Dilip Bobde Patil v. Laksons India Private Limited & Ors.

(i) that the flat purchasers are entitled only to nominal membership of respondent No.2 society;

(ii) that in the absence of a “No Objection Certificate” from respondent No.2, the registration of a new society cannot be granted; and

(iii) that the formation of a sub-society within a tenant-ownership society is impermissible in law. The Court must therefore examine whether these grounds are legally sustainable, having regard to the statutory provisions of the MOFA and the MCS Act.

16. The First question which arises for consideration is whether respondent No.1. promoter has locus and competence to press the revision impugning registration of Vienna Apartments Co-operative Housing Society when respondent No.2. the larger society has not challenged that registration. Who may challenge. locus, standing and public interest:

17. A person who shows direct and substantial legal or proprietary interest in the subject matter has standing to challenge a quasi-judicial order. A promoter who claims loss of a contractual or proprietary right qualifies as an aggrieved party. He may invoke revision or judicial review against registration that he shows injuriously affects his rights.

18. This right flows from private law interests and from the need to preserve orderly application of the statute. The right is not an open licence to relitigate mere policy or commercial preferences. The challenger must show a real legal grievance.

19. In the present case respondent No.1 alleges that registration breaches the statutory scheme and the undertaking embedded in the lease and sale agreements. He therefore possesses prima facie locus to move revision. Limits to the developer’s right. acquiescence, estoppel and acceptance by the larger society:

20. A distinct principle curtails a challenger who seeks to undermine an act accepted by the body directly affected. If the larger society. here respondent No.2. knew of the registration, took steps which evince acceptance, and did not oppose, the courts will treat that conduct as important. Acceptance by the society creates an estoppel against relabelling the same complaint through another forum.

21. In the present facts respondent No.2 did not challenge the order of registration before the authority which allowed it. The society had earlier given consent to individual admissions and had permitted construction. The promoter cannot therefore succeed by arguing merely that a sub-society should not exist when the society itself manifested assent to construct multi storied building.

22. Mr. Joshi, learned counsel for the petitioner, is correct in submitting that the right to form an association, including a cooperative society, is protected under Article 19(1)(c) of the Constitution of India. This right is an important part of individual and collective freedom. It allows citizens to come together for a common purpose, including management of their residential property through a co-operative society.

23. The State may frame reasonable regulations for the manner in which such societies are to be registered, but it cannot altogether refuse registration when the legal requirements have been duly met. The MCS Act and the Rules framed under it clearly recognize this right of flat purchasers. Section 8 of the MCS Act, read with Rule 4 of the Maharashtra Co-operative Societies Rules, permits the Registrar to reject an application for registration only if the proposed society fails to meet statutory requirements, such as insufficient number of members, improper documentation, or ineligibility of applicants.

24. In the present case, the rejection is based on the alleged absence of consent or “No Objection Certificate” from respondent No.2, which is the parent society holding the land. Such a ground has no basis in law. Once the flat purchasers have fulfilled all conditions prescribed by the statute, such as majority membership, submission of required documents, and compliance with the Rules, the registration cannot be withheld merely because the parent society has not issued its “No Objection”.

25. When the parent society itself has not challenged the order granting registration, the requirement or relevance of a “No Objection Certificate” (NOC) becomes entirely immaterial.

26. In law, an NOC is only a supporting document meant to show that the existing society or land-owning body has no objection to formation of another co-operative body over the same premises. It is not a statutory condition for registration under the Maharashtra Co-operative Societies Act, 1960 or the Rules made thereunder. The Act nowhere provides that registration of a new society depends upon prior consent of an existing one.

27. Once the Registrar or competent authority, after examining the proposal, has found that the requirements of law are satisfied, such as adequate number of members, common interest, proper documentation, and compliance with procedure, the registration becomes a valid and complete administrative act. If the parent society does not object to such registration or challenge the order within the prescribed time, it implies acceptance of the decision. The principle of finality of administrative orders then applies.

28. Permitting the continued relevance of an NOC after registration, when the parent society has not disputed it, would unsettle the stability of such statutory decisions. It would also lead to uncertainty in functioning of newly formed societies. The law does not permit an indefinite shadow of objection to hang over a registered co-operative body.

29. Therefore, in such circumstances, absence or non-production of a “No Objection Certificate” loses all significance once (i) the statutory authority has granted registration upon satisfying itself about compliance with law, and (ii) the parent society has not questioned the registration order before revisional forum.

