Bombay High Court
Seena Niwas Co-Operative Housing ... vs Roshanlal S. Medh And 6 Ors on 9 March, 2021
Author: A. K. Menon
Bench: A. K. Menon
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION NO.1350 OF 2020
IN
SUIT (LODGING) NO.154 OF 2020
1. Seena Niwas Co-op. Housing Society Ltd. ]
2. Misty Land Developers Pvt. Ltd. ].. Applicants-Plaintiffs
Versus
1. Roshanlal S. Medh ]
2. Sandeep Roshanlal Medh ]
3. Sanjeev Roshanlal Medh ]
4. Pawankumar Roshanlal Medh ]
5. Jayshree Kirit Gandhi ]
6. Kishor Dahyalal Lakhani ]
7. Satinder Kasturilal Issar ].. Respondents-Defendants
Mrs. Veena Thadani, with Mr. Vishal Thadani and Ms. Sneha P. Sonawane, for
the Applicants-Plaintiffs.
Mr. Manoj Vishwakarma, with Mr. Rajesh Jain, for Respondent-Defendant
Nos.1 to 5.
CORAM : A. K. MENON, J.
DATED : 9TH MARCH 2021.
P.C. :
1. In a suit claiming damages and mandatory injunction, the plaintiff no.1-co-operative housing society of flat purchasers and the plaintiff no.2 - a private limited company, engaged in development of real estate, have sought reliefs against seven members of the society, who have not agreed to comply with the society's request to execute the development agreement and 1/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit agreements of permanent alternate accommodation and thereafter handover possession of the flats to the plaintiffs to enable the 2 nd plaintiff to commence and complete the work of re-development.
2. In the IA, the plaintiffs seek a direction to the defendants to execute the development agreement, irrevocable power of attorney and agreements for permanent alternate accommodation in accordance with the resolution of the general body of the society. Mandatory orders have sought to handover possession of 7 flats with a direction to the Court Receiver to execute those documents and to take possession of the flats with police assistance, if required.
3. The matter was initially circulated for ad-interim reliefs on 3 rd March 2020. The IA was initially opposed by all the defendants. Thereafter, in the course of several hearings, which commenced during the lock-down and on video conferencing, attempts were made to arrive at a workable settlement.
The first hearing was held on 31 st August 2020. Thereafter, this matter was listed on several times upto November, 2020 on video conference and then by physical hearing from 2 nd December 2020 onwards. Over those hearings, settlements were arrived at between the plaintiffs and defendant no.6-Kishor Dahyalal Lakhani vide consent terms dated 9 th September 2020, signed on 11th September 2020, as recorded in the order of this court on 16 th September 2020, and thereafter between the plaintiffs and defendant no.7-Satinder Kasturilal Issar vide consent terms dated 3 rd December 2020, as recorded in 2/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit the order of this court on 14 th December 2020. These persons were occupying flat nos.B-201 and B-302 respectively.
4. The IA today survives only in respect of flat nos.A-004, A-101, B-303, B-304 and B-404. Flat nos.A-101, B-303, B-304 and B-404 are occupied by four persons, who are from the same family. Flat no.A-004 is occupied by defendant no.5. Several attempts have been made to arrive at consent terms between them. These defendants 1 to 5 are represented by Mr. Vishwakarma, who has also made several attempts to bring about a settlement.
5. In this order, reference being made to the "defendants" shall mean reference to "defendant nos.1 to 5" and reference being made to the "society" and the "developer" shall mean reference to "plaintiff no.1-society" and "plaintiff no.2-developer" respectively.
6. It is the plaintiffs' case and as canvassed by Ms. Thadani that the society comprises of 40 members residing in two buildings Rameshwar "A" and Rameshwar "B", comprising of ground + 4 upper floors, in Swastik Park, Chembur, Mumbai on a plot of land admeasuring about 2,233 square yards. The plaintiff no.2 has been appointed by the society as a developer. The society has contended that the buildings are old and dilapidated, incapable of being repaired except at huge costs and the possibility of partial collapse in the process of extensive repairs. The ceiling in one of the flats being flat no.A- 202 has partially collapsed. Photographs are being relied upon at Exhibits 3/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit and D to the plaint in order to demonstrate the state of affairs in these two buildings. I may mention here that the photographs at Exhibits C and D to the plaint are not disputed.
