by LFIAdmin | Oct 25, 2022 | Home
By Ritabh Singh, 4th Year Law Student, Government Law College, Mumbai,
ritabhsingh44@gmail.com | October 25, 2022
INTRODUCTION
The Hon’ble Supreme Court judgment pronounced on the 28th September 2022, in X v. The Principal Secretary [1], declared that all woman have a right to safe abortion upto 24 weeks. The Hon’ble Supreme Court declared that the distinction based on the marital status of a women in Rule 3B(c) of the Medical Termination of Pregnancy Rules, 2003 (MTP Rules) is “artificial and constitutionally unsustainable”, and single women with pregnancies upto 24 weeks cannot be denied safe and legal abortion. Section 3B(c) allows termination of pregnancy upto 24 weeks if there is change of marital status during the ongoing pregnancy (widowhood and divorce). The Court also recognised marital rape, a much contraversal topic, as a legal ground for abortion under Rule 3B(a).
Looking back at the history of abortion in India, there has always existed social stigma against abortion, even when the women is married. Thus women were forced to choose an unsafe method of abortion, which seriously impacted the health of the woman, many cases resulting to death. In fact, about 8 women die each day due to unsafe abortions, and 67% of the abortions carried out are unsafe [2]. The Medical Termination of Pregnancy Act, 1971 (MTP Act), was enacted to legalize abortions, and found its basis from the Abortion Act, 1967 passed in the United Kingdom. The MTP Act legalized abortions, and as years have passed, the legislature has made much more strict rules for who can terminate a pregnancy as people have shown preference for a male child over a female child. It is also imperative to note that the MTP Act is an exemption to Section 312 of the IPC [3].
THE CASE
The challenge to the provisions were made by a 25 year old single woman who wanted to terminate her pregnancy after the Delhi High Court stated that consensual relationships are not covered under MTP Rules 2003. The Hon’ble Supreme Court, in an order passed on 21th July 2022, allowed the petitioner to abort her 24 week pregnancy as allowing her an unwanted pregnancy would have been contrary to the intent of Section 3(2) of the MTP (Amended) Act, 2021. However, the Court further heard the matter as it dealt with a ‘substantive question of law’ which was – is the distinction between married and single women under Rule 3B(c) of the MTP Rules 2003 constitutionally valid?
THE JUDGMENT
As mentioned before, the Court held that the rule was infact discriminatory and violative of Article 14. The Court held that the law be given a purposive interpretation. In the MTP Act, Explanation 2 of Section 3(2) contained the following words –
“Where any pregnancy occurs as a result of failure of any device or method used by any married woman or her husband for the purpose of limiting the number of children, the anguish caused by such unwanted pregnancy may be presumed to constitute a grave injury to the mental health of the pregnant woman.”
The same were amended in 2021, and Explanation 1 of Section 3(2) says – “For the purposes of clause (a), where any pregnancy occurs as a result of failure of any device or method used by any woman or her partner for the purpose of limiting the number of children or preventing pregnancy, the anguish caused by such pregnancy may be presumed to constitute a grave injury to the mental health of the pregnant woman.”
The Court after interpreting the intention of the legislature held that the legislature intended to clarify the scope of Section 3(2) and recognized that pregnancies could happen outside marriage as well. Even the statement of objects and reasons of the MTP Amended act indicated that the primary concern was to increase access to safe and legal abortions. The statement of object and reasons also do not distinguish between married and unmarried women, thus encompassing all women.
The court held that Rule 3B(c) cannot be read in isolation and has to be read with other sub-clauses of 3B. The other sub-clauses are as follows –
(a) survivors of sexual assault or rape or incest;
(b) minors;
(d) women with physical disabilities [major disability as per criteria laid down under the Rights of Persons with Disabilities Act, 2016 (49 of 2016)];
(e) mentally ill women including mental retardation;
(f) the fetal malformation that has substantial risk of being incompatible with life or if the child is born it may suffer from such physical or mental abnormalities to be seriously handicapped; and
(g) women with pregnancy in humanitarian settings or disaster or emergency situations as may be declared by the Government.
