1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE Second Appeal No.38 of 2007 With Civil Application No.70 of 2007 M/s.Ishwar Constructions Pvt.Ltd. and anr. Appellants Vs. Ashok Chadha & ors. Respondents With Second Appeal No.62 of 2007 With Civil Application No.112 of 2007 M/s.Ishwar Constructions Pvt.Ltd. and anr. Appellants Vs. Shri Anil V. Mahtaney Respondent Mr.K.Y.Mandlik for appellants. Mr.Y.R.Naik for Respondent Nos. 2 to 11, 13 to 21, 23, 24, 26 to 28, 30, 32 to 34, 36 & 38 in S.A.38/07 and for respondent in S.A.62/07. CORAM: B.H.MARLAPALLE, J. Reserved on : April 16, 2007. Pronounced on : May 04, 2007. ORAL ORDER: 1. These two Second Appeals arise from the Judgment and decree passed by the learned Ad-hoc District Judge, 12, Pune in Civil Appeal No.335 of 2000 and Civil Appeal No.189 of 2000. Both the appeals were partly allowed. Civil Appeal No.335 of 2000 arising from Regular Civil Suit No.324 of 1996 was decided on 20/9/2006 whereas Civil Appeal No.189 2 of 2000 arising from Regular Civil Suit No.326 of 1995 came to be decided on 30/9/2006. RCS No.326 of 1995 (hereinafter referred to as "the earlier Suit") was filed for declaration and permanent injunction and by the judgment and order dated 29/1/2000 it came to be dismissed by the learned 7th Jt. Civil Judge, Junior Division at Pune. Whereas RCS No. 324 of 1996 (hereinafter referred to as "the later Suit") was filed for declaration, injunction and specific performance. In both the suits the property concerned is common viz. the housing scheme comprising of four buildings "A", "B", "C" and "D" and developed under the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (for short "the Flats Act") and located on the plot of land admeasuring 12,599.79 sq.mtrs. (less approximately 2787 sq.mtrs. occupied by the State Government) of City Survey No.425-4, 5, 6-B, 7, 8, 9 of B.J. Road, Pune 411 001. The decree passed in Civil Appeal No.189 of 2000 reads thus: (1) The appeal is allowed partly. (2) The judgment and decree passed by the 3 learned 7th Jt. C.J.J.D. Pune on 29/1/2000 in RCS No.326/95 is hereby set aside. (3) The suit is decreed with costs. (4) The defendant nos.1 and 2 are permanently restrained from making any additional construction in the open space and the property in City Survey No.425, 4, 5, 6-B, 7, 8, 9 of B.J. Road,Pune or any building therein including the Club House in any manner. . Whereas the decree passed in Civil Appeal No.335 of 2000 reads as under: (1) The appeal is allowed. (2) The judgment and decree passed by the learned 10th Jt. C.J.J.D., Pune on 9/3/2000 in RCS No.324 of 1996 is hereby set aside. (3) The suit is decreed partly with costs and it is hereby declared that the deed of declaration dated 1/7/1993 subjecting the 4 scheme to the Maharashtra Apartment Ownership Act, 1970 is hereby declared as illegal and the defendant nos.1 and 2 are hereby directed to form a co-operative housing society under the provisions of the Maharashtra Co-operative Societies Act within a period of six months from today defining in clear terms the rights of the plaintiffs and purchasers of flats on the basis of the sale agreement entered by them from out of the cost and charged they have recovered from them. (4) The defendant nos.1 and 2 are further restrained from making any additional construction in the open space and the property and are restrained from preventing the plaintiffs and the flat purchasers from using and enjoying the common areas and amenities provided. 2. The earlier suit was filed by Shri Anil Mahtaney for declaration and permanent injunction whereas the later suit was filed by 40 flat owners. The housing complex consisting of four buildings referred to hereinabove as "A", "B", "C" and "D" came 5 to be named as "Parmar Paradise" and the plaintiffs are the owners of flats in the said housing complex at Pune. In the earlier suit, the defendant no.1 was the company i.e. M/s. Ishwar Constructions Pvt. Ltd. who was the developer and defendant no.2 was its Managing Director whereas in the later suit in addition to these two defendants, the Municipal Commissioner of Pune Municipal Corporation was impleaded as the third defendant. The later suit was for declaration and injunction. It is under these circumstances that these Second Appeals are being decided by a common order, on the basis of the paper-book that has been submitted by the learned counsel for the appellants - original defendant nos.1 and 2. 