In the High Court of Punjab and Haryana at Chandigarh LPA No. 38 of 2007 Date of decision: March 10, 2009 The Punjab State Federation of Cooperative Housing Building Society Limited. ... Appellant Vs. Financial Commissioner, Cooperation, Punjab, Chandigarh and others ... Respondent Coram: Hon'ble Mr. Justice Uma Nath Singh Hon'ble Mr. Justice A.N. Jindal Present: Mr. I.S. Sidhu, Advocate for the appellant. Mr. Salil Sagar, Addl. A.G. Punjab with Ms. Simsi Dhir, AAG, Punjab. Mr. A.S. Khaira, Advocate for the respondent No.3. Mr. R.S. Sihota, Sr. Advocate with Mr. H.P.S. Ishar, Advocate for the respondents No. 4 to 6 and 8 to 10. Mr. Ashwani Prashar, Advocate for the respondent No.7. A.N. Jindal, J This L.P.A. is directed against the judgment dated 31.5.2006 passed by the learned Single Judge of this Court, dismissing the writ petition and validating the order dated 22.2.2000 (Annexure P-6) and dated 18.7.2000 (Annexure P-5), passed by the Financial Commissioner, Cooperation ( hereinafter referred as 'the Financial Commissioner'). Brief resume of facts is that Housefed was allotted 5.49 acres of land for construction of multi-storeyed flats in Sector 70, S.A.S. Nagar, Mohali by the Estate Officer, Urban Estates, Punjab, Chandigarh in January, 1988 vide memo dated 28.1.1988. The Housefed transferred the said flats LPA No. 38 of 2007 -2- in favour of Shri Guru Teg Bahadur Co-operative House Building Society Limited, Mohali (hereinafter referred as 'the Society') for the purpose of construction of multi-storeyed flats. Since this act of the Housefed was thought to be in violation of the original allotment scheme, therefore, the government cancelled the aforesaid transfer. Consequently, in order to overcome the violation, the Housefed took over the construction from the Society by entering into a tripartite agreement i.e. amongst Housefed. Society and the original builder, who was engaged by the society for the construction of the flats. On 29.4.1989, Board of Directors of the Housefed passed a resolution providing thereunder that the Housefed would have right to allot 20 flats out of the discretionary quota, which reads as under :- “Discretionary quota: The discretionary quota of dwelling units is approved as under :- (i)Chairman, Housefed Two units (ii)Members of B.O.D (9) One unit each (iii)Secretary, Housing One unit (iv)Secretary, Cooperation One unit (v)R.C.S. Punjab Two units (one for Addl. RCS in-charge Housing) (vi)Managing Director Two units (vii)Director, Housing One unit (viii)D.T.P. One unit (ix)D.C. of District One unit” Again on 22.12.1990, vide a separate resolution by the society, the Housefed was authorised to dispose of the aforesaid 20 flats. It was also incorporated that the Housefed would supply a list of members in LPA No. 38 of 2007 -3- whose favour the flats were to be allotted. Pursuant to the said resolution the Housefed reserved 6 flats to itself and had allotted 14 flats to the persons as indicated, vide memo dated 31.1.1991. This resolution invited several complaints submitted to the Government of Punjab regarding the illegal allotment of the flats out of the discretionary quota. Consequently, on enquiry, Secretary, Cooperation appointed Administrator of Society to hold enquiry. Ultimately, on 23.8.1991, the Administrator, while exercising the powers of Board of Directors of the Housefed upheld the allotment to 8 persons and cancelled the remaining 6 allotments. Consequently, this Court also upheld the cancellation of the said allotment. Out of the 8 members, who were held to be genuine, three allottees namely Major Ranjit Singh, Smt. Gurdev Kaur and Kartar Singh withdrew their earnest money. Similarly, three persons out of 6 irregular allottees also withdrew their earnest money and so as the application for allotment. The petitioner has further submitted that four genuine allottees took over the possession of the flats whereas the remaining four persons challenged the cancellation of the allotment by raising an arbitration dispute. On 11.8.1991, Chairman of the Managing Committee of the Society convened the general body meeting and in-spite of lack of coram, the Society confirmed the earlier allotment of 148 flats and regarding the refund of money to the persons who had not been allotted flats, it was resolved that their earnest money and share money be refunded. However, the Chairman/President of the Society fabricated and manipulated resolution at their own level and added in the said resolution a clause vide which he took himself the right of allotment of flats to the members i.e. 20 flats which had fallen vacant due to the cancellation of the discretionary allotment