30. In effect, silence or inaction of the parent society operates as acceptance of the registration, and the question of “No Objection” becomes redundant both in fact and in law. Applicability of MOFA and Duty of the Promoter:

31. The documents placed on record, particularly the sale agreements between the developer (respondent No.1) and the flat purchasers, make it clear that the MOFA applies to this project. Clause 36 of each agreement specifically states that the transaction will be governed by the provisions of MOFA. This is significant because MOFA is a welfare legislation meant to protect flat purchasers from the inaction or arbitrary conduct of developers.

32. Section 10 of MOFA places a clear legal duty on every promoter or developer to take necessary steps for formation of a co-operative society, or a company, of the flat purchasers within a reasonable time after most of the flats are sold. The purpose of this provision is to ensure that the flat purchasers can jointly manage and maintain their building and that the property is not kept under the permanent control of the developer. Section 11 of MOFA further requires that, once such a society is formed, the promoter must convey the title of the land and building to that society within the prescribed period.

33. In this case, respondent No.1, who is the developer, has failed to perform these statutory duties. The undertaking dated 17 September 2001 given by respondent No.1 to respondent No.2 shows that the developer was aware of these obligations. The undertaking recorded that the construction would be used by the directors of the company, and if the flats were sold, the consent of respondent No.2 would be obtained to admit purchasers as nominal members. However, the developer later sold the flats to third-party purchasers between 2003 and 2005, collected full consideration, but never took steps to form a co-operative society as required under Section 10. This deliberate omission deprived the flat purchasers of their legal right to collective ownership and management of their building.

34. Such default cannot now be used as a defence to defeat the lawful rights of the flat purchasers. The obligations under MOFA are statutory and not dependent on the developer’s convenience or the terms of a private undertaking. Once flats are sold, the promoter’s role is limited to ensuring proper conveyance and formation of the society. Non-performance of these duties cannot be justified on the ground that the parent society, respondent No.2, already exists.

35. The existence of respondent No.2 does not absolve respondent No.1 of its statutory responsibility. The membership of the developer in respondent No.2 is personal to him and does not automatically extend to the flat purchasers. Each flat purchaser has an independent right under MOFA to demand formation of a cooperative society. The scheme of MOFA itself contemplates that, after the society of purchasers is formed, it will step into the place of the developer and become the member of the land-owning or parent society. This is a legal mechanism designed to protect purchasers and ensure transfer of property in their favour.

36. Therefore, registration of the petitioner’s Vienna Apartments Co-operative Housing Society does not amount to creating a “subsociety” or duplication of any existing entity. It is a lawful step consistent with the framework of MOFA. The petitioner’s society, once registered, would merely represent the collective ownership of flat purchasers and, by operation of law, would become a member of respondent No.2 society in place of the developer.

37. In substance, the defence of respondent No.1 and No.2 seeks to perpetuate the developer’s control and deny the purchasers their statutory rights. Such a position is contrary to the spirit and purpose of MOFA, which was enacted to ensure that ownership and control of residential buildings ultimately vests in the flat purchasers themselves. On the Issue of “Sub-Society within a Society”:

38. The objection raised that a separate or “sub-society” cannot exist within a tenant-ownership society is not correct in law. The Maharashtra Co-operative Societies Act (MCS Act) nowhere prohibits formation of a smaller or independent society of flat purchasers within a larger layout or tenant-ownership society. Section 22 of the MCS Act, read with Section 154B-5, expressly allows one co-operative society to become a member of another co-operative society. This legal provision itself answers the objection and makes it clear that there is no legal bar to one society being a member of another.

39. The term “sub-society” is not recognized by the MCS Act. It is a phrase loosely used in practice, but it has no legal meaning. What the law forbids is duplication of the same ownership or registration of two societies claiming rights over the same property. However, where the proposed society represents a distinct group of purchasers who own and occupy a separate building within a larger layout, the formation of their society is valid and lawful. Such registration does not disturb the ownership of the land or the legal structure of the parent society as such society steps into the shoes of promoter who is the member of larger society.

40. In the present case, the proposed Vienna Apartments Cooperative Housing Society consists of purchasers of flats located in a single, identifiable building constructed on Plot No.12. The building has separate amenities, a separate entrance, and is maintained independently. The flat purchasers are not claiming ownership of the entire layout or any part of land belonging to other plots. They are only seeking to organize themselves for better management and maintenance of their own building. This is fully consistent with the intent of both the MOFA and the MCS Act.

