), 50 and 62) may be amended by the Association at any duly constituted General Body Meeting of the Unit Owners convened for such purpose.....
::: Downloaded on - 07/05/2014 23:52:17 ::: (5) NMS 1484/13(b) Bye-laws Nos.6, 12, 26 (b)(i), 50 and 62 are not capable of being amended.
9. Clause 6 is unamendable. Clause 6 relates to persons other than members in Clause 5. Clause 5 comprises to first owners of flats being the flat purchasers from the plaintiff of 71 flats and the plaintiff itself of the remaining 7 flats. Clause 6 has not been amended. However the resolution which is challenged relates to the newly added Clause 61(A). That in terms amends Clause 6 by applying it also to the plaintiff which is excluded in Clause 6. The plaintiff's challenge to the newly added Clause 61(A) shall be presently considered.
10. Clause 62 is also unamendable. It relates to the extent of the liability of the plaintiff as a member of defendant No.1 condominium. The liability cannot be exceeded since clause is unamendable and has not been amended.
11. The reliefs prayed for by the plaintiff shall have to be considered in the light of the above clauses of the Bye-laws.
12. In the meeting dated 23.09.2012 several resolutions including resolution No.10 came to be passed seeking to amend Bye-laws 7(A) & 7(B) and 67(a) & 67(b). the initial Bye-laws contained only Clause 7 relating to the legal representatives of a deceased owner to automatically become members of the association with which there is no dispute. Clauses 7(A) & 7(B) are added in the new Bye-laws which the plaintiff has challenged. These clauses, upon the resolution which came to be passed, applied to all subsequent purchasers and owners under Clause 7(A). Each subsequent purchaser and owner has to contribute Rs.500 per sq. ft.
::: Downloaded on - 07/05/2014 23:52:17 ::: (6) NMS 1484/13towards the building development and improvement fund. Under Clause 7(B) all owners are required to pay Re.1 per sq. ft. p.m. towards development fund.
13. Clause 67(a) and (b) are sought to be amended to add Clause 67(A) & (B). There is no material difference.
14. Consequently the plaintiff's liability is only to the extent of Clause 62(a) which has remained unchanged and hence the plaintiff refutes the liability under Clause 7(A) and 7(B). This relief is not opposed before the Court. Hence the relief in terms of prayer (a)(ii) and (iii) would require to be granted.
15. The plaintiff has challenged another resolution in the further meeting held on 23.03.2013. Under this resolution Clause 61A is added to the Bye-laws. Clause 61A runs thus:
61A. No owner shall be entitled to sell, assign or transfer his/her unit without obtaining prior permission of the Board. Any owner desirous of selling/assigning/transferring his/her unit shall give notice of such intention of selling assigning and transferring to the Board giving the details and particulars of the Purchaser(s)/ Assignee(s)/Transferee(s) as prescribed by the Board. The Board shall therafter within 15 days of receipt of such notice, after considering the suitability of the intending Purchaser(s)/ Assignee(s)/Transferee(s) grant its permission for such sale, assignment and transfer and admission of the intending purchaser(s)/ Assignee(s)/Transferee(s) to the membership of the Condominium upon the sale/assignment/transfer of the Unit in favour of such intending Purchaser(s)/Assignee(s)/Transferee(s) being completed subject to payment of all dues including interest on delayed payment to the Condominium as per this Bye-laws".
16. Clause 61A is similar to Clause 6. It goes further than Clause 6 also. It deals with the application to be made not merely for being ::: Downloaded on - 07/05/2014 23:52:17 ::: (7) NMS 1484/13 accepted as the Member of the Association, but also for the purchase of the flat itself. It imposes a restriction upon all owners to their entitlement to sell, assign or transfer their flats/units without permission of the board. It requires "suitability" of the intending purchasers/assignees/transferees to be considered by the board. It does not except the persons shown as members in Clause 5. Consequently it does not except the plaintiff. The plaintiff has not sold 7 out of 78 flats. The plaintiff claims to be entitled to sell those flats just as the plaintiff sold the first 71 flats to the members of defendant No.1 (which includes defendant Nos.2 to 7 who are on the board of defendant No.1 at present.)
17. It is the case of the plaintiff that the plaintiff is not bound by the restriction contained in Clause 61A. It is also the case of the plaintiff that the restriction is sought to be imposed upon plaintiff is malafide. There are a number of disputes between the parties. The Court is informed that there are other litigations too. The plaintiff apprehends that the defendant would malafide refuse the transfer to the transferees chosen by the plaintiff.