made by the Housefed. The LPA No. 38 of 2007 -4- petitioner had challenged the resolution dated 18.8.1991 contending that though the Administrator had cancelled the right of the Housefed to have discretionary quota, however, the said resolution contained a clause that the flats fallen vacant should be sold by way of open auction. However, the Deputy Registrar set aside the part of the resolution, vide which the right was retained by the President to allot all the flats. Petitioner further submitted that the persons whose allotments were cancelled had filed a writ petition in the High Court against the cancellation of their allotment, which was dismissed while observing that they had an alternative remedy to raise an arbitration dispute under Sections 55 and 56 of the Punjab Co-operative Societies Act, 1961. Thereafter the said allottees raised an arbitration dispute before the Registrar Co-operative Societies, Punjab, and vide order dated 23.12.1998, the Registrar, Co- operative Societies, Punjab dismissed the reference and upheld the cancellation of the allotments to the said persons. Against the order of the Registrar, Co-operative Societies, Punjab, the allottees filed two appeals before the Secretary/Financial Commissioner, Cooperation, Government of Punjab, Chandigarh. Though the appeal was time barred, yet vide order dated 22.2.2000, the appeals were accepted and order passed by the Registrar, rejecting the reference was set aside by the Financial Commissioner while observing that the Housefed was challenging the resolution and allotment made by the President of the Society by laying claim of 16 flats out of 20 discretionary quota flats which were allotted by the President of Society. Learned Financial Commissioner further observed that Registrar was not right in holding that the President of the Society had gone beyond its jurisdiction in any manner in allotting the flats reserved for LPA No. 38 of 2007 -5- Housefed, as reservation of flats for Housefed was violative of order of Administrator. He also further observed that the tripartite agreement also did not provide discretionary quota in favour of the Housefed. The resolution dated 22.12.1990 passed by the society provides that 20 flats (10 flats on the ground floor and 10 on the first floor) would be at the disposal of Housefed for allotment as discretionary quota. It was also provided vide said resolution that Housefed would supply the list of members in whose favour the flats were to be allotted. Pursuant to the said resolution Housefed reserved 6 flats to itself and remaining 14 flats were allotted to the persons whose names were intimated to the society by the Housefed vide its memo dated 31.1.1991. However, lots of complaints regarding this discretionary quota were obtained by the Administrator. Pursuant to which, on 23.8.1991, Administrator exercising powers of Board of Directors of Housefed, upheld the allotments of 8 persons as genuine and cancelled the allotments of 6 allottees which was upheld by the High Court. Out of 8 persons, 6 persons including Major Ranjit Singh, Gurdev Kaur and Kartar Singh withdrew their earnest money. However, genuine allottees took over the possession, whereas, remaining 4 persons challenged the cancellation of the allotment by way of raising an arbitration dispute. Thereafter, Chairman of the Managing Committee of the Society convened a general body meeting on 11.8.1991 and despite the lack of coram, he proceeded to confirm the allotment of 148 flats and further fabricated the said resolution by adding a clause that he had the right to allot 14 flats which had fallen vacant out of the discretionary quota meant for the Housefed. The resolution dated 11.8.1991 was challenged before the Deputy Registrar, Co-operative Societies, who set aside the part LPA No. 38 of 2007 -6- of the resolution vide which the President was authorised to allot all the flats. Later on, the persons whose allotments were cancelled filed a writ petition in the High Court which was dismissed observing that they could proceed for alternative remedy for raising an arbitration dispute under Section 55 and 56 of the Punjab Cooperative Societies Act 1961. As such, they raised the arbitration dispute before the Registrar Co-operative Societies, Punjab, who vide its order dated 23.12.1998 observed as under :- “1. Society had no right of allotment at its own level as the same were earmarked to Housefed on account of discretionary quota. 2. The allotments being illegal and bad in law are not protected under Sections 41 and 53 of the Transfer of Property Act. 3. The purchaser should have been beware, therefore, their rights could not be protected and they even did not take care to take possession of the flats before making payments. 