Bombay High Court
Shubham Builders vs Kanchan Villa Co-Operative Society Ltd on 4 April, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
2024:BHC-OS:6074
(20)CARBPL-19952-2023.doc
rajshree
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION (L) NO.19952 OF 2023
Shubham Builders ] .. Petitioner
vs.
Kanchan Villa CHS Ltd. & Ors. ] .. Respondents
Mr.Karl Tamboly a/w Vikramjeet Garewal and Preet Vora i/b Rashmi Pendse for the Petitioner.
Mr.Mayur Khandeparkar a/w Mr.Anuj Desai and Umesh Tawari i/b M/s. S. Ashwinikumar & Co. LLP for Respondent No.1.
Mr.Simil Purohit a/w Shanay Shah, Piyush Shah, Dishang Shah and Hetta Sagar i/b Piyush Shah, for Respondent Nos.2 to 8.
CORAM : BHARATI DANGRE, J DATE : 4th April, 2024.
P.C. 1] Shubham Builders, the Developer duly appointed by the Respondent No.1-Society, for development of its building, has filed Petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking direction against Respondent Nos.2 to 8, to immediately hand over, quiet, vacant and peaceful possession of 8 flats and one garage in their possession in the Building, Kanchan Villa Co-operative Housing Society, situated at Plot No.15 and 16, Goraswadi, Malad, in accordance with the terms of the Development Agreement, so as to implement the Re-development project. In the alternative, the Developer has sought appointment of the Court Receiver in respect of 1/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 ::: (20)CARBPL-19952-2023.doc the flats and the garage in possession of the Respondents, with a direction to take forcible possession for handing over of the same to the Petitioner.
2] I have heard learned counsel Mr.Karl Tamboly for the Petitioner, Mr.Mayur Khandeparkar, for Respondent No.1 and Mr.Simil Purohit for Respondent Nos.2 to 8.
3] When the Respondent No.1, decided to undertake redevelopment of its building, on being satisfied with the offer of Shubham Builders, it was appointed as a Developer, in a Special General Body Meeting held on 28.04.2013, by majority vote of 15 out of 16 eligible members. However, as the agenda for the meeting was incomplete, the meeting was adjourned to 05.05.2013 and on that date, three members of the Society requested to accept the consent in writing since they were proceeding out of station and were unable to attend the SGM.
Pursuant to the aforesaid meeting, 16 out of 24 society members issued consent letters in their individual capacity agreeing to the appointment of Shubham Builders as the Developer. Accordingly, the Petitioner was appointed to undertake the project of redevelopment.
4] On 17.08.2013, a Memorandum of Understanding was entered between the Developer and Respondent No.1-Society and it was followed by Agreement for Redevelopment as well as Power of Attorney. It is the case of the Petitioner, it spent huge amount towards the conveyance deed dated 28.05.2014 for the property executed in favour of Respondent No.1 and on its execution on 28.05.2014, it was registered with the Sub Registrar of Assurances, Goregaon, at Borivali.
2/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 :::(20)CARBPL-19952-2023.doc Ultimately, by an Agreement dated 29.05.2014, which was registered on 30.05.2014, the Petitioner was appointed as a Developer and the terms and conditions of the redevelopment were specifically set out therein.
The Petitioner borne the stamp duty of Rs.30,21,450/- on the Development Agreement and on 29.05.2014, Respondent No.1 executed Power of Attorney (POA) in its favour, so as to enable it to undertake the redevelopment process and the Power of Attorney was duly registered. As a consequence of execution of the aforesaid documents, the Petitioner acquired the rights to undertake redevelopment of the property of the Society, including the structure standing therein.
5] In the entire process, there were some disgruntled elements, who were not ready and willing to accept the Petitioner as the Developer and this resulted in initiation of proceedings alleging non compliance of the guidelines dated 03.01.2009, published by the Co- operative Department, to be adopted for selecting a prospective developer. Even the grievance in this regard was placed before the Deputy Registrar, Co-operative Societies, Mumbai, who passed an order on 07.05.2013, holding that the necessary compliance was ensured before the Petitioner was appointed as the Developer and the meeting in which the resolution was passed, was properly held.