The court held that none of these sub-clauses distinguish between married and unmarried women. Thus the court gave Section 3B(c) a purposive interpretation, read it with explanation 1 of Section 3(2) of the MTP (Amended) Act, 2021 and held that any woman can abort her pregnancy upto 24 weeks. The court held that such laws are ‘provider-centric’ laws and must be applied accordingly.
CONCLUSION
A landmark judgment on a sensitive issue has not only upheld bodily autonomy of women, but also accepted marital rape in the scope of abortion. This judgment has removed the unreasonable classification made by law. Laws cannot be static and must evolve as times change. After the Supreme Court of United States overturned Roe v. Wade [4], abortion rights became uncertain. The Supreme Court of India has rightly protected women’s right on abortion and her reproductive autonomy.
However, according to law, it is the Registered Medical Practitioner (RMP) who still holds strong power on a women who is seeking abortion, and even though the women can seek help in a Court of Law, RMPs still hold fundamental power in the choice of a women to terminate her pregnancy.
[1] SLP (C) No 12612 of 2022
[2] BMJ Global Health Reports
[3] Section 312 – Causing Miscarriage, IPC (1860)
[4] 410 U.S. 113 (1973)
by LFIAdmin | Mar 20, 2022 | Home
By Nazaqat Lal, Advocate & Solicitor, Bombay High Court
nazaqat_lal@hotmail.com | March 20, 2022
INTRODUCTION
Section 11 of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (“the Act”) requires the promoter to convey all his right, title and interest in the land and building in favour of the co-operative society or organization of flat purchasers. There is often a delay on the part of the promoters in executing such conveyance. Such delay prejudices the flat purchasers and their right to fully enjoy and exploit their property. The concept of deemed conveyance seeks to remedy this.
ANALYSIS
If the promoter fails to convey his right, title and interest in the land and building within 4 months from the formation and registration of the society or company, or within such time as maybe agreed upon by and between the promoter and flat purchasers, the society can make an application to the competent authority for issuing a certificate/an order stating that such society is entitled to have a unilateral deemed conveyance. Such application is required to be accompanied by true copies of the registered agreements for sale and all other relevant documents, including the occupation certificate, if any.
On receipt of such application, the competent authority shall make enquiry, verify the authenticity of the documents submitted and give the promoter a reasonable opportunity to be heard. If satisfied, the competent authority shall issue a certificate to the Sub-Registrar stating that it is a fit case for enforcing unilateral execution of a conveyance deed conveying the right, title and interest of the promoter in the land and building in favour of the society.
On receipt of such certificate and unilateral instrument of conveyance, the Sub-Registrar shall give the promoter an opportunity to show cause why such unilateral instrument of conveyance should not be registered as ‘deemed conveyance’. If satisfied, the Sub-Registrar shall register the instrument as ‘deemed conveyance’.
As the name suggests, deemed conveyance is a unilateral execution of a conveyance deed whereby the promoter is deemed to have conveyed his right, title and interest in the land and building in favour of the society of flat purchasers, followed by the unilateral registration thereof under the Registration Act, 1908. The provision for deemed conveyance was inserted in the interest of flat purchasers. However, there are certain practical difficulties that arise that prevent flat purchasers from taking benefit of this provision or prove to be a hindrance.
CERTAIN PRACTICAL DIFFICULTIES THAT ARISE
One issue that usually arises is that of stamp duty. If all the flat purchase agreements of the society members (including agreements for shops, garages and parking) are duly stamped and registered and the full FSI potential of the land on which the society building stands has been utilised, the instrument of deemed conveyance shall be treated as a supplementary document to such agreements and the stamp duty and registration fees payable on the instrument of deemed conveyance will be nominal.