18. Incidentally the Bye-laws also show how the business of the meeting was transacted when the said resolution was passed which has erroneously come to be incorporated in the amended Bye-laws and which runs thus:
(a) Members suggested that the time given to the Board to respond to proposed be shortened to 15 days instead of 30 as proposed. Also the approval process of the Board should be fair and reasonable. The Board of Managers accepted this request.
(b) Mr. Kapadia reminded members and the Board of Managers that, as a prior board member himself, the practice of prior approval of the Management Board to any sale/purchase of flat in the condominium had always been in place and was based on Article 9 of the Bye Laws was unnecessary and the Board of ::: Downloaded on - 07/05/2014 23:52:17 ::: (8) NMS 1484/13 Managers should instead enforce Article 9.
(c) Mr. Jatia asked the Board to check the legality of this Bye Law, Mr. Uberoi made a recommendation to the Board of Managers to get a Lawyers opinion confirming the legality of this amended Bye Law.
19. The Minutes of the Meeting dated 23.03.2013 shows what transpired thereat. It appears that Clause 61A initially required 30 days period for the board of defendant No.1 to consider the suitability of the intending purchaser. It was suggested that that period be curtailed to 15 days which suggestion is shown to have been accepted and implemented.
A further suggestion that the approval of the board should be fair and reasonable is not incorporated in the newly amended Clause 61A. The plaintiff's apprehension that the approval process would not be fair and reasonable, therefore, cannot be ruled out in view of the disputes between the parties.
20. The business that transpired at the meeting held on 23.03.2014 also shows that one Mr. Jatia of the plaintiff asked the board to check the legality of the Bye-law No.61A. One Mr. Uberoi recommended the board of management to get a lawyer's opinion confirming the legality.
21. The plaintiff has challenged the resolution as opposed to the bye-laws which constitute a contract between the parties and by which the members of the Condominium/Association are bound.
22. Mr. Madon on behalf of the plaintiff argued that the plaintiff has a proprietary right in the 7 remaining flats in which he continues to be the owner and under Clause 5(b) of Bye-laws is a member of the association. Permission for sale is opposed to law. Mr. Madon would argue that in any event Clause 16A relates only to transferees of the plaintff ::: Downloaded on - 07/05/2014 23:52:17 ::: (9) NMS 1484/13 under Clause 5(a) of the Bye-laws; the other transferees are already covered under Clause 6 of the Bye-laws.
23. Mr. Madon also argued that a similar restriction upon transfer or upon admission of a member in a co-operative society is specifically disallowed under the Maharashtra Co-operative Societies Act and that such a restriction is in effect only for demanding transfer fees and extorting the same. Mr. Andhyarujina on behalf of the defendants contended that the clause is only a reasonable restriction upon the sale of flats in the association/condominium. The members would not like to have an undesirable neighbour. A person who would commit nuisance or who would have illegal antecedents or whose admission as a member would constitute any danger to the society, its members or its premises may be excluded upon the application being considered by the board. Mr. Andhyarujina would argue that the clause is only to maintain the profile of the building constituting reasonable restrictions which can be allowed in law. He also argued that the clause necessarily relates to restriction upon the membership rather than the actual transfer. He also argued that the Maharashtra Ownership Apartments Act, 1970 is silent as to the objection against transfer which is contained in the Maharashtra Co-operative Societies Act, 1960.
24. The legal right of the owner of an association/condominium under the Maharashtra Apartment Ownership Act, 1970 to which my attention has been drawn by Mr. Madon has to be seen. The status of apartments, the ownership of apartments and the entitlement to the common areas and facilities are set out in Sections 4, 5 & 6 of the Act, the relevant parts of which run thus:
4. Status of apartments.-......... each apartment, together with ::: Downloaded on - 07/05/2014 23:52:17 ::: (10) NMS 1484/13 its undivided interest in the common areas and facilities, appurtenant to such apartment, shall for all purposes constitute heritable and transferable immovable property.........
5. Ownership of apartments.- (1) Each apartment owner shall be entitled to the exclusive ownership and possession of his apartment........
6. Common areas and facilities.- (1) Each apartment owner shall be entitled to an undivided interest in the common areas and facilities.....