7. Ms. Thadani submitted that the society being interested in re- development of the building had invited tenders in accordance with the procedure laid down by the State Government. Public notice was issued and a Special General Body meeting was held on 31 st March 2014, at which three developers were shortlisted. Defendant nos.1 to 5 did not participate and the society resolved to award the work of re-development to one Mahesh Developers Pvt. Ltd. A Development Agreement was signed on 18 th December 2015 between members of the society and the developer. It was registered on 11th February 2016. A power of attorney was also executed in favour of Mahesh Developers. Thereafter, the developer committed breach of the agreement; project did not commence and as a result, the society was constrained to terminate the said development agreement. The developer had paid stamp-duty on the development agreement, but having decided to walk away from the project, the said developer issued a no objection certificate dated 6th March 2019, annexed at Exhibit-E to the plaint, for appointment of other developer subject to reimbursement of their expenses.
8. In this background, the society caused a structural audit of the buildings to be carried out on 6th July 2019. The buildings were classified as 4/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit "C-2A", requiring evacuation in part and major structural and civil repairs, which would cost and estimated at Rs.1.25 crores. Ms. Thadani invited my attention to the audit report annexed at Exhibit-F to the plaint. Considering the cost of the repairs and the state of the buildings, the society was of the view that it would be more appropriate to demolish and re-develop the property. The society called a Special General Body meeting on 7 th July 2019 at which the structural report was approved. The society agreed to terminate the development agreement with Mahesh Developers. The agreement was accordingly terminated on 29th July 2019. Thereupon, an arbitration petition was filed by the society in this court bearing no.412 of 2019, under Section 9 of the Arbitration and Conciliation Act, 1996, to recover compensation from Mahesh Developers for having failed to complete re-development work.
9. During the pendency of this arbitration petition, the society is said to have followed the guidelines issued by the State pursuant to Section 79(A) of the Maharashtra Co-operative Societies Act, 1960 and had appointed a Project Management Consultant, issued an advertisement and invited tenders after following due process. An advertisement was issued on 7 th October 2019 inviting fresh tenders from interested developers. The consultant informed the society that two tenders have been received and a Special General Body meeting was then convened on 27 th October 2019. The Deputy Registrar of Co-operative Societies was requested to depute a representative and on 28 th October 2019, the society requested the Deputy Registrar of Co-operative 5/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit Societies to conduct a meeting to enable the society to appoint a developer. An officer was nominated for the said purpose. On 16 th November 2019, the society requested the two bidders to attend the Special General Body meeting then proposed to be convened on 24 th November 2019 and make their respective presentations. On 24 th November 2019, when the meeting took place, two officers from the Deputy Registrar of Co-operative Societies, "M" Ward, were present. 28 members out of 40 attended the meeting. The 1 st defendant attended the meeting, but refused to sign the attendance register. At the meeting, the members were apprised of termination of the development agreement with the previous developer, issuance of advertisement and receipt of two bids; one from P.M. Constructions and other from the 2 nd plaintiff. P.M. Constructions did not attend the meeting, but the 2 nd plaintiff did and made an offer as set out in paragraph 15 of the plaint.
10. The 1st defendant objected and insisted that the developer should provide a bank guarantee as well. It was then decided to put the resolution to vote. While the 2nd defendant declined to vote, the 1 st defendant walked away. All other members voted in favour of appointing the 2 nd plaintiff. The 2nd plaintiff was thus elected as the new developer for re-development of the society's buildings. Reliance is placed on Exhibit-H to the plaint being a copy of the resolution passed at the said meeting. The Deputy Registrar has been then informed and a no objection certificate was sought. Consent letter to appoint the 2nd plaintiff as developer was issued by the society on 5 th 6/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit December 2019 and in this manner, the procedures for appointment of the 2nd plaintiff concluded.