However, if any one or more society member’s flat purchase agreements or agreements for shops, garages and/or parking are not duly stamped and registered, stamp duty liability on such agreements will have to be cleared. Further, if the FSI potential of the land on which the society building stands has not been fully utilized, stamp duty will be payable on the present market value of such unutilized FSI, making the stamp duty payable on the instrument of deemed conveyance, substantial. Notification dated 12th April, 2012 sets out the detailed procedure. Given the property prices in Mumbai, this stamp duty liability may run into several lakhs or crores.
Another issue that arises in some cases is that the promoter has the right to develop only a portion of the land which is part of a larger undivided plot. There are also cases in which phase wise redevelopment is done of multiple buildings standing on the same sub-divided plot. When an order of deemed conveyance is passed in such cases, disputes often arise about the area of land conveyed under such order/certificate of deemed conveyance.
Computing or quantifying the entitlement of a society applying for deemed conveyance may not always be easy as the society maybe entitled to the land on which the society building stands, as well as proportionate right in common areas, internal access roads, gardens, etc. together with other societies.
Lastly, a society being a successor in title of the promoter cannot claim any rights higher than that of the promoter. Defects in title of the promoter cannot be remedied by execution of an instrument of deemed conveyance nor are the rights of original owners of the land affected or influenced by an order of deemed conveyance or the registration of the certificate thereafter. Original owners can raise disputes of title, computation and quantification of area, FSI, etc. by filing a civil suit. The civil suit will be decided on its own merits unaffected by any order of deemed conveyance that may have been passed.
CONCLUSION
When a promoter fails to fulfil his obligations of conveying his right, title and interest in the land and building, the competent authority steps in to fulfil such obligations to avoid hardship to the flat purchasers. However, to take the benefit of the provision of deemed conveyance, flat purchasers and societies must have all their documents in place and be willing to comply with all applicable provisions of law. Flat purchasers and societies must also have sufficient funds available with them as the stamp duty payable on an instrument of deemed conveyance may run into several lakhs or crores in certain cases. Lastly, a society being a successor in title of the promoter cannot claim any rights higher than that of the promoter.
by LFIAdmin | Dec 24, 2021 | Home
By Nazaqat Lal, Advocate & Solicitor, Bombay High Court
nazaqat_lal@hotmail.com | Dec 24, 2021
[*The relevant sections and statutes have been mentioned in brackets]
INTRODUCTION
After taking possession of flats and forming co-operative housing societies, flat owners often have to wait for years till the developer conveys his right, title and interest in the land and building to the co-operative housing society. This is a hindrance to co-operative housing societies as the transfer of title in the land and building in their favour remains in abeyance till such time. More often than not, a situation arises when the society owns the building consisting of flats and apartments but not the land underneath the building. Such situation presents several difficulties in utilization and exploitation of the full potential of the property. The concept of deemed conveyance under Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (“the Act”) (also popularly known as “MOFA”) seeks to remedy this.
ANALYSIS
Section 11 of the Act read with Rule 9 of the rules framed thereunder casts an obligation on the promoter (as defined therein) to convey his right, title and interest in the land and building to the co-operative housing society or company formed by the flat takers or apartment owners. If the promoter fails to do this within 4 months from the formation and registration of the society or company, or within such time as maybe agreed upon between the promoter and flat purchasers, the society can make an application to the competent authority for deemed conveyance. As the name suggests, deemed conveyance is a unilateral execution of a conveyance deed whereby the promoter is deemed to have conveyed his right, title and interest in the land and building in favour of the society of flat purchasers, followed by the unilateral registration thereof under the Registration Act, 1908.
