Nutan Jaibharat Co-operative Housing Society Limited v. State of Maharashtra Legal Department

08.03.2023 calling for the Special General Body Meeting on 19.03.2023 by raising a dispute, inter alia, alleging that suggestions given by them were not responded to by the Society. It is Respondent Nos.[2] and 3’s case that suggestions were contained in the letter dated 10.03.2023. There were other letters addressed by Respondent No.2 also. 5 of 29

(viii) In the dispute Application filed by Respondent Nos.[2] and 3, Petitioner – Society raised a preliminary objection on maintainability stating that in view of the settled law as laid down by this Court in the case of Mohinder Kaur Kochar V/s Mayfair Housing Private Ltd. and Ors.[1] the Co-operative Court did not have jurisdiction to deal with disputes relating to redevelopment which do not pertain to the business of the Society.

(ix) On 19.03.2023, Special General Body Meeting was convened on which date Respondent Nos.[2] and 3 and one other member created a ruckus by taking law into their hands, disturbing the decorum and did not allow the proceedings of the meeting to carry out. Conduct of these Respondents is recorded in the minutes of the meeting. In view of the impugned order, Respondent Nos.[2] and 3 did not allow the proceedings of the Special General Body Meeting to be held on 19.03.2023 despite the impugned order having categorically directed the Society to hold the meeting with directions but had restricted it from taking any policy decisions.

(x) Hence, the present petition.

5. At this juncture, it would be pertinent to reproduce the operative part of the impugned order dated 18.03.2023 which reads thus:- “1. The application is partly allowed.

2. The opponent society is hereby restrained form finalizing development agreement without taking into consideration all the suggestions made by the disputants (as per suggestions mentioned in the letter dated 10/03/2023) or from taking any policy decision in meeting to be held on 19/03/2023 at 2.00 pm.

3. The opponent society is hereby directed to supply the documents sought by the disputants from the society as per letter dated 26/02/2023 within 7 days.

4. The opponent society is at liberty to conduct SGBM on 19/03/2023 as scheduled.

5. The ad-interim injunction granted till next date.”

6. Mr. Kanade, learned Advocate appearing for the Petitioner - Society would submit that the impugned order has been passed at the behest of two members (Respondent Nos.[2] and 3) of the Society completely overlooking the fact that the Society has followed the due process of law since 2017 for redevelopment and most importantly the notice dated 08.03.2023 calling for the Special General Body Meeting on 19.03.2023 having stated that it was called to “consider” the draft Development Agreement and the draft Power of Attorney. He would submit that findings in the impugned order are completely aggravated and hold that Petitioner – Society has passed resolutions which are allegedly arbitrary and illegal. He would submit that facts in the present case would show that redevelopment of the Society 7 of 29 commenced since the year – 2017 strictly in accordance with the due process of law as contemplated by the provisions of the said Act. He would submit that by virtue of the impugned order, redevelopment of the Society building has been stalled and restricted at the behest of two members (Respondent Nos.[2] and 3) who are not even dissenting members, but members who have consented for redevelopment but have made suggestions which are required to be considered by the General Body in the General Body Meeting. If that be so, the impugned order is ex-facie illegal and unsustainable. Next he would submit that the impugned order returns a finding that Petitioner – Society did not file its written statement or reply to place its objections to the dispute Application. He would submit that it further holds that the Petitioner – Society did not file its Application under Order VII Rule 11 of the Civil Procedure Code (for short 'CPC') who had raised the objection of jurisdiction. In this regard he would submit that Petitioner – Society received notice of the proceedings before the Cooperative Court on 16.03.2023 at 07.45 p.m.. That 17.03.2023 was the only available working day (Friday) and the impugned order was passed on 18.03.2023 (Saturday). He would submit that objections raised by the Society to the principal grievance of the disputants is supported by documentary evidence but most importantly the objection on jurisdiction ought to have been considered by the learned Co-operative Court once raised and in that view of the matter, the 8 of 29 impugned order passed below Exhibit-5 ought not to have been passed since a jurisdictional issue was raised by the Petitioner – Society. Next he would submit that apart from the fact that the impugned order is passed without jurisdiction, even on merits the disputants (Respondent Nos.[2] and 3) being in a miniscule minority, on their own showing that they are not averse to redevelopment cannot stall redevelopment. He would submit that the General Body of the Petitioner – Society was to consider suggestions given by all members in respect of the drafts circulated to all members, deliberate and discuss the same and follow the due process of law. However, by virtue of the impugned order a direct mandate has been given in the said order to the Petitioner to consider all suggestions given by the disputants which is not only perverse but illegal. By virtue of the impugned order he would submit that there is an embargo and restraint on the Petitioner - Society from finalizing the Development Agreement without taking into consideration the suggestions of the disputants. He would submit that the impugned order does not stop here but further directs that unless and until the Society takes into consideration objections of the disputants no policy decision can be taken by the Society in its General Body Meeting. He would submit that the impugned order thus is not only contrary to law but manifestly illegal and arbitrary. He has urged the Court to take into account the fact that the Petitioner – Society is not averse to consider 9 of 29 suggestions of the disputants or for the that matter any other member of the Society and would be happy to place the same in the General Body for the General Body to decide after scrutinising them on the basis of feasibility and viability, but the impugned order mandatorily directs the Society to consider the suggestions of Respondent Nos.[2] and 3 and restrains the Society from finalizing the redevelopment Agreement without taking them into consideration even if they are manifestly unreasonable, erroneous, illegal and arbitrary. He would submit that the effect of such an order is that unless and until all suggestions (whether reasonable or unreasonable) made by disputants are considered, the Society is restrained from finalizing the Development Agreement or taking any policy decision. He would thus submit that the impugned order jeopardizes the rights of the majority members of the Society at the instance of the two disputants and has caused tremendous prejudice to all members of the Society. He has therefore urged that the impugned order deserves to be quashed and set aside.