6] Being aggrieved by the said order, 8 members, who were otherwise not happy with the appointment of the Petitioner, filed Revision Application before the Divisional Joint Registrar, Co-operative Societies, alleging that there were gross anomalies in the letter issued by Respondent No.1, as well as the report of the Officer, who was 3/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 ::: (20)CARBPL-19952-2023.doc deputed to attend the SGM on 05.05.2013. It was alleged that there were 20 members present out of which 12 voted in favour of the Petitioner, whereas 8 voted for other Developers and, therefore, Shubham Builders secured 3/5th votes, and since 4 members were not present at the time of the decision, who had given their prior consent letter, the count was 16 out of 24 and thus, there was no required strength, in appointing the Developer. It was stated that since it did not enjoy 3/4th majority as required by the directive issued under Section 79A of the Maharashtra Co-operative Societies Act and Rules, and hence the appointment of the Developer was flawed.
The Revision Application was allowed by the Divisional Registrar, Co-operative Societies and the letter dated 07.05.2013 issued by the Deputy Registrar was quashed and set aside.
This resulted in the Review Petition being filed before the Hon'ble Minister, who by order dated 30.09.2015 allowed the Review Petition and set aside the order of Divisional Joint Registrar, once again upholding the order of the Deputy Registrar dated 07.05.2013.
This order was challenged in Writ Petition No.12266/2015 and the learned single Judge, remanded the matter to the Divisional Joint Registrar , Co-operative Societies and thereupon on 02.05.2016, the Revision Application was dismissed by confirming the decision of the Deputy Registrar, Co-operative Societies, dated 07.05.2013.
7] In the interregnum, a declaratory Suit came to be filed by Nirmala Narayana Pillai and 8 others against Shubham Builders, seeking declaration, that the Developer is not validly appointed and the Development Agreement dated 29.05.2014 alongwith the Power of Attorney executed by the Society in favour of the Developer in respect of the redevelopment of the suit property is illegal, vexatious and null 4/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 ::: (20)CARBPL-19952-2023.doc and void and not binding upon the Petitioner.
On 22.07.2016 in the Notice of Motion(L) No.2086/2016 filed in the Suit, this Court, recorded that the Developer has not applied for IOD and, therefore, the question of dispossessing the Plaintiff and/or demolishing the suit building do not arise. It was, therefore, directed that the Society and the Developer shall not dispossess the Plaintiff or demolish the building until further orders.
This Notice of Motion, at a subsequent point of time was withdrawn.
In the meantime, the Minister for Cooperative Marketing and Textile, on 14.06.2017 allowed the Revision Application filed by Respondent nos.2 and Respondent Nos.4 to 8 and set aside the order dated 07.05.2013, which is challenged by the Society in WP (L) No.24656/2017, which is pending for adjudication before this Court.
8] In the above circumstances, the Society in its meeting dated 31.08.2019 resolved to terminate the Development Agreement as well as Power of Attorney in favour of Shubham Builders, executed on 30.05.2014. However, on 10.12.2019, the Notice of Motion which was pending before the Court alongwith the order of status-quo, was withdrawn by making a statement that the Development Agreement has been terminated and there is a proposal to appoint a new Developer. As a consequence, the status-quo order stood vacated.
The Suit filed by Respondent Nos.2 to 8, however, is continued before this Court and so also another Suit filed by legal heirs of P.K.N. Pillai, (Respondent Nos.2 to 4) claiming rights over the garage structure, in the City Civil Court, Dindoshi, where an order is obtained that the possession of Respondent No.2 over the garage shall not be disturbed.
5/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 :::(20)CARBPL-19952-2023.doc 9] In this whole journey, the building standing on the property became dilapidated and call for urgent repairs. However, the society is unable to bear the costs and though it was desirous of redevelopment, its efforts being scuttled by Respondent Nos.2 to 8, the Society held its meeting on 08.03.2020, in order to take further steps.
In the SGM held on 08.03.2020, 23 out of 24 members attended and out of them, seven members were represented by their associate members, who submitted appropriate consent letters authorising them to attend and vote on their behalf.
The minutes of the meeting record as under :
"Mrs. Raksha Vaishnav mentioned that Committee Member, Mr. Nikesh Dholakia approached her and said that in the last six months, the new Managing Committee had not taken up redevelopment. So they met with Mis Shubham Builders and other society members. She stated that the developer is still interested in executing the redevelopment of Kanchan Villa and is interested in proceeding with the consent of 100% members. She mentioned that the eight •.... / members who had earlier withdrawn consent for M/s Shubham Builders had visited the developer at their office, were convinced by the representatives of the developer and had given fresh consent on Rs 100 stamp paper. These consent papers are being held by the developer. As per the new redevelopment guidelines issued on 04-07-2019, amongst other prerequisites and conditions, having a majority of at least 51 % of the total members of the society giving consent to a developer is sufficient for the selection of that developer.