In some cases, the promoter has the right to develop only a portion of the land which is part of a larger undivided plot. There are also cases in which phase wise redevelopment is done of multiple buildings standing on the same sub-divided plot. When an order of deemed conveyance is passed in such cases, disputes often arise about the area of land conveyed under such deemed conveyance. Computing or quantifying the entitlement of a society applying for deemed conveyance may not always be easy as the society maybe entitled to the land on which the society building stands, as well as proportionate right in common areas, internal access roads, gardens, etc. together with other societies. The question that therefore, arises for consideration is what would be the appropriate forum and nature of proceedings to be initiated for adjudication of such disputes involving questions of title, quantification of area entitlement and FSI, etc. arising from an order of deemed conveyance. Would the remedy be by way of filing an appeal, civil suit or writ petition?
To answer this, it is important to understand the jurisdiction being exercised by the competent authority under Section 11 of the Act and what rights, if any, are being determined by an order of deemed conveyance.
In Mazda Construction Company & Ors. v. Sultanabad Darshan CHS Ltd.[1], the Bombay High Court explained the scope of scope of powers exercised by the competent authority while issuing an order of deemed conveyance as under:
“20. To my mind, reading of Sections 10 and 11 together with Section 5A would make it amply clear that what is to be performed by the Competent Authority is a duty and obligation which the promoter is to perform in law. That is to convey the title and execute the documents according to the agreement. If that is the duty which is to be performed by the promoter, but which he fails to perform, then, the Competent Authority steps in to fulfill it. That is a duty towards the flat purchasers and which duty cannot be avoided except at the cost and pains of legal proceedings including a criminal prosecution. In these circumstances and when sections 10 and 11 are read together and harmoniously with the preceding sections including those which contain the particulars of the agreement, then, it becomes absolutely clear that what has to be conveyed even by a deemed conveyance, which is an unilateral act and which enables the flat purchasers to acquire the Promoter’s right, title and interest in the land and the building. Therefore, it cannot be said that an unilateral deemed conveyance conveys something more than what belongs to the Promoter. Section 11(1) provides for conveyance of Promoter’s right, title and interest in the land and building as is clear from the words “his right, title and interest….” appearing therein. I am not in agreement with Mr. Samdani that there are no guidelines guiding and enabling the Competent Authority to grant a deemed conveyance and therefore, the powers are likely to be abused or exercised arbitrarily in every such case. There are inbuilt checks and safeguards inasmuch as what is to be issued is a certificate entitling a unilateral deemed conveyance. It is not a document which stands alone or is a distinct transaction. It is a grant or conveyance in terms of what the agreement between parties stipulates and provides for being conveyed to the flat purchasers. Therefore, the Applicant is permitted to apply to the Competent Authority u/s 11(3) and such application is to be accompanied by true copies of the registered agreements for sale executed by the Promoter with each individual member/ flat purchaser and other relevant documents. It is to further that and to insist on the promoters fulfilling their obligations within the prescribed period, but noticing that their failure has resulted in hardship to flat purchasers, that the Legislature has stepped in. To my mind, this is not a power which can be exercised by the Competent Authority in ignorance of or by brushing aside the earlier provisions and contents of the agreement with the flat purchasers. Equally, the Competent Authority has to take into consideration the contents of other relevant documents.” (emphasis supplied)
In the case of M/s Mahanagar Partnership Firm & Ors. v. District Deputy Registrar of Co-operative Societies (Pune City), Pune & Ors. [2], the Bombay High Court held as follows.
“9. In the case of Mazda Construction Company Vs. Sultanbad Darshan CHS Ltd, Writ Petition No.3912 of 2012, it is held that issue of title in respect of the property cannot be gone into by the Competent Authority under the provisions of the MOFA and the same can be decided only by the Civil Court. In paragraph 17 of Angelina Randolph Pereira’s case (supra), it is held that contentions regarding title in respect of property in question or adjudication in respect of the property in question or adjudication in respect of entitlement of the exact quantification of FSI on the plots in question cannot be gone into the proceedings under section 11 of the MOFA. The Competent Authority cannot decide validity of the agreements between the parties. The order granting Deemed Conveyance does not conclude issue of right, title, interest in the immovable property. The petitioners can still file substantive suit of title claiming the appropriate reliefs. Merely because order of Deemed Conveyance is passed and certificate of title is issued by the Competent Authority under section 11, the petitioners are not precluded from seeking adjudication of their right in respect of the suit property by filing suit. All such contentions can be gone into in a properly instituted suit.
