Gs Patel, J
1. In our view, the Petition is thoroughly misconceived. The Petitioners are not members of the 3rd Respondent Society. They are third-party flat purchasers in a redevelopment project that was once being undertaken by the 2nd Respondent, M/s G.A. Builders Pvt Ltd (“GABPL”), represented before us by Mr Ojha.
2. The principal reliefs sought in the Writ Petition are in prayer clauses (a) and (b) at pages 13 and 14, which reads ::thus:
(a) This Honourable Court be pleased to issue Writ of Certiorari or writ in the nature of Certiorari or any other writ, directions, orders be passed calling upon the Respondents Nos. 1 to call for the records and proceedings in respect of the Intimation of Approval (IOA) No – EE/BP Cell/GM/MHADA-29/1210/2022 dated 14.12.2022 issued by Respondent No. 1 at Exhibit “D” and after going through its validity, legality and propriety thereof, the said impugned IOA be quashed and/or set aside.
(b) That this Honourable Court be pleased to restrain the Respondents from demolishing the said building of the Respondent No. 3 pursuant to Intimation of Approval (IOA) No – EE/BP Cell/GM/MHADA-29/1210/2022 dated 14.12.2022 issued by Respondent No. 1.
3. Clearly, these third-party flat purchasers, all of whom have transactions and agreements only with GABPL, claim substantive rights in regard to the property of the Society and the proposal of the Society for its own redevelopment.
4. We are given to understand that between the Society and the developer, there are and were other proceedings in arbitration and elsewhere. These will remain unaffected by the present order. All other remedies between the builder GAPBL and the Society are also unaffected by the present order. The only question to which we address ourselves is whether these third-party flat purchasers from the developers can claim substantive rights as against the Society itself.
5. The basis for this claim is an undertaking-cum-indemnity given by the Society to MHADA, a copy of which is at Exhibit “D-1” at pages 314 to 315. It reads ::thus:
UNDERTAKING CUM INDEMNITY BOND
To,
Executive Engineer Building Permission Cell,
MHADA,
Griha Nirman Bhavan,
Kala Nagar, Bandra (E),
Mumbai
We Mr Dharamaraj Ranga swamy, the Chairman, and Mr Vijay C Sharma, the Secretary, both adult, Indian Inhabitants, Presently Residing at Subhash Nagar, Chembur (East), Mumbai No. 400071, do hereby are giving undertaking cum indemnity bond on behalf of Chembur Shivsmruti Co-operative Housing Society Ltd. Building no.22, Subhash Nagar, Chembur (East), Mumbai-400071.
As per the Contempt Petition (L) 7362 of 2021 dated 11th March 2022 physical possession of the said property was handed over to the said society and now the existing old structure standing thereon on the said plot will be demolished by the appointed demolition contractor, who is appointed by the society and if any claim or liabilities of the terminated developer arises in present or in future then the said claim or liability will be settled by the society alone.
Further the old structure will be completely demolished on society’s own risk and we will indemnify the MHADA authority and its officers and all other staff against any claim or legal consequences if arises thereof.
This undertaking will be binding on us.
Secretary Chairman
6. Then reference is invited by Mr Thorat for the Petitioner to the permission granted by MHADA to Society at Exhibit “D” from pages 305 to 309. Condition 16 of this permission is that any third-party rights created are to be settled by the Society following the undertaking submitted by the Society.
7. These two provisions read together are nothing more than an indemnity. They do not and cannot be held to create substantive rights in praesenti to the Society building and properties nor in respect of the development rights of the Society in regard to the property that the Society itself owns. At best, if there is a claim that the Petitioners have against the developer, it may be open for the developer to then claim that the developer is fully indemnified by the undertaking given by the Society and which is Condition 16 of the MHADA permission.
8. the next submission is that now the RERA has been established, the rights of third-party flat purchasers are thus protected even in regard to the property of the Society.
