Rachana Developers v. State of Maharashtra & Ors.

14. For the purpose of adjudicating the issues arising in the present writ petition, it becomes necessary to advert to the relevant statutory provisions. In particular, Sections 4 and 10 of the Maharashtra Ownership Flats Act, 1963, and Sections 2 and 11 of the Maharashtra Apartment Ownership Act, 1970, assume significance. The said provisions, which have a direct bearing on the controversy, read as under. “4. Promoter before accepting advance payment or deposit to enter into agreement and agreement to be registered.— (1) Notwithstanding anything contained in any other law, a promoter who intends to construct or constructs a block or building of flats, all or some of which are to be taken or are taken on ownership basis, shall, before he accepts any sum of money as advance payment or deposit, which shall not be more, than 20 per cent. of the sale price enter into a written agreement for sale with each of such persons who are to take or have taken such flats, and the agreement shall be registered under 19[the Registration Act, 1908 (Act 16 of

1908) (hereinafter in this section referred to as Registration Act) and such agreement shall be in the prescribed form. (1-A) The agreement to be prescribed and sub-section (1) shall contain inter alia the particulars as specified in clause (a); and to such agreement there shall be attached the copies of the documents specified in clause (b)— (a) particulars.—

(i) if the building is to be constructed, the liability of the promoter to construct it according to the plans and specifications approved by the local authority where such approval is required under any law for the time being in force;

(ii) the date by which the possession of the flat is to be handed over to purchaser;

(iii) the extent of the carpet area of the flat including the area of the balconies which should be shown separately;

(iv) the price of the flat including the proportionate price of the common areas and facilities which should be shown separately, to be paid by the purchaser of flat; and the intervals at which instalments thereof may be paid;

(v) the precise nature of the organisation to be constituted of the persons who have taken or are to take the flats; (vi) the nature, extent and description of limited common areas and facilities;

(vii) the nature, extent and description of limited common areas and facilities;

(viii) percentage of undivided interest in the common areas and facilities appertainingto the flat agreedto be sold;

(ix) statement of the use of which the flat is intended and restriction of its use, if any;

(x) percentage of undivided interests in the limited common areas and facilities, if any, appertaining to the flat agreed to be sold;

10. Promoter to take steps for formation of co-operative society or company.—(1) As soon as a minimum number of persons required to form a co-operative society or a company have taken flats, the promoter shall within the prescribed period submit an application to the Registrar for registration of the organisation of persons who take the flats as a cooperative society or, as the case may be, as a company; and the promoter shall join, in respect of the flats which have not been taken, in such application for membership of a cooperative society or as the case may be of a company. Nothing in this section shall affect the right of the promoter to dispose of the remaining flats in accordance with the provisions of this Act: Provided that, if the promoter fails within the prescribed period to submit an application to the Registrar for registration of society in the manner provided in the Maharashtra Co-operative Societies Act, 1960 (Mah. Act 24 of 1961), the Competent Authority may, upon receiving an application from the persons who have taken flats from the said promoter, direct the District Deputy Registrar, Deputy concerned, to register the society: Provided further that, no such direction to register any society under the preceding proviso shall be given to the District Deputy Registrar, Deputy Registrar or, as the case may be, Assistant Registrar, by the Competent Authority without first verifying authenticity of the applicants, request and giving the concerned promoter a reasonable opportunity of being heard. Sections 2 and 11 of the Maharashtra Apartment Ownership Act reads thus: “2. Application of Act.—This Act applies only to property, the sole owner or all of the owners of which submit the same to the provisions of this Act by duly, executing and registering a Declaration as hereinafter provided:

11. Contents of Declaration.— (i) The Declaration shall contain the following particulars, namely:— (a) Description of the land on which the building and improvements are or are to be located; and whether the land is freehold or leasehold [and whether any lease of the land is to be granted in accordance with the second proviso to Section 2 of this Act; (b) Description of the building stating the number of storeys and basements, the number of apartment and the principal materials of which it is or is to be constructed;

(c) The apartment number of each apartment, and a statement of its location, approximate area, number of rooms, and immediate common area to which it has access, and any other date necessary for its proper identification;

(d) Description of the common areas and facilities;

(e) Description of the limited common areas and facilities, if any, stating to which apartments their use is reserved; (f) Value of the property and of each apartment, and the percentage of undivided interest in the common areas and facilities appertaining to each apartment and its owner for all purposes, including voting; and a statement that the apartment and such percentage of undivided interest are not encumbered in any manner whatsoever on the date of the Declaration; (g) Statement of the purposes for which the building and each of the apartments are intended and restricted as to use; (h) The name of a person to receive service of process in the cases hereinafter provided, together, with the residence or place of business of such person which shall be within the city, town or village in which the building is located;