10. In view of the consistent view taken by this Court in the aforesaid decisions, I do not find that any case is made out for invocation of powers under Article 227 of the Constitution of India. It is made clear that if any suit is filed by the petitioners for adjudication of title in respect of the suit property, the same can be decided without being influenced by the order of Deemed Conveyance passed by the Competent Authority and certificate of title issued by the Competent Authority in favour of the second respondent. Subject to this clarification, Petition fails and the same is dismissed with no order as to costs.” (emphasis supplied)
A similar view was also taken by the Hon’ble High Court at Bombay in M/s. Chintamani Builders vs. State of Maharashtra & Ors. [3], Angeline Randolph Pereira vs. Suyog Industrial Estate Premises Co-operative Society Limited [4] and Bhalchandra Gaurishankar Pandya & Ors vs. State of Maharashtra & Ors. [5]
CONCLUSION
When a promoter fails to fulfil his obligations of conveying his right, title and interest in the land and building, the competent authority steps in to fulfil such obligations to avoid hardship to the flat purchasers. However, a society being a successor in title of the promoter cannot claim any rights higher than that of the promoter. Moreover, the flat purchase agreements are an internal arrangement or agreement between the promoter and flat purchasers to which the original owners may or not maybe party. In case the original owners are not party to such agreement, their entitlement will not be affected or influenced by the order of deemed conveyance or the registration of the certificate thereafter. Original owners can raise disputes of title, computation and quantification of area, FSI, etc. by filing a substantive civil suit by pointing out relevant documents as also by leading oral evidence and not by way of invoking the extra-ordinary writ jurisdiction. An order granting deemed conveyance will not conclude such issues. The civil suit will be decided on its own merits unaffected by any order of deemed conveyance that may have been passed.
[1] Order dated 31.08.2012 in Writ Petition 3912 of 2012 (Bombay High Court)
[2] Order dated 6.12.2018 in Writ Petition (St.) No. 31966 of 2018 (Bombay High Court)
[3] Order dated 11th August, 2016 in WP No. 2839 of 2013
[4] 2018 (6) ALL MR 729
[5] Order dated 6th August, 2021 in WP No. 2948 of 2015
by LFIAdmin | Oct 25, 2022 | Home
By Nazaqat Lal, Advocate & Solicitor, Bombay High Court
nazaqat_lal@hotmail.com | October 25, 2022
INTRODUCTION
In commercial transactions, there are often allegations of siphoning off of funds, lack of transparency in maintaining accounts and disposing of or encumbering property in a manner contrary to what was agreed upon between the parties. The circumstances surrounding such acts/omissions and the consequences of such acts/omissions may be coupled with allegations of fraud. While alleging fraud, it is important to note that such allegations may affect the arbitrability of the dispute if there is an arbitration agreement between the parties. It is therefore, imperative to understand what facets of fraud are arbitrable and what facets are not.
ANALYSIS
What is meant by ‘arbitrable’ or ‘arbitrability’?
In the case of Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.[1], the Supreme Court laid down 3 facets or tests of arbitrability. The three facets of arbitrability, relating to the jurisdiction of the Arbitral Tribunal, are as under:
(i) Whether the disputes are capable of adjudication and settlement by arbitration?
(ii) Whether the disputes are covered by the arbitration agreement?
(iii) Whether the parties have referred the disputes to arbitration?
Another important indicator given by the Supreme Court in Booz Allen’s case was to ascertain whether the disputes relate to rights in rem or rights in personam. In this regard, the Supreme Court held as follows.
“38. Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.”