3. The suit plot originally belonged to Smt. Gosap Banu, wife of Manikchand Sorabjee Captain and the husband was the life beneficiary under the Deed of Settlement dated 10th June 1930. By an agreement dated 4th December 1983, the defendant no.2 purchased the suit plot. The competent authority for determination of the surplus land, by its order dated 27th September 1984 passed under Section 8(4) of the Urban Land (Ceiling and Regulations) Act, 1976 held 6 that there was no vacant land and thereafter the sale deed was executed in favour of the defendant no.2 on 11th March 1985 and the same was registered. The defendant no.2 thereafter promoted a scheme of construction of residential flats on the said plot and the construction to be carried out by the defendant no.1 - company under the Flats Act. Each building was to contain 16 flats thus making a total of 64 flats in the proposed housing complex called Parmar Paradise and the first agreement for sale was signed on 21st January 1988 and it was registered on 12th February 1988 between the plaintiff in the earlier suit and the defendant nos.1 and 2. The plaintiffs in the later suit have signed the agreements between the period from July 1985 to October 1992. Undoubtedly the flat owners were put in possession by the end of 1992 and the completion certificate dated 30/6/1993 also was issued by the Pune Municipal Corporation. On or about 2nd February 1993 the Developers collected an amount of Rs.3100/- from each of the plaintiffs as being the charges towards the share money and formation of the co-operative housing society by cheque and the receipt was issued (Exhibit 32) to that effect. 7 4. Though the housing scheme was developed under the Flats Act and in the agreement for sale itself it was the commitment made by the developers that the flat owners’ co-operative housing society shall be registered and an amount of Rs.3100/- was collected accordingly in February 1993, surprisingly on 1/7/1993 the developers submitted a deed of declaration and got the same registered in respect of the suit flats (Parmar Paradise) under the Maharashtra Apartment Ownership Act, 1970 (for short "the Apartments Act"). Subsequently each of the flat owners was called upon to sign the deed of agreement under the Apartments Act (Exhibit 33 is the Deed of Declaration and Exhibit 35 is the Deed of Apartments). The developers subsequently and without the consent of flat owners carried out certain additions and alterations in the open land, they also made structural changes without the approval of the plaintiffs or any other flat owner. As per the plaintiffs certain common amenities like sports facilities and health club etc. as were promised while signing the agreement for sale (Schedule-C) were not provided and on the contrary the developers made encroachment by additional construction of approximately 1500 sq.ft. The construction of the 8 club house was not carried out as promised in the agreement and on the contrary the defendant nos.1 and 2 constructed first and second floor on the building which was supposed to be a club house. It was further alleged that the club house so constructed was divided into two health clubs which were being run on commercial basis. With all these grievances the plaintiffs had approached the trial Court for the following reliefs: (a) Deed of Declaration executed under the Apartments Act on 1/7/1993 be declared as illegal. (b) The defendants were not entitled to carry out any additions, alterations and construction on the suit land and more particularly in the open space in the form of building or on the existing construction including the Club House or in any manner whatsoever to that effect. (c) For directions to the Defendant Nos.1 and 2 to form a Co-operative Housing Society and convey all the common spaces, open spaces 9 without any reservation in favour of the said Society or alternatively, the Defendant Nos.1 and 2 be directed to delete all the reservations made in favour of Defendant Nos.1 and 2 and reserving the same for common use of all the flat owners. (d) For a permanent injunction from implementing the Deed of Declaration dated 1st July 1993 and from carrying out any additions, alterations in the form of any any construction or any structural changes, additions, alterations of whatsoever nature on the suit land including the common amenities and existing buildings and the Club house building and and defendant nos.1 and 2 be restrained from submitting any plan, revised plan for sanction to Defendant No.3. 