Chandka 1 NMS-3274-10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 3274 OF 2010 IN SUIT NO. 2725 OF 2010 Vardhman Developers Limited ..Plaintiff versus Thailambal Co-op. Hsg. Socy. Ltd. & Ors. ..Defendants Mr. D. D. Madon, Sr. Advocate with Mr. Yadunath Chaudhari for Plaintiff in support. Mr. Mannadiar i/b. Mannadiar & Co. for Defendant No. 1. Mr. Vaibhav Sugdhare with Mr. A. Vibhute and Mr. Keval Shah i/b. Khaitan & Jayakar for Defendant Nos. 2, 3, 7, 8 and 9 to show cause. Mr. Naval B. Sharma with Ms. Geeta Sharma for Defendant Nos. 5 and 6 to show cause. CORAM : DR. D. Y. CHANDRACHUD, J. 07 March 2011. P.C. : The First Defendant is a Cooperative Housing Society registered under the Maharashtra Co-operative Societies Act 1960 and consists of 28 members. The suit has been instituted by the developer because 8 out of the 28 members opposed a re-development of the property despite (i) a Chandka 2 NMS-3274-10 resolution of the society; (ii) an agreement with the developer; and (iii) individual affidavits of consent executed by the members of the society including the objectors. Of them one, the Fourth Defendant settled and vacated the premises, leaving Defendant Nos. 2, 3 and 5 to 9 in the array. 2. A Resolution was passed by the Society on 6 September 2007. In pursuance of the Resolution the members including the Defendants who are objecting now to the re-development executed Affidavits of Consent agreeing to the re-development. An Agreement was entered into between the Plaintiff, who is a Developer and the First Defendant on 27 August 2008 to facilitate the re-development. The Agreement contemplates that all the existing members would be provided free of cost residential flats of an area equivalent to the existing carpet area and in addition usable carpet area of about 22.5% (including dry balcony, flower beds but excluding niche area) free of cost and on ownership basis. Annexure 7 to the Agreement specifies the existing area, the additional area and the total area to be provided to every member of the Society. 20 members, according to the Plaintiff vacated the premises prior to the date of the institution of the suit and an amount of approximately Rs.64 lacs has been paid by way of rent for obtaining transit accommodation. All the members of the Society executed Affidavits of Consent and these included the objecting Defendants. On 27 Chandka 3 NMS-3274-10 March 2010 a Supplemental Agreement was entered into between the Society and the Developer for the enhancement of rent. The reliefs that have been sought in the suit is a declaration that the Consent Affidavits executed by Defendants 2 to 9 are subsisting and valid; a declaration that the Development Agreement and the Supplemental Agreement continued to be valid and subsisting; and a decree for specific performance more particularly against Defendants 2 to 9. In the Motion, the Plaintiff seeks an order appointing the Court Receiver as receiver of flats presently in the occupation of Defendants 2 to 9. Since Defendant 4 has settled the dispute, no relief has been pressed as against that Defendant at the hearing of the Motion. 3. On behalf of the Plaintiff it has been submitted that in the present case (i) the objecting Defendants were aware at all material times of the Resolution that was passed by the Society and the Development Agreement with the Developer; (ii) the Resolution has not been challenged; (iii) a minority of the members cannot thwart the process of re-development; and (iv) an order appointing the Receiver is necessary in order to facilitate the process of re-development and to ensure that the process is not obstructed by a minority of persons. Chandka 4 NMS-3274-10 4. Learned counsel appearing on behalf of the Co-operative Society has supported the Plaintiff and while relying on Clause 5 of the Development Agreement submitted that the Agreement protects the interest of all the members of the Society. 5. On behalf of the Fifth and Sixth Defendants, the following submissions have been urged: (i) In view of the provisions of Section 91 of the Maharashtra Co-operative Societies Act 1960 this Court would not have jurisdiction to entertain and try the suit; (ii) No notice has been furnished under Section 164 of the Act; (iii) The guidelines framed by the State of Maharashtra on 3 January 2009 have not been complied with; (iv) The Director of the Plaintiff in question had no authority to file the suit and the Board Resolution has not been produced; (v) There is no right vesting in the Plaintiff to institute the suit there being no privity with the objecting Defendants; (vi) The Power of Attorney issued by the Developer on the basis of which the Development Agreement was Chandka 5 NMS-3274-10 executed has not been registered; (vii) The Consent Affidavits suffer from a deficiency because they do not bear the notarial registration number and they have not been signed in the presence of the Notary. The stamp paper was purchased by the Developer; and (viii) There is an arbitration clause contained in the Development Agreement between the Society and the Developer. 