11. Thereafter, on 22nd December 2019, a Special General Body meeting was held, at which 33 members were present and they signed the new Development Agreement with the plaintiff no.2-developer as also a power of attorney in his favour. Individual agreements were also executed by the members present mentioning flat numbers, areas and the floors on which the flats to be allotted. 33 out of 40 members have then signed the development agreement; leaving the initial 7, who were opposing appointment of plaintiff no.2-developer. Of these 7 members, 2 have now agreed to sign the development agreement under the consent terms. The dissenting members are the defendants. Majority of the members have agreed to vacate and handover their premises upon the formalities set out in the development agreement will be completed by the developer. According to Ms. Thadani even when Mahesh Developers was initially appointed, defendant nos.1 to 7 had made certain demands beyond what was being offered to the 33 other members. They demanded a bank guarantee in the sum of Rs.2.2 crores each, additional sum of Rs.2 lakhs towards maintenance and insurance paid and some more expenses over and above what has been offered under the development agreement and which has been accepted by the majority of the members. Thus, it is only defendant nos.1 to 5, who have resisted, but then the overwhelming majority has favoured re-development. 7/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit
12. Ms. Thadani submitted that additional demands were being made by defendant nos.3 and 4 stating that they have carried out repairs in their flats at their costs and these members called upon the society to reimburse these costs as well. According to the plaintiffs, these defendants are not co- operating and are exposing the other members and their families to the risk of damage and collapse of the building. In the circumstances, it is submitted, according to Ms. Thadani, that the defendants are bent upon creating obstacles. Some of them have filed a dispute in the co-operative court seeking reimbursement of the repair costs, which came to be dismissed on 25 th September 2017. It is pointed out that the 1 st defendant was the chairman of the managing committee of the society, when the repairs were allegedly carried out. As far as defendant no.3 is concerned, the plaintiffs have contended that he has demanded an additional parking slot. These defendants are thus in a minority and have stalled re-development of the buildings; repairs being impractical. The society having passed appropriate resolution, the defendants are bound to comply. Several meetings have been held with these defendants, but they keep demanding additional money, additional parking space etc.
13. In the meanwhile, the developer prepared plans and a lay-out and submitted them to the Municipal Corporation and was in the process of applying for IOD and CC. The developer was agreeable to get this development agreement registered after paying the stamp-duty, once the 8/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit other members of the society have signed the development agreement. It is stated that the unreasonable demands of these defendants cannot be accepted. The condition of the flats is so bad that many members moved out of their flats and let out their flats at very low rent and lives of the occupants are at risk. In the circumstances, it is contended that the defendants must be asked to vacate.
14. As far as the grievances of these defendants are concerned, Ms. Thadani has submitted that the developer has agreed to pay a sum of Rs.2,000/- per sq.ft. to each member as a corpus on the existing area, which is in excess of the construction cost. Developer has agreed to pay the corpus 50% thereof to the society and 50% thereof to the members. The society therefore has to make payment to the Collector of Mumbai for change of land user. The developer has also agreed to pay shifting charges and brokerage for locating temporary alternate accommodation and for payment of advance monthly rent for one year @ Rs.60/- per sq.ft. carpet area. 24 post-dated cheques towards rent for further two years will also be handed over by the developer. This Ms. Thadani submitted was extremely reasonable and acceptable to the society and majority of the members; however the defendants are not co-operating and are obstructing further progress. She therefore submits that the reliefs prayed for in this IA are liable to be granted. She has also made reference to certain correspondence in which some of the defendants have made certain demands.
9/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit
15. Ms. Thadani has also taken me through the provisions of the Development Agreement dated 22 nd December 2019, annexed at Exhibit-L to the plaint., and the proposed development plan, which is annexed thereto showing floor-wise plan. In these circumstances, it is submitted that the interim relief may be granted.