(i) Provision as to the percentage of majority of votes by the apartment owners which shall be determinative of whether to rebuild, repair, restore, or sell the property in the event of damage or destruction of all or part of the property; (j) Any other details in connection with the property which the person executing the Declaration may seem desirable to set forth consistent with this Act; (k) The method by which the Declaration may be amended, consistent with the provisions of this Act. (2) A true copy of each of the Declaration and bye-laws and all amendments to the Declaration or the bye-laws shall be filed in the office of the competent authority. Provided that, no property shall be submitted to the provisions of this Act, [unless it is used or proposed to be used for residence, office, practice of any profession or for carrying on any occupation, trade or business or for any other type of independent use:”

15. The rival submissions cannot be decided in isolation. They must be tested against the statutory framework of the MOFA Act and the MAO Act. Both enactments operate in different areas. Yet, they meet at a crucial stage of housing development. That stage is when the promoter collects money, enters into agreements, and decides the form of organisation of flat purchasers. It is at this point that the rights of purchasers crystallise and statutory duties of the promoter become enforceable.

16. The MOFA Act regulates the relationship between the promoter and the flat purchaser at the very beginning. It is a welfare legislation meant to protect purchasers, who invest their life savings in a flat. The Act insists on certainty before any substantial amount is accepted. Section 4 lies at the heart of this protection. It restrains the promoter from accepting advance payments unless a written and registered agreement for sale is executed. Sub section (1A) clearly prescribes what the agreement must contain. These particulars are compulsory. They are statutory disclosures meant to inform the purchaser of his future rights and obligations. Clause (v) of Section 4(1A) has direct relevance to the present dispute. It requires the agreement to clearly state the precise nature of the organisation to be formed. The legislature has deliberately used clear and firm language. The purchaser must know at the time of signing the agreement whether he will become part of a cooperative society, a company, or a condominium. These are not interchangeable arrangements. Each has different rules of management, voting rights, ownership of common areas, and remedies in law. The statute does not permit the promoter to postpone this decision or keep it flexible. Certainty at the threshold is the essence of this provision. If an agreement contains a clause that allows the promoter to decide the form of organisation at a later stage, such a clause directly conflicts with Section 4(1A)(v). It may give convenience to the promoter, but it weakens the protection given to the purchaser by law. A clause which gives an open ended discretion to the promoter defeats the statutory mandate. The law requires the promoter to make his choice clear at the outset. It does not permit him to keep the matter undecided and alter it later to suit his convenience. When the statute insists on disclosure of the exact form of organisation, any clause that postpones or avoids that disclosure runs contrary to the law. Such a clause weakens the protection given to flat purchasers. The purchaser signs the agreement believing that the stated terms will govern his rights. If the promoter is allowed to change the form of organisation at any later stage, the purchaser is left without certainty. The law does not recognise such uncertainty. Statutory rights cannot be diluted by drafting clauses that reserve unchecked power in favour of the promoter. Therefore, an open ended discretion strikes at the very purpose of the statute. It allows the promoter to bypass mandatory requirements and defeats the legislative intent of ensuring certainty in housing transactions. A promoter cannot use clever drafting to escape a statutory obligation. Where a statute mandates disclosure and certainty, any contractual term inconsistent with it must yield. MOFA overrides such clauses. The discretion claimed by the promoter, therefore, cannot be unfettered or absolute.

17. Section 10 of MOFA strengthens this legislative intent. It casts a clear duty on the promoter to initiate formation of a cooperative society or a company once the minimum number of purchasers is reached. He must initiate formation of the organisation that was disclosed in the agreement under Section 4(1A)(v). This duty is not optional. It is time bound. The statute also provides a remedy if the promoter defaults. In such a case, purchasers can approach the Competent Authority, which can direct registration of a society. This provision shows that the law does not tolerate delay, indecision, or unilateral control by the promoter. It favours prompt formation of an organisation that represents the collective interests of purchasers.

18. The MAO Act stands on a different footing. It is an enabling statute. It applies only when the owner or all owners of the property consciously decide to submit the property to its provisions. Section 2 makes this requirement explicit. Submission to the MAO Act is not automatic. It requires execution and registration of a declaration. This declaration is not a routine document. Section 11 lays down its contents in great detail. It must cover the entire property, all apartments, common areas, undivided interests, intended use, voting rights, and the manner in which the declaration can be amended. The declaration is the foundation of a condominium. It fixes rights permanently.

19. The character of a declaration under the MAO Act clearly shows that it is based on collective ownership and collective consent. A condominium cannot come into existence by unilateral action. It presupposes participation of all apartment owners, because each owner acquires an undivided share in the common areas. These rights cannot be fixed without their consent. A declaration signed by only a few purchasers does not reflect collective will. The position becomes more serious when those few purchasers are closely connected to the promoter. Such a declaration does not meet the statutory intent. Mere registration of such a document does not cure the defect. Registration records a document. It does not validate non compliance with mandatory statutory requirements.

