The Lokmanya Pan Bazar Association Ltd. v. The State of Maharashtra

16. He submits that after possession was handed over, the society alone has shouldered all responsibilities. It has maintained the buildings, paid taxes and carried out all management functions. The petitioner has not discharged any duty that an owner or promoter is expected to discharge. Nor has the petitioner exercised any ownership rights after handing over possession.

17. He submits that the petitioner’s contention regarding lack of service is unsustainable. The petitioner was served at its registered office address. That is the address stated in the agreements, in the pleadings and in the records of the Ministry of Corporate Affairs. The petitioner’s own documents show this address as its registered office. Under Section 51 of the Companies Act, service at the registered office is valid service. In addition, notice was published. The allegation of fraud is unfounded. If the petitioner failed to update its registered office, it cannot rely on its own default. The Deputy Registrar satisfied himself regarding proper service and compliance with statutory requirements before issuing the deemed conveyance certificate. The petitioner chose not to appear despite opportunities. There is no procedural illegality in the proceedings.

18. He submits that the society fulfilled all requirements under Section 11 of MOFA. The promoter did not execute conveyance within the statutory period. The society has been in possession for many years and has acted as owner in all respects. The petitioner has no valid objection to conveyance except reliance on the concept of Special Patron Membership, which has no legal foundation. The petitioner and Respondent No.4 both fall within the definition of “promoter” under Section 2(c) of MOFA. Their obligation to convey arose in 2002 when the society was registered. Having failed to do so for more than ten years, they cannot now claim prejudice. The petitioner seeks to avoid compliance with MOFA and to retain wrongful control. It has not approached the Court with clean hands. No legal infirmity exists in the impugned order.

19. In these circumstances, Respondent No.3 submits that the writ petition be dismissed. The impugned order of deemed conveyance and the certificate issued in favour of the society be upheld. Respondent No.3 seeks imposition of exemplary costs and all consequential reliefs in the interest of justice. Consideration of Rival Submissions: Applicability of MOFA to the Present Transaction:

20. The first issue that calls for determination is whether MOFA applies to the present transaction. This question has to be answered primarily on the basis of the written agreements between the parties. The law attaches great weight to the terms of a written contract, voluntarily agreed to and signed by both sides, unless it is shown to be vitiated. No such challenge is even suggested in the present case. The individual agreements executed between the developer and the purchasers, under which the purchasers obtained their respective premises in Harshad B and Harshad C, are on record. Each of these agreements in clear terms states that the development and sale of the units shall be governed by the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, commonly known as MOFA. This is not a stray or casual recital. It is a conscious incorporation of the statutory regime under which the parties agreed to be governed. Clause 26 of each agreement further reinforces this position. It specifically records that the agreement shall always remain subject to the provisions of MOFA and the rules framed thereunder. The use of the expression “shall always remain subject” leaves no manner of doubt. It indicates a continuing submission of the contractual relationship to the discipline of the statute. It is not open to either party, after having entered into such a stipulation, to contend that MOFA does not apply, unless it is first shown that the clause is illegal or void. No such case is made out. The Court cannot ignore that these agreements were drafted by or at the instance of the promoter side. The promoter chose to clothe the transaction in the character of a flat purchase governed by MOFA. The purchasers paid consideration and altered their position on that footing. The promoter, having derived benefit under these very agreements, cannot now resile from the statutory character expressly given to them. To permit such a stand would be to allow a party to both approbate and reprobate, which the law does not countenance. Therefore, on a plain reading of the agreements, particularly Clause 26, and in the absence of any credible material to suggest a different intention, the only reasonable conclusion is that the parties themselves subjected the transaction to MOFA. The Court, accordingly, holds that MOFA applies to the present transaction and governs the relationship between the petitioner as promoter and the flat purchasers of Harshad B and Harshad C. Effect of the “Special Patron Member” Description:

21. The petitioner argues that MOFA does not apply because the purchasers were described as “Special Patron Members” of the petitioner-company and because the land continued to remain in the ownership of that company. On this basis, the petitioner contends that Section 11 of MOFA, which requires a promoter to convey title to an association of flat takers, has no application. After examining the documents and the conduct of parties, the Court finds no merit in this submission. The Court proceeds on a clear and well-settled principle. When a statute is enacted to protect purchasers, the Court must look at the real nature of the transaction. The law does not permit the promoter to change the true character of the arrangement merely by affixing a different label. The evidence before the Court shows that the purchasers acted as flat buyers in every material respect. They paid the price for the flats. They received possession of clearly defined units. They assumed responsibility for outgoings connected with the premises. These are the usual and defining features of a flat purchase under MOFA.