5. On assessment of the oral and documentary evidence adduced by the parties the trial Court in the earlier suit held that the developer had acted in breach of the agreement for sale but the plaintiff could not prove that the developer had acted in breach of the Flats Act. It further held that the 10 developer had revised the earlier plans approved by the Corporation without the consent of the plaintiff and the objection raised by the defendants regarding non-joinder of parties was rejected. However, the trial Court held that the plaintiff was not entitled to the declaration and injunction sought for and the reasoning in support of this refusal to grant the relief was set out in the following words: "...According to me after amendment of Section 7A the defendant can construct an additional building if competent authorities had given legal sanction to the building. The defendants cannot alter or change the structure of the building which is purchased by the plaintiff. Here, in this matter the defendant cannot change the structure of plaintiff’s flat nor change the structure of the plaintiff’s building. Here, in this matter he is constructing the additional building as per sanctioned plan. According to me, after amendment of the provisions of Section 7A and in the light of above discussion of the judgment in Khatri Builders Vs. Mohmed Farid Khan [1992 (1) Bom.C.R. [1992 (1) Bom.C.R. [1992 (1) Bom.C.R. 11 305] 305] 305]. In my opinion, the plaintiff is not entitled for the relief of injunction for restraining the defendant not to construct the additional building. So far as the other prayers of the plaintiffs are concerned, the defendants have flouted their words and did not provide the facilities which they were bound to provide. And so far as the breach of agreement in between the plaintiff and defendants is concerned, in respect to provide the common amenities, it is no doubt clear that, the defendants did not obey their words and did not provide the common facilities as assured vide Exh. 61 Clause-C. In my view if the defendants are not providing the common facilities as per agreement, giving an injunction against the defendants or restraining them from making additional construction as per sanctioned plan is not a relief or Court cannot grant such relief in favour of the plaintiff. If the defendants have not followed the contract, it is the plaintiff who can take action against the defendants in respect of breach of agreement. He can file suit for compensation against the 12 defendants, in respect of the breach of agreement and not providing the common facilities...." 5A. In the later suit the trial Court held: (a) that the plaintiffs could not prove that the defendant nos.1 and 2 had agreed to form a society. (b) that the defendant nos.1 and 2 made additions. (c) that the defendant nos.1 and 2 made additions alterations and structural changes in the construction without the consent of the owners. The trial Court further held that the suit was within limitations and the Court had the jurisdiction to entertain and try the suit but the plaintiffs were not entitled to claim specific performance under the Flats Act and they were accordingly not entitled for the declaration and injunction as prayed for. 13 6. In Appeal No.189 of 2000 the lower Appellate Court held that it was obligatory on the part of the developer to form a co-operative housing society, that the developer had made illegal construction without any right and interest and, therefore, the judgment and decree of the trial Court was not sustainable. Whereas in Appeal No.335 of 2000 the lower Appellate Court held that the defendant nos.1 and 2 had made illegal changes in the construction plans and the trial Court was in error in holding that the deed of declaration and deed of apartment was binding on the flat owners and consequently the judgment and decree passed by the trial Court was unsustainable. 7. The agreement for sale which was registered on 23/7/1985 in favour of plaintiff no.9 was at Exhibit 29. On 30/6/1993 the completion certification (Exh. 33) was issued by the Municipal Corporation. The plans sanctioned by the Municipal Corporation were at Exhibits 127 to 134. In the plan at Exhibit 127 the four buildings sanctioned in September 1990 were shown as "A-1", "A-2", "B-1" and "B-2". These buildings were subsequently renumbered as "A", "B", "C" and "D". The plan at Exhibit 128 and sanctioned 14 in January 1995 showed a single storeyed building for the health club. The plan at Exhibit 129 sanctioned by the Corporation in June 1995 showed the proposed two floors added upon the club house and these additional floors were shown for the residential purposes of defendant no.2 In earlier point of time the plan at Exhibit 131 was approved by the Municipal Corporation on 15/7/1993 and it gave a bird’s eye view of the entire complex. It showed the four buildings and health club surrounded by open space and a pump room and tank in another open space. Certain conditions were imposed by the Municipal Corporation while approving this plan