vss IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION NO.4311 OF 2006 CRIMINAL APPLICATION NO.4311 OF 2006 CRIMINAL APPLICATION NO.4311 OF 2006 D.D. Udeshi & Ors. ... Applicants V/s. State of Maharashtra & Anr. ... Respondents Mr.Amit Desai with Vivek Vashi, Sharan Jagtiani, Sandeep A. Vale and Mr.Zal Andhyarujina for Applicants Ms.A.A. Mane, APP, for State Mr.R.P. Walvaikar for Respondent No.2 CORAM: SMT.NISHITA SMT.NISHITA SMT.NISHITA MHATRE, J. MHATRE, J. MHATRE, J. DATED: JUNE 30, 2008 JUNE 30, 2008 JUNE 30, 2008 JUDGMENT: JUDGMENT: JUDGMENT: . The present application has been filed under section 482 of the Criminal Procedure Code for quashing the process issued on 21.7.2006 against the applicants i.e. the accused Nos.4 to 10 in complaint case No.97/SS/2006 pending before the Special Metropolitan Magistrate, 49th Court, Borivali. 2. The undisputed facts in this case are as follows: Applicant Nos.1 to 6 are the trustees of applicant No.7 trust which is a charitable trust. On 11.7.1978, the trust entered into an agreement with Jasmine Builders Private Limited (for short, hereinafter referred to as ‘Jasmine builders’) to lease a plot of land alongwith : 2 : the structures standing on it for a period of 50 years. One building on that property had already been leased to a third party and, therefore, it was provided in the agreement that when the lessee vacates that part of the land on which the structures leased to him were erected, Jasmine builders would be leased that land as well. Thereafter, on 28.9.1985, the trust agreed to sell the property to Jasmine builders subject to the approval of the Charity Commissioner. The Charity Commissioner accorded approval for the sale of the plot on 10.2.1989. In the meantime, i.e. on 26.4.1986, Jasmine builders agreed to provide accommodation to each of the tenants on the land. Jasmine builders thereafter demolished the structures on the land and constructed a multi-storeyed building in 1989. Flats were allotted to each of the tenants including Respondent No.2 who is the complainant in the present case. Agreements for sale of the flats were entered into by Jasmine builders with these tenants. The remaining flats were sold by Jasmine builders by entering into separate agreements with the flat purchasers. It appears that subsequently in the year 1992, Jasmine builders amalgamated with Satellite Developers Pvt. Ltd. (for short, hereinafter referred to as ‘Satellite developers’). The scheme of amalgamation was approved by this Court in Company Petition NO.122 of 1992. Thereafter on 22.4.2003, a deed of conveyance was executed by the applicants and : 3 : Satellite developers transferring the plot to Satellite developers in accordance with the agreement dated 28.9.1985. Two more structures were constructed on the land by Satellite developers after obtaining the requisite permissions. These structures were meant to rehabilitate the tenants of the demolished structures on the land as well as for sale of flats to third parties. Separate cooperative societies have been formed in respect of each of these buildings. 3. The brother of Respondent no.2 filed civil suit No.3712 of 2005 in the City Civil Court, Mumbai seeking an injunction against the trust, Jasmine builders and Satellite developers restraining them from acting upon the conveyance. However, the plaintiff in that suit failed to get any favourable orders in respect of the injunction prayed for. Thereafter one of the societies filed a suit against Satellite developers seeking a direction from the Court against it to execute all documents in respect of the land in the name of the society. Respondent No.2 though a member of the society was not authorised to take any action on behalf of the society against the applicants, the other accused in the complaint. Thereafter Respondent No.2, without any authority from the society, filed the complaint on 15.4.2006 before the Metropolitan Magistrate, 49th Court at Borivali alleging that the applicants had committed : 4 : offences punishable under sections 13(1) of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (for short, hereinafter referred to as ‘MOFA’), 406 r/w 114 of the Indian Penal Code. After the verification was recorded, process was issued by the Metropolitan Magistrate against the applicants and other accused. Aggrieved by this decision of the Special Metropolitan Magistrate, the applicants have preferred the present application under section 482 of the Cr.P.C. for quashing the complaint. 