1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. NOTICE OF MOTION NO.700 OF 2008 IN SUIT NO.467 OF 2008 Bjranglal Eriwal & Ors. ...Plaintiffs. Vs. Sagarmal Chunilal & Ors. ...Defendants. .... Mr. Sanjay Jain with Ms.Sandhya Jain i/b.Mr. Ajay K.J. Panicker for the Plaintiffs. Mr. P. G. Karande for the Defendants. ..... CORAM :DR.D.Y.CHANDRACHUD, J. March 27, 2008. ORAL JUDGMENT: The Motion for interim relief arises in a suit which has been instituted principally to enforce the obligation of the developer under the Maharashtra Ownership Flats Act, 1963 (“the Act”). Counsel appearing on behalf of the Plaintiffs has, at the present stage, urged submissions in support of prayer clauses (c ), (d) and (e) of the Motion by which an order of injunction has been sought: (i) Restraining the First Defendant from putting up any additional construction, horizontally or vertically in the building in question, 2 contrary to the layout and the sanctioned plan without the specific consent of the Plaintiffs under Section 7 of the Act; (ii) Restraining the First Defendant from using, selling and disposing of or creating third party rights or interests in the flat constructed on the 18th Floor or any other upper floors to be constructed; and (iii) Restraining the Third Defendant – the Municipal Corporation, from approving any amendment to the lay out and building plans without the specific consent of the Plaintiffs under Section 7 of the Act. 2. The suit relates to a building situated on Final Plot 138, TPS-III at Senapati Bapat Marg, Matunga, Mumbai. The First Defendant is a developer who is engaged in carrying on development on the plot of land, which admeasures 2043 sq.yards. There were old tenanted structures, some of which were A-category cessed structures within the meaning of the Maharashtra Housing and Area Development Act, 1976. A proposal was submitted under the Development Control Regulation 33(7) for the redevelopment of the property and upon plans being approved, a rehabilitation building to accommodate the tenants and a free sale building enabling the 3 developer/owner to market and dispose of residential flats were to be constructed. 3. The agreement with the Plaintiffs was entered into on 9th October 2006. The recitals to the agreement inter alia provide in clause 4 that since the property was constructed prior to 1st September 1940, it has been classified in Category-A for the purpose of the levy of repair cess under the Maharashtra Housing and Area Development Act, 1976, and the owner had envisaged a scheme of redevelopment under Development Control Regulation 33(7). The aforesaid recital specifically provides that under the scheme for redevelopment, the owner had planned a separate building consisting of a ground floor and seven floors for the benefit of tenants and occupants and another building consisting of stilts and 17 floors for the benefit of flat purchasers. Clause 10 of the recitals once again emphasizes that the owner has sole and exclusive rights to sell flats and premises in the new multi-storeyed building consisting of stilts and 17 floors. Clause 13 refers to the fact that the Municipal Corporation had sanctioned the plans on 19th May 2001 for the 4 building and has granted an IOD. Clause 15 stipulates that copies inter alia of the IOD and Specifications of the building and the plan of the flat agreed to be purchased by the flat purchaser are annexed to the agreement. Under the agreement, the owner and developer agreed to sell to the Plaintiffs, a residential flat, namely, Flat No.10 with a carpet area admeasuring 109.22 sq.mtrs. on the 10th Floor of the building at and for a consideration of Rs. 74.21 lakhs. Clause 6 of the agreement stipulates that the Floor Space Index available in respect of the property is 4206 sq.mtrs. and no part thereof has been utilized by the owner elsewhere. Under clause 15, each of the flat purchasers furnished their consent to permit the owner to make additions, amendments and alterations to the building plans including raising of additional storeys or structures on the land. Clause 18 similarly provides that without modifying the plan of the flat purchasers, the owner would be entitled to amend, modify or vary the lay out plans or building plans or to consume such FSI as may be available in respect of the property. In clause 31 of the agreement, it has been stipulated that the terrace space in front of or adjacent to the terrace flats in the building shall belong exclusively to the 5 respective purchasers of the terrace flats and such terrace spaces are for the exclusive use of each such purchaser. The terrace, it is provided, would not be enclosed unless permission in writing is obtained from the local authority and the owner of the Society, as the case may be. As already noted above, the plan of the residential flat is annexed to the agreement and forms part of these proceedings. 4. By the year 2006, the First Defendant as developer had carried out construction upto the 17th floor. An application for the grant of an occupation certificate was submitted, it is alleged, only in respect of the first floor. The developer submitted an application to the Municipal Corporation for permission to use a certain component of the FSI of the rehabilitation building on the ground that certain areas should be treated as free of FSI. Similarly, a certain part of the FSI comprised in the common areas of the free sale building were sought to be regarded as free of FSI. Upon the grant of permission by the Municipal Corporation, the owner proceeded to construct an additional storey, namely the 18th floor. The construction of the 18th floor forms the subject matter of the dispute in the suit. 6 5. When the Notice of Motion came up for ad-interim relief on 28th February 2008, a statement was made on behalf of the First and Second Defendants that no additional plans shall be put up for sanction, nor shall any third party rights be created in the 18th floor. A statement was also made to the effect that any further work that was done thereafter, for the completion of the 18th floor shall not create any equity in favour of the First and Second Defendants. An affidavit has been placed on the record on behalf of the Plaintiffs containing photographs setting out the position of the flat on the 18th floor as of 29th February 2008 and as of 18th March 2008. The photographs would show that the internal work in respect of the original flat on the 18th floor is incomplete as of the date of this order. 