viz. that the club house could be used only by the flat holders and its use for commercial purposes was strictly prohibited. The plan at Exhibit 132 was another lay out approved in the year 1990 and as per the same the club house was to be constructed between building "A-1" and "A-2" and was to be surrounded by an open space. Apparently instead of a club house, a pump room and tank were constructed between these two buildings and the location of the club house was shifted towards the North Western corner of the plot. Thus the plan at Exhibit 132 was revised by the plan at Exhibit 131 showing the club house essentially a 15 single storeyed structure. The brochure given along with the agreement (Exh. 29) was at Exhibit 28 and the map was shown at Exhibit 30. Thereafter the plan at Exhibit 128 was approved in January 1995 and Exhibit 129 was approved in the year 1995. The deed of declaration (Exhibit 33) as noted earlier was registered unilaterally by the Defendant nos.1 and 2 on 1/7/1993 and the deed of apartment (Exhibit 35) was registered on 08/11/1994 i.e. prior to the approval granted to the plans at Exhibits 128 and 129 but after the plan at Exhibit 131 was sanctioned on 15/7/1993. There is a bungalow shown near the buildings "C" and "D" and which is admittedly the personal property of the defendant no.2 and his wife and it is not part of the subject scheme "Parmar Paradise". The health clubs were shown to have been sold to defendant no.2 and his wife on 29/9/1996 along with all rights and interest therein. These health clubs were handed over to some third parties to run as a commercial venture. The defendant no.2 also claimed that he had the right to construct above the health club and thus additional two storeyed construction was put up thereby forming two additional residential units belonging to the defendant no.2. 16 8. One of the conditions at Exhibit 131 approval granted by the Corporation clearly put restrictions on the use of the club and it confined only to the flat owners and in addition it was not permissible to run it as a commercial venture. The said condition is reproduced as under : "Only the flat holders in the said property can use the club. The club cannot be used for commercial or gainful purpose in any manner. The said condition shall be binding on the owner, promoter, developer, flat holders and society." . On behalf of the plaintiffs in the later suit one Shri Ashok Kauromt Idnani was examined whereas in RCS No.326 of 1995 the plaintiff - Anil Vishindas Mahatney was examined and the defendant no.2 was examined to oppose the suit. Certain clauses of the agreement for sale which are relevant for the present purposes are reproduced as under : "AND WHEREAS the Purchaser demanded from the Vendor and the Vendor has given inspection to 17 the Purchaser of all the documents relating to the said property, the said order, plans, designs and specifications and of such other documents as are specified under the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 and the Rules made thereunder. AND WHEREAS the builder will be selling the flats in the said building on what is known as ownership basis with a view that ultimately the purchasers of all the flats in the said building should form themselves into a form themselves into a form themselves into a Co-operative Co-operative Co-operative Society duly registered under Society duly registered under Society duly registered under Maharashtra Maharashtra Maharashtra Co-operative Societies Act, 1960 Co-operative Societies Act, 1960 Co-operative Societies Act, 1960 or or or they should incorporate a Pvt. Ltd. they should incorporate a Pvt. Ltd. they should incorporate a Pvt. Ltd. Company Company Company with themselves as share holders with themselves as share holders with themselves as share holders and upon the purchaser of all the flats in the said building paying in full all their respective dues payable to the builders under the agreement and strictly complying with all the terms and conditions of their respective with the builders in a form similar to this agreement, the builders shall cause to be the builders shall cause to be the builders shall cause to be 18 transferred transferred transferred the said plot together with the the said plot together with the the said plot together with the building building building constructed therein or in favour of constructed therein or in favour of constructed therein or in favour of such such such Co-operative Co-operative Co-operative Housing Society or a Limited Housing Society or a Limited Housing Society or a Limited Company Company Company as the case may be. as the case may be. as the case may be. (Emphasis supplied) 4. F.S.I. : ... ... The residual F.A.R. (F.S.I.) in the plot or the layout not consumed will be available to the Promoter till the registration of the society. Whereas after the registration of the society the residual F.A.R. (F.S.I.) shall be available to the Society. Before the execution of the sale deed if any additional FSI is available and claimed by the Promoters, they shall be entitled to construct additional flats etc. upon the said property and dispose off the same in as similar manner. 