41. Under the scheme of MOFA, once the purchasers’ society is formed, it steps into the shoes of the developer and becomes a member of the larger land-owning society. This ensures continuity of ownership and management without creating any conflict. Therefore, registration of the petitioner’s society would not amount to creating a “sub-society” in the prohibited sense. It would merely substitute the developer as the rightful member representing the flat purchasers.

42. Further, the argument of respondent No.2 that its “No Objection” is necessary loses all relevance in the present case. The larger society has not itself challenged the order of registration. Once the competent authority has granted registration and the parent society has chosen not to dispute it, the registration becomes final and binding. The Court cannot, at the instance of others, reintroduce an objection which the parent society itself has abandoned.

43. Hence, the reasoning that registration of the Vienna Apartments Co-operative Housing Society would result in a “subsociety within a society” is not sustainable either in fact or in law. The proposed society is a lawful and independent body of purchasers entitled to registration and to become a member of the parent society in place of the developer, as contemplated under On Nominal Membership:

44. The idea of “nominal membership” in a co-operative housing society was originally meant for limited and temporary purposes. It allowed a person who was not a full-fledged owner to be associated with the society for restricted activities such as parking of vehicles, use of common amenities, or participation in specific welfare functions. Such membership was never intended to grant ownership rights or voting powers in the affairs of the society. It was a supplementary category of membership created only for convenience.

45. Flat purchasers who have paid full consideration for their flats and occupy them as lawful owners cannot be treated as nominal members indefinitely. To do so would be to deny them their rightful ownership status and participation in management. This defeats the very object of the MOFA, which was enacted to ensure that purchasers of flats are not left dependent upon the developer or the land-owning society. The law intends that they should collectively form their own co-operative society, manage the building themselves, and enjoy the full benefits of ownership.

46. The position of the law has become even clearer after the introduction of Chapter XIII-B into the Maharashtra Co-operative Societies Act, 1960. This chapter was brought in to modernize the structure of co-operative housing societies and to protect the interests of genuine flat purchasers. It clearly contemplates that those who own and reside in flats are entitled to full membership, either directly or through formation of their own society. The concept of keeping them permanently as “nominal members” has no place under the present legal framework.

47. Once the flat purchasers form their own co-operative housing society, that society becomes a juristic entity under the Act. It then steps into the position earlier held by the promoter or developer. In other words, the new society replaces the developer as the member of the larger, land-owning or parent society. This substitution is automatic under the law and ensures that the rights and liabilities connected with the building are transferred to the true beneficiaries, i.e., the flat purchasers.

48. The reasoning adopted by respondent No.3, that the flat purchasers must continue as nominal members of the parent society, runs contrary to this statutory evolution. Such reasoning, if accepted, would mean that flat purchasers could never become full members and would forever remain dependent on the developer, who no longer has any beneficial interest in the property. This would undermine both the purpose of MOFA and the spirit of the Co-operative Societies Act, which is to empower genuine occupants to manage their property through democratic participation.

49. Therefore, once purchasers have paid the full price, taken possession, and are maintaining the building at their own cost, they are entitled as a matter of right to form their own cooperative society. The newly formed society of purchasers must be recognized in law as stepping into the shoes of the promoter and becoming the rightful member of the larger society in his place. This interpretation alone gives full effect to the protective intent of On Res Judicata and Earlier Rejection:

50. Respondent No.1 has argued that the petitioner’s earlier application for registration of the proposed housing society, filed on 27 March 2017, had been rejected, and that by not disclosing this fact, the petitioner is barred by the principle of res judicata. This argument does not hold good either in law or on facts.

51. The principle of res judicata applies only when an issue has been finally decided by a competent authority or court between the same parties, on the same set of facts, and under the same law. It prevents repeated litigation over the same matter. However, this rule has no application when there is a change in circumstances or a change in the governing law which alters the legal position.

52. The record shows that the petitioner’s earlier application in 2017 was rejected on a jurisdictional ground of absence of minimum members apart from other grounds. At that time, under the unamended provisions of the Maharashtra Co-operative Societies Act, the minimum number of persons required to form a co-operative housing society was higher than the number of flat purchasers in the petitioner’s building. Consequently, the application was held to be premature. There was no final adjudication of the petitioner’s right to form a society.