6. There is no merit in the contention based on Section 91 of the Maharashtra Cooperative Societies Act 1960. Section 91 brings within its purview disputes touching interalia the constitution, management or business of a society. Now in the present case. the process of re- development of the Society by the Developer does not constitute the business of the society within the meaning of Section 91. The demolition of the existing building and the reconstruction of the building of the society is not the business of the society. Section 91 is therefore not attracted. For the same reason, no notice under Section 164 is required. The contention based on the guidelines of the State Government dated 3 January 2009 is without any substance. The Development Agreement in this case was entered into on 27 August 2008 much prior to the enforcement of the guidelines. The Chandka 6 NMS-3274-10 contention that the Director of the Plaintiff had no authority is belied by the copy of the Board Resolution dated 15 May 2010 which has been placed on record. The Resolution authorised the Director in question to represent and sign documents, returns, statements and other writings on behalf of the Company to be submitted interalia before any Court of law. Similarly there is no merit in the contention of the objectors that the Power of Attorney in favour of the nominee of the Plaintiff has not been registered. The Development Agreement admittedly has been registered. The Power of Attorney executed by the Society was similarly registered and stamp duty in excess of Rs.19 lacs was paid. The contention based on the Consent Affidavits is similarly devoid of substance. It has been stated on behalf of the Plaintiff that the Developer had forwarded the stamp paper to the Cooperative Society. The Consent Affidavits were executed, notarized and remitted back to the Developer. Significantly there is no dispute about the fact that the Consent Affidavits have been duly executed. There being no dispute about the fact that the Consent Affidavits have been signed and executed by the objecting Defendants, the objection is lacking in substance. The contention that there is an arbitration clause in the Development Agreement between the Society and the Developer, over looks the basic factual position that there is no dispute between the Society and the Developer. It is the objectors who are objecting to the enforcement of the Chandka 7 NMS-3274-10 Development Agreement. A suit for obtaining necessary reliefs is therefore maintainable. For these reasons I am of the view that the objections which are raised on behalf of Defendant Nos. 5 to 6, however technical, are devoid of any material substance. 7. On behalf of Defendants 2, 3, 7, 8 and 9, learned counsel submitted that these Defendants are agreeable in principle to the process of re- development. However, it has been urged that the real dispute relates to the additional area which the Plaintiff has agreed to provide under the Development Agreement. According to the learned counsel the Developer is not providing the area actually agreed in terms of Clause 5 of the Agreement. In this regard, it would be necessary to advert to the provisions of Clause 5 of the Development Agreement which are to the following effect:- “..... the Developer agrees that upon re-development, the Developer through the Society as agreed in this agreement, shall provide to each member of the said society being the member as set out in the list mentioned in the SECOND SCHEDULE in the new building/s on the said property, a residential Flat of an area equivalent to the existing Carpet Area Plus additional Municipal approved usable carpet area of about 22.5% (Twenty Two point Five percent) of the existing Carpet Area of the respective Flats of the members including dry balcony, flower bed but excluding niche area free of all costs and on ownership basis. (hereinafter referred to as the Permanent alternate accommodation) The areas of the new flats to be allotted to the existing members are as Chandka 8 NMS-3274-10 set out in ANNEXURE – 7. “The Developer agrees and confirms that there will be no deviation from the area as promised herein above (subject to a tolerance limit of +/- [plus/minus] 1%) from the area mentioned in ANNEXURE – 7 hereto which is the area shown in the Sanctioned Plan and the actual construction while handing over the Permanent Alternate Accommodation to the members of the Society. In the event of any negative deviation in the aforesaid the Developer shall compensate the concerned flat owner member by paying the flat owner a sum calculated at Rs.12,600/- (Rupees twelve thousand six hundred only) per Square Foot for every Square Foot of area that is less than the promised area.” Hence it is clear that the Developer has agreed to provide the existing carpet area and in addition usable carpet area of about 