Since the majority of the members wished to move forward with M/s Shubham Builders for redevelopment once more, she pressed for a resolution cancelling all the resolutions passed in the EGM_held on 28- 07-2019. In case of a vote, she requested members vote with a simple Yes or No. She said if the resolution is not passed unanimously, the dissenting members would have to approach the developer on their own initiative to get their concerns addressed.
Mr. Nikesh Dholakia said that M/s Shubham Builders is ready to continue with the redevelopment process. The condition of the building is not good. He mentioned if they get 100% consent, then they will give a revised offer within 15 days and listen to the concerns of the dissenting members and draft supplementary agreement for the same."6/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 :::
(20)CARBPL-19952-2023.doc 10] After a brain storming discussion in the meeting, it was agreed that after obtaining consent of 100% of the members, Shubham Builders will be give its revised offer, but Mr.Ramesh Pillai, one of the dissenting member indicated that they will study the offer and decide on consent.
However, as the outcome of the meeting, it was agreed that the redevelopment shall be resumed by the same Developer, with a hopeful thinking, that the 9 dissenting members will get their grievances resolved through Shubham Builders and the project would continue with 100% consent.
11] After this meeting, another SGM was held on 10.10.2021, for adopting and approving the revised clauses, in the draft of 'Development Agreement' and it was resolved to approve the final draft of 'Development Agreement', which would be submitted for adjudication of stamp duty and thereafter for registration.
The Agenda of the SGM held on 30.10.2021 clearly recorded that the purpose was to find a solution regarding 100% consent from the members for redevelopment.
Pursuant thereto a supplementary Redevelopment Agreement is executed between the Society and Shubham Builders, on 30.12.2021, which set out the entire background facts and with reference to the SGM dated 30.10.2021, in which it was resolved to add new clauses in the supplementary redevelopment agreement, it is recorded as under :
"Pursuant to the negotiations and representations mentioned above the Society has agreed for the appointment and authorization of the Developer herein to carry out the redevelopment of the said property. Accordingly the party had executed a Memorandum of Understanding on August 17, 2013 (MOU) duly notarized and recording the broad terms and conditions arrived at amongst themselves."7/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 :::
(20)CARBPL-19952-2023.doc 12] The revised Development Agreement, thereafter, set out revised terms of understanding between the Developer and the Society. Pursuant thereto, on 27.03.2023 the Petitioner has obtained IOD under Section 346 of the MMC Act and on 03.05.2023 it issued notice to the members for vacating the units for undertaking the redevelopment process, in terms of the Development Agreement date 29.05.2014 and subsequent Development Agreement dated 30.12.2021.
The individual members submitted their consent letters for redevelopment of the Society and based upon this, Mr. Tamboly would submit that except Respondent Nos.2 to 8, the remaining members are rendering their co-operation and in fact 16 members have even vacated and the Petitioner is paying them the transit rent since March, 2023.
However, since Respondent nos.2 to 8 have failed to vacate and are still occupying the building, according to Mr. Tamboly, the Developer is suffering a loss as the whole process of redevelopment, is getting postponed and he justify the relief set out in the Petition asking Respondent Nos.2 to 8 to vacate 8 flats and one garage in their possession.
13] Mr. Simil Purohit, who is joined by Mr. Shanay Shah and Mr.Praful Shah, representing Respondent Nos.2 to 8 submit that the original meeting in which the Developer was appointed itself is illegal and unless and until curtains are drawn upon the same, the Petitioner shall not proceed with the redevelopment.
Mr. Shanay Shah has invited my attention to the proceedings pending before the Deputy Registrar and it is his submission that pursuant to the directions issued by him on 16.10.2023, no NOC is obtained for appointment of Shubham Builders.
8/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 :::(20)CARBPL-19952-2023.doc 14] In my considered view, when in the SGM held on 08.03.2020 a resolution is passed to reinduct the Petitioner as a Developer and that decision is taken by the majority, I do not think that the Society has committed any flaw as the Development Agreement was supplemented by additional terms and a Fresh supplementary Development Agreement is executed. The ground that the proceedings as regards the appointment of Developer are pending before the Deputy Registrar, Co-operative Societies, is not a ground to put the majority of members of the Society to a disadvantageous position.
Reliance of Mr. Shah on a communication dated 16.10.2023, issued by the Deputy Registrar, intimating the parties about the hearing, in my considered opinion, is of no consequence as far as collective will of the Society is expressed through its resolution.