22. On the other hand, there is no evidence that the purchasers were ever treated as genuine members of the petitioner-company. Corporate membership ordinarily carries rights. These include the right to vote, to attend and participate in meetings, to influence management decisions and to exercise a voice in the affairs of the company. The purchasers were denied all such rights. The petitioner’s own Memorandum and Articles of Association describe Special Patron Members as persons who hold no rights in governance, no rights in management and no rights in the company’s internal affairs. This is admitted from the documents. These facts demonstrate that the Special Patron Membership was not intended to create any real corporate relationship. It was a nominal description without any substance. If such a description were accepted as sufficient to take purchasers outside the protection of MOFA, it would allow promoters to defeat the statute by a simple device. A promoter could, in every case, call purchasers “members”, deny them all real rights and then claim that MOFA has no application. This would undermine the purpose of the legislation. The Court cannot endorse such an outcome, especially when credible evidence shows that the purchasers acted as flat takers and not as members of a corporate entity.

23. Sections 10 and 11 of MOFA confer a clear right on flat purchasers to form a co-operative society, company or association and to seek conveyance of the land and building in favour of that body. This right is statutory. It does not depend on the promoter’s consent. It cannot be taken away by describing purchasers as Special Patron Members when those so-called members have no voting rights, no power to manage the property and no authority in the petitioner-company. The Court, therefore, finds that the petitioner’s argument is contrary to the documents and unsupported by evidence. The mere description of purchasers as Special Patron Members does not override the nature of the transaction, which is that of a flat purchase under MOFA. The purchasers were not functioning members of the petitionercompany. They were flat takers with statutory rights. Their right to form a society and to seek conveyance cannot be neutralised by a nominal and ineffective form of membership. For these reasons, the Court rejects the contention that MOFA does not apply, and holds that Sections 10 and 11 of MOFA fully govern the rights of the parties. Maintainability of the Application for Deemed Conveyance:

24. The petitioner next argues that the application for deemed conveyance was not maintainable. According to the petitioner, the land always stood in the name of the petitioner-company, and because the purchasers were described as Special Patron Members of that company, they could not demand conveyance from the very same company. This argument does not withstand legal scrutiny and is not supported by the evidence on record.

25. Section 11 of MOFA must be interpreted in its plain and practical sense. The section does not say that the association of flat takers must be a different legal entity from the land-owning entity. What the section requires is simple. There must be a promoter as defined under Section 2(c). That promoter must have constructed or caused the construction of a building consisting of flats. Flat purchasers must have acquired premises under agreements governed by MOFA. Once these conditions are satisfied, the promoter must, within the stipulated time, form an association of flat takers and convey the land and building to that association. The Act does not permit the promoter to escape this obligation by adopting a particular corporate structure or label. If a promoter decides, for his commercial convenience, to keep title in his own company and then calls purchasers by a different name, that choice cannot dilute the statutory mandate. Credible evidence shows that the petitioner-company held the land and the developer constructed the buildings. Both the petitioner-company and Respondent No.4 developer have acted as promoters. The documents executed with purchasers were agreements for sale of flats. These facts bring the case squarely within the statutory structure of MOFA. Therefore, the petitioner cannot avoid conveyance on the ground that the purchasers were Special Patron Members. As already noted earlier, these so-called members had no actual membership rights in the company. They held no voting rights, no management rights, no rights in the company’s affairs, and were treated as flat takers in every practical sense. For MOFA, the real position of parties must be seen, not their labels. The evidence supports only one conclusion: the purchasers are flat takers and the petitioner and Respondent No.4 are promoters. It is also necessary to note that the society was registered in the year

2002. From that point onward, MOFA required the promoter to execute the conveyance within the statutory time. The record before the Court shows no effort on the part of the petitioner to comply with this obligation. The statutory period expired long ago. Once that period elapsed, the law conferred on the society a right to apply for deemed conveyance. This right flows directly from the statute and does not depend on the will of the promoter.