22.5% to every flat owners free of cost on ownership basis. This area is to include a dry balcony and flower beds but is to exclude the niche area. In the event of a shortfall the Developer has agreed to compensate the concerned owner at a rate calculated at Rs.12,600/- per sq. ft. Annexure - 7 of the Agreement as noted earlier contains a statement of the existing areas in the occupation of each of the flat owners, the additional area to be provided and the total area to be provided. The learned counsel appearing on behalf of the Plaintiff has tendered an undertaking before the Court on the instructions of Mr. Rajesh Vardhan, the Managing Director of the Plaintiff, that the Plaintiff shall duly abide by the provisions of Clause 5 of the Development Agreement dated 27 August 2008 read with Annexure - 7. The undertaking is accepted. The undertaking protects the interests of the flat owners. Chandka 9 NMS-3274-10 8. Finally, it may be observed that there is no merit in the contention that there is no privity of contract between the objecting Defendants and the Plaintiff. All the objecting Defendants are members of the First Defendant which is a Cooperative Housing Society. They have executed Consent Affidavits agreeing to the process of re-development by the Plaintiff. The argument that there is a lack of privity is therefore devoid of substance. 9. A Development Agreement was entered into between the Society and the Developer. In pursuance thereof 20 out of 28 occupants have already acted on the Agreement and vacated the flats. In addition one occupant has settled the dispute. The objecting Defendants cannot be permitted to obstruct the process of re-development. This position is in accord with the law laid down by the Division Bench of this Court in M/s. Whiz Enterprise Private Ltd., vs. State of Maharashtra1. Hon’ble Mr. Justice A. M. Khanwilkar, speaking for His Lordship and the then learned Chief Justice, Mr. Justice Swatanter Kumar, held as follows: “Be that as it may, it is not in dispute that the General Body of the Respondent No. 3 Society has unanimously resolved to take forward re-development of the building. That resolution was passed as back as on 3rd February 2008. Consequent to the said Resolution, the Respondent No.3 Society entered into Development Agreement with the Petitioners on 18th April 2008. Moreover, 1 Writ Petition (Lodging) No. 28 of 2009 decided on 30th July 2009 Chandka 10 NMS-3274-10 overwhelming majority of members of the Respondent No. 3 Society have acted upon the said arrangement agreed between Petitioners and Respondent No.3 and are looking forward to the re-development of the building. It is only Respondent Nos. 4 and 5 are opposing re- development of the building. Significantly, they did not participate in the General Body Meeting to oppose the proposal of the re-development. Nor have they chosen to question the wisdom of the General Body reflected in the Resolution dated 3rd February 2008 before appropriate forum. The Agreements entered between the Respondent No.3 and the Petitioners herein have not been challenged by the Respondents 4 and 5 before Court of competent jurisdiction. Suffice it to observe that the decision of the General body will bind the Respondents 4 and 5 and they are obliged to vacate the existing premises and hand over the same to the Petitioners to enable the Petitioners to redevelop the building as per the Agreement reached between the parties. Assuming that this Court were to take the view that demolition of the building was not essential, even then, in view of the decision of the General Body of the Society that the building should be redeveloped, the Respondents 4 and 5 would be bound by the said decision.” In view of the judgment of the Division Bench noted earlier, it would not be possible to proceed on the basis of the observations contained in a Judgment of a learned Single Judge in Acknur Constructions Pvt. Ltd. vs. Sweety Rajendra Agarwal & Ors.1 to the extent to which it lays down a proposition contrary to the judgment of the Division Bench. The judgment of the Division Bench must prevail. 10. The appointment of a Receiver is necessary to ensure that the 1 2010(1) Bom.C.R. 15 Chandka 11 NMS-3274-10 Development Agreement which has been accepted by the Co-operative Society in its General Body is duly implemented. The dissenting minority cannot obstruct redevelopment where the cooperative society of which they form part has passed a resolution and has entered into a development agreement. The wisdom of the general body and their autonomy to decide what represents the common weal must prevail, save in a case of demonstrable fraud. The Motion is accordingly made absolute in terms of prayer clause (a) to the exclusion of Defendant No. 4 ( owner of Flat No. 13 in Nirmal Building who has since settled the dispute). The Receiver shall act on the basis of the present Order after the expiry of a period of four weeks from today. (Dr. D. Y. Chandrachud, J.)