9. None of these issues are res integra. All of them are comprehensively decided by the two decisions of this Court both by SC Gupte J, sitting singly. The first of these is the decision in Vaidehi Akash Housing Pvt Ltd v New DN Nagar Cooperative Housing Society Union Ltd & Ors[2014 SCC OnLine Bom 5068 : (2015) 3 AIR Bom R 270.] and connected matters. There were various contenders before the Court. Vaidehi Akash set out submissions made on behalf of third-party flat purchasers. There were other issues considered in that judgment with which we are not immediately concerned. There are two issues however, that are material to our discussion today. The first is the concept of the ‘rule of majority’ in cooperative society matters. Individual members who protest against society actions often describe this as the tyranny of a brute-force majority. But whatever label that one may choose to ascribe to it, the fact is that this is precisely the frame of law. Indeed, there is sufficient authority to say that once a person becomes a member of a Society, he literally loses his identity: see Aditya Developers v Nirmal Anand Co-Operative Housing Society Ltd,[ 2016 SCC OnLine Bom 100: (2016) 3 Mah LJ 761 : (2016) 4 AIR Bom R 26 : (2017) 5 Arb LR 66] a decision by a learned Single Judge of this Court (KK Tated J). This has been consistently followed by coordinate benches,[ Rajawadi Arunodaya CHSL v Value Projects Pvt Ltd, 2021 SCC OnLine Bom 9572; Chirag Infra Projects Pvt Ltd v Vijay Jwala CHSL & Anr, 2021 SCC OnLine Bom 364 : (2021) 3 Bom CR 271; Westin Sankalp Developers v Ajay Sikandar Rana & Ors, 2021 SCC OnLine Bom 421] and reaffirmed by at least one Division Bench.[ Time Field Corporation v Sankalp CHSL & Ors, 2022 SCC OnLine Bom 1436.] In Vaidehi Akash, Gupte J dealt with the concept of rule of majority in paragraphs 75 onwards [Of the SCC OnLine report, corresponding to paragraph 15 of the original] inter alia citing the Division Bench Judgment of this Court in Girish Mulchand Mehta & Anr v Mahesh S Mehta & Anr.[ 2009 SCC OnLine Bom 1986 : (2010) 2 Mah LJ 657 : (2010) 1 Bom CR 31. Reaffirmed in Sarthak Developers v Bank of India Amrut-Tara Staff CHSL, Appeal 24 of 2013, decided on 5th December 2012 (Dr DY Chandrachud J and AA Sayed JJ (as they then were), per Dr DY Chandrachud J); unreported.]
10. Specifically on the question of the challenges to the development canvassed on behalf of third parties, i.e., those third party purchasers in whose favour rights are allegedly created by the developer, the discussion is to be found in Vaidehi Akash in
paragraphs 80 to 93.[ The paragraph numbering in the SCC OnLine report is completely different from the original. These paragraphs of the SCC Report correspond to paragraphs 16 (and its several sub-paragraphs) to 18 of the original.] These speak eloquently to a determination of the issue. Rather than attempt a summarisation, and since the discussion is not only exhaustive but is comprehensive from all perspectives, we take liberty of reproducing the relevant portions of these paragraphs.
80. This brings us to an important aspect of this group of matters and which has engaged anxious attention of this Court. During the subsistence of the Society Development Agreement and in pursuance of various rights conferred upon it thereunder with reference to disposal of the free sale component of the project, Vaidehi has created third party rights in favour of various flat purchasers and others. These flat purchasers and others themselves consist of different categories. There are those who have come in between the dates of the Society Development Agreement and the Rustomjee Agreement. During this period the entire free sale component, i.e. nearly 2,53,500 sq.ft. of real estate, was at the disposal of Vaidehi and it was free to deal with the same the way it liked. Third party rights have been created by it in favour of various parties during this period. Then there are others who have come in after the Rustomjee Agreement but before the Society Development Agreement was terminated by the Society. During this period Vaidehi had a limited right, namely, the right to deal with an area of 37050 sq.ft. for residential use and 20000 sq.ft. for commercial use. Different considerations may apply to those third parties whose rights have been created within or beyond this limitation on Vaidehi’s rights, as the case may be, for Vaidehi seems to have gone much beyond its limitation during this period and oversold its position. It purports to have created rights over an area far in excess of this limited F.S.I. available to it for disposal. Another distinction as between the various third parties is on the basis of the kinds of arrangements entered into with them by Vaidehi. There are purchasers who hold registered agreements with Vaidehi, whilst there are those who have unregistered agreements and there are others who have simply allotment letters in their favour. The rights of these various stakeholders vis-a-vis the entitlement of the Society and through it of Rustomjee to go ahead with the redevelopment project need an anxious thought. Whilst some of these third parties appear to be investors, there may certainly be those who are genuine buyers who have staked their hard-earned money to obtain premises within the project.