4. The purchasers could exercise their option and seek suitable remedy available to them under law. The aggrieved persons then preferred two appeals before the Financial Commissioner, Co-operation, Government of Punjab, Chandigarh challenging the order of Registrar. The Financial Commissioner set aside the order passed by the Registrar Cooperative Societies and observed that (i) the Registrar fell in error in considering the power of the President of the Society regarding allotment of the flats (reserved for the Housefed) as no discretionary quota could be allotted to the Housefed; (ii) the tripartite LPA No. 38 of 2007 -7- agreement did not contain any clause with regard to providing of the discretionary quota in favour of the Housefed; and (iii) the resolution dated 26.11.1995 was quite invalid, vide which it was observed that the President had allotted the flats in consonance with the orders passed by the Registrar. Since the aforesaid orders were passed by the Financial Commissioner in the absence of the counsel for the petitioner, therefore, the Housefed as well as the Society moved two applications for re-calling the order dated 22.2.2000, but the same were dismissed. Now the appellants by way of present writ petition have challenged the order of the Financial Commissioner as well as the orders passed over the review petitions. Vide judgment dated 31.5.2006, learned Single Judge, after considering that the petitioner was not entitled to any discretionary quota for allotment, dismissed the writ petition. Appellant has assailed the judgment on the ground that after cancellation of the allotments, the plots reverted back to the Housefed and in order to over come the violation as pointed out by the Government, the appellant entered into tripartite agreement with the society and the contractor for construction of the housing complex consisting of 168 flats. Consequent to that, as per agreement, the construction work which was earlier entrusted to the society was taken over by the appellant itself. Thus, the entire project became the exclusive ownership of the appellant. A resolution was passed by the appellant reserving 20 flats as discretionary quota and authorising the society for allotting remaining 148 flats by a draw of lots. Similar resolution was passed by the Society authorising the Housefed-appellant to allot 20 fats (reserved as discretionary quota) to the LPA No. 38 of 2007 -8- persons as indicated by it which still holds as good as an arrangement between the appellant and respondent No.3-Society. The discretionary quota allotment was provided for the reason that the appellant was to construct flats for the members of the Society by investing its own money in the first instance which was later on to be paid by the Society in installments in respect of 148 flats. Since only 148 allottees were required to pay the cost of their flats and the rest were borne by the appellant-Housefed, as such the reversion of the flats to the Society does not arise at all, even after scrapping the quota as the Housefed became the real owner of the above referred flats. Learned Single Judge has not noticed the subject matter of dispute in writ petition. The arbitration reference was raised before the respondent No.2 with regard to the illegal order of cancellation of allotment of flats issued by the Management of the Society which were allotted in pursuance of the resolution dated 11.8.1991 by the Managing Committee of the Society. The said arbitration reference was dismissed and the appeal preferred by the respondents-allottees wherein the matter in dispute remained the same, therefore, the Single Judge could not go beyond the scope of reference in dispute. It was also urged that after the order of cancellation of the discretionary quota passed by the Administrator-cum- Secretary Corporation, the appellant-Housefed was the only authority to allot the discretionary quota. The society vide its resolution dated 22.12.1990, considered the quota of 20 flats to the appellants and the same was conveyed to the appellant vide letter dated 9.1.1991. The appellant had never relinquished its rights over the discretionary quota and never authorised the Society for making allotment against the said quota at their level, therefore, the respondent No.2 in its order had rightly recognized the LPA No. 38 of 2007 -9- right of the appellant and President of the Society had no right to allocate the flats. The crux of the arguments advanced by the learned counsel for the appellant is that after cancellation, the flats reverted