25. Consequently the owner is an owner of the unit/flat purchased by him/her as also a co-owner in the common areas and facilities. As such he/she is entitled to transfer as also bequeath the property owned by him/her as he would any other immovable property. The 5 modes of the transfer of the property set out in the Transfer of Property Act have been included in Section 4 together with any other manner of transfer. Each owner, including the plaintiff, defendants and other members of the association, has a similar right. Under the Bye-laws as initially framed the application was required to be made at the time subsequent purchase/sale and for subsequent owners. The present members and the plaintiff contemplated in Clause 5 were excepted. Consequently when the present members became owners by purchasing their units/flats, their application for membership was not put up before the Board of Association. Similarly for the other members who would be allotted flats by the plaintiff, as has been done for the 71 members already, the plaintiff would decide to whom to allot the premises and consequently transfer it by way of an agreement or a deed of apartment. Such transfer is contemplated in the expression "in any other manner whatsoever" in Section 4 of the Act. A reading of Section 4 would show the complete transferability of an apartment by its owner under the Act. If the plaintiff malafide sought to sell any of those flats to undesirable parties who may create such nuisance, danger or ::: Downloaded on - 07/05/2014 23:52:17 ::: (11) NMS 1484/13 otherwise, the association would have recourse to law.
26. The plaintiff apprehends that defendant No.1 associate would malafide refuse membership of the association to any person to whom the plaintiff desired to sell the remaining 7 flats. It may be mentioned that despite deliberation requiring the approval process to be fair and reasonable, that aspect has not been incorporated in Clause 61A of the Bye- laws justifying the apprehension of the plaintiff of course. If under Bye-law 61A the board of defendant No.1 malafide refused to admit any person without any valid reason, he/she would have recourse to law in a Civil Court.
27. Under these circumstances it would have to be seen whether Clause 61A, which runs contrary to Clause 6 of the Bye-laws, would impose a reasonable restriction upon the plaintiff as it would upon subsequent purchasers and subsequent owners under Clause 6 so that the application for membership of a proposed transferee would be turned down only for valid reason and whether that much can or must be allowed under the existing Bye-laws which has come to incorporated in Clause 61A pursuant to and meeting validly convened and held and the resolution having being passed by the requisite majority.
28. Mr. Madon drew my attention the judgment in the case of Hill Properties Ltd. Vs. Union Bank of India & Ors. (2014) 1 SCC 635 in which the restriction on transferability and alienability by a mortgage, sale, etc of a flat in a company owning a building has been considered. In that case the flat purchasers became shareholders of the company. They had a right to occupy the flat. The Supreme Court considered whether their right extended also to mortgage the flat to a bank and if so whether the bank ::: Downloaded on - 07/05/2014 23:52:17 ::: (12) NMS 1484/13 could have it attached and sold in execution of a decree for non payment of the mortgage debt. The Court observed in para 12 of the judgment that the right, title and interest over the flat which is conveyed to the party is a specie of property, whether that right has accrued under the articles of association of a company or through the Bye-laws of a co-operative society. The Court also observed that these rights are statutorily recognized under the Maharashtra Apartment Ownership Act, 1970. (Sections 4, 5 & 6 of the Maharashtra Apartment Ownership Act, 1970 are illustrations). The Court considered that whether they be members of a co-operative society or a shareholders of a company, the flat holders had an independent right in the flat and a collective right in the flat complex. The Court observed thus:
A flat owner's right to dispose of his flat is also well recognised, and one can sell, donate, leave by will or let out or hypothecate his right.
It is too late in the day to contend that flat-owners cannot sell, let, hypothecate or mortgage their flat for availing of loan without permission of the builder, society or the company. So far as a builder is concerned, the flat-owner should pay the price of the flat.
So far as the society or company in which the flat-owner is a member, he is bound by the bye laws or articles of association of the company, but the species of his right over the flat is exclusively that of his. That right is always transferable and heritable. Of course, they will have charge over the flat if any amount is due of them upon the flat.
29. The Court referred to the case of DLF Qutab Enclave Complex Educational Charitable Trust Vs. State of Haryana & Ors. (2003) 5 SCC 622 in which the Supreme Court held that the right to transfer the land is incidental to the right of ownership and can be taken away only by statute. In the case of DLF (supra) the Supreme Court had to consider the Haryana Development and Regulation of Urban Areas Act, 1975. Under Rules 10 & 11 of the Rules framed thereunder an embargo ::: Downloaded on - 07/05/2014 23:52:17 ::: (13) NMS 1484/13 was created upon certain type of transfer of lands. In para 32 of that judgment the Court held:
32. Although the object of the said Act is laudable but does it mean that with a view to achieve the same the regulatory provisions contained therein should be construed as a total prohibition on transfer of land ........