It would not be out of place to mention that the Arbitration Act, 1996 (“the Act”) does not of itself set out what disputes are arbitrable. It does not exclude any category of disputes treating them as non-arbitrable either. However, Section 34(2)(b) of the Act lays down that if ‘the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force,’ the same will be a ground for setting aside the arbitral award. Similar language is also used in the context of Sections 48(2) and 57(1)(b) of the Act. What will then require to be shown is that there is a law which makes the subject-matter of the dispute incapable of settlement by arbitration.
The courts have held that certain kinds of disputes may are not capable of adjudication through the means of arbitration. The following categories of disputes are generally treated as non-arbitrable (a) criminal offences, (b) matrimonial disputes, (c) guardianship matters, (d) insolvency and winding up matters and (e) testamentary matters.
Meaning of fraud
“15. “Fraud” is a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his detriment. Fraud can be of different forms and hues. Its ingredients are an intention to deceive, use of unfair means, deliberate concealment of material facts, or abuse of position of confidence. The Black’s Law Dictionary defines “fraud” as a concealment or false representation through a statement of conduct that injures another who relies on it..”[2]
Is fraud an arbitrable dispute?
In the case of A. Ayyasamy v. A. Paramasivam & Ors.[3], the question of arbitrability of fraud came up before the Supreme Court. The brief facts of the case are set out hereunder to better appreciate the findings and decision of the Supreme Court. The parties to the lis were brothers who had entered into a deed of partnership for the purpose of carrying on a hotel business in partnership. The eldest brother took charge of the administration of the hotel on the assurance that he would carry on the business in a disciplined manner. It was also agreed between the brothers that the daily collection of money would be deposited the very next day in the hotel’s current account. However, the eldest brother failed to deposit the day-to-day collection into the bank account as promised. Further, the eldest brother drew a cheque on the hotel’s current account for a substantial sum in favour of his son without the knowledge and consent of the other brothers. There was also an allegation that the eldest brother would keep the hotel account books with him and not permit the other brothers to examine the same. The aggrieved brothers filed a suit seeking a declaration that as partners they were entitled to participate in the administration of the said hotel and sought a permanent injunction against the eldest brother from interfering with their right to participate in the administration of the hotel. The eldest brother challenged the maintainability of the suit on the ground that there was an arbitration agreement between the parties. The brothers resisted the challenge to maintainability on the ground that serious allegations of fraud had been alleged by them and the same could only be decided by a civil court and not an arbitral tribunal. Two courts held that considering that there were serious allegations as to fraud and malpractices committed by the eldest brother in respect of the finances of the partnership firm and the case does not warrant to be tried and decided by the arbitrator and a civil court would be more competent which has the means to decide such complicated matter.
Before coming to the decision of the Supreme Court, it is pertinent to note that the Supreme Court drew a distinction between ‘serious fraud’ and ‘fraud simpliciter’ and held the former to be non-arbitrable and the latter to be arbitrable.
“18. …However, at the same time, mere allegation of fraud in the pleadings by one party against the other cannot be a ground to hold that the matter is incapable of settlement by arbitration and should be decided by the civil court. The allegations of fraud should be such that not only these allegations are serious that in normal course these may even constitute criminal offence, they are also complex in nature and the decision on these issues demands extensive evidence for which the civil court should appear to be more appropriate forum that the Arbitral Tribunal…”[4]
“23. …It, thus, follows that those cases where there are serious allegations of fraud, they are to be treated as non-arbitrable and it is only the civil court which should decide such matters. However, where there are allegations of fraud simpliciter and such allegations are merely alleged, we are of the opinion that it may not be necessary to nullify the effect of the arbitration agreement between the parties as such issues can be determined by the Arbitral Tribunal.”
The Supreme Court finally held that the allegations of purported fraud were not so serious and could be taken care of by the arbitrator. Reversing the judgments of the two lower courts that had rejected the applications filed under Section 8 of the Act, the Supreme Court allowed the appeal.