16. The IA is opposed by the aforesaid defendants 1 to 5 on the basis of the affidavit-in-reply filed by defendant no.2 dated 11 th December 2020, which Mr. Vishwakarma submitted may be treated as affidavit-in-reply on behalf of defendant nos.1 to 4. Defendant no.5 has filed a separate affidavit dated 24 th December 2020. Relying on the aforesaid replies, Mr. Vishwakarma submitted that the defendants are not confident that the developer will be in a position to complete re-development work. He said that his clients were not satisfied that the developer will be in a position to undertake the re- development work. Relying on paragraph 5(m) of the affidavit-in-reply of defendant no.2, Mr. Vishwakarma submitted that the developer has no knowledge of development. The defendants had been offered inspection of certain records of the developer. The defendant had engaged M/s. J.P. Gosher & Co., Chartered Accountants, to inspect the documents relied upon by the developer, which included audited financial statements for the Assessment Year 2018-19 and unaudited and unattested financial statements for the Assessment Year 2018-19 of one Anil Sharma, who is believed to be the Managing Director of the developer.
10/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit
17. Mr. Vishwakarma submitted that after perusing these documents, the CA has issued a certificate, which appears at Exhibit-B to the affidavit-in- reply dated 11th December 2020, in which the CA has clearly observed that the company does not have any apparent financial capacity to complete the re-development project and as far as the managing director of the developer is concerned, no opinion can be drawn on the basis of unaudited and unattested financial statement. In the circumstances, it is submitted that unless the defendants were satisfied about the financial capability of the developer, it was not in the interest of the society to go ahead for re- development with this developer. He further submitted that his clients are willing to go ahead with the re-development, if the developer provides bank guarantee as demanded in the sum of Rs.2.2 crores per flat. The defendants have sought further information such as personal net worth certificate, solvency certificate, construction activities in last seven years and income tax returns of the last seven years, but the same were not forthcoming. Mr. Vishwakarma submitted that Mahesh Developers had limited knowledge of the business and some members had shown their willingness to go ahead with that developer, who had paid about Rs.1 lakh to 34 members pursuant to which an agreement was executed. Dispute then arose which had resulted in an arbitration proceedings between the society and Mahesh Developers. He therefore submitted that unless there is some financial backing, which is guaranteed, the defendants were not agreeable to go ahead with the re- development.
11/26IA-1350-2020-SEENA NIWAS CHSL.doc Dixit
18. As far as defendant no.5 is concerned, the defendant no.5 adopts the statements in the reply filed by defendant no.2 and seeks to highlight lack of experience of the developer. She calls upon the developer to produce bank guarantee equal to the cost of construction, three years' post dated cheques for all the 40 members, provide advance cheques, specify brand of material etc. and provide a corpus fund of Rs.30 lakhs. It is on this basis that the defendants have opposed the re-development.
19. Mr. Vishwakarma has relied upon the circular dated 3 rd January 2009 issued by the Government of Maharashtra, Co-operative Marketing and Textile Department, which provides for the procedure to be followed under Section 79(A) of the MCS Act, 1960; calling for meetings, circulation of minutes to all members, appointment of an architect / project management consultant, nature of work to be carried out by the consultant, selection of a developer and finalization of a tender. He pointed out that the developer was to give bank guarantee of 20% of the price of re-development project. This has not been done in the present case and in that respect, Mr. Vishwakarma states that non-compliance with this provision is also a reason why the defendants are unable to agree to the re-development.
20. Mr. Vishwakarma placed reliance on the decision of this court in the case of Vikram Delite Co-op. Housing Society Ltd. Vs. Meenakshi 12/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit Chandrakant Shah & Ors. 1. Further reference is made to the decision of this court in M/s. Maya Developers Vs. Neelam R. Thakkar & Ors. 2 in support of the defendants' case. Mr. Vishwakarma therefore submitted that the IA is required to be rejected and no relief may be granted.
21. As far as the society's contention about the offer made by the developer is concerned, there is no response on merits as to the condition of the buildings. In fact, conducting repairs would be at huge cost. All that the defendants have highlighted is that the developer must provide a bank guarantee and provide security as to financial backing for carrying out work.