4. When this matter came up for admission, an order was passed staying the proceedings before the criminal court in respect of the applicants herein. The issue involved in this application is whether the term ‘promoter’ as defined u/s 2(c) of the MOFA can include the owner of a plot of land in the facts and circumstances of the present case. The entire controversy in this matter hinges on the interpretation of the word "promoter" as used in section 13 of the MOFA. The main contention raised on behalf of the applicants by Mr.Desai appearing for them is that the trustees would by no stretch of imagination be promoters as defined under the MOFA. He submits that only an owner who is developing the property on his own or through a developer could be termed as a promoter : 5 : alongwith the developer. In this case, he points out the trustees had entered into an agreement for sale of the land in 1978 with Jasmine builders and the Charity Commissioner had approved of the sale. The land had been conveyed to the Satellite developers since the trust was paid the entire consideration. He further submits that the complainant i.e. Respondent No.2 herein has implicated the applicants without there being any default on their part in terms of section 13 of MOFA. He submits further that once the trustees had agreed to sell the land and an irrevocable power of attorney was executed by them in favour of Jasmine builders, the trustees were not responsible for defaults, if any, which might have been committed by the developer. The learned counsel then points out that Jasmine builders had entered into agreements for sale of flats with the tenants of the trustees as well as with different flat purchasers and the trustees were not confirming parties to the sale of flats. This according to the learned counsel indicates the intention of the parties was that it was only Jasmine builders who was responsible for the development of the property after which the land would be conveyed to them. He urges that the applicants are not ‘promoters’ as defined under section 2(c) of MOFA and therefore cannot be penalised under the provisions of the Act and more particularly under section 13 of the Act. He, therefore, submits : 6 : that the complaint filed against the trustees is an abuse of process of law and, therefore, should be quashed. 5. On the other hand, Mr.Walvaikar appearing for the respondent No.2 submits that Jasmine builders were only assignees of the plot of land and the applicants had control over the plot even after execution of the agreement for sale of the land. He points out that the construction of the buildings on the land was undertaken by Jasmine Builders on the basis of an irrevocable power of attorney executed in their favour by the trustees and therefore they had acted as agents of the trustees. He submits that after construction of the buildings and sale of flats to various flat purchasers it was incumbent on the applicants to convey the land to the cooperative societies and not to Satellite developers which was a developer. According to the learned advocate, the sale was complete only after the land was conveyed to Satellite developers in 2003. He contends that by this point of time, the societies were already formed and were functional on the plot of land and, therefore, the applicants ought to have conveyed the land to the society and not to Satellite developers. The learned advocate then submits that a perusal of the definition of promoter contained in MOFA would indicate that the only interpretation possible would be that an : 7 : owner of a plot of land is also a promoter. Therefore, submits the learned advocate, an owner of a plot of land on which a society is constructed, albeit by a developer, must convey the land to the society. The learned advocate then submits that the applicants or the trust did not have a clear title and the right to transfer their interest in the premises because the title was incomplete till the Charity Commissioner sanctioned the sale. The learned advocate then submits that the applicants are equally responsible for the offences punishable under section 13 of the MOFA and therefore, the proceedings before the Metropolitan Magistrate should not be quashed. 6. In order to appreciate the controversy which has arisen in this case it would be advantageous to set out the definition of ‘promoter’ as provided in section 2(c) of the MOFA as under: (c) "promoter" means a person who constructs or causes to be constructed a block or building of flats or apartments for the purpose of selling some or all of them to other persons, or to a company, co-operative society or other association of persons, and includes his assignees; and where the person who builds and the persons who sells are different persons, the term includes both" 7. Section 13 of the Act provides that a promoter, who contravenes the provisions of section 3, 4, 5, 10 or : 8 : 11 of the Act shall on conviction be punished with imprisonment for a term extending to 3 years or with fine or with both. The word ‘promoter’ finds place in sections 3,4,5, 10 and 11 besides other sections of MOFA. Under section 11 of the Act, a promoter is expected to take all necessary steps to complete his title and convey to the organisation of persons who have purchased flats in the building constructed the right, title and interest in the land and building. This provision would indicate that if the promoter is required to complete his title in order to convey the land and building to the society, the owner would not be included in the term ‘promoter’ in every case. In the present case, it is not disputed that there was an agreement for sale with Jasmine builders. There is also no dispute that Jasmine builders and thereafter Satellite developers had their title perfected by entering into conveyance with the applicants in the year 2003, after the Charity commissioner granted the sanction for the same. However, this does not mean that the