CONCLUSION
As set out hereinabove, allegations of fraud may affect the arbitrability of the dispute depending on the seriousness of the fraud alleged. Resultantly, the nature of proceedings filed by the affected party would also be determined by the fraud alleged.
[1] (2011) 5 SCC 532
[2] A. Ayyasamy v. A. Paramasivam & Ors. (2016) 10 SCC 386
[3] Ibid
[4] Ibid
by LFIAdmin | Nov 5, 2021 | Home
By Nazaqat Lal, Advocate & Solicitor
nazaqat_lal@hotmail.com | Nov 05, 2021
INTRODUCTION
Buildings of co-operative housing societies are being redeveloped on a large scale in the state of Maharashtra. Prior to 2009, a number of complaints were received from members against managements of co-operative societies in which redevelopment was taking place. Some of the common complaints included not taking the members in confidence in the redevelopment process, lack of transparency in the tender process, no orderliness in the work of architects and project consultants, no preparation of redevelopment project report, no consistency in agreements with different developers, etc. At that time, there was no concrete policy to address the aforesaid grievances. As a result, a study group was formed to study the complaints received at various levels. After consultation with all stakeholders, the study group opined that it was essential to frame regulations for redevelopment of buildings of co-operative housing societies. Accordingly, the State Government issued directives under Section 79-A (“the Directives”) of the Maharashtra Co-operative Societies Act, 1960 (“the Act”).
ANALYSIS
The Directives lay down a step by step process for undertaking redevelopment of co-operative housing societies. The process commences with the calling of a special general body meeting of the society to discuss the redevelopment of the society’s building and ends with the original members being allotted flats in the redeveloped building. One of the primary objectives of the Directives is to ensure transparency and make the process democratic.
A number of cases started being filed alleging non compliance with these Directives and consequently, praying for the redevelopment to be stopped. A question that naturally arose was whether compliance with the Directives was mandatory or directory and accordingly, whether any deviations were permissible.
In a series of judgments passed by various benches over the years, the Bombay High Court has consistently taken the view that the Directives are directory and not mandatory.
In the case of Maya Developers v. Neelam R. Thakkar & Ors.[1], the developers sought interim reliefs against certain members who were not handing over peaceful and vacant possession despite the execution of the development agreement. The Defendants alleged that the Directives under Section 79-A had not been followed. Some specific non-compliances alleged were no detailed feasibility report, no transparency and the selection of the Developer was not just haphazard but was contrived to benefit Maya Developers, one of whose partners was a relative of a managing committee member. It was further contended that there was no decided case yet on the nature of the guidelines issued under Section 79-A and that these guidelines had a binding statutory force. The Bombay High Court held that what the 2009 Directive seeks to set in place are a set of guidelines.
“74. …This is also apparent from the fact that the Government chose to issue these under Section 79A rather than some other section of the Act. What is set out is a broad policy; and this stands to reason, for not every single provision of this Directive lends itself to strict compliance. Clauses 1, 2, 5, 7, 8 and 10 all use the word ‘should’, not ‘must’ or ‘shall’. Clause 11 in terms says that the Development Agreement ‘should’ contain some conditions and provisions but these are specifically subject to the terms and conditions approved by the General Body Meeting of the Society. This Directive must be read as a whole, and not in the manner Mr. Pai suggests by plucking out one clause here and another there. Read thus, it is clear that the whole of the 2009 Directive is recommendatory, not obligatory. If it were otherwise, and to be read as Mr. Pai would have me do, it would undermine the authority of the society in general meeting, and the fundamental democratic underpinnings of cooperative societies. When Mr. Pai asks that is it possible that a majority can decide the fate of all, the answer must be an unequivocal yes; that is the basis of the entire edifice of the MCSA, subject to specific statutory exceptions. It is impossible to accept his submission that the 2009 Directive in mandatory. It is, as Mr. Kapadia says, a broad road map, and was brought into existence to provide guidance when there were far too many problems in redevelopment of societies. Material compliance is more than sufficient; and it in no way undermines or detracts from the overall authority of the general body of a society’s members. It is sufficient if participation, notice and disclosure are ensured. Where majority decisions are consistent with material compliance with the provisions of the Directive, that is surely enough.”