22. I have heard learned counsel for the parties at some length and over a period of time when this matter was heard, the plaintiffs have relied upon the profile of the developer; the projects undertaken by them, their technical capacity etc. However, we are not concerned in the present IA with these aspects, which are for the society to consider. As far as this IA is concerned, one thing is clear, the society appears to have followed due process before appointing a developer. This can be seen from the additional affidavit filed on behalf of the society by the Secretary of the society, which is dated 26 th February 2020. In that affidavit, the deponent states that on 8 th November 2019, defendant nos.1 to 7 was given notice of the Special General Body meeting to be held on 24 th November 2019 in the presence of the 1 (2016) SCC OnLine Bom. 6234 2 (2016) 6 Bom.C.R. 629 13/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit representative nominated by the Deputy Registrar of Co-operative Societies along with the agenda for the meeting. The notice dated 8 th November 2019 was served by hand delivery upon all members of the society including defendant nos.1 to 6. Each of them have acknowledged receipt of the notice. At the meeting on 24th November 2019, two officers nominated by the Deputy Registrar of Co-operative Societies and 28 members of the society have attended the meeting. Out of the 28 members, 27 of them signed the attendance register. Defendant nos.1 and 2 also attended the meeting, but defendant no.1 refused to sign the attendance register. In view thereof, defendant no.1 was not permitted to speak at the meeting. The husband of defendant no.5 also attended the meeting, but since he was not a member, the affidavit states that he was not allowed to participate in the meeting. Defendant no.2 on the other hand refused to vote. The entire proceedings are said to be video recorded.
23. The Secretary's affidavit relies upon true copy of the agenda and extracts of the minutes book for 24 th November 2019. The extract of the Minutes Book, copies of which are annexed at pages 52 to 57 of the additional affidavit records that the meeting started at 11:30 a.m. and two officers of "M" Ward, Chembur Office were present. The record further indicates at item no.14 that the resolution was passed which was duly proposed and seconded by the members. The developer was awarded the work of re-development by majority of 26 x 2. No member voted in favour of 14/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit the other bidder. In view of the 26 favourable votes, the plaintiff no.2 was appointed as developer. The minutes further record that defendant no.2 refused to vote. The entire process has been documented. The notice of the Special General body meeting is also seen to have been served on the defendants 1 to 5, as seen from Exhibit-F to the additional affidavit. The development agreement, power of attorney and individual agreement also have also been served upon the defendants along with the notice dated 9 th December 2019, as seen from Exhibit-G to the additional affidavit.
24. In this set of facts what is to be considered is whether the defendants' insistence on providing bank guarantee for each of the flats and the insistence of defendant no.5 that plaintiff no.2-developer must provide her with a bank guarantee in the sum of Rs.2.2 crores, as seen from Exhibit D-1 to the IA, would be justified. Exhibit-C to the IA is a structural audit report. It records the names of the consultants, the name of the society. Consultants' conclusions and critical observations read thus :-
"The structures are repairable but requires urgent structural repairs, water-proofing and other civil repairs to maintain structural stability. Urgent and extensive structure requires structural repairs, including polymer modified mortar, jacketing, recasting, micro-concreting etc. and partial / localised room wise evacuation may be required during repairs.
The building is classified under Category "C2-A" and it requires partial evacuation, requiring major and urgent 15/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit structural and other civil repairs from inside and outside of the building."
25. The fact remains that the cost of such repairs are estimated at Rs.1.25 crores and it is for the society to decide whether they wish to repair the building at that cost or to re-develop it. The minutes of the meeting indicate that the society has resolved to re-develop. There is no opposition from defendant nos.1 to 5 to the proposed re-development, but they oppose the society's decision to go ahead with the plaintiff no.2-developer. The reason is that defendant nos.1 and 2 want their own separate security arrangements in addition to what the society has negotiated.
26. In a co-operative society where majority of the members have agreed to proceed in a particular fashion, as in the present case, it is not possible for the individual members to dictate terms. All issues should have been raised at the meetings, but defendants 3 and 4 did not attend the meeting; defendant no.1 did not sign the attendance register and therefore could not vote; defendant no.2 signed the attendance register but refused to vote and defendant no.5 also did not remain present, but sent her husband instead. It is these persons alone who are not convinced that the plaintiff no.2-developer is the right developer for the society, but the society has resolved to support the re-development by plaintiff no.2.