7. PER-CONTRA, Mr. Joshi, learned Advocate appearing for the Respondent Nos.[2] and 3 – disputants before the Co-operative Court would submit that the impugned order is appellable before the Co-operative appellate Court and without exercising the right of appeal the Petitioner – Society cannot invoke the extraordinary 10 of 29 jurisdiction of this Court. He would submit that the conduct of the Petitioner – Society and more specifically the Managing Committee of the Society is such that it has violated the provisions of Section 79A of the said Act. On being specifically asked as to what is the violation, he would submit that the Managing Committee has overlooked the fact that the Developer appointed by the Society does not have a sound financial capacity. Next he would submit that the Managing Committee has not taken into confidence all members of the Society and the steps which are taken by the Managing Committee are as per the Maharashtra Ownership of Flats Act (for short ‘MOFA’) and not under Real Estate Regulatory Authority (for short ‘RERA’) which is the norm for redevelopment as on date. On being asked to make good this submission, Mr. Joshi is unable to give a reasoned answer. Next he would submit that the Petitioner – Society has failed to provide necessary documents to the disputants and there is no transparency in the Development Agreement as only one Developer has given the offer and he was the one who was selected by the Managing Committee. He would further submit that time of finalizing the offer of the present Developer and the appropriate prescribed procedure is not followed. Once again on being asked to inform the Court as to which prescribed procedure was not followed, Mr. Joshi is unable to give any cogent reply. He would next submit that all suggestions and opinions expressed by members of the Society are to be considered in the 11 of 29 meeting and only thereafter finalization of the Development Agreement ought to take place. He would submit that a number of members have given suggestions in writing but the Petitioner – Society has not disclosed or discussed the same and the Managing Committee has allotted the permanent alternate accommodation at their whims and fancies. He would submit that no draw has taken place while some members are allotted larger area in the developed building whereas the Respondent No.2 is discriminated. Next he would submit that the Petitioner – Society has not supplied all documents but only very few documents in respect of the redevelopment process, that the revised plan submitted by the Developer is not circulated to the members. He would however fairly submit that certain norms required under Section 79A under the Act relating to solvency Certificate, bank guarantee are not being considered and in that view of the matter, it is incumbent upon the Petitioner – Society to consider the suggestions in the larger interest of all Society members. He would therefore submit that this Court be pleased to uphold the impugned order.

