Case BriefsTribunals/Commissions/Regulatory Bodies

Maharashtra Real Estate Appellate Tribunal, Mumbai: The Coram of Indira Jain J., (Chairperson) and Dr K. Shivaji, Member (A), expressed that, if the change of promoter without following the procedure prescribed under the law is left to the wisdom of society, it will not only render the relevant provisions of revocation of registration redundant but also create chaos and uncontrollable situation leaving the fate of allottees /flat purchasers in doldrum.

Factual Matrix


Complainants had booked apartments in a real estate project, respondent 2 was initially appointed as a developer by the society. In 2018, the society terminated the development agreement executed with respondent 2 and revoked the power of attorney. After the termination of the development agreement, society appointed Mangal Buildhome Private Limited as a developer to complete the project.

Complainants stated that the appointment of a new developer by society was in the contravention of the provisions of Section 15 of the Real Estate (Regulation and Development) Act, 2016 and therefore, they filed complaints before MahaRERA to seek direction to execute and register agreements for sale, cancellation of a development agreement with new developer and completion of the project.

As per the interim order the society was directed to convene a meeting of allottees and come up with a way forward for the completion of the project and the interim order restrained both the developer from creating third party rights.

The above-said interim order was challenged. Further impugned order dated 3-12-2021 came to be passed by the Chairperson, MahaRERA while disposing of complaints on merit.

Moot Question


Whether the action of the society in appointing a new developer is prima facie in accordance with the procedure prescribed under the law?

In the present matter, though society had come with a plea that intimation of revocation of registration was sent to the Authority, it was evident that no decision was taken by the Authority n letter written by the Society.

Law requires the decision of the Authority and in the absence of such decision mere intimation by society to the Authority would not empower the society to appoint a new developer during the subsistence of registration of the project.

Coram also noted that the society did not obtain the prior written consent of two-thirds of allottees at the time of appointment of a new developer after the termination of the development agreement entered into with the erstwhile developer.

Prima facie, the action of the society in appointing a new developer was not in consonance with the procedure prescribed under law. Hence, stay was not granted. [Mangal Buildhome (P) Ltd. v. Ramasubramanian R. Nadar, Appeal No. AT006000000053504, decided on 21-4-2022]


Advocates in appearance:

Mr. Sanjay Jain, Advocate, for appellants in Appeal Nos.AT006000000053504, AT006000000053506, AT006000000053508, AT006000000053509 and for respondent No.3 in 4T006000000053512, AT0060000000535 15, AT0060000000535 13 and AT0060000000535 14,

Mr. Harshad Bhadbhade, Advocate, for appellant in Appeal Nos. AT006000000053512, AT006000000053515, 4T006000000053513 and 4T006000000053514 and for respondent No.3 in Appeal Nos.4T006000000053504, AT006000000053508, AT006000000053506, AT006000000053509

Mr, Nilesh Gala, Advocate, for respondent No.1 in Appeal Nos. AT006000000053504, AT006000000053508, AT0060000000535 12, AT00600000005351s.

Mr. Nimay Dave, Advocate for respondent No.1 in Appeal Nos.AT006000000053506, AT006000000053509, AT006000000053513, AT006000000053514

Case BriefsHigh Courts

Bombay High Court: G.S. Patel, J., in its opening remarks, expressed with respect to the present matter that:

This is the usual story of a solitary member of a society obstructing the redevelopment of the society building.

 It does not matter to this member that the building is in a dilapidated condition unfit for human habitation.

It does not matter to him that the building has been declared as such by the Planning Authority and categorized as a ‘C1’ building.

It does not matter to that dissenting member that the building now poses a risk to all occupants — including the dissenting himself — and, in addition, others in the vicinity.

It also does not seem to matter to this member that his actions come at the very real cost of other member of the society.

Persistently the respondent has been obstructing the redevelopment work for the past 6 years—which is beyond shocking! 

Further, the Court elaborated that respondent 2 imagines that it is only he who can tell right from wrong, that it is only he who knows what is good for all, and that he is entitled without any assumption of liability to continually obstruct the redevelopment, put his fellow members at risk and continue in this fashion.

With respect to declaring the redevelopment agreement null and void, whether the respondent 2 obtained any order at all? The answer that the Bench received was ‘not yet’.

Stating that respondent 2 is wrong on every single aspect of the matter, Bench added that he is entirely in error in believing that no action could be taken and that he was protected or insulated from the operation of law.

Factual Matrix

 In the present matter, respondent 1 society had 20 tenements and the only tenement that is still in occupation was respondent 2. In 2014, the Society resolved to for redevelopment, followed by a redevelopment agreement, under which a provision for arbitration was included, as per which any disputes were to be referred to arbitration.

The said property was located on MHADA Land. Municipal Corporation of Greater Mumbai declared the said building in the ‘C1’ category, i.e. as unsafe and unfit for human habitation.

As per the Court’s understanding the said proposal for redevelopment was for some ‘illegal’ reasoning.

Submission

Point that was urged was that the building was meant for persons from lower-income group and hence permission of or from the Social Welfare Department was essential and was a requirement. Not having been obtained the permission the entire agreement was illegal, null and void.

But it was not shown how SWD was a ‘Planning Authority’ under the town planning statute or that it has the power to veto, stop or stall any development or re-development project.