6. On behalf of the Plaintiffs, it has been urged that the construction of the 18th floor by the owner and developer is in breach of the obligation cast upon the developer under Section 7(1)(ii) of the Maharashtra Ownership Flats Act, 1963. It has been urged that the representation which was made to the Plaintiffs in the agreement was 7 that the building would consist of stilts and 17 floors and that plans were sanctioned for a building possessing these dimensions. The submission which has been urged on behalf of the Plaintiffs is two fold. Firstly, it has been urged that by virtue of the provisions of Section 7(1), it is not open to the owner/developer to change the plan of a residential flat; and a portion of the FSI which was sold to the Plaintiffs and which is attributable to the built up area of the flat is now sought to be shown as free of FSI. Secondly, it has been urged that the specific consent of the flat purchasers was required before the owner/developer could carry out any alteration or addition in the structure of the building. The submission urged is that no specific consent has been granted and that the general consent recorded in clauses 15 and 18 of the agreement would not amount to a valid consent in law. 7. On the other hand, it has been urged on behalf of the owner/developer that by clauses 15 and 18 of the agreement, the Plaintiffs, as flat purchasers, had furnished an irrevocable consent permitting the developer to put up additional storeys or construction 8 and this would amount to a valid consent within the meaning of Section 7(1) of the Act. Secondly, it has been urged that the total FSI that is available has been disclosed in clause 6 of the agreement and that the work of development has not resulted in an excess utilization of FSI. Thirdly, it has been submitted that there is no alteration in the plan in respect of the flat which has been purchased by the Plaintiffs and there is no challenge before the Court to the building plans. Finally, it has been submitted that there was a disclosure of the lay out in the agreement and in view thereof, it is not open to the Plaintiffs to object to the construction of an additional floor albeit, after the date of the agreement with the Plaintiffs. 8. The dispute in the present case revolves around the interpretation of the provisions of Section 7(1) of the Maharashtra Ownership Flats Act, 1963. Section 7(1) provides thus: “7. After plans and specifications are disclosed no alterations or additions without consent of persons who have agreed to take the flats; and defects noticed within [three years] to be rectified. (1) After the plans and specifications of the building, as approved by the local authority as aforesaid, are disclosed or furnished to the person who agrees to take one 9 or more flats, the promoter shall not make - (i) any alteration in the structures described therein in respect of the flat or flats which are agreed to be taken, without the previous consent of that person; (ii) any other alterations or additions in the structure of the building without the previous consent of all the persons who have agreed to take the flats in such building.” 9. The effect of sub-section (1) of Section 7 is to prohibit the promoter from carrying out alterations and additions of a certain nature after the disclosure of the approved plans and specifications of the building to a person who agrees to purchase a flat in the building. In other words, once the local authority has approved the building plans and specifications and there is a disclosure of such plans and specifications to a flat purchaser, the promoter is precluded from carrying out alterations and additions of the nature prescribed by clauses (i) and (ii) of sub-section (1). Clause (i) relates to an alteration in the structure of the flat which is agreed to be purchased, while clause (ii) deals with any other alterations or additions in the structure of the building. Neither an alteration in the structure of the flat which is agreed to be purchased, nor an alteration or addition in 10 the structure of the building can be carried out; once the approved plans have been disclosed or furnished to the flat purchasers. This prohibition is, however, lifted on condition that the previous consent has been taken. Where the alteration is sought to be made in respect of an individual flat, under clause (i) of sub-section (1), the previous consent of that person is envisaged. Where an alteration or addition is contemplated in the structure of the building, the previous consent is required of all persons who have agreed to take flats in the building. 10. The provisions of Section 7(1) were amended by Amending Act 36 of 1986. Prior to the amendment, clause (ii) of sub-section (1) of Section 7 contained a prohibition not merely in respect of an alteration in the structure of the building, but also placed an embargo on the construction of any additional structure. As a result of the amendment, the embargo now applies to any other alterations or additions in the structure of the building. Section 7A was inserted to make a position explicit which according to the legislature existed implicitly prior to 1986. 