Tanvi’s Diamoda Cooperative Housing Society Ltd. v. State of Maharashtra & Ors.

1. The petitioner housing society has invoked the writ jurisdiction of this Court under Articles 226 and 227 of the Constitution of India. The challenge is to the Judgment and Order dated 14 July 2025 passed by respondent No.2. By the said order, respondent No.2 confirmed the Judgment and Order passed by respondent No.3 under Section 23(2) of the Maharashtra Cooperative Societies Act, 1960.

2. The material facts are as follows. Gala No.103 in the petitioner society belonged to one Mrs. Saroj Mehta. She was a member of the petitioner society. She did not pay maintenance charges and property taxes for a long period. The petitioner society issued several notices to her calling upon her to clear the dues. She did not comply. The default continued and the arrears remained unpaid.

3. Indian Overseas Bank took physical possession of Gala No.103 under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The petitioner society, by letter dated 25 May 2017, informed the Bank that an amount of Rs.57,96,197 was outstanding towards maintenance in respect of the said premises up to 30 June 2012. Indian Overseas Bank thereafter executed a sale certificate dated 15 March 2021 and sold the premises to respondent No.4 under a sale deed dated 27 April 2021. The sale was completed without obtaining a no objection certificate from the petitioner society.

4. Respondent No.4, on 19 June 2021, applied to the petitioner society for transfer of membership. He enclosed a cheque towards transfer fees. The petitioner society, through its Advocate, addressed a notice to respondent No.4 stating that the amounts of Rs.100 and Rs.500 tendered towards membership would not be deposited until clearance of all outstanding dues related to the premises. The notice dated 15 September 2021 also called upon respondent No.4 to pay the arrears and informed him that membership could not be granted unless dues were cleared. The communication was issued within ninety days and therefore amounted to a refusal under Section 23(2) of the Maharashtra Cooperative Societies Act, 1960.

5. Respondent No.4 thereafter filed an appeal under Section 22(2) registered as Appeal No.15 of 2021 before respondent No.3. Respondent No.3 allowed the appeal by order dated 22 July 2022. The petitioner society challenged that order by filing Revision Application No.421 of 2022 before respondent No.2. Respondent No.2 dismissed the revision by order dated 14 January 2025. The petitioner has therefore approached this Court by filing the present writ petition.

6. Learned Advocate for the petitioner submitted that the petitioner society had communicated its refusal within the statutory period. He pointed out that the society informed respondent No.4 on the eighty seventh day that his request for membership could not be accepted unless the outstanding dues of the previous member were cleared. He submitted that once such refusal was communicated within ninety days, an appeal under Section 22(2) was not maintainable. He further submitted that Section 154B 7 mandates that no transfer of shares becomes effective unless all dues of the housing society are paid. He argued that even when a purchaser acquires a unit through an auction held by a bank under the SARFAESI Act, the society cannot be compelled to admit such purchaser as a member until its dues are cleared. On these grounds, he submitted that the impugned orders are unsustainable and deserve to be set aside.

7. Learned Advocate for respondent No.4 supported the impugned orders. He submitted that an auction purchaser cannot be compelled to pay the arrears of the previous member. He relied on the judgment of this Court in Brightland Cooperative Housing Society Ltd. vs. Divisional Joint Registrar, Cooperative Societies and Others, 2025 SCC OnLine Bom 2795. He pointed out that this Court has held that previous dues cannot be treated as a ground to deny membership to an auction purchaser. He submitted that the view taken by the Authorities is consistent with the law laid down in the said judgment. He therefore prayed that the impugned orders be upheld and the writ petition dismissed.

8. In rejoinder, learned Advocate for the petitioner submitted that the judgment in Brightland Cooperative Housing Society was rendered in a different factual context. He submitted that in Brightland, there was a serious dispute regarding the quantum of dues claimed by the society. He pointed out that in that case, the purchaser had repeatedly sought a break up of the dues from the society since 2009. There was no response. This Court, therefore, held that unless the quantum of dues is adjudicated either in a dispute under Section 91 of the Maharashtra Cooperative Societies Act or in proceedings under Section 154B 29, and unless the dues are crystallized, they cannot be relied upon to refuse membership. He submitted that in the present case respondent No.4 has not disputed the quantum of dues. He therefore argued that the Authorities could not have exercised jurisdiction under Section 22(2) in favour of respondent No.4.

