HIGH COURT SHUTS DOORS FOR REDEVELOPMENT CASES IN CO-OP. COURT

Now, a redevelopment disputes between the Developers and Housing Societies in Mumbai as also its members will not be heard by a Co-operative Court, the Bombay High Court has ruled. Justice Shahrukh Kathawalla rejected a plea by a lone obstinate flat owner of a Vile Parle Society that the High Court did not have jurisdiction to hear the case.

Justice Kathawalla ruled that suit between a Developer and the Housing Society or its members cannot be a dispute which can be adjudicated by the Co-operative Court under Section 91 of the Maharashtra Co-operative Societies Act (MCS Act). He cited earlier judgments on the similar issues.

Justice Kathawalla stated that Sect. 91 of MCS Act covers disputes involving the constitution, management or business of a Society and that the process of redevelopment of any Housing Society by the Developer does not constitute the business of the Housing Society.

The Court directed the Court Receiver to take the help of the police, if necessary, to evict the lone flat owner in case he fails to vacate the premises by September 30, 2013.

“It is clear that the (opposing flat owner) has filed the said dispute (before the Co-operative court) with a view to wrongly obstruct the reconstruction of the property and to cause inconvenience 14 out of the 15 members of the Society who have already handed over possession of their respective flats to the Developer and are waiting for the redevelopment project to be forthwith undertaken,” said the Judge. “The building is in a precarious condition and likely to collapse and endanger the life and property of its occupants as well as other members of the public,” the Judge said.

The redevelopment of Akash Cooperative Housing Society, a 40 year old building having 15 flats, was assigned to Developers Akash Pruthvi Lifestyle in 2012. The Developer was to provide new flats to the existing owners under the scheme. While 14 of the 15 members signed the Agreement and vacated the premises. However, one flat owner refused and filed a suit before the Co-operative Court. He alleged irregularities.

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 CONCLUDED CONTRACT A MUST FOR REDEVELOPMENT OF HOUSING SOCIETY - MUMBAI HC

 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPEAL NO.335 OF 2012 IN NOTICE OF MOTION NO.1394 OF 2012 IN SUIT NO.1330 OF 2012

Mr.Gopi Gorwani … Appellant

VERSUS

Jeevan Prabha Co-operative Housing Society Ltd and ors … Respondents

Mr.Venkatesh Dhond, Senior Advocate i/b Raval Shah & Co. for appellant.

Mr.Sanjay Jain i/b Mustafa Kachwala for respondent No.1

Mr.Simil Purohit i/b Ganesh & Co for respondent No.3

CORAM: MOHIT S. SHAH, C.J. & N.M. JAMDAR J.
Thursday, August 30, 2012.

P.C

This appeal filed by the original plaintiff takes exception to the order passed by the Trial Judge of this Court dated 4 April 2012 dismissing the Notice of Motion taken out by the appellant praying for an order of injunction pending the suit.

2. The appellant is a developer. The appellant filed the Suit bearing No.1330 of 2012 praying for a declaration that there is a subsisting and binding contract between the appellant and respondent No.1: Jeevan Prabha Co-operative Housing Society Ltd. (hereinafter ‘Society’ for short) for re-development of a building situate at plot no.104, 4th road, T.P.S. IV, Bandra (west) Mumbai.

3. The appellant based his claim on the resolutions dated 31 March 2011 and 26 June 2011 passed by the Society. The appellant contended that in view of the resolutions passed by the Society and the correspondence entered into between the parties, there is a concluded contract between the Society and the appellant. Appellant contended in the suit that in spite of the concluded contract, the Society in a Special General Meeting held on 22 July 2011 unanimously passed a resolution that the appellant is not to be awarded a contract of redevelopment of the Society’s property.

4. The plaintiff took out a Notice of Motion bearing No.1394 of 2012, praying for appointment of a receiver and for a direction that the Society be ordered not to deal with any other developer in respect of the re-development of the Society premises.

5. The learned trial Judge after considering the rival contentions came to a prima facie conclusion that there is no concluded contract between the parties. The draft agreement itself showed that the contract was not finalized. The learned Judge also noted that the Society had executed a Development Agreement on 5 March 2012 with another developer i.e. respondent No.3. The learned Judge found that for loss of profit and for the work executed, if any, at the most the appellant can have a money claim and thus no order of injunction is necessary. The learned trial Judge accordingly dismissed the Notice of Motion by his order dated 4 April 2012.

6. The appellant thus is in appeal before us. We have heard Shri V.R. Dhond learned senior counsel for the appellant, Mr. Sanjay Jain learned counsel for the Society, Mr.Simil Purohit learned counsel for the respondent No.3, the new developer.

7. Mr.Dhond, learned senior counsel submitted that the finding of the learned trial Judge that there is no concluded contract is erroneous. The learned counsel drew our attention to the resolution dated 31 March 2011 passed in the Special General Meeting of the Society. According to the learned counsel a decision was taken to appoint the appellant as a developer. Learned counsel submitted that after this decision, the appellant acted on the said resolution and resolved certain pending issues with the occupants of the flats and the garage. Learned counsel submitted that the appellant invested his time, energy and money in clearing off the obstacles for the redevelopment of the property.

8. The appellant also obtained No Objection Certificate from the Deputy Registrar of Cooperative Housing Societies and thus for all practical purposes the Society had entrusted the work of redevelopment to the appellant. It was urged by the learned counsel that in view of this contract the appellant is entitled to specific performance and interim protection during the pendency of the suit. On the other hand, Mr. Jain for the Society contended that though there was a resolution in favour of the appellant, it was only a preliminary decision and the Society had not finally decided to entrust the work of redevelopment to the appellant.