26. The Competent Authority therefore acted within its jurisdiction in entertaining the society’s application. The application met the legal requirements. The objection raised by the petitioner is based on an incorrect understanding of Section 11 and is unsupported by credible material. The Court holds that the application for deemed conveyance was maintainable in law. Validity of Respondent No.3 Society and the Challenge to Its Formation:

27. The petitioner then argues that Respondent No.3 society itself is not a valid entity. The petitioner claims that the purchasers were already Special Patron Members of the petitioner-company and therefore could not legally form a separate co-operative society. This argument is not supported by credible evidence on record.

28. The undisputed facts show that the society was registered in the year 2002. The flat purchasers took this step only after they realised that, despite being called Special Patron Members, they had no voting rights, no participation in management, and no control over the affairs of the petitioner-company. They were, in substance, treated as outsiders in all matters of decision making. Their formation of the society was therefore a lawful exercise of their statutory rights under MOFA, which expressly permits flat purchasers to constitute themselves into a co-operative society when the promoter fails to do so. The petitioner cannot say that the society’s formation was unknown to it. The record shows that the petitioner’s own solicitors wrote letters to the authorities in October 2002 in which they referred to the society. Despite this knowledge, the petitioner never exercised its legal remedy under Section 152 or 21A of the Maharashtra Co-operative Societies Act to challenge the registration. Section 152 or 21A provides a clear mechanism for seeking cancellation of a society’s registration when valid grounds exist. The petitioner did not take that step at any time. Instead, the petitioner allowed the society to function for more than a decade. During this entire period, the society managed and maintained the building, undertook repairs, paid municipal taxes and handled administration. The petitioner neither objected nor assumed any of these responsibilities. The society became, in fact and in law, the representative body of the flat purchasers and the manager of the property.

29. When a society has been functioning openly and continuously for years, and when the promoter has taken no timely steps to challenge its registration despite full knowledge, the Court must apply the principles of acquiescence and estoppel. These principles prevent a party from challenging, at a belated stage, a state of affairs that it has knowingly allowed to continue.

30. In writ jurisdiction under Article 226, the Court does not ordinarily disturb long-standing structures, especially where thirdparty rights, property management and public obligations such as taxes are involved. Interference at this stage would unsettle the rights and responsibilities that have been operating for many years. Applying these principles, the Court finds no basis to entertain the petitioner’s delayed objection to the existence or validity of Respondent No.3 society. The society was lawfully formed. Its registration was never challenged at the appropriate time. It has acted as the functioning body of flat purchasers for over a decade. There is no credible The petitioner then argues that Respondent No.3 society itself is not a valid entity. The petitioner claims that the purchasers were already Special Patron Members of the petitioner-company and therefore could not legally form a separate co-operative society. This argument is not supported by credible evidence on record. Allegations of Denial of Natural Justice and Surreptitious Proceedings:

31. The petitioner next claims that the deemed conveyance order was obtained by violating the principles of natural justice. Three allegations are made. First, that Respondent No.3 gave an incorrect address in the application. Second, that notices were sent to a defunct address even though the society knew the petitioner’s operational address. Third, that the public notice issued by the Competent Authority lacked proper particulars. After examining the record, the Court finds no credible evidence to support any of these allegations.

32. The society has produced documents from the Ministry of Corporate Affairs. These documents show that the address used for service was the same address declared by the petitioner-company as its registered office. The agreements with the flat purchasers also show this address. The pleadings filed by the petitioner in earlier proceedings contain the same address. When a company states an address in statutory records and in its contracts, it is bound by that declaration. Section 51 of the Companies Act also states that service at the registered office constitutes good service. This legal rule exists so that parties dealing with a company may rely on the public records maintained by it. If the petitionercompany later shifted its operational address but failed to update its statutory records, the responsibility rests entirely on the petitioner. A company cannot be permitted to keep a wrong or outdated address on official records, receive statutory benefits from that address, and then claim, when service is effected on that same address, that the service is invalid or mala fide.