9. I have considered the record. I have heard both sides. The issue before this Court is narrow. The question is whether the petitioner society had refused membership within the period of ninety days and whether such refusal was lawful in view of the admitted arrears of the earlier member.

10. For a proper adjudication of the point involved, it is necessary to set out the relevant statutory provisions. Section 154B-7 and Section 154B-12 read as follows. “154-B-7. Restriction on transfer of share or interest of a Member.— Subject to the provisions of this Act, in case of a housing society, no transfer of share or interest of a Member or the occupancy right, except the transfer of his heir or a nominee, shall be effective unless,— (a) the dues of housing society are paid; (b) the transferee applies and acquires Membership of the cooperative housing society in due course of time: Provided that, the transfer of share or interest in respect of lease hold properties shall be governed by the terms of the lease, which are not inconsistent with lease of land to the cooperative housing society or with lease by housing society to its Members. Explanation.—For the purpose of this section, occupancy right shall not include right of a tenant or a licensee on leave and license basis. 154-B-12. Transfer of share, right, title and interest.—A Member may transfer his share, right, title and interest of his property in the society by way of registered document by following the due procedure as provided in the rules or byelaws.”

11. Section 154B 7 and Section 154B 12 create a simple and clear framework. The law explains how membership in a housing society moves from one person to another. Buying a flat does not automatically make the buyer a member of the society. Membership is granted only as per the Act. When a flat is sold by way of sale deed or in an auction, the buyer gets ownership of the flat. However, he gets society membership only when the law permits it. The society has the authority to ensure that all legal requirements are met before granting membership.

12. Section 154B 7 is mandatory. The requirement in Section 154B 7 that no transfer becomes effective unless dues are paid is mandatory. The Legislature has used a negative form to show that it is compulsory. It states that a transfer does not take effect unless the dues are paid. This rule applies to all transfers, whether voluntary or through auction. When the amount payable is indisputable or undisputed, the transferee must satisfy this condition. The law requires that statutory conditions must first be fulfilled. Section 154B 7 imposes a specific condition. It states that a transfer becomes effective only when all dues of the society are paid. It also states that the purchaser must apply for membership and the society must process that application in accordance with law. These conditions are equally important. The Legislature intended that societies should not suffer financial loss because a member leaves behind arrears. If societies are compelled to accept transfers without clearance of dues, they will not be able to recover common expenses. This will affect all existing members. The provision therefore protects the financial stability of the society. A cooperative housing society survives on the timely collection of maintenance charges. Members enjoy common facilities because every member contributes. When arrears remain unpaid for years, the society and its members suffer. The law protects the society in such circumstances. Section 154B 7 ensures that the financial structure of the society is not disturbed by transfers that leave arrears behind. It places the responsibility upon the transferee to clear dues when the earlier member defaults.

13. Membership in a cooperative society is not an unconditional right. It is governed by the Act and the by laws. The society must act fairly and within the framework of law. It cannot impose conditions that the law does not permit. However, it also cannot ignore conditions that the law expressly requires. If Section 154B 7 says that dues must be paid first, the society is duty bound to insist on it. The purchaser’s ownership of the flat remains unaffected. What remains incomplete is the entry of his name in the membership register until dues are settled.

14. Section 154B 12 deals with transfer through a registered document. It gives a member the right to transfer his interest by following required legal procedure. This right is recognized. However, this right is not absolute. It must be read together with Section 154B 7. Both provisions work together. Section 154B 12 explains the process of transfer between individuals. Section 154B 7 explains when such transfer becomes effective in the records of the society. A transfer may be valid between the parties, but it becomes effective in the society only when dues are cleared.

15. When a flat is sold in execution proceedings, the auction purchaser receives a lawful title to the flat. That title cannot be questioned. However, the Cooperative Societies Act still requires that membership must follow the statutory procedure. The auction purchaser cannot skip this legal step. If arrears exist, the society has a right to insist on their payment. The law applies equally to voluntary and involuntary transfers. The statute does not exempt auction purchasers. Its purpose is to ensure that the society is not deprived of legitimate dues.