53. Thereafter, in 2019, the State Legislature amended the MCS Act by introducing a separate Chapter XIII-B dealing exclusively with co-operative housing societies. This amendment reduced the minimum requirement for registration of a co-operative housing society to five members. The change in law was intended to remove the practical difficulties faced by small residential buildings in forming their own societies. Thus, the very basis on which the petitioner’s earlier application was rejected no longer exists.

54. In the present case, the petitioner’s second application was made after this statutory amendment and after fulfilling the new eligibility criteria. The petitioner now represents seven flat purchasers out of ten, which is well above the required number under the amended law. Therefore, the present application is based on different legal provisions and different factual circumstances.

55. In such a situation, the earlier rejection cannot operate as a bar. To apply res judicata here would amount to denying the petitioner the benefit of a change in the law that was specifically enacted to help flat purchasers. The doctrine of res judicata is meant to prevent repetitive claims, not to perpetuate injustice or to obstruct the exercise of a legal right created by subsequent legislation.

56. Hence, the Court finds that the plea of res judicata raised by respondent No.1 is misconceived. The petitioner’s present application stands on a fresh cause, supported by a new statutory framework. The Registrar was bound to consider it on its own merits in light of the amended law, and not reject it on the basis of an earlier order passed under an old and now superseded legal regime. On the Alleged Violation of MOFA and MCS Act:

57. Respondent No.2 has argued that the petitioner’s proposal for registration of a separate housing society goes against the provisions of the MOFA and the agreements executed between the developer and the flat purchasers. This argument does not stand to reason and is contrary to the record.

58. The sale agreements themselves show that each transaction between the developer and the purchasers was expressly made subject to the provisions of MOFA. Clause 36 of these agreements clearly states that the rights and obligations of both parties shall be governed by MOFA. When a statute like MOFA is made part of a contract, it automatically overrides any inconsistent condition that may exist in the agreement. Therefore, even if any clause in the agreement were to limit the right of purchasers to form a cooperative society, such a clause would have no legal effect because it would run contrary to a statutory mandate.

59. Section 10 of MOFA makes it a statutory duty of the promoter to take all necessary steps for formation of a co-operative housing society or company of the flat purchasers. This provision is clear and unambiguous. It was enacted to ensure that ownership and management of the building ultimately pass into the hands of the actual purchasers, and not remain under the control of the developer. Hence, the argument that formation of a separate society violates MOFA is unsound. In fact, the law requires precisely such a step to be taken.

60. Respondent No.2 has also relied on Section 154B of the MCS Act to argue that the petitioner did not have the required number of members to form a society. This contention too is without merit. The record clearly shows that seven out of ten flat purchasers in the building have signed the proposal for registration. This number represents more than 70% of the total purchasers, which comfortably exceeds the minimum 51% requirement prescribed under the MCS Act. Therefore, the statutory condition for registration is fully satisfied.

61. The purpose of prescribing a percentage requirement is to ensure that the formation of a society is genuinely representative of the majority of occupants. When such majority support is undisputed, the law does not expect more. The authority cannot read into the statute any condition not provided by it.

62. It is also important to note that neither MOFA nor the MCS Act prohibits formation of a separate society within a larger layout, provided that the new society represents a distinct and identifiable group of flat purchasers. In this case, the purchasers of Vienna Apartments occupy a single building on Plot No.12, with separate amenities and independent maintenance. Their proposal, therefore, is consistent with both statutes.

63. In conclusion, the objection raised by respondent No.2 alleging violation of MOFA and the MCS Act is contrary to both the documentary record and the intent of the law. The petitioner’s proposal satisfies every statutory requirement. It advances, rather than violates, the legislative objective of empowering genuine flat purchasers to manage their own property through a registered cooperative housing society. On applicability of the judgment in the case of Karvenagar G.R.S.M.:

64. Respondent No.1 has relied heavily on the judgment of thi Court in Karvenagar G.R.S.M. to contend that formation of a new society within an existing tenant-ownership society is impermissible. The Court finds that such reliance is misplaced, as the facts and legal issue in that case are entirely different from the present one.