8. The learned AGP appears for Respondent No.1 and would submit that considering the facts and circumstances of the present case this Court be pleased to pass appropriate directions and order in the present Petition in so far as the impugned order is concerned. 12 of 29

9. I have heard Mr. Kanade, learned Advocate appearing for the Petitioner – Society, Mr. Joshi, learned Advocate appearing for the disputants – Respondent Nos. 2 and 3, and Mrs. Palsuledesai, the learned AGP appearing for the State and with their able assistance perused the pleadings in the present case. I have also heard Mr. Thomas, learned Advocate for the Intervenors to whom I will revert later.

10. At the outset, it is seen that it is an admitted position that the disputants (Respondent Nos.[2] and 3) have through their Advocate Mr. Joshi submitted that they are not averse to redevelopment and not against redevelopment. All that the disputants want is that their suggestions be considered. It is pertinent to note that all valid and reasonable suggestions from Society members are indeed required to be considered. The notice dated 08.03.2023 in the agenda item no.2 records as under:- “2) To consider and approve the Draft Development Agreement between the Developer M/s Arcadia Developers Pvt. Ltd; and M/s Nutan Jai Bharat CHS Ltd; which has been already circulated to all the members vide the circular dated 3rd March 2023 and to pass all the relevant resolutions for the redevlopment project of our society.”

11. Perusal of the above agenda item reveals that the General Body of the Society is to consider and approve the draft Development Agreement. It further records that the General Body shall pass all relevant resolutions for the redevelopment of the Society. The 13 of 29 timeline which is alluded to in the earlier part of the judgment hereinabove would clearly show that redevelopment process of the Society building commenced in February, 2017. At every stage between 05.02.2017 and 27.08.2021 steps taken by the Petitioner – Society are found to be in consonance with the provisions of the said Act. It is extremely pertinent to note that disputants – Respondent Nos.[2] and 3 have never taken any objection whatsoever to all such steps taken by the Petitioner – Society during the aforesaid period. It is seen that the approval dated 09.08.2021 has been granted by the Deputy Registrar strictly in consonance with the provisions of the said Act. It is seen that out of 47 members 32 members were present and 30 out of the 32 members who were present have in the presence of the authorized Officer of the Government approved the appointment of the Developer. It is pertinent to note that Respondent Nos.[2] and 3 the disputants did not even bother to attend the General Body Meeting on 19.07.2021. Therefore it cannot lie in the mouth of the private Respondents to now revisit and reset the clock back to 2021 and allege that the appointment of the Developer is invalid due to allegations raised by them pertaining to the Developer’s financial capacity. Nothing prevented the private Respondents from placing the alleged objections at the then time which they conveniently did not do so nor even register their presence at the General Body Meeting. Further allegations relating to non compliance of the provisions of Section 14 of 29 79-A of the said Act alleged by the private Respondents deserve to be rejected outrightly. Once the majority of the members of the Society present at the General Body Meeting after following the due process of law have appointed the Developer with an overwhelming majority of 93 % members present and consenting for appointment of Developer, to raise an objection / allegation after almost two years thereafter by two members of the Society out of the 47 members is wholly impermissible and cannot be permitted. It can be gathered from the facts that the disputants have raised the bogey of objections having not considered by the Society in its General Body Meetings merely to harass the Society. This cannot be permitted by the Court and more specifically in the manner in which the impugned order has been passed.