27. In this factual background, I am of the view that the defendants' 16/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit contentions cannot be accepted. In any event, it is after the promulgation of the Real Estate (Regulation and Development) Act, 2016, the project would be required to be registered under that Act and as such there are several protections under that Act which the developer will have to follow, including registration of the project etc. Section 4(2)(1)(D) of the said Act provides that 70% of the amounts collected from the sale proceeds of the free-sale components shall be deposited in a separate account to be utilized only for construction and land costs. This would also have to be followed.
28. In the instant case, it is stated that the developer has agreed to provide 42.50% extra carpet area over and above the existing carpet area free of costs in the new building. Hardship compensation is being paid at Rs.2,000/- per sq.ft. of the existing carpet area to all the unit holders. This has to be paid at the time of vacating the flat. Security deposit is being paid to the society in a sum of Rs.25 lakhs at the time of handing over possession. The carpet areas of the existing and proposed new flats are also listed in Schedule-II to the development agreement and it is in this manner that the society intends to proceed. Mr. Vishwakarma has raised an objection that after paying the hardship compensation partly to the society and partly to the individual member, the society is required to pay for costs of change of land user and that it is not really a security for the members and it does not sufficiently safeguard the interest of the members. There are always attendant risks in the matters of re-development. It is anticipated that the developer will follow all 17/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit the rules and regulations in the process of re-development. The opposition in the present case appears to be fueled by suspicion / by the doubts harbored by 5 members. Whether or not these are genuine doubts cannot be ascertained at this stage. The society has collectively decided to engage a developer to carry out re-development work. This decision will have to be honoured. Even assuming that such bank guarantees were to be provided, these are commercial aspects, which are to be negotiated as between the society and the developer. Every individual member cannot seek to impose his or her version upon the society and the society in its collective wisdom has taken a decision and that will hold good as against all members. In the present case there are no allegations of malafides against the society's office bearers.
29. When the matter was first moved on 3 rd March 2020, the court has observed that the reliefs sought by the plaintiffs against the non co-operating members were drastic since none appeared for the defendants. That day the Prothonotary & Senior Master was directed to issue notice to all those non co- operating defendants, which was accordingly done. Initially, on 28 th September 2020, when the matter was heard on video conference, Mr. Vishwakarma stated that defendant nos.1 and 3 wanted adjoining flats, which the society has now agreed to provide, which the society did on the date of hearing. The other concern of Mr. Vishwakarma on behalf of defendant nos.1 to 5 is the financial aspects, to which I have already dealt with above. Thereafter, on several occasions, the defendants were not represented; 18/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit however, during the pandemic with hearings on the VC and serious concerns, the defendants were given a long rope. Advocate Mr. Ram Singh representing Mahesh Developers intervened and contended that he would withdraw all claims, subject to reimbursement of amounts spent by his client. Thereafter, once again, on several occasions, the defendants were not represented. On 9 th December 2020, the defendant no.2 appeared in person, but since his Advocate was not available, the matter had to be adjourned once again and the IA has been heard for final disposal on 16 th December 2020.
30. In the meantime, on 14th December 2020, defendant no.7 signed consent terms and the suit was decreed in terms thereof. On 16 th December 2020, the Advocate for the defendants 1 to 5 agreed that the photographs annexed to the plaint are that of the suit buildings. On that day, the learned counsel Mr. Jain appearing for defendants 1 to 5 submitted that the only opposition then was that the developer must be asked to give a bank guarantee for the cost of the construction. These are not the aspects which need to be considered at this stage since the society has already taken a decision. One of the grievances of the defendants 1 to 3 that they require adjacent flats has been resolved. Inspection of some documents were given; however, the defendants are not satisfied with the financial statements. The intervention application filed by Mahesh Developers has since been disposed. Whether or not arbitration proceedings are still underway is not the subject matter of the present suit or IA. The meetings held with the society with 19/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit requisite quorum has recorded in the minutes and this court has already observed on 16th December 2020 that it is not possible to accede to the request of Mr. Jain that the plaintiff no.2-developer be directed to provide the bank guarantee towards construction costs. Thus, all in all, the defendants and other members of the society are agreed that the building requires to be re- developed and therefore Court Receiver, High Court, Bombay came to be appointed of the flats and has taken symbolic possession since then.