33. The petitioner also argues that the public notice was vague. However, the petitioner has not produced any material to show that the notice omitted essential particulars or misled any person. The record shows that a public notice was issued as a supplementary measure, after service was already effected at the registered office. When the primary service is valid in law, the burden shifts to the petitioner to demonstrate real prejudice. Apart from a general statement, no such prejudice has been shown. The Competent Authority recorded that service was complete. It then issued a public notice and fixed the matter for hearing. The petitioner did not attend. When a party chooses not to respond after proper service, it cannot later claim that natural justice has been violated. Natural justice protects the right to be heard. It does not protect a deliberate absence.

34. On the basis of the evidence, the Court is satisfied that the plea of fraud or surreptitious conduct is unfounded. Service was carried out at the correct statutory address. A public notice was also issued. The petitioner did not participate despite these steps. The allegation of non-service is, therefore, rejected. Effect of the ULC Exemption Order and Its Continuing Operation:

35. A major part of the petitioner’s argument is based on the exemption order issued under Section 20 of the Urban Land Ceiling Act. The petitioner relies on three conditions found in that order. First, that the exempted land must be used only for the petitioner’s own members. Second, that it cannot be transferred to outsiders. Third, that any transfer requires prior permission of the State Government. The petitioner submits that, although the Urban Land Ceiling Act has been repealed, the exemption order survives because of the savings clause in the Repeal Act and the Full Bench ruling in Maharashtra Chamber of Housing Industry. On that foundation, the petitioner argues that the land cannot be conveyed to Respondent No.3 society under any circumstances.

36. The Court accepts the legal position that a Section 20 exemption order continues to remain valid even after repeal of the main statute. Its conditions do not vanish. They continue to bind the parties. However, the real question is: what do these conditions actually mean and what consequence follows from them. This question must be answered based strictly on the language of the exemption order and the credible evidence on record.

37. The exemption order was granted so that the petitioner could retain and develop surplus land subject to strict controls. The essential purpose of the conditions was to ensure that the land was not commercially exploited in the open market, but was used exclusively to provide premises to a defined class described as the petitioner’s own members. The prohibition on transfer to outsiders was directed at preventing speculative sale or commercial use of the exempted land. The order does not state anywhere that flat purchasers who occupy the premises after paying full price and who organise themselves into a co-operative society under MOFA will be treated as outsiders. Nothing in the exemption order suggests that a conveyance to such a body is forbidden. The credible evidence on record shows that the flat purchasers are the very persons contemplated as beneficiaries under the petitioner’s development scheme. They paid consideration for their flats. They took possession. They have lived in the buildings for years. They formed a co-operative society as required by MOFA. They are not strangers to the land. They are not outsiders seeking commercial benefit. They are the legitimate beneficiaries for whom the development was undertaken. A conveyance in favour of their society is only a formal transfer of title to the collective body that represents them. It does not change the identity of the beneficiary class.

38. The petitioner’s argument seeks to treat the flat purchasers as outsiders merely because they created a society. This interpretation finds no support in the terms of the exemption order. A society is only an organisational form for the same group of persons. It does not introduce any new beneficiary. It does not alter the composition of the class for whom the land was exempted. It is true that, as between the petitioner and the State Government, questions may arise whether any permission is required or whether any amounts must be paid under the exemption conditions. Those issues concern compliance between the State and the petitioner. They do not affect the rights of the flat purchasers under MOFA. The petitioner cannot use the exemption order as a defence to deny conveyance to the society, because MOFA casts a mandatory obligation on the promoter to convey the land to the association of flat takers. The exemption order does not override MOFA. Both laws operate in their respective fields.

39. Therefore, based on credible evidence and the actual language of the exemption order, the Court holds that the petitioner cannot rely on the Section 20 conditions to block conveyance. The purchasers are the intended beneficiaries of the development. Their society is not an outsider. A conveyance to the society fulfills both the object of MOFA and the purpose of the exemption order. Distinguishing the Precedents Cited by the Petitioner:

40. In Mazda Construction, the Court held that deemed conveyance conveys only the promoter’s right, title and interest and cannot extend beyond what the promoter is legally entitled to convey. The case turned on disputes relating to extent of land, common areas, and FSI rights, and the Competent Authority had exceeded its jurisdiction. The judgment does not hold that contractual clauses can override MOFA. It only says that the Competent Authority cannot grant more than what the promoter himself had in law. It does not say that the promoter can rely on a contract to defeat conveyance. The focus is on the promoter’s legal title, not on a contractual device. It does not support the proposition that the promoter’s development agreement, or the “Special Patron Member” structure, can deprive flat purchasers of statutory rights under Sections 10 and 11 of MOFA.