MHADA had passed an order with respect to the stated obstruction by respondent 2 under Section 95A of the MAHADA Act, in October 2018.

Mr Singh for the developer made a statement that Kondvilkar at all times will be treated at parity with all other members of the society and won’t be denied a single benefit of re-development. He will be put in possession of his allotted flat in the redeveloped building after the occupation certificate has been obtained.

Bench elaborated with regard to the Society’s general body resolution that, it is simply not possible for a member of the society to disobey, disavow or flout openly taken decisions of the general body of the very society of which he claims to be a member.

Can a development agreement which was signed between the Chairman of the Society and one of the Managing Committee members be binding upon a non-signatory i.e. Kondvilkar?

 While analysing the facts and circumstances of the present matter, Court cited the Bombay High Court decision in Aditya Developers v Nirmal Anand Co-op. Hsg Soc Ltd., 2016 SCC OnLine Bom 100, where it was observed that:

 “21. It is to be noted that once the person becomes a member of the Co-operative Society he loses his individuality with the Society and has no independent rights except which is given to him by the statute and bye-laws. Hence, objection raised by the respondent nos.3, 4, 6 and 7 that there is no privity of contract between them and petitioner, is not maintainable.

In Court’s opinion, the decision of Sarthak Developer’s v. Bank of India Amrut-Tara Staff CHSL, Appeal (L) No. 310 of 2012, provided a complete answer in the present case. Hence, all the decisions by Mr Singh are binding and are apposite.

If it’s suggested that Girish Mulchand Mehta v. Mahesh S Mehta, 2009 SCC OnLine Bom 1986, was a case of tenants, then that argument fails once we see that it has been used again and again in cases involving members of a cooperative society — including Sarthak Developers

What does Kondvilkar want?

Bench noted that he was unable to articulate it beyond saying “the law must be followed.”

Further, the High Court added that Kondvilkar will bend the knee to the law and to this Court’s judgment.

There is not a vestige of a defence in law, on facts, in equity or in justice

 On the reconstruction of the building and after obtaining the occupation certificate when all other members are put in possession, the 2nd Respondent will also be given possession of his allotted premises.

Further, the High Court held that:

Any attempt by the 2nd Respondent to obstruct the Court Receiver’s department from taking possession, either by fling complaints or otherwise, will be treated as an act of Contempt of Court and will be dealt with as such.

[Chirag Infra Projects Pvt Ltd v. Vijay Jwala Coop. Hsg Soc Ltd., 2021 SCC OnLine Bom 364, decided on 12-03-2021]


Advocates before the Court:

Mr Amogh A Singh, with Bhavin R Bhatia, Rohit Yadav & Moksha M Doshi, for the Petitioners.

Mr Amol Joshi, with Vinod Rane, i/b Rane & Co, for Respondent No.1.

Ms Divya B Parmar, for Respondent No. 2.

Case BriefsSupreme Court

Supreme Court: While dealing with the question that whether the development agreement between the DDA and the developer Kenneth Builders was frustrated within the meaning of Section 56 of the Indian Contract Act, 1872 due to some intervening circumstances, the Court upheld the judgment of the Division Bench of the Delhi High Court, and concluded that the performance of the contract between the DDA and Kenneth Builders for development of project land for premium flats and resettlement houses was frustrated. This was through the refusal of the Delhi Pollution Control Committee (DPCC) and the Department of Forests, Government of the National Capital Territory of Delhi (GNCTD) to grant permission to the Respondents to construct upon land they deemed as falling within the Ridge. The Respondents were entitled to refund of deposit of bid money made to the DDA, with an interest of 6 % operating from date of final deposit, i.e. 11th September 2006.

The current project land was not technically demarcated as Ridge land, and the Delhi Development Authority had marked it out as ‘residential’. However, objections were raised by the Department of Forests of GNCTD.  Although the Ministry of Environment and Forestry had initially given clearance,  it had in a reference to it by the Additional Solicitor General during the pendency of the High Court proceedings, deemed the land to be Ridge land and recommended taking the opinion of the Central Empowered Committee set up in T.N. Godhavarman v. Union of India  (2013) 8 SCC 198. The CEC held that any non-forestry use of land falling in the Ridge was only permitted after clearance by the Ridge Management Board, and that the present land did indeed fall in the “extended ridge area”. The decision in W.P. (C) No. 3339 of 2011, decided 30th November 2011, required the clearance of the Ridge Management Board for development projects on land outside the notified Ridge Area, but possessing  morphological features conforming to the Ridge. The Respondents’ application to DPCC for “consent to establish” was denied in the absence of the ridge demarcation report (not provided by DDA) and forest clearance.

In light of the denial of permission to construct on the disputed land, the fact that Respondents had taken all steps to commence the required  construction and that neither party had contemplated the requirements that made performance impracticable, the Court held the contract to be frustrated under Section 56, Indian Contract Act, 1872. It mentioned in passing the dictum in Satyabrata v. Mugneeram Bangur and Co, (1954) S.C.R. 310, whereby impossibility was not merely literal or physical impossibility, but impracticability and uselessness of action for the object and purpose envisaged by parties at the time of formation of contract. [Delhi Development Authority v. Kenneth Builders and Developers and Ors., Civil Appeal No. 5370 of 2016 with Civil Appeal No. 5371 of 2016]