back to the Housefed, therefore, it was out of their jurisdiction to allot the same. To the contrary, the allottees have supported the judgment and argued that the Housefed was not entitled to allot any flat as the Government had scrapped the discretionary quota given to the appellant Housefed on 7.2.1992. The Secretary Corporation while considerinmg the allotment out of the discretionary quota as illegal felt that this is quite irregular process and as such discretion does not deserve to be given to the appellant. After the discretionary quota was scrapped, flats were to be allotted to the members of the society, therefore, the appellant has no cause of action. The appellant has neither any financial interest nor there is any person of the appellant who is a member of the society-respondent No.3. The allottees are in possession of the flats since 1995 which have been allotted to them according to rules and they being bonafide purchasers are suffering unnecessarily on account of vaxious litigation in which they have been dragged. Arguments heard. Record perused. Admittedly, the appellant had transferred 5.49 acres of land situated in Sector 70, SAS Nagar, Mohali on 28.1.1988 for construction of multi-storeyed flats to the respondent No.1- Society, with regard to payment of which there is no dispute. A technical defect that no prior approval was taken by the Housefed, the said allotment was cancelled. However, there is no dispute that ultimately the property went in the hands of the Society for construction of 168 flats. Society constructed flats accordingly and there is LPA No. 38 of 2007 -10- no dispute that 148 flats were allotted by the Society under the Self Financing Scheme on 1.7.1991. The tripartite agreement which was entered into between the Housefed society and the builder does not contain any clause that 20 flats were reserved for allotment by the Housefed-appellant to the members of its choice. No doubt, a resolution was passed by the Society to give 20 flats to the Housefed as discretionary quota to be allotted by the Society to the various persons. However, the discretionary quota was scrapped by the State Government for the reasons that (i) quota being being mis-used; (ii) the scrapping was in accordance with the judgments of High Court and Supreme Court of India as the same was passed without any guidelines. After the discretionary quota for officers has been scrapped by the State Government, the discretionary quota flats were to be transferred to the society as it was the society who was the owner of the flats. The question of discretionary quota was raised before the Apex Court in case Common Cause: A registered Society vs. Union of India JT 1996 (8) SC 613 and the Apex Court was pleased to scrap the same. Full Bench of this Court in case Anil Subharwal vs. State of Haryana 1997 (2) PLR 7 also declared the allotment of flats by discretionary quota as illegal. As such, in view of the settled legal position, Housefed could not claim any right over the discretionary quota which was once fixed by the society and later on scrapped by the Government and confirmed by the Single Bench. The plea raised by the appellant for 16 flats on the ground that the same were reserved for it cannot be accepted as the flats were never constructed with its own investment or otherwise owned by it and were only to be allotted by way of discretion. The appellant was given a chance to allot the flats and it did so in 4 cases. The appellant did not exercise its rights to allot the other LPA No. 38 of 2007 -11- 16 flats, therefore, now after change of circumstances and scrapping of the discretionary quota by the Government, the appellant cannot come to lay a claim over them which had already been allotted by none else but the authorised body of the society. Having scrutinized the impugned judgment, it transpires that the Financial Commissioner in his reasoned order has rightly set aside the order passed by the Registrar holding that the claim of the appellant that they were owner of 20 flats in view of the resolution passed by the Housefed and proved by the Society cannot be sustained because, if a right to make discretionary allotment is given to a person, he cannot claim to be the owner on that ground. The order passed by the Financial Commissioner has done full justification by upholding that the allotment made to the members of the society by the Society and the Housefed was left with no rights in the flats and it had no right to interfere in the process of allotment. Resultantly, finding no merit in the appeal, the same is dismissed. (Uma Nath Singh) (A.N. Jindal) Judge Judge March 10, 2009 deepak