12. It is further seen that the impugned order proceeds on the basis that unless and until the suggestions given by the disputants as stated in their letter dated 10.03.2023 are taken into consideration the Society cannot proceed with finalising the Development Agreement or take any policy decision without considering the said suggestions. Such a direction by the Co-operative Court is contrary to public policy and cannot be countenanced. Reasonability and feasibility of the alleged suggestions given is the prerogative of the Society after scrutinising the same in consonance with the law and facts of each 15 of 29 case and to give such an omnibus direction to consider all suggestions and take them into consideration and not take any policy decision until then is high handed and arbitrary. It is pertinent to note that since 2017 the Society has followed the due process of law. The findings returned by the Co-operative Court that the opponent – Society has failed to provide documentary evidence to show that the suggestions made by the disputants are / were considered by the Opponent – Society and that the Opponent – Society has not taken pain to consider the suggestion of the disputants is perverse and illegal in the facts and circumstances of the present case. To answer this question raised by the disputants it would be worthwhile to note the suggestions given by the dissenting members to the Society for consideration. The reason to embark on this exercise is only because the condition of the Society building is extremely dilapidated. The Society building is 70 years old. Any further delay would be detrimental to the interest of each and every member including the disputants who are staying in the Society. The suggestions which are contained in the letter dated 10.03.2023, prima facie, are seen to be considered in the Development Agreement to a large extent, after due consultations. However, some of the suggestions demanded by the disputants are far fetched and on the face of record they would be impossible to be considered by the Developer for undertaking redevelopment of the Society. Some of the suggestions made by the 16 of 29 disputants, inter alia, pertain to the discussion and deliberation which have taken place over a period of two years since the appointment of the Developer. It is a different thing that a member may want the maximum and the best of security for himself and for all members but process of redevelopment would depend upon balancing the interest of the existing members of the Society and the Developer who is undertaking the redevelopment process. If the Society insists on incorporating obligations which are unreasonable and not acceptable to the Developer or conditions of payment or bank guarantee or any other financial obligations which are onerous, then there is every chance that the development will suffer or get protracted or the Developer will reject the proposal of the Society. In this view of the matter, though suggestions can be given by the disputants / members of the Society, it can never be insisted by the disputants who are in the most miniscule minority in the present case to insist that their suggestions have to be incorporated in the redevelopment Agreement. That decision is solely of the General Body and no one else after the Managing Committee deliberates on the feasibility of any suggestion and resovles to place it before the General Body. An unreasonable suggestion shall never be acceptable to the Developer and therefore scrutiny of the suggestions by the Managing Committee is very essential. It is seen that if some of the suggestions put forth by the disputants in the letter dated 10.03.2023 are incorporated by the 17 of 29 Society as per the impugned order, there is every likelihood that the Developer will never agree to the same as they are commercial decisions and depend on commercial viability. The draft Development Agreement in the present case as seen has been arrived at after the appointment of Developer in 2021 over a period of almost two years. Such is the case that the suggestions made by the two disputants will not only set the clock back if the Developer retreats but will be detrimental to the entire redevelopment process. Nothing prevented the two disputants to raise their suggestions after appointment of the Developer. There is not even a shred of correspondence on the part of the disputants until the address of the letter dated 10.03.2023 given by them which is in reply to the notice dated 08.03.2023. Undoubtedly as suggested by Mr. Kanade the suggestions given by the members will be considered in the meeting of the General Body. Every member of the Society has a right including the disputants to raise their suggestions / objections. Ultimately it is the General Body which would finally decide on the same. If there is variance and dispute on the suggestions offered in the General Body, it shall follow the due process of law and put to vote the resolutions relating to suggestions in the draft Development Agreement. However to insist that every suggestion given by the disputants has to be incorporated in the draft redevelopment Agreement is not only contrary to law but contrary to the democratic process envisaged under the law of co- 18 of 29 operation.

13. During the course of submissions Mr. Kanade has submitted and I record that there is no discrimination whatsoever with respect to any favoritism or advantage in respect of the Managing Committee members vis-a-vis other members. He would submit that each and every member of the Society would be entitled to all benefits at par with each other. The disputants in their pleadings have made bald allegations on this issue. Such bald allegations cannot be permitted by the Court and no cognizance of such allegations should ever be taken by any Court. It is seen that pursuant to the impugned order the Petitioner – Society in the most democratic manner conducted the meeting on 19.03.2023 as per the directions contained in the impugned order, the minutes of which are at page Nos.482 to 485 of the Writ Petition. The disputants and one more member have created absolute chaos in the said meeting despite the fact that the meeting was held as per the agenda and also as per directions in the impugned order but still was not allowed to be conducted in the democratic manner by the disputants and one another member of the Society. It is seen that the Respondent No.2 has in that said meeting repeatedly kept shouting on the mike that the Co-operative Court had granted a stay on the said meeting. This has been recorded in the minutes of the meeting, when there was no such stay. It is further seen that the said 19 of 29 members who resisted and committed chaos in the meeting were completely disinterested in the meeting and were only interested in not allowing the meeting to take place resultantly leading to a walk out not only by the other members present but also the Developer. Perusal of the minutes of meeting dated 19.03.2023 and the conduct of the disputants stated therein does not reveal a happy picture. It is disgusting. After hearing their suggestions and Developer’s say on them, the General Body could have put it to vote. But even that was not allowed by the disputants despite repeated requests by the Committee. The costs of the entire meeting held on 19.03.2023 should be recovered by the Society from the disputants as it failed only because of their high handedness. Society shall be at liberty to recover the costs by taking out appropriate proceedings against the errant members as available to it in law.