31. In conclusion, Mr. Vishwakarma relied upon a decision of this court in Maya Developers Vs. Neelam R. Thakkar (supra) and a decision of this court in Vikram Delite Co-operative Housing Society Ltd. Vs. Meenakshi Chandrakant Shah (supra) in support of his contentions. In Maya Developers, Mr. Vishwakarma has relied upon the fact that the court had taken into consideration the guidelines pursuant to Section 79(A) of the MCS Act and submitted that the court considered that the developer will give a bank guarantee for an amount equal to 20% of the project costs. He therefore submitted that the demand of the defendants is not unreasonable. This leads me to consider the state of the law on the subject, which is by now fairly well settled. I quickly recapituate the decisions that are relevant for the present purposes.
32. In Girish Mulchand Mehta & Anr. Vs. Mahesh S. Mehta & Anr. 3, a Division Bench of this court has reiterated the fact that the general body of 3 (2010) 2 Mh.L.J. 657 20/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit the society is supreme and the general body having taken a conscious decision to re-develop the building, it operates against the minority, who may wish to oppose the consequences of the resolution. In that case, there is a partial challenge to the resolution passed by the society, but in the instant case, the resolution of the general body, to which Ms. Thadani has made reference to and copies of which are annexed to the plaint and additional affidavit-in- support, have not even been challenged. Absent such a challenge, in my view, it is not open to the defendants to now seek to assail the effect of the resolution.
33. Girish Mehta (supra) makes reference to the decision of the Supreme Court in the State of U.P. Vs. Chheoki Employees Co-op. Society Ltd. 4, wherein the court observed that the member of a society has no independent right qua the society and it is a society that is entitled to represent as a "corporate aggregate". The court also observed that the stream cannot rise higher than the source and as long as resolutions passed by the general body are in force and not over turned by a forum of competent jurisdiction, the decision would bind the appellants in that case. The case in hand is no different. The five defendants cannot take a decision that is opposed to that of the majority and that too in the absence of a challenge to the resolutions. The defendants also did not participate in the voting process. Of 5 defendants, 3 remained absent. The defendant no.1 remained present, but did not sign the attendance register; the 2nd defendant signed the attendance register, but did not vote. As 4 AIR 1997 SC 1413 21/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit far as these members are concerned, they are minuscule minority of 5 as compared to the total number of members, which is 40. Thus, it is 35 members against 5 members that we are considering. Clearly, the majority view must prevail.
34. In M/s. Maya Developers Vs. Neelam R. Thakkar & Ors. 5, this court has considered extensively the law pertaining to redevelopment and the various aspects of re-development and in the face of a challenge to jurisdiction under Section 9A. It deals extensively with Section 79(A) and State Government's power to give directions in the public interest. It specifically deals with the guidelines and the circulars upon which Mr. Vishwakarma laid much emphasis and holds that the 2009 circular on re-development i.e. 3 rd January 2009 is only a recommendation and not mandatory. The suggestion in the guidelines is to the effect that, in a given set of facts, parties should consider the guidelines. The majority's decision would however prevail. In paragraph 79, the court observed that use of the word "regulation" in the 2009 Directive seeks to set in place some guidelines. The State Government chose to issue these under Section 79(A) of the MCS Act rather than some other section and what is set out is a broad policy which is recommendatory in nature.
35. In that view of the matter, the defendants cannot insist on every single guideline being followed including that of the requirement of securing 20% of the construction costs by way of a bank guarantee. In a given set of facts, 5 (2016) 6 Bom.C.R. 629 22/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit even arriving at 20% of the construction costs would be tricky considering the fact that there are several variables that required to be considered. Not only in Maya Developers, but also in Harsha Co-operative Housing Society Ltd. & Ors. Vs. Kishandas S. Rajpal & Ors. 6, this court has held that the Government Resolution would be required to be followed by the society where members are unable to come to any decision by a resolution of their own. In the present case, there is a clear unambiguous resolution arrived at after calling a meeting of shareholders and in the presence of the Deputy Registrar's nominees. I find no anomaly in that respect.