65. In the Karvenagar case, the issue before the Court was whether the State Government could compel an existing housing society to amend its bye-laws and admit as members a group of persons who had constructed a multi-storeyed building on one of its plots. The parent society in that case was formed by members who had each obtained separate plots to construct individual houses for their personal residence. Their bye-laws specifically prohibited commercial construction or sale of flats. When one member sought to construct a multi-storeyed building for sale of flats, the Government issued a general direction under Section 79A of the MCS Act compelling such societies to amend their bye-laws and admit new societies of flat purchasers as members.

66. This Court struck down the Government’s direction as unconstitutional. It held that the State had no power under Section 4 or Section 79A of the MCS Act to force an amendment to the bye-laws of an existing society or to impose new members on it against its will. The Court observed that the right to form and continue an association under Article 19(1)(c) of the Constitution includes the right to decide who should be its members. Therefore, compelling an existing society to amend its bye-laws and admit another body as a member was held to be a violation of that fundamental right.

67. The present case stands on an entirely different footing. Here, the petitioner’s society is not being “forced” upon respondent No.2 by any governmental direction. Nor is the State compelling respondent No.2 to change its bye-laws or admit new members. The flat purchasers themselves, who have paid full consideration for their flats and occupy them, have come forward to form a society in accordance with the mandate of Section 10 of the MOFA. They are exercising their own statutory right, not a right imposed by the State or an external authority.

68. In Karvenagar, the action of the Government was struck down because it sought to override the internal autonomy of an existing society and impose new members without consent. In the present case, the proposed Vienna Apartments Co-operative Housing Society seeks registration on its own under the law, without any such compulsion. Its formation does not infringe the autonomy of respondent No.2, because the law itself contemplates that once a society of purchasers is registered, it would step into the shoes of the developer, who is already a member of the landowning society. This is a natural and lawful substitution, not an intrusion.

69. Moreover, Karvenagar involved a situation where the original member intended to act contrary to the object and bye-laws of his own society by undertaking commercial development. Here, respondent No.1, the developer, has already constructed and sold flats in accordance with the permissions granted by respondent No.2. There is no breach of bye-laws or departure from the purpose of the parent society. The only issue is that after selling the flats, the developer has failed to perform his statutory duty under MOFA to form a society of purchasers.

70. Therefore, the principle laid down in Karvenagar cannot be extended to prevent flat purchasers from forming their own society. That judgment protects a society from external interference; it does not empower a developer to indefinitely block the legitimate rights of flat purchasers.

71. In fact, the reasoning of Karvenagar supports the petitioners rather than the respondents. It upholds the autonomy of associations and recognizes that membership cannot be imposed by an outside agency. Here, the petitioners themselves are the affected group, and their right to form an association is protected by the same Article 19(1)(c) that was invoked in Karvenagar. The difference is only that the present case involves the exercise, not the denial, of that right.

72. Hence, the reliance placed by respondent No.1 on the Karvenagar decision is misplaced. The facts, context, and legal issue of that case do not apply here. The registration of the petitioner’s Vienna Apartments Co-operative Housing Society is in conformity with both MOFA and the MCS Act and does not amount to imposition upon respondent No.2. It is the lawful and natural outcome of the flat purchasers’ statutory right to selfgovernance and collective ownership of their property.

73. After considering the material on record and the rival submissions, this Court finds that the reasoning adopted by respondent No.3 in rejecting the petitioner’s proposal is legally unsound and contrary to the very object of both the MOFA and the MCS Act.

74. The order dated 23 June 2021 passed by respondent No.3, therefore, cannot be sustained. It proceeds on an incorrect interpretation of the law and disregards the legislative intent behind MOFA, which seeks to transfer ownership and control to the purchasers. The order also nullifies the earlier order dated 18 December 2020 passed by respondent No.4 granting registration, which was in full conformity with law.

75. Accordingly, the impugned order dated 23 June 2021 is quashed and set aside. The order dated 18 December 2020 granting registration to the petitioner’s Vienna Apartments Cooperative Housing Society is restored. The concerned authorities are directed to complete all formalities and issue the certificate of registration within four weeks from today.

76. It is, however, clarified that the observations made in this judgment shall not apply to cases where the bye-laws of the parent housing society expressly prohibit the construction of multistoreyed buildings or where such construction has been undertaken without express permission, duly supported by a resolution of the larger society.

77. All pending applications, if any, stand disposed of. There shall be no order as to costs.

78. At this stage, learned Advocate for respondent No.2 prayed for stay of this order. However, for the reasons stated in this judgment, the request for stay is rejected. (AMIT BORKAR, J.)