14. Be that as it may, in view of above observations and findings the impugned order is wholly unsustainable in law and deserves to be interfered with. The impugned order is thus quashed and set aside.

15. Mr. Thomas, learned Advocate appearing for Intervenors in Interim Application (L) No. 16143 of 2023 has impressed upon the Court that he appears for 12 Intervenors who are members of the Petitioner Society. The names of 12 Intervenors is given in the cause 20 of 29 title of the Intervention Application. He would submit that the redevelopment of the Society is for the benefit of all members including Intervenors and therefore the Intervenors be heard and / or impleaded in the present Petition.

16. I have heard Mr. Thomas and considered his submissions. He would submit that the Intervenors have certain grievances which have not been addressed by the Society before entering into or taking steps towards finalizing the Development Agreement with the Developer.

17. At the outset, he would submit that the procedure laid down under Section 79A of the said Act has not been followed in as much as the Developer has been appointed on the basis of one single tender when at least three tenders are required to be looked into. This submission of the Intervenors is rejected outrightly since the procedure followed by the Society from 2017 as alluded to herein above clearly shows the transparency which which the Society has appointed the Developer and also having obtained the requisite noobjection from the Competent Authority after authorisation by its General Body. Be that as it may, this objection is unsustainable after a period of almost 6 years since the Society had begun the process of redevelopment in the year 2017. The democratic process followed by the Society is clearly documented and it was always open for the 21 of 29 Intervenors to convey their objections to the Society as also during the various General Body Meetings held in a democratic manner for consideration. Decisions taken by the Society have been implemented and have not been challenged by the Intervenors till date and hence, in that view of the matter, this objection is dismissed.

18. Next Mr. Thomas would submit that prima facie, the Intervenors are not pleased by the behaviour of the Petitioner Society and the Managing Committee Members and their election and appointment has been challenged before the Co-operative Court in the year 2022. Be that as it may, once again the said proceedings will be decided on its own merits, but mere filing of the proceedings cannot be a ground to stall redevelopment.

19. Next he would submit that as per the tender document, Developers had agreed to give Rs. 17 Crore as bank guarantee whereas in the Development Agreement, bank guarantee amount is reduced to Rs. 4 Crore. It needs to be stated at this stage that the Development Agreement which is proposed to be executed has been arrived at after negotiations and several rounds of discussions having been held with the Developer which would obviously be in the interest of members of the Society. However, this does not still preclude the Intervenors from placing their objections before the Managing Committee and seeking appropriate response thereto from the Managing Committee as well as 22 of 29 the Developer in the General Body Meeting which will also be attended by the Developer and the PMC at the request of the Managing Committee of the Petitioner Society. After hearing submissions of all sides in the General Body Meeting, it shall be open to the Society to place any such issue for voting before the General Body for consideration including the issue of bank of amount of guarantee. It needs to be stated that furnishing bank guarantee amount is a commercial decision based upon several considerations which require deliberations. Be that as it may, this objection of the Intervenors shall be dealt with by the Society on its own merits and the same shall be placed before the General Body Meeting for a vote on the same so as to consider the same democratically if so raised. Any demand by members, once again has to be tested on the grounds of reasonableness and viability. If the majority members seek a humunguous amount of bank guarantee amount and if that is not acceptable to the Developer, then there is likelihood of him withdrawing and redevelopment may suffer. Hence, General Body will consider any such resolution tabled before it and vote on it.

20. Next he would submit that the Developer has no financial capacity to construct and complete the project and the Committee Members are not asking the Developer to give the solvency certificate to the Society. Once again, if this procedure is not followed and if it is 23 of 29 a mandatory condition, it shall be open to the Society to explain the same in the General Body Meeting and put the said issue to vote and / or in the alternative the Intervenors can always approach the competent authority with their grievance.