15] It is trite position of law that the directives issued under Section 79A of the Maharashtra Co-operative Societies Act, will not overrule the decision of the majority of the members and it is time and again held that the directives issued under Section 79A of the Act, are merely directory in nature and do not enjoy a binding force qua the members of the Society.
Section 79A is the power of the Government on receipt of the report of the Registrar, to issue certain directions for securing proper implementation of cooperative programms and to ensure that the management of the business of the Society is carried out in an effective manner.
Reliance placed by Mr. Tamboly on the decision in case of M/s.Maya Developers vs. Rajkumar Nagda dated 13.07.2016 in Notice of Motion (L) No.834/2015, makes the position of law amply clear .
9/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 :::(20)CARBPL-19952-2023.doc 16] Another important point, which must warrant consideration is that, when the members of the Society have taken a conscious decision, to go ahead with redevelopment, with the earlier developer whom they have selected, despite passage of time and on reposing trust in him, by reintroducing him in the project, subject of execution of supplementary development agreement, I do not think that this Court shall substitute the said decision, which is taken by majority of its members.
In case of Rajesh Mishra and Mrs.Beena R. Mishra vs. Shree Ahuja Properties Pvt. Ltd. & Ors. In Appeal (L) No.11941/2021, by the order dated 16.09.2021, the Division Bench of this Court held as under :-
"44. With respect to Advocate Ms. Poddar's contention qua the financial capacity of the developer to complete the redevelopment project, we are not impressed by the same. The developer enjoys the support of the Trilok society. The resolutions of the society in that regard have not been challenged. It is not for us to go behind the commercial wisdom of the society. In this regard, we may quote from paragraph 34 of the judgment in the case of Hari Om Sayaji Properties LLP v/s Yoga Yog CHSL (supra):
34. I am also in agreement with the submission of the Learned Counsel of the Plaintiff that the restriction on the transfer of Development Rights granted by the society to the Developer is a restriction for the benefit of the society and not an absolute one. An assignment after a General Body Resolution and a no objection issued by the Assistant Registrar of Co- operative Societies shows that the procedure followed is more or less the same which is required to be followed for the purpose of appointment of the developer at the first instance and the same would therefore not be in contravention of the Government of Maharashtra Notification dated 3 January, 2009 issued under Section 79A of the Maharashtra Co-operative Societies Act, 1960 more particularly Clause 11(7) of the aforesaid Notification. No provision in the Co-operative Societies Act or the Rules or any 10/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 ::: (20)CARBPL-19952-2023.doc other legal provisions has been brought to my notice which would curtail the right of the Society to redevelop the property when the General Body of the Society intends to do so.
Essentially, that is the commercial wisdom of the General Body of the Society. It is not open for the Court to sit over the wisdom of the General Body as an Appellate Body/Appellate Authority, merely because some members in minority disapprove of the decision of the General Body, unless it is shown that the decision was the product of fraud or misrepresentation or was opposed to some statutory prohibition. The aforesaid view has consistently been taken by this Court in (i) Girish Mulchand Mehta v. Mahesh S. Mehta,
(ii) Akash Pruthvi Lifestyle v. Akash Co-op. Hsg. Soc. Ltd. and
(iii) Maya Developers v. Neelam R. Thakkar. In the present case the General Body took a conscious decision after due deliberations to redevelop its property. It is now well settled in the case of Maya Developers (supra) that the 2009 direction is not mandatory when there is substantial compliance. Moreover, 34 out of 37 occupants have vacated the said building without any demur or protest showing that the majority overwhelmingly supported the development by the Plaintiffs, amendment of the Bank Guarantee clause and execution of the Supplementary Deed as well as the Deed of Assignment. Defendant Nos. 2 to 4 have also addressed a letter dated 27th May, 2016 (Exhibit-SS to the Plaint) wherein they have stated that they were ready for an amicable solution so that the redevelopment process goes as per schedule and that they were not against redevelopment. I find that in the present case there is substantial compliance and the actions of the- Society are supported by all its members save and except Defendant Nos. 2, 3 and 4."
17] I am unable persuade myself with the arguments advanced on behalf of Respondent Nos.2 to 8, who had tried their level best to put spoke in the wheels of the redevelopment process, by filing Suit in the city Civil Court as well as before this Court, where at present there is no order prohibiting the Petitioner/Developer from undertaking the redevelopment.