81. The flat purchasers’ main arguments are that under the Society Development Agreement, which was at any rate valid upto 16 April, 2010, Vaidehi had the authority to deal with the entire free sale component, i.e. nearly 2,53,500 sq.ft. of area; that even if such authority could be treated as having been divested by it under the Rustomjee Agreement, between 4 April, 2007 (i.e. the date of Rustomjee Agreement) and 16 April, 2010 (i.e. the date of termination of the Society Development Agreement), Vaidehi had the authority to deal with 57050 sq.ft of area as shown above; that the agreements entered into by
Vaidehi during these periods were lawful and binding on the Society, since during these periods Vaidehi was an agent of the Society and the former’s acts within; its authority were binding on the latter; and that at any rate, the Society itself being a ‘promoter’ within the meaning of MOFA, the rights of the purchasers under MOFA were binding on the Society and the latter could not enter into any agreement with Rustomjee in breach of these rights.
82. The purchasers’ rights may, thus, be examined from two angles, one from the standpoint of the contract between the Society and Vaidehi (who was their vendor) and the other from the standpoint of the obligations of the Society, if any, under MOFA.
83. No doubt Vaidehi had been conferred with the authority to deal with the free sale component of the project by the Society under the Society Development Agreement, but the question is whether such authority was to be exercised by Vaidehi for its own sake or on its own account as an independent contractor or as an agent of the Society. Some of the important clauses of the Society Development Agreement may be noted in this behalf. These are as follows: … … …
84. The clauses quoted above, read together and in their proper perspective to be gathered from the whole agreement, clearly envisage the development and sale of the free sale component of the project by Vaidehi on their own account and as an independent contracting party and not as agents of the Society. The contract between Vaidehi and the Society is on a principal to principal basis; it neither constitutes a partnership nor a joint venture or agency between the two. The third party purchasers with whom Vaidehi might enter into agreements for sale would have no privity of contract with the Society and the Society would in no way be responsible for any claim made by such purchasers against Vaidehi under their respective agreements for sale.
85. There being no privity of contract between the Society and the third party purchasers claiming under Vaidehi, the third party purchasers cannot claim specific performance of their respective agreements for sale except through Vaidehi. They stand or fall by Vaidehi. If the rights of Vaidehi are brought to an end upon a lawful termination of the Society Development Agreement, the third party purchasers cannot lay any independent claim against the Society or anyone claiming through the Society. The agreements with third party purchasers are premised upon a valid, subsisting and enforceable agreement between their vendors, namely, Vaidehi and the owners, namely, the Society and in fact refer to the Society Development Agreement in this behalf. Admittedly, therefore, the third party purchasers had, or at any rate, ought to have, notice of the Society Development Agreement and its terms and conditions and Vaidehi’s obligations to perform the same. If Vaidehi fails to perform these obligations, the purchasers cannot but suffer the consequences. In other words, the purchaser’s rights are subject to Vaidehi’s rights and not higher than those. Therefore, from a contractual standpoint, the third party purchasers have no case against the Society or Rustomjee, who claim through the Society.
86. Let us now consider if these third party purchasers have any rights under MOFA against the Society. It is submitted on their behalf that the Society is very much a ‘promoter’ within the meaning of MOFA as regards their respective agreements for sale. Learned Counsel for the purchasers rely upon the definition of “promoter” contained in Section 2(c) of the MOFA. The definition is in the following terms:
“promoter” means a person and includes a partnership firm or a body or association of persons, whether registered or not who constructs or causes to be constructed a block or building of flats, or apartments for the purpose of selling some or all of them to other persons, or to a company, co-operative society or other association of persons and includes his assignees; and where the person who builds and the person who sells are different persons, the term includes both.”