9. The learned counsel supported the order passed by the learned trial Court. Learned counsel also drew our attention to the letter dated 22 July 2011 written to the appellant in which the Society had pointed out to the appellant that there were several inconsistencies, contradictions in the draft Development Agreement submitted by the appellant. In the said letter the Society had also made a grievance that the appellant had unilaterally tried to take over the garage from a tenant when the appellant was only entitled to negotiate the price, and the Society had lost confidence in the appellant.

10. Having heard the rival contentions, we are of the view that the learned trial Judge was right in coming to a conclusion that the Notice of Motion deserved to be dismissed. Prima facie the correspondence entered in to between the parties clearly indicates that the Development Agreement between the parties was not signed.

11. Before the Development Agreement could be signed the Society by its resolution dated 22 July 2012 decided not to continue with the appellant as their developer. Thus the Society decided not to enter into any agreement with the appellant. The initial resolution dated 31 March 2011; it appears, was merely a decision to explore the possibility of redevelopment through the appellant.

12. This resolution and subsequent correspondence indicates that final decision of entrustment of development work to the appellant was yet to be taken. The learned trial Judge has rightly held that the contention of the appellant may at the most give rise to a money claim for damages.

13. Ultimately the work of redevelopment of a Housing Society is such that the Society must have confidence in its developer. Once the members of the Society had by a unanimous resolution, before executing the final agreement, decided not to get the premises developed through the appellant, the Society cannot be forced to get the redevelopment work done through appellant, when prima facie there is no concluded contract.

14. The balance of convenience is also not in favour of the appellant as work of redevelopment is now already entrusted to respondent No.3.

15. During the appeal proceedings we had suggested the parties to amicably resolve the dispute however the
talks between the parties did not fructify into a mutually accepted solution.

16. There is no merit in this Appeal which is dismissed.

CHIEF JUSTICE

N.M.JAMDAR J

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HOUSING SOCIETY CAN DISMISS ERRING BUILDER FROM REDEVELOPMENT DEAL

A Housing Society cannot be forced to go with a Builder who has repeatedly failed to stick to the terms and delayed the redevelopment project, the Mumbai High Court ruled on Monday the 10th June, 2013.

In June 2009, Ideal Co-operative Housing Society in Juhu Scheme had invited Expressions of Interests from Builders interested in redevelopment of their building. In March 2010, the General Body of the Society selected Gorwani Builders for the work.

The Society had invited proposals for redevelopment and selected Gorwani Builders in March 2010. No MOU or Development Agreement was signed. The Builder had deposited Rs 50 lakh with the Society which asked it to go ahead with the redevelopment work on the basis of the terms of ‘Expression of Interest’.

Despite specific instructions that the new building should be a residential-plus-commercial structure with flats only for the existing 24 tenants, Gorwani proposed commercial space in the basement and the ground floor, two-level parking, seven floors for existing residents and flats on the 11th floor for sale in the open market.

The Society did not agree with the same as also had been waiting for the last four years for redevelopment of its property, but the Builder was not inclined to move in the matter. The Society had no other alternative but to start process afresh to select another Builder.

When Gorwani Builders learnt that Society was planning to invite fresh tenders for the redevelopment, it issued a notice to the Society. Subsequently, Gorwani filed a suit, asking the Court to order the Society to execute a Development Agreement or pay Rs 15 crore in damages. It also filed an application seeking to stop the Society from calling for fresh proposals. The Court dismissed the plea saying that Gorwani repeatedly deviated from EOI terms’.

It was opined by the Judge that the work of redevelopment of any Housing Society is such that a Society must have confidence in its Builders and that once the members of the Society have expressed loss of trust, faith and confidence in the Builder on account of various deviations and violations, the Society cannot be forced to get the redevelopment work done through that Builder.

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BUILDERS RULE OVER MINORITY IN REDEVELOPMENT

Supreme Court once again crushed the dissents of minority members who tried to rule against the Builders by opposing the redevelopment of their Society. Three flats belonging to dissenting members of an Andheri based Housing Society, who opposed a redevelopment plan, were forcefully taken possession of by the Assistant Court Receiver following a Supreme Court order delivered in favour of the Builders.

The complete possession of Bank of India Amrut-Tara Staff Correspondent Housing Society in Andheri (West) was taken on February 15, 2013 amidst police presence after the Supreme Court ruling of January 31, 2013. 

On May 25, 2008, the said Society comprising 160 members housed in two buildings, entered into a Redevelopment Agreement with Sarthak Developers. The buildings were 27 years old and were in dilapidated condition due to inferior quality construction. There were plumbing defects and big cracks in the columns.  The Society had no option but to opt for redevelopment.

However, of the 160 members, 142 members gave their consent and began vacating their premises from June 2012, while 18 members did not agree to the Redevelopment Scheme.

Since the dissenting members refused to vacate their flats, the Builders issued legal notice on September 30, 2010 and the Builders filed an arbitration petition and appeal against these members.

When asked the reason for their dissent, one of the 18 dissenting members said that it was a misunderstanding about our disagreement. Since the majority had agreed, they were being asked to give their consent too and that they were never against the redevelopment. What they asked for was more transparency in the matter of redevelopment from the members of the Managing Committee.

Since the High Court Judgment of December 5, 2012, went in favour of the Builders, 15 dissenting members out of 18 gave their approval. Of the remaining three members who stood their ground, two members refused to accept the decision, while the third member challenged the order of High Court in Supreme Court.

The Supreme Court, based on a January 13, 2013 hearing, dismissed the petition and directed the dissenting members to surrender their flats amicably to the Builders for redevelopment.

Accordingly, on February 15, 2013, the Assistant Court Receiver accompanied by the Versova Police, initiated the procedure of forced handover of the flats to the Builders. While two of the three members handed over possession of their flats, the Police had to break open the door of the third flat as the concerned member was not present.

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