30. The Court also referred to the case of Ramesh Himmatlal Shah Vs. Harsukh Jadhavji Joshi (1975) 2 SCC 105 which considered the attachability of any flat in a co-operative society under Section 60 of the CPC. In that case also the society owned the flats allotted to the members of the society who had the right of occupation. In execution of a decree the creditor sought to attach the flat. The Court held that the flat in a co-operative society was both attachable and saleable. Of course, in that case the Court also observed that the auction purchaser would have to apply to be a member of the society. His application for membership would be granted unless there were cogent and relevant reasons for not doing so.
31. It is observed in para 24 of the judgment that if the society turns down his application for membership (which, of course, cannot be done except for valid reasons) it was up to him to take recourse to law.
However that would not make the flat non attachable or non saleable.
32. Clause 61A impliedly amends Clause 6. Clause 6 is stated to be unamendable under Clause 67(a) as also the amended Clause 67(a). Clause 61(a) effectively amending Clause 6 is, therefore, against the Bye- laws of the association.
33. Clause 67(a) makes Clause (6) unamendable because it relates to a separate and distinct class of persons, being persons who would be ::: Downloaded on - 07/05/2014 23:52:17 ::: (14) NMS 1484/13 members upon sale (execution of the agreement or deed of apartment) by the plaintiff who is the present member of 7 flats. The reason for this exception is easy to find. The plaintiff would not have formed the condominium/association of 71 persons to whom the plaintiff sold (entered into agreement/deed of apartment) until the plaintiff sold (entered into such agreement/deed of apartment) with the remainder of the persons. It was only to "form the condominium expeditiously" "to complete the title of the unit holders" (being the 71 purchasers of flats from the plaintiff including the defendants) that the condominium/association was formed "even before" the sale by the plaintiff of the remaining 7 flats. Consequently Clause 6 and also Clause 62 must remain unamendable. No indirect amendment of these clauses can be allowed. The plaintiff has a legal right in the remaining 7 flats which the plaintiff can exercise as before (as done in respect of the 71 flats already sold. The bye-laws constitute a contract between the association/ condominium and its members and between the members inter se. Hence the defendants as also the other members are bound by the bye-laws including Clauses 6 & 62 thereof. The defendants are, therefore, estopped from acting to the contrary. The rights of the plaintiff continue as before in respect of the sale of the remaining 7 flats and the execution of the agreement/deed of apartment with the purchasers who would become members without any vetting by the board of the association as before. They do not constitute and cannot be taken to be "new members" or "subsequent members" as shown in Clause 6 of the bye-laws.
34. This principle would apply to the above extent to all "new members" or "subsequent members" pursuant to Clause 61A of the bye- laws. It, however, cannot apply even to the above extent to the plaintiff for the remaining 7 flats in the building constructed by it in view of the ::: Downloaded on - 07/05/2014 23:52:17 ::: (15) NMS 1484/13 unamendable Clause 6 for the reason that but for such exception of the plaintiff therefrom the condominium/association itself would not have been formed until now.
35. The defendants have sought to enforce Clause 61A as a part of its Bye-laws. Consequent upon a public notice given by a proposed transferee/allottee of the flat under a deed of apartment, the attorney of the defendant sent a reply stating that under the existing Bye-laws no member was permitted to sell or transfer his apartment without prior consent of the Board of Management which is a pre-condition to a sale.
The reply also stated to the proposed transferee that he would not be entitled to be admitted as a member and would not be entitled to enjoy any of the facilities and amenities to which the members were entitled should he purchase the flat without consent of the Board of Management.
36. Defendant No.1 Association would not be entitled to reject the membership applied for by any of the persons who have been allotted the flat under the deed of apartment executed by them with the plaintiff under Clause 61A.
37. Hence Notice of Motion is granted in terms of prayer (a) (i),
(ii), (iii) and (iv).
38. The defendants shall file their written statement within 30 days. The suit is adjourned to 20.06.2011 at 3 p.m. for framing issues upon such written statement.
This order is stayed till 20.06.2014.
(ROSHAN DALVI J.) ::: Downloaded on - 07/05/2014 23:52:17 :::