title of the trust was not clear or that the trust had to perfect its own title to the plot of land. The very fact that Satellite developers took necessary steps to complete its title to the property indicates that it is the Satellite developers which is the promoter of the society. : 9 : 8. In order to decipher the true intent of the parties to the agreement for sale dated 28.9.1985, it would be necessary to highlight a few provisions of the agreement. These provisions would demonstrate whether the agreement is a development agreement as submitted on behalf of the Respondent No.2 on an agreement for sale of the land, simpliciter. The nature of the earlier transaction of lease between the applicants and Jasmine builders is set out in the agreement. The recitals stipulate that the agreement is executed subject to permission being obtained from the Charity Commissioner for the sale of the land for a price of Rs.48,15,000/-. The schedule for the payment of the consideration is incorporated in the agreement. Clauses 6 and 7 of the agreement provide for the purchaser i.e. Jasmine builders to construct at their cost buildings in the manner deemed fit by them. The clauses do not reserve the right of the vendors (the applicants herein) to sell the flats nor do they have any right over the construction. In fact under clause 10, the purchaser has agreed to lease certain structures to the Vendor. If indeed this was purely a development agreement as suggested by Respondent No.2, there would have been no need for the parties to include such a clause. Clauses 12 and 13 make it abundantly clear that the agreement is not a development agreement since the purchaser is given the right to utilise the FSI and avail of the : 10 : compensation in respect of the area notified for acquisition. the execution of the conveyance has been made subject to the entire purchase price being paid. Thus there can be no doubt that the agreement dated 28.9.1985 is an agreement of sale and not a development agreement. 9. The agreement between the flat purchasers and Jasmine builders makes it amply clear that the trustees had nothing to do with the sale of flats and it was only Jasmine builders who enjoyed the right to sell the flats while reserving their right to utilise the land as they desired. This right was subject to providing the tenants with accommodation after the old structures were demolished. This agreement also indicates that the intention of the parties was that the land would be sold to Jasmine builders by the trustees after the sanction was obtained from the Charity Commissioner. Much has been sought to be made of the power of attorney executed by the trustees in favour of Jasmine builders. However, this power of attorney does not indicate that the petitioners had no desire or intention to sell the land but had only appointed Jasmine builders as their assignees. Reading the agreement for sale conjointly with the power of attorney in my opinion would indicate that Jasmine builders were to act on the basis of the power of attorney in furtherance of their intention to : 11 : develop the land, till such time the Charity Commissioner permitted the sale. All the necessary permissions from various authorities for erecting the buildings were to be obtained on the basis of this power of attorney. However, once the conveyance was executed after the sale was sanctioned the power of attorney was of no consequence. Therefore in my opinion the intention of the trustees was to sell the land to Jasmine builders who would construct buildings on the land and sell flats. The deed of conveyance fortifies this interpretation of the nature of the transaction. Considered thus, the trustees cannot be said to be ‘promoters’. 10. It is undisputed that the flats were sold to various parties and the tenants were also allotted flats by separate agreements of sale. In fact, Respondent No.2 was also one of the beneficiaries of one such agreement dated 26.4.1986 entered into between Jasmine builders and the Hingwala family. This agreement between the tenants and Jasmine builders stipulates that the trustees i.e. the applicants herein had executed and delivered a general power of attorney dated 25.4.1986 in favour of Pankaj S. Shah and Suresh B. Shroff. There is no dispute again that the buildings were constructed by Jasmine builders. Admittedly, the applicants were not confirming parties to the agreement. : 12 : The deed of conveyance which was executed in April 2003 mentions the history of the transactions between the trust and Jasmine builders, leading to the sale of flats. The entire consideration was paid by Jasmine builders and, therefore, Jasmine builders became entitled to obtain the conveyance of the property. However, since the company was amalgamated with Satellite developers the land was conveyed to Satellite developers. Even this factual aspect has been stipulated in the agreement with the flat purchasers. 