20. When MOFA and the MAO Act are read together, the legal position becomes clear. At the agreement stage, MOFA demands certainty and full disclosure. The promoter must declare the form of organisation upfront. If he opts for a cooperative society, Section 10 obliges him to act within the prescribed time. If he chooses the condominium route, the strict requirements of the MAO Act must be fully satisfied. Partial compliance, unilateral action, or selective consent does not amount to lawful submission of the property to the MAO Act.

21. In the present case, the agreements show that amounts were collected for formation of a cooperative society. At the same time, the declaration under the MAO Act was not executed by all purchasers. It was brought into existence without clear collective consent. Such conduct does not conform to either statute. MOFA does not permit uncertainty at the agreement stage. The MAO Act does not permit unilateral submission of property.

22. In these circumstances, the authorities were right in looking at the substance rather than the form. They correctly held that the statutory requirements of the MAO Act were not fulfilled. They rightly concluded that the promoter could not rely on an incomplete and unilateral declaration to defeat the statutory right of purchasers to form a cooperative society under MOFA. This interpretation advances the object of both enactments. It safeguards flat purchasers and ensures that statutory mandates are not diluted by contractual clauses or one sided acts of the promoter.

23. The petitioners rely heavily on the contractual clauses contained in the agreements executed with the flat purchasers. Clauses 24, 25 and 31 are pressed into service to contend that the developer retained discretion to decide the form of organisation. According to the petitioners, this discretion was lawfully exercised when a declaration under the MAO Act was executed on 18 December 2004 and registered on 18 February 2005 along with the bye laws of the condominium. The submission is that once the declaration came into existence and was communicated to the On this premise, it is urged that the subsequent application made in December 2006 for registration of a cooperative society was legally impermissible, and the Registrar acted without jurisdiction in granting registration.

24. This argument appears attractive at first glance. However, it cannot be examined in isolation from the statutory framework governing flat transactions. The rights and obligations arising under MOFA and the MAO Act are not left entirely to contractual discretion. They are regulated by mandatory statutory provisions enacted to protect flat purchasers and to ensure transparency in the formation of associations. Clause 24 of the agreement does speak of a declaration under the MAO Act. Yet, the clause itself postpones such declaration until the building is fully developed, flats are sold, and full consideration is received. More importantly, the clause cannot override the requirements of the statute. The mere existence of a contractual clause does not validate an act if the statute requires something more. A declaration under the MAO Act is a statutory instrument. It must strictly comply with Sections 11 and 19 of the MAO Act which is mandatory.

25. The record shows that the declaration relied upon by the petitioners was not executed by all flat purchasers. It was signed only by seven persons. Six of them allegedly belong to the promoter’s family. This fact is not in dispute. Such a declaration cannot represent the collective will of persons who have taken or are to take flats in the building. A condominium, by its very nature, rests on consent and participation of all apartment owners. A unilateral or selective declaration defeats the statutory scheme.

26. The argument that the Registrar was informed of the declaration in June 2005 also does not advance the petitioners’ case. Intimation cannot cure a substantive illegality. If the declaration itself does not conform to the statute, its registration or communication does not give it legal sanctity. Registration is a ministerial act. It does not validate an instrument that is otherwise contrary to law.

27. The conduct of the promoter also assumes significance. At the time of execution of agreements under Section 4 of MOFA, amounts were collected from purchasers towards formation and registration of a cooperative society. These amounts have admittedly not been refunded. This conduct is inconsistent with the case now set up that the promoter had irrevocably opted for a condominium. Actions speak louder than clauses drafted in agreements.

28. The reliance placed on the judgment in Cipla Limited is apposite. The Division Bench has authoritatively held that unilateral execution and registration of a deed of declaration is contrary to the MAO Act and cannot be recognised even for the purposes of MOFA. The Court has made it clear that a declaration must conform strictly to Sections 11 and 19 of the MAO Act. Anything short of that has no legal efficacy. The later judgment in Vasant Buddhiram Gonte follows the same principle. These decisions leave little scope for doubt.

29. Viewed in this legal backdrop, the orders passed by the not suffer from perversity or jurisdictional error. They have consistently held that the so called declaration did not meet statutory requirements and therefore could not prevent registration of a cooperative society. The authorities have applied settled law to admitted facts. No error apparent on the face of the record is demonstrated.

30. The supervisory jurisdiction of this Court under Article 227 is limited. It is not an appellate jurisdiction. When statutory authorities act within their bounds and apply correct legal principles, interference is neither warranted nor permissible.

31. For these reasons, the challenge to the registration of Respondent No.4 society fails. The petitioners have not made out a case for interference. The impugned order confirms a legally valid registration and calls for no further scrutiny. The writ petition, therefore, deserves to be dismissed. (AMIT BORKAR, J.)