11 11. The provisions of Section 7 have been construed in a recent judgment of the Supreme Court in Jayantilal Investments vs. Madhuvihar Co-operative Housing Society. 1 The Supreme Court held that the rights of the promoter to make additions or alterations in the structure of the building in accordance with the layout plan had to be balanced with the obligations of the developer to form a Co- operative Housing Society and convey its right title and interest to the society. The Supreme Court emphasized that the promoter is statutorily obliged to make a true and full disclosure to flat takers and this observation remains unfettered. Hon'ble Mr.Justice S.H. Kapadia while delivering the judgment of the Court observed thus: “The obligation of the promoter under MOFA to make true and full disclosure to the flat takers remains unfettered even after the inclusion of Section 7-A in MOFA. That obligation remains unfettered even after the amendment made in section 7(1)(ii) of MOFA. That obligation is strengthened by insertion of sub-section (1-A) of Section 4 of MOFA by Maharashtra Amendment Act 36 of 1986. Therefore, every agreement between the promoter and the flat taker shall comply with the prescribed Form V. It may be noted that, in that prescribed form, there is an explanatory note which inter alia states that clauses 3 and 4 shall be statutory and shall be retained. It shows the intention of the legislature. Note 1 clarifies that a model form of agreement has been prescribed which could be modified and adapted in each case depending upon the facts and circumstances of each 1 2007(9) SCC 220 12 case but, in any event, certain clauses including clauses 3 and 4 shall be treated as statutory and mandatory and shall be retained in each and every individual agreement between the promoter and the flat taker.” (emphasis supplied). The Supreme Court noted that clauses (3) and (4) of the Model form are declared to be statutory by the legislature “because the promoter is not only obliged statutorily to give the particulars of the land, amenities, facilities etc., he is also obliged to make full and true disclosure of the development potentiality of the plot which is the subject matter of the agreement.” While taking note of the fact that the promoter is required to fully disclose the inherent FSI and whether the plot in question is capable of being loaded with additional floating FSI and TDR, the Court observed thus: “In other words, at the time of execution of the agreement with the flat takers the promoter is obliged statutorily to place before the flat takers the entire project/scheme, be it a one-building scheme or multiple number of buildings scheme. Clause 4 shows the effect of the formation of the Society.” (emphasis supplied). The judgment of the Supreme Court emphasized that the obligation of the developer is to make a full and complete disclosure of the entire 13 project to flat purchasers. If there has been a complete disclosure of the entire project, then in such a case, the promoter is not required to obtain the prior consent of the flat purchasers so long as the lay out plan and building bye laws are complied with. The Court observed as follows: “Once the entire project is placed before the flat takers at the time of the agreement, then the promoter is not required to obtain prior consent of the flat takers as long as the builder puts up additional construction in accordance with the layout plan, building rules and Development Control Regulations, etc.” (emphasis supplied). 12. The provisions of the Act, as construed now by the judgment of the Supreme Court, would leave no manner of doubt that the statutory bar upon the promoter altering the structure of a flat agreed to be purchased under clause (i) of sub-section (1) of Section 7 and of making any other alterations or additions in the structure of the building under clause (ii), can be lifted only subject to a disclosure by the developer of the entire project or scheme. The previous consent that is contemplated by sub-section (1) of Section 7 must be an informed consent. An informed consent is one which is freely given, after a flat purchaser is placed on notice by a complete and 14 full disclosure of the project or scheme which the builder intends to implement. The consent that is contemplated by sub-section (1) of Section 7 is, therefore, a specific consent which is relatable to the particular project or scheme of the developer which is intended to be implemented. The observations of the Supreme Court in Jayatilal Investments, bring about a balance between the rights of the promoter on the one hand and a flat purchaser on the other. There is a statutory embargo upon the making of alterations either in an individual flat or in respect of the structure of the building after the disclosure of the plans and specifications of the building. This embargo was introduced by the legislature specifically to obviate the kind of malpractices that were taking place. The lifting of the embargo is conditional on the grant of previous consent. The lifting of the embargo must be confined strictly within the parameters which have been envisaged by the legislature and it is in that context the Supreme Court has held that the consent can be regarded as valid if there has been a full disclosure by the developer of the entire project which he has to implement. Thus construed, there can be no manner of doubt that it is not open to a developer/promoter to rely upon a 15 general consent. To allow such generalized consents to operate would defeat the public policy which underlies the provisions of sub- section (1) of Section 7 as interpreted by the Supreme Court. It is a well settled principle of statutory interpretation that the interpretation which the Court places on a statute must be purposive, so as to achieve the object and intent of the legislature. The Maharashtra Ownership Flats Act, 1963, is an Act to regulate the promotion of the construction of, the sale and management, and the transfer of flats on ownership basis. The preamble specifically provides that the State Government was conscious of the fact that on account of an acute shortage of housing, there were “sundry abuses, malpractices and difficulties relating to the promotion of the construction of, and the sale and management and transfer of flats taken on ownership basis.” The legislature has found that such malpractices not merely existed, but they were increasing. It is in this background that the Court must adopt a purposive interpretation of law and that interpretation which would defeat the object of the legislature must be eschewed. 