The case of Maya Developers (supra) is also important as it discusses in detail the jurisdiction of the High Court in light of Section 91 of the Act.
In the case of M/s National Properties v. Sindhi Immigrants CHS & Ors.[2], the developer sought a mandatory injunction directing certain members to hand over vacant and peaceful possession pursuant to the development agreement executed with the society and majority members. It was the Plaintiff’s case that the defendants were all related to one Kukreja Group, an entity that had participated in the tender process but was not selected. Subsequently, this entity, through its members and relatives purchased a few flats and tried to stall the redevelopment process. The Defendants alleged collusion between the Plaintiff and the society alleging that the Plaintiff’s proprietor was the secretary of the society. It was also the Defendants’ case that the Directives under Section 79-A had not been complied with. The Hon’ble Bombay High Court held that the consents were initially granted and at that time the contesting defendants were not even flat holders. Further, once the society approved the proposal by the requisite majority, it is not open for the minority individual members to obstruct the redevelopment process. As far as alleged noncompliance of the Directives issued under Section 79-A was concerned, the Court followed the line of judgments in the case of Maya Developers (supra) and Kamgar Swa Sadan Co-operative Housing Society Ltd.[3] and held that the Directives under Section 79-A was merely recommendatory and did not have statutory force.
In the case of Abhanga Samata CHS v. Parag Arun Binani & Anr.[4], a solitary member had challenged the process of redevelopment on the ground that the Directives under Section 79-A had not been followed in letter and spirit and the selection of the developer itself was vitiated by fraud. Some of the non compliances alleged included not inviting tenders by issuing advertisements in newspapers, society not producing written consent letters from members, absence of video conferencing of meetings, etc. The trial court held in favour of the member and injuncted the redevelopment process. The society and developer appealed against the trial court’s order. Their main contention was that all the decisions had been taken by the majority and such decisions would be binding on the dissenting minority. Moreover, the Directives under Section 79-A were directory and not mandatory, and therefore, substantial compliance was sufficient. The appellate court (the Bombay High Court) set aside the trial court’s order and held that the findings by the trial court were contrary to the material on record. Moreover, the irregularities noted by the trial court cannot displace the decisions taken by the majority members of the society. It further held that the Directives under Section 79-A are not mandatory and substantial compliance is sufficient. Decisions taken democratically cannot be interfered with unless the same were caused by fraud or misrepresentation.
CONCLUSION
From the aforesaid judgments and the judgments relied upon therein, it becomes amply clear that the Bombay High Court has consistently taken a view that the Directives are directory and not mandatory in nature. Therefore, a redevelopment would not ordinarily be stopped on the ground of lack of strict compliance with the Directives. The Court has also held that the State Government is empowered to issue directions in public interest for the purpose of proper implementation of the Act and the Directives are required to be followed only when the members are unable to come to a decision on their own. The Bombay High Court has given paramount importance to the decision of the majority and held that the same would be binding on the minority. The Court has also taken into consideration that the buildings undergoing redevelopment are usually in a condition that is hazardous for the inhabitants to continue residing in and therefore, have been reluctant to intervene in stopping redevelopment processes. In order to get an order injuncting redevelopment, very grave instances of fraud, collusion and/or misrepresentation would have to be shown that severely prejudice the rights of the co-operative housing society and its members at large.
[1] Notice of Motion (L) No. 834 of 2015 : 2016 SCC Online Bom 6947 : (2016) 6 Bom CR 629
[2] Notice of Motion No. 285 of 2016 in Commercial Suit No. 509 of 2016 (Bombay High Court)
[3] 2018 SCC OnLine Bom 1319
[4] Appeal from Order (St) No. 7776 of 2021 (Bombay High Court)