11/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 :::(20)CARBPL-19952-2023.doc In any case, 16 members of the Society have taken conscious decision to repose faith in the Petitioner/Developer and on expressing faith, they have moved out of the building, with an earnest hope that they shall be re-habilitated in their new habitat. The Developer is bearing their rents, which ultimately, would amount to a waste, since unless and until all the members vacate, the work of redevelopment cannot be started and despite obtaining IOD, the construction activity of cannot begin.
Respondent Nos.2 to 8 have chosen to be glued to their respective units, only on some flimsy ground of a minuscule percentage not having voted in favour of the Developer and though through the series of litigation before the co-operative department, which ended upto the order of Minister, which is ultimately subjected to challenge in the Writ Petition before this Court, the long journey of the proceedings has not come to an end .
Hopefully, the long wait of the members for their dream homes, shall end with a direction being issued to the non-cooperative members i.e. Respondent Nos.2 to 8, to vacate their respective units as they are clinching to them without any justifiable reason and if majority of the members have reposed faith in the Petitioner, despite the society earlier having resolved to be terminated the Development Agreement and a supplementary Development Agreement is now executed, Respondent Nos.2 to 8 are better advised to vacate the premises, though they can continue to litigate as regards non compliance in conduct of a meeting as early as in 2013, almost a decade back.
18] On the previous date of hearing, a grievance was also made on behalf of Respondent Nos.2 to 8 that the benefits which have been 12/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 ::: (20)CARBPL-19952-2023.doc conferred upon them under the Supplementary Agreement are less beneficial than the one which were assured under the Development Agreement dated 29.5.2014.
I have made serious endeavor by directing Mr. Karl Tamboly to present before me a chart of the comparative benefits and offer an explanation if there is reduction in the benefits. He has produced before me the following chart depicting the comparison :-
Category Development Agreement Supplementary Development Agreement Additional Area 41% (Clause 5) 23% (clause 5) Rent Rs.55 per sq. ft. (Clause Rs.25 Per sq. ft. (Clause 12(I)) 12(I)) Hardship Compensation Rs.1,451/0 per sq. ft.( one No Compensation time) (Clause 6) Shifting Charges Rs.15,000/- (One time to No shifting charges and fro) (Clause 11(IV)) Completion period 28 months after obtaining 36 months + 6 months Commencement grace period after Certificate (Clause 14) obtaining Commencement Certificate(Clause 14) Nee Compliance/ Additional Burden :
19] Mr. Karl Tamboly, has also placed before me the consent offered by the 16 members to accept the 23% additional area alongwitih the rent specified therein and the minutes of meeting of the Society held on 20.12.2020, clearly record that the 16 members have expressed their consent to accept the additional area of 23%, alongwith the rent, amenities provided in the Development Agreement as well as other components.
20] With this consensus on part of the majority of the members, and particularly when they are convinced to get larger percentage of 13/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 ::: (20)CARBPL-19952-2023.doc additional area with no hardship compensation and shifting charges being paid, I do not think it is open for this Court to exercise its wisdom over the consensus of the members of the Society and bring the same to a grinding halt. When the members are ready to go on with the commercial offer of the Developer, with open eyes and conscious mind, after examining pros and cons of the issue, there remains a limited scope for this Court to interfere.
In the wake of the aforesaid, the Petition is made absolute by directing Respondent Nos.2 to 8 to vacate the garage Flat Nos. B-5, B-6, B-3 & B4, A-8, B-2, B-12 and B-13 in the possession o f Respondent No.2 to 8 respectively in the building viz Kanchan Villa Co-op. Housing Society Limited situated at Plot No.15 & 16 Goras Wadi, Malad (West) Mumbai - 400 064, for the purpose of redevelopment on or before 30.04.2024, failing which, the Court Receiver, High Court Bombay is appointed as Receiver to take possession of the aforesaid flats by serving notice upon them within a period of 7 days.
If required, it is open for the Receiver, to take assistance from the local police station if he faces resistance.
Upon obtaining possession of the aforesaid flats, the same shall be handed over to the Society, who shall in turn hand over the same to the Developer, who shall forthwith proceed with the process of demolition of the building and its redevelopment.
21] Upon pronouncing the order, the learned counsel for the Respondents has prayed for stay of of two weeks, which I must decline, as according to me, Respondent Nos.2 to 8 cannot put the 16 members of the society to inconvenience, by postponing the process of redevelopment on some flimsy grounds.
14/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 :::(20)CARBPL-19952-2023.doc Hence, the request for stay is declined.
[BHARATI DANGRE, J] 15/15 ::: Uploaded on - 12/04/2024 ::: Downloaded on - 17/04/2024 12:08:20 :::