13. In so far as this Court is concerned, it would be material to 16 note that right from 1984, successive judgments of Learned Single Judges have taken the view that the consent which is contemplated by sub-section (1) of Section 7 must be a consent specifically taken and that a blanket consent or authority would not be valid in the eyes of law. In Neena Sudarshan Wadia vs. Venus Enterprises,2 a Learned Single Judge of this Court held as follows : “Now, we have to understand the meaning of the word 'consent' as used in clause (ii) of sub-section (1) of Section 7. After the plans and specifications of the building as approved by the local authority are disclosed or furnished to a person who agrees to take a flat from the promoter, a prohibition is claimed on the promoter not to make any alterations in the building or constructed additional structures. This prohibition can be lifted if before the promoter carries out the alterations in the building or before he starts the work of additional construction, the promoter obtains the consent of all the persons who have agreed to take the flats. For the purpose of obtaining consent, a promoter must ask the flat owners for their permission and reveal to them the nature of the proposed alterations to the building or of the additional structures to be constructed as, without such disclosure, the flat owners cannot know for what work the permission is sought and for what work they are required to consent. Again in response to a request for consent, there must be an affirmative acceptance from all the persons who have agreed to take the flats. The word “consent” in the context of the section does not mean implied consent such as by conduct or acquiescence or circumstance that might be consent. Consent in this section is to be understood to mean as positive consent to specific items of work or alteration to be carried out or 2 1984(2) Bom CR 505 17 particular additional structure to be built by a promoter. This seems to be the object of enacting these provisions of obtaining previous consent of the flat-owners as otherwise the malpractices and irregularities intended to be eradicated by this enactment would continue to flourish and the promoters would not be deterred by the penal provision of section 13. A blanket consent or authority obtained by a promoter at the time of entering into an agreement for sale or at the time of handing over possession is not the consent contemplated by Section 7(1)(i) or (ii) for such a blanket consent or authority would sew up or nullify these provisions.” The same view has recently been reiterated by Hon'ble Mr.Justice A.M. Khanwilkar in Tejal Residency Co-op. Housing Society Ltd. vs. Brihan Mumbai Municipal Corporation.3 In that case, in addition to Flat Nos.1 and 2, in Wing-A of the building the builder desired to construct Flat No.3 abutting flat No.2 on every floor. However, the plan as sanctioned on the date of the execution of the agreement with the flat purchaser did not incorporate such a position and the plan as sanctioned permitted the builder to construct only Flat Nos.1 and 2 on every floor of Wing-A. The Learned Single Judge held that thus understood, the builder can and could have commenced construction of the proposed structure only after taking prior consent of each flat 3 2007(6) ALL MR 861 18 purchaser who would be affected by such construction, which had not been done. The Learned Single Judge held that a general consent taken for all additions and alterations would be of no avail: “Counsel for the defendants placed reliance on several clauses of the agreement to contend that there is general consent accorded by the respective flat purchasers. It is well settled that such a general consent will be of no avail. Such a consent cannot be the basis to enable the builder to go for the amendment of the plan already sanctioned and available at the time of execution of the purchase agreement without taking prior consent of the flat purchasers, although, the proposed construction is intended horizontally and vertically to the structure of the flat purchasers.” 19 The view which was taken in the judgment of 1984 and more recently in 2007, accords with a line of authority namely, the judgment of A.V. Savant, J. in Khatri Builders v. Mohmed Farid Khan,4 and the judgment of F.I. Rebello in Ravindra Mutenja vs. Bhavan Corporation.5 In Khatri Builders, this Court held that Section 7(1) would extend to the construction of any additional structure which is not in the original plans and specifications as approved by the local authority. In the circumstances, it was held there that the promoter could not be permitted to put up an additional floor on the terrace. The grant of an injunction was confirmed. 14. For the aforesaid reasons, I am of the view that in carrying out construction of the 18th floor, the developer/owner have been in breach of the obligation which has been cast by Section 7(1)(ii) of the Act. In these circumstances, a protective order would be warranted to ensure