41. In ACME, the Court reaffirmed two principles. First, that the Competent Authority must consider the Agreement for Sale, sanctioned plans and other relevant material. Second, the Competent Authority cannot adjudicate title disputes. It conveys only the promoter’s right, title and interest. The Court clarified that the agreement for sale is a foundational document, because it records the nature of the transaction and the rights promised to purchasers. When an agreement shows that purchasers bought flats under MOFA, contractual language cannot later be used by the promoter to claim that they were “members” instead of purchasers. This case supports the flat purchasers. It emphasises that MOFA agreements govern the transaction and that statutory rights cannot be defeated by clever drafting. The Competent Authority must look at the real nature of the agreements.

42. Tushar Jivram Chauhan involved land that was incapable of conveyance due to an overriding statutory disability. The Court held that deemed conveyance cannot be granted at all where title cannot legally pass under any circumstances. The judgment does not deal with contractual rights between promoter and purchaser. It concerns inherent legal disabilities on transfer, not agreementbased restrictions. This case does not assist the petitioner because, the petitioner here does hold title. There is no absolute statutory bar on conveyance to the society. Therefore, contractual clauses like “Special Patron Membership” cannot take the case into the Tushar Jivram Chauhan category.

43. A.H. Wadia Trust judgment concerned land belonging to a public trust, where alienation required prior permission under Section 36 of the Maharashtra Public Trusts Act. The Competent Authority granted deemed conveyance without hearing the owner. The decision deals with mandatory statutory requirements for alienation, not with contractual restrictions between promoters and flat purchasers. The Court held that deemed conveyance cannot override a statute. Not applicable to the petitioner’s case because the petitioner’s land is not subject to such statutory bar, and nothing in the development agreement creates a legal impossibility of conveyance. A self-created contractual structure (like “Special Patron Membership”) cannot be equated with a statutory prohibition on transfer.

44. From all four judgments, the following principles emerge: Contractual terms cannot defeat MOFA. Any clause that tries to restrict or postpone conveyance contrary to Sections 10 and 11 is void in spirit and unenforceable in effect. The Competent Authority conveys only what the promoter lawfully possesses. If the promoter holds clear title, contractual restrictions cannot be used to avoid conveyance. Agreements for sale are central. Where agreements explicitly state that the transaction is governed by MOFA, the promoter cannot fall back on later characterisations like “Special Patron Membership”. Only statutory disabilities can bar conveyance. Cases like Tushar Chauhan and Wadia Trust involve legal incapacity to transfer, not contractual constructs. A promoter cannot create a contractual fiction to avoid a statutory duty. This principle is implicit in ACME and supported by the structure of MOFA, which protects purchasers and constrains promoters.

45. On the other hand, the broad scheme of MOFA and the consistent trend of judicial pronouncements emphasise the protective object of the statute. Promoters and developers are not permitted to devise ingenious structures to indefinitely postpone or evade conveyance. The device of describing purchasers as “Special Patron Members” without giving them any genuine corporate rights, and then using that very description to deny them the right to form a society or demand conveyance, falls squarely within what the statute seeks to prevent. Conduct of Parties and Equitable Considerations:

46. The Court must also consider the conduct of the parties over the years, because conduct often reveals the true character of the relationship better than written labels or later explanations. The evidence on record shows that, from the time the society was formed, it has taken full responsibility for the buildings and the property. The society has been maintaining the common areas, carrying out repairs, paying municipal taxes and electricity charges for common spaces, engaging security services and managing all day-to-day affairs. These are the responsibilities that ordinarily fall upon an owner or a promoter until conveyance is executed. On the other hand, there is no evidence to show that the petitioner has discharged any such responsibility after handing over possession of the flats. The petitioner has not contributed to maintenance or repairs. It has not participated in the management. It has not paid any municipal taxes. It has not acted as a person in control of the property. This consistent course of conduct shows that, in reality, the petitioner stepped back from all responsibilities long ago, and the society stepped into the role of custodian and manager. The petitioner allowed this arrangement to continue for more than a decade. At no point did it object to the society performing these functions. It raised no protest regarding the society’s management. It did not assert control over the buildings. It took no steps to convene meetings or exercise authority as an owner. The petitioner remained silent and inactive until the society exercised its statutory right under MOFA to seek deemed conveyance. Only then did the petitioner approach this Court and attempt to reassert ownership by relying on technical objections.