21. Next he would submit that in view of favours done to the Developers, the Managing Committee Members would be getting three bedroom flats on the higher floor in the prominent corner location facing Siddhivinayak Temple and the main road in the proposed building whereas other members / occupants would be getting much more less area than their legal entitlement according to DCPR 2034. This objection is prima facie vague, insufficient, inadequate and a bald allegation. Nevertheless the procedure for allotment of flat is concerned, it is clarified that the same has to be strictly in accordance with law and the statute. If the Intervenors have adequate details about they getting lesser area than the Managing Committee Members, the details of the same shall be placed before the Managing Committee so that effective explanation can be sought for in the General Body Meeting for consideration of the General Body. At this juncture, I would like to reiterate that Mr. Kanade, learned Advocate for the Society has clearly emphasized that each member of the Society shall be getting area at par with all other members and strictly according to their entitlement as per the Development Agreement. In 24 of 29 that view of the mater, this objection is unsustainable.

22. Next he would submit that the voices of the Intervenors have been silenced despite raising objections time and again in the General Body Meetings. This again is a general allegation. Needless to state that the Society functions on the basis of a democratic character and on the basis of the majority wherein the minority is always going to be unhappy. This does not mean that the voices of the minority are silenced. Decision by a General Body on the basis of the majority decision by the members would undoubtedly prevail over the minority decision. That is the essence of the character of the democratic set up in the General Body. If every member of the minority group aspires to have their say and rights to be considered to the detriment of the majority, the same cannot be allowed. Development would never ever take place in that case. Hence, whatever may be the objections / suggestions of the Intervenors or for that matter, Respondent Nos. 2 and 3, the same shall be informed to the Managing Committee of the Society as directed hereunder and shall be considered by the Managing Committee and if found reasonable, an effective resolution to that effect shall be placed before the General Body for consideration and voting. Considering that the submissions made by the Intervenors have been considered, the Interim Application stands disposed along with the present Writ Petition with the following directions. 25 of 29

23. As requested by Mr. Kanade and also the request having been endorsed by Mr. Joshi, I am inclined to issue the following directions for conducting the Special General Body Meeting of the Society which shall be conducted in accordance with law:-

(i) It is directed that atleast 15 days advance notice of the

Special General Body Meeting for considering the draft D.A. and draft P.O.A. shall be circulated and intimated to all members of the Society as prescribed under the said Act, Rules and bye-laws. Copies of D.A. and P.O.A. shall be circulated to all 47 members alongwith notice. Objections received from members within one week from the date of notice shall be placed before the Managing Committee in writing which shall after due scrutiny and if found relevant and feasible prepare a Resolution to be tabled before the General Body of the Society for consideration and voting by the members. It is clarified that it shall not be incumbent upon the Committee to consider each and every suggestion if it is already considered and incorporated in the draft Development Agreement. Each suggestion shall be scrutinised on its own merits and reasonableness. After the resolution is tabled in the meeting, the member 26 of 29 making the suggestion shall be allowed to speak first, followed by the Chair (M.C.) and thereafter reply by the Developer and PMC who should be present. Thereafter the Resolution shall be put to vote in accordance with law. The special General Body Meeting shall be officiated by an Officer appointed by the Hon'ble Bombay High Court namely Mrs. Chandan

(ii) Special General Body Meeting will be Video recorded and the copy of such video recording shall be retained by the Society.

(iii) In view of the above directions, the Dispute Application filed by Respondent Nos.[2] and 3 in the Co-operative Court is dismissed.

(iv) Petitioner Society shall bear the necessary costs and expenses of the Officiating Officer. The costs of the officiating Officer appointed by this Court to attend the Special General Meeting is fixed at Rs.30,000/- which shall be borne by the Petitioner – Society and paid over to the concerned Officer before the meeting which shall be a condition precedent. The officiating Officer of this Court shall if so required take necessary assistance of the Police Authorities and procure presence of lady constables / gent constables in the General Body 28 of 29 Meeting so as to avoid any untoward incident in the meeting. The charges for conduct of meeting and all other charges shall be borne by the Society including Police Security.

(v) Copies of the minutes shall be given to all members of the Society in accordance with law by the Society. All contentions of all parties namely the Petitioner Society, Members, Respondent Nos.[2] and 3 and the Intervenors are expressly kept open.

24. With the above directions, Writ Petition stands disposed.

25. Interim Application stands disposed. [ MILIND N. JADHAV, J. ]