9. POSSESSION : The Promoter shall give possession of the flat to the Flat Purchaser on or before 15th November 1992. 10. The flat holder agrees and binds to pay regularly every month by 5th of each English 19 Calendar month to the Builder until the assignment of the said property consisting all the flats in building is executed in favour of a co-operative housing society or Private Limited Company / Association. 19. ... When the Co-operative Society or Private Limited Company is registered or incorporated, as the case may be, and all the amounts due and payable to the Builders are paid in full, the Builders shall cause transfer and assignment of rights, title and interest of owners in respect of the said property in favour of such Co-operative Society or the Limited Company or Association of flatholders as the case may be. 21. Shri P. Narayan, Advocate of the Builders shall prepare and / or approve, as the case may be, the conveyance and all other documents to be executed in pursuance of this agreement as also bye-laws or the memorandum of Articles of Association, Declaration etc. in connection with the formation, registration and / or incorporation of the Co-operative 20 Society or Limited Company of Association, as the case may be. All the cost charges and expenses in connection with the preparation and execution of the conveyance and other documents and the formation registration and incorporation of the Co-operative Society or Limited Company or Association as the case may be shall be borne, shared and paid by all the flatholders in the building to be constructed, payable by the flatholders in the building to be constructed, payable by the flatholders and that the builders shall not in any event be liable to pay such costs, charges and expenses." 8A. The above conditions incorporated in the agreement for sale clearly indicated that the housing complex by name "Parmar Paradise" was to be converted into a Co-operative Housing Society or a Private Limited Company or an Association of Flatholders and on its formation the entire property including open space was to be transferred to such Society, Private Limited Company or the Association, as the case may be. It was the responsibility of the developer’s Advocate to prepare the conveyance and all other 21 documents for registration of such society, private limited company or association as the case may be and all the costs, charges and expenses in that connection would be borne by the purchasers/flat holders. Once the Society / Company / Association was registered the builder - developer would be out of picture and would have no right of any encumbrances or any FSI and it was obvious that in view of these agreement terms, an amount of Rs.3100/- was collected as per the receipt at Exh. 32 in February 1993 from the flat owners. Thereafter the completion certificate was issued by the Corporation on 30/6/1993. The builder did not take any steps to register the society / association or incorporate a private limited company and instead unilaterally the defendant - builders got registered a Deed of Declaration at Exhibit 33 on 1/7/1993 under the Apartments Act so as to grab the remaining FSI and to change the plans for club house, health club and other amenities which is so clear from the following clauses in the Bye-laws of Parmar Paradise Condominium and attached as Exhibit "B" to the Deed of Declaration : "Two health clubs bearing health club No.1, 22 admeasuring 46 sq.mtr. and Health Club No.2 admeasuring 534 sq.mtr. and garden area above health club admeasuring 1260.04 sq.mtr. shall be exclusively owned by Mr. & Mrs. I.C. Parmar with a right to raise additional floors over and above the health clubs as per the choice of the grantors. The servant room / store room admeasuring 3 x 3.6 sq .mt. at the entrance of western side wall shall also be the restricted property of Mr. & Mrs. Parmar. The floating F.S.I. of the entire area : That Mr. & Mrs. Parmar shall have right to floating F.S.I. either at existing health club building or their own bungalow or any other area of the plot or on the plot elsewhere. Rooms in B & C Building : The rooms below B and C Building admeausring