87. It is submitted that the Society can at any rate be said to have caused the building of flats to be constructed for the purpose of selling the same and as a person, who causes such building to be built, is as much a promoter as a person who sells premises in such building.
88. The Society is the owner of the property and has entered into an agreement with the developers, i.e. Vaidehi, for redevelopment of its property. The redevelopment envisages construction of the Society’s building to accommodate its members and also construction of building/s of flats/premises to be sold to outsiders. The agreement authorizes or entitles the developers to construct such building/s and sell flats/premises therein to outsiders. Such authority or entitlement is to the developers’ account and in their own right and as an independent contractor. If in exercise of such authority or entitlement, a building is constructed by the developers, it cannot be said that such building is caused to be constructed by the Society within the meaning of Section 2(c) of the MOFA.
89. Any other interpretation would lead to anomalous consequences, which could never have been contemplated by MOFA. The owners of lands entering into agreements for sale or development agreements with promoters/developers would be held as being subject to all liabilities of a promoter, such as liability of disclosure of plans and specifications, outgoings etc. under Section 3 of the MOFA, entering into agreements in accordance with Section 4, giving possession of flats and suffering the consequences of Section 8, forming co-operative societies of flat purchasers under Section 10 and so on. This would be plainly inconceivable.
90. Prima facie, thus, there is no case to treat the Society, who is merely in the position of an owner vis-a-vis the third party purchasers, as a ‘promoter’ within the meaning of MOFA and foist the obligations of a promoter on the Society in relation to the purchasers.
91. Besides what is discussed above, there are many other difficulties in the way of many of these third party purchasers. In the first place, it now transpires from the various proceedings that their vendor, Vaidehi, has proceeded to allot an area far in excess of its entitlement, which was merely 2,53,500 sq.ft. FSI to start with and thereafter restricted to 57050 sq.ft. (i.e. after the Rustomjee Agreement). In fact, what Vaidehi appears to have dealt with is an area far in excess of even the total FSI (at the rate of 2.4) available on the entire land. Secondly, the individual transactions are evidenced only in a few cases by registered agreements with Vaidehi. Many transactions are contained in unregistered agreements or even allotment letters which are not even stamped. Many of these transactions appear to be simply financial arrangements. Each individual case of a third party purchaser would thus be subject to different considerations based on the entitlement of Vaidehi at the relevant point of time and the nature and incidents of the individual transaction. But we are dealing here with the rights of the individual purchasers vis-a-vis the Society and Rustomjee claimed through Vaidehi and not their rights qua Vaidehi. All these purchasers certainly have independent rights to claim damages against Vaidehi, peculiar to their individual cases, but they have prima facie no right to claim anything from the Society and Rustomjee, much less specific performance of their individual agreements. In the premises, the individual features of their respective cases, as noted above, have no relevance to our discussion in this group of Motions and need not be discussed any further. Even the best placed amongst them have no leg to stand on as against the Society or Rustomjee.
92. That brings us to sum up the result of the above discussion on the prima facie case on merits of individual stakeholders. Prima facie, it is clear that Vaidehi has committed breaches of the Society Development Agreement and that the termination of the Agreement by the Society was legal and proper. Vaidehi has not made out any case of its readiness and willingness to perform its obligations under the Society Development Agreement. Vaidehi is not entitled to specific performance of the Society Development Agreement or restrain the development of the suit property by the Society or Rustomjee. The Rustomjee Agreement and its confirmation by the Society by the Confirmation and Supplementary Agreements as well as further Agreement dated 29 January, 2011 between the Society and Rustomjee are valid and proper. Members of the Society opposing the development through Rustomjee are not entitled to any interim relief either on the basis of the aforesaid agreements being in breach of the Society Development Agreement or on the basis of breach of bye-laws or contravention of the State Government circular dated 3 January, 2009 or on account of the alleged non-performance of the offer letter by MHADA or the booklet or directives of MHADA or indeed on account of any alleged FSI violation or usurpation. The decisions of the Society in connection with the present dispute are prima facie taken bona fide and none of the challenges of the members opposing redevelopment are prima facie sustainable. None of the third party purchasers, who claim through Vaidehi under their respective agreements for sale/allotment letters, have any case for specific performance of their respective agreements against the society or Rustomjee. None of these purchasers has any enforceable right under MOFA against the Society or Rustomjee.