11. In the case of Ramniklal Tulsidas Kotak v/s. M/s.Varsha Builders & Ors., AIR 1992 BOM 62 AIR 1992 BOM 62 AIR 1992 BOM 62, a learned Single Judge of this Court (Dhanuka, J.) has considered the scheme of MOFA. The explanatory note issued by the Government of Maharashtra under the Rules prescribed under the MOFA has been interpreted by the learned Judge. It has been observed that the explanatory note 2 which is mandatory, indicates that if an owner of the land and buildings engages a developer as his agent to develop the land and building and authorises him to dispose of flats, such an owner would have to be joined as a confirming party to the tripartite agreement. This agreement is to be executed between the promoter, the flat purchaser and the owner so that the owner is bound by the terms and conditions and contents of the tripartite agreement. The learned Judge has then : 13 : considered the scheme of the act and held thus: 17. It is clear from the scheme of the Act that the promoter need not necessarily be the absolute owner of the land or a long-term lessee thereof. At the same time, it is imperative that the promoter must have sufficient entitlement and right to construct on the land and dispose of the flats on ownership basis so as to bind the owner of the freehold and the leasehold interest. If the promoter is not the owner of the land or is not the duly authorised lessee of the property but is developing the same as a mere developer under an agreement, the owner or the authorised lessee must necessarily be made a Confirming Party to the transaction in respect of agreement to sell the flat with each of the flat buyers so as to bind the owner or the lessee with the transaction and not to leave the flat buyer in a lurch later on. If the promoter is developing the land as agent of the owner, such agency must be irrevocable. The above construction follows by necessary implication and is supported by the scheme of the Act and its objects to protect the flat purchasers and check the malpractices." 12. Thus, it is obvious that an owner of the land who has conveyed the property to the builder, as in the present case, can by no stretch of imagination be a promoter. In fact, section 2(c) indicates that a promoter is a person who constructs or causes to be constructed a block or building of flats for the purpose of selling some or all of them to other persons. This means that the promoter who causes a building or flats to be constructed must have as his object the sale of some or all the flats to other persons. Unless a person constructs the building or flats for the purpose of : 14 : selling them, he cannot be deemed to be a promoter. An owner who sells the land with a general power of attorney and who has no interest in the sale of the flats would not in my opinion be a promoter. It is only if the person intends to sell the flats after construction that he could be deemed to be a promoter. Such a person would have to enter into an agreement for the sale of flats which would have to be registered. Thus, even though a person owns the land and has caused another to construct flats on the land, unless the former has some interest in the sale of flats he cannot be deemed to be a promoter as defined under section 2(c) of the MOFA. 13. It has been submitted by the learned advocate for the respondent that the very fact that the applicants have executed a power of attorney in favour of Jasmine builders indicates that Jasmine builders were acting as the assignees and agents of the applicants and therefore, were merely developers while the applicants were the owners, who had caused the development of their property. He submits that all owners of land who enter into such an arrangement of executing a power of attorney in favour of the builder would be promoters. 14. The Delhi High Court in the case of Asha M. Jain v/s. Canara Bank (EFA (OS) 3/1990 decided on (EFA (OS) 3/1990 decided on (EFA (OS) 3/1990 decided on : 15 : 15.10.2001) 15.10.2001) 15.10.2001) has recognised the methodology used by the owners and builders for the sale of flats when the purchasers of such properties deal with them as their own for a fairly long time and for an interest in it. The Delhi High Court held that in a case where the full consideration has been paid pursuant to an agreement to sell having been executed with an irrevocable power of attorney, section 202 of the Contract Act would not be applicable as the sale of the land has to be construed from principal to principal. 15. In the present case, there is an agreement of sale which was entered into in 1985. That agreement is accompanied by irrevocable power of attorney in favour of Jasmine builders on the basis of which Jasmine builders paid the entire consideration to the trust. The deed of conveyance was executed much later, only after the buildings were constructed and the Charity Commissioner had sanctioned the sale. However, this would not necessarily lead to the conclusion that the owner of the property was equally liable under MOFA since the trust had already been paid the entire consideration. 16. In my view, the interpretation placed by the advocate for the complainant, respondent No.2 herein, on the definition of promoter as found in section 2(c) of : 16 : the MOFA is not sustainable. Hence, the process issued against the applicants in complaint case No.97/SS/2006 pending before the Special Metropolitan Magistrate, 49th Court, Borivali is quashed and set aside. 17. Application is allowed. Rule made absolute. No order as to costs.