36. Furthermore, in National Properties, through its proprietor Mr. Sanjay Ghansham Jumani Vs. Sindhi Immigrants Co-op. Housing Society Ltd. 7, this court has reiterated the view taken in Writ Petition No.10285 of 2009 and Maya Developers. National Properties also considers the aspect of the majority view prevailing. In the circumstances, one other aspect that requires to be considered is the nature of the relief to be granted and whether mandatory order can be granted at this stage. In this behalf, the decision of this court in Dorab Cawasji Warden Vs. Coomi Sorab Warden 8 has analyzed precedents and found that the plaintiff must have a strong case that it should be of a higher standard than a prima facie case that is normally required for prohibiting injunction and that it is necessary to prevent irreparable or serious injury which cannot be compensated in terms of money and the 6 Writ Petition No.10285 of 2009 7 2019 SCC OnLine Bom 762 8 (1990) 2 SCC 117 23/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit balance of convenience should be in favour of the person seeking such relief. The facts of the present case, in my view, clearly justify grant of such relief. The grant of a mandatory injunction in the present set of facts would, in my view, be justified considering the society's decision to go for re-development rather than repeated repairs at the huge costs.
37. Yet again, in Disha Construction Vs. Jaysen S. Mastakar and Ors. 9, this court has held that in a development project where the building is in a dilapidated condition and where there were 27 non-co-operating members, out of a total of 120, the non-co-operating members were in a minority and it was held that they cannot stall or obstruct redevelopment. The court appointed a Court Receiver of the suit property and directed the developer to provide a bank guarantee, because it was agreed upon in the suit agreement. The non-co-operating members were directed to handover possession to the Receiver, who would then in turn handover possession to the plaintiff- developer. In the event of such members not handing over possession, the Court Receiver was directed to take forcible possession with police assistance, if so required. In Calvin Properties and Housing Vs. Green Fields Co-operative Housing Society Ltd.10, this court has reiterated that the majority view prevails, although appointment of a Receiver is a drastic step and court is empowered to appoint a Receiver, if it is just and convenient to do so. 9 2014 (2) Mh.L.J. 353 10 2013 SCC OnLine Bom 1455 24/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit
38. In the present case, the co-operative society and the developer are the plaintiffs. They have re-affirmed their commitment to comply with all commercial aspects. While there is no reason to doubt this commitment given the obligations of the developer and the society as stated above, there is one aspect that remains to be considered notwithstanding the protections contemplated by the RERA viz. security for payment of rent to the tenant- members of the society, once they leave their premises and the building is demolished. This is an aspect which constitutes considerable volume in re- development related litigation. In the present case, the plaintiff-developer has offered to pay one year's rent in advance and thereafter provide post-dated cheques for a further period of twenty-four months. The fate of these post- dated cheques is not known today and in that respect, it will be necessary to ensure that these cheques are honoured.
39. In the circumstances, I pass the following order :-
(i) There will be an interim order in terms of prayer clause
(a)-(i), a-(ii) and (b), restricted to Flat Nos.A/004, A/101, B/303, B/304 and B/404.
(ii) In the event, the defendants do not vacate the suit premises, liberty to apply and seek police assistance.
(iii) The plaintiff no.2-developer shall provide adequate security for payment of 24 post-dated cheques that it intends to issue for the 2 nd and 3rd year, during which 25/26 IA-1350-2020-SEENA NIWAS CHSL.doc Dixit re-development of the building is expected to be completed and shall continue to secure overdue rent, if any, by providing bank guarantees or by securing the amounts to be paid in a fixed deposit in a bank in a manner such that the post-dated cheques are honoured upon presentation.
(iv) No order as to costs.
(v) IA is disposed in the above terms.
(A. K. MENON, J.)
26/26
Sneha Digitally signed
by Sneha A. Dixit IA-1350-2020-SEENA NIWAS CHSL.doc A. Dixit Date: 2021.03.09 13:41:27 +0530 Dixit