93. Even the considerations of balance of convenience and irreparable injury clearly weigh in favour of the Society and its members, who support the redevelopment project. The fundamental basis or rather the very raison d’etre of the entire redevelopment project is the need for housing of 480 members of the Society. These members have already surrendered their tenements to enable the Society to carry out the redevelopment project first through Vaidehi and later through Rustomjee, as noted above. Since 2006, these members have been living in temporary alternative accommodations. The buildings on the suit property occupied by these members have since been demolished and a rehab building for their permanent alternative accommodation is under construction. The development of the free sale component is inextricably linked to the construction of the rehabilitation component. The cost of the construction of the rehabilitation component has to be necessarily funded from and out of the development and sale of the free sale component. Any relief granted to either of the stakeholders, namely, Vaidehi or the members opposing the redevelopment project or the third party purchasers, who claim through Vaidehi, will necessarily impact the construction of the rehabilitation component adversely and jeopardize the members’ right to their permanent alternative accommodation. The members cannot be asked to wait indefinitely for years for getting something which they are legally entitled to and which legal entitlement is not even questioned by any other stakeholders.
(Emphasis added)
11. We are in respectful agreement with all these findings on law. We emphatically reaffirm Vaidehi Akash.
12. The second decision also by Gupte J is of 14th October 2019 in Goregaon Pearl CHSL v Dr Seema Mahadev Paryekar & Ors. 2019 SCC OnLine Bom 3274. This dealt inter alia not only with the issue of third-party flat purchasers but specifically from paragraph 7 onwards the question of whether RERA gave them additional or superior rights. Goregaon Pearl referenced the previous decision in Vaidehi Akash expressly. The distinguishing feature of that case was set out in paragraph 8. Ultimately, the learned Single Judge held on a careful consideration of these provisions that the provisions of RERA do not make any difference. RERA was introduced to set up a regulatory authority for the real estate sector and to ensure efficiency and transparency and consumer protection in that sector. It defines promoter in a manner similar to that in the Maharashtra Ownership Flats Act, 1969 (“MOFA”). Even Section 18 of RERA, on which considerable emphasis was laid in Goregaon Pearl, requires promoters to discharge obligations and provides remedies for purchasers without prejudice to other rights if there is a default by the promoter. Section 19 entitles the allottee to obtain possession. Purchasers’ grievances are redressed by the authority. None of these provisions, Gupte J held, make the owner of the freehold or leasehold interest in the land (the party who enters into a development agreement with a developer) liable for compliance with and fulfilment of the developer’s obligations.
13. in the present case, this is precisely the same distinction between GABPL, (the developer) and the Society (the owner). Therefore, the present case is on exactly the same footing as Goregaon Pearl. Gupte J went on to hold that if there was any ground regarding relative position of the land owners and developers in regard to the development projects registered under RERA, and particularly where the owners were entitled to a share in the total revenue, this has now been clarified by MahaRERA that only such individuals or organisations would meet the definition of promoter in RERA on account of their being land owners as are specified at the time of online registration with the Authority. In Goregaon Pearl it was found that the Society in question there, the appellant before Gupte J, was not a specified promoter in the online registration. That is not even the case that is made in the present Petition before us.
14. We now reaffirm Goregaon Pearl as well.
15. Consequently, this Petition fails.
16. We have not examined the question of the validity of the termination as between the Society and the developer, GABPL. We are not called upon to do so in the present Petition. Any observation that we might make in that regard would clearly be obiter and not binding on any of the parties. All questions of termination, validity of termination, and of continuation of the appointment of the developer are left for decision in appropriate proceedings with all contentions between the Society and the Developer being expressly kept open or, at any rate, unaffected by the present order.
17. The Petition is rejected. No costs.