47. In law, such prolonged silence and inaction carry significance. When a promoter knowingly allows a society to function as the effective owner and manager for many years, it cannot suddenly claim that the society has no right to ask for conveyance. Equity does not support such a position. A party that has benefited from inaction, avoided expenses, and allowed another party to shoulder all responsibilities cannot later claim legal disadvantage when the law requires it to fulfil its statutory obligations.

48. The evidence thus shows a clear pattern. The society behaved as the owner in every essential respect. The petitioner avoided all burdens connected with ownership. It is only when the society sought to formalise its rights that the petitioner raised objections. The Court cannot ignore this conduct, which strongly supports the society’s case. Equitable considerations therefore weigh against the petitioner and reinforce the conclusion that the petitioner cannot now resist conveyance.

49. In light of the above discussion, the Court answers the principal issues thus, MOFA applies to the present project. Respondent No.3 society is a valid association of flat takers. The petitioner and Respondent No.4 are promoters within the meaning of Section 2(c). The right of the society to seek conveyance under Section 11 accrued upon its registration and the promoter’s failure to convey within time. The ULC exemption order does not bar conveyance to the society; its conditions, to the extent they survive, govern the relationship between the State and the promoter and do not negate MOFA rights of flat purchasers. The plea of non-service and violation of natural justice fails. No ground is made out to set aside the order-cum-certificate of deemed conveyance. Compliance with Statutory Requirements and Scope of Judicial Review:

50. The petitioner argues that the certificate of deemed conveyance should be set aside because the procedure was improper and because the Competent Authority had no jurisdiction to pass such an order. After examining the entire record, the Court finds no credible evidence to support this claim. The Competent Authority acted strictly within the limits of Section 11 of MOFA. That section creates a clear mechanism. When a promoter does not execute the conveyance within the time fixed by law, the flat purchasers or their society may approach the Competent Authority to obtain a deemed conveyance. The materials placed before the Court show that all basic requirements of Section 11 were fulfilled. The society was properly registered. It represented flat purchasers who were already in possession of their respective premises. For many years, the society carried out all responsibilities connected with ownership. It maintained the buildings, paid taxes, undertook repairs and managed the property. On the other hand, the promoter did not execute the conveyance despite the statutory mandate. Once this failure continued beyond the permitted period, the society’s right to apply for deemed conveyance arose in law.

51. The record also shows that the Competent Authority ensured service of notice in accordance with law. Service was effected at the petitioner’s registered office address. A public notice was also issued. The petitioner had every opportunity to place its objections on record. It chose not to appear. A party that remains absent after proper service cannot later complain that the proceedings suffered from procedural defects.

52. The Court must also see whether the impugned order discloses any glaring error or illegality that would warrant interference under Article 226 of the Constitution. No such error is shown. The Competent Authority considered the documents placed before it, examined the statutory requirements and passed an order that falls squarely within its jurisdiction. There is nothing arbitrary, unreasonable or perverse in the reasoning adopted.

53. In these circumstances, the plea that the deemed conveyance order is procedurally defective or jurisdictionally unsound cannot be accepted. The order is lawful and does not call for interference in writ jurisdiction. Final Conclusion and Order:

54. The inevitable conclusion is that the writ petition is devoid of merit. The impugned order and the certificate of deemed conveyance issued in favour of Respondent No.3 society are upheld. The petition is dismissed. In the facts and circumstances of the case, and having regard to the prolonged attempt of the petitioner to resist statutory conveyance, this is a fit case for imposition of costs.

55. The petitioner shall pay costs of Rs.50,000/- to Respondent No.3 society within a period of eight weeks.

56. All pending applications, if any, stand disposed of.

57. At this stage, learned Advocate for the petitioner seeks stay of the judgment and order. However, in view of the reasons recorded in the judgment, the request for stay stands rejected. (AMIT BORKAR, J.)