Bombay High Court Quashes Deregistration of Apex Housing Society Formed by Flat Purchasers: “Statutory Right Under MCS Act Cannot Be Curtailed by Developer’s Agreement Clause” — No Fraud or Misrepresentation Proven to Invoke Section 21A

Court’s Decision

The Bombay High Court set aside the order dated 28th February 2025 passed by the Divisional Joint Registrar deregistering the Neelkanth Heights Cooperative Housing Societies Association under Section 21A of the Maharashtra Cooperative Societies Act, 1960. The Court held that the deregistration was legally unsustainable as there was no evidence of fraud or misrepresentation, and emphasized that the statutory rights of flat purchasers to form an apex cooperative body cannot be curtailed by any clause in a developer’s agreement.

Facts

The petitioners, representing three registered cooperative housing societies (Rameshwar, Mansarovar, and Girija) forming part of the Neelkanth Heights project, registered an apex body named Neelkanth Heights Cooperative Housing Societies Association on 1st April 2022.

Despite registration of the constituent societies between 2004 and 2011 and occupation of flats by purchasers, the developer failed to form an apex body or execute a conveyance deed under Section 11 of MOFA. As a result, the petitioners themselves formed the apex association and applied for deemed conveyance.

The developer then initiated deregistration proceedings, claiming the association was registered prematurely and without consent. The Divisional Joint Registrar passed the impugned order of deregistration, citing misrepresentation.

Issues

1. Whether the Registrar could deregister a cooperative housing association under Section 21A of the MCS Act on the basis of the developer’s objection.
2. Whether the formation of the apex body required the developer’s consent.
3. Whether the petitioners had engaged in fraud or misrepresentation warranting deregistration.

Petitioners’ Arguments

• The MCS Act and MOFA confer a statutory right on flat purchasers and registered societies to form an apex association.
• Developer’s consent is not required for formation under Section 154B-8(1) of the MCS Act.
• The deregistration was motivated by malice, timed to frustrate their pending application for deemed conveyance.
• No fraud or misrepresentation was committed; required documents were duly submitted.
• Alleged reliance on a clause in the developer’s agreement is legally impermissible as private contracts cannot override statutory rights.

Respondent’s Arguments

• The developer cited a clause in the flat purchase agreements indicating the apex body would be formed only after completion of the entire project.
• It was alleged that registration occurred without furnishing the agreements or proper consent, constituting misrepresentation.
• Citing precedents like Waghmay Mahila Machchimar Sahakari Sanstha and Lodha Belmondo Housing Federation, it was argued that registration prior to completion of the layout and without disclosure violates the statutory scheme.
• State argued there was no malice in the order and defended the administrative records.

Analysis of the Law

• Section 21A allows deregistration only if registration was obtained by fraud or misrepresentation, or the society has outlived its purpose.
• Fraud must be proved with specificity and strong evidence, not inferred from procedural lapses.
• The agreement under Section 4 of MOFA cannot override the statutory rights under MCS Act.
• Section 154B-8 permits registered societies to form an apex body; no provision requires the developer’s consent for such registration.

Precedent Analysis

• The Court distinguished Waghmay Mahila Machchimar Sahakari Sanstha, holding that its ratio did not apply as it involved fabricated records and deliberate fraud, unlike the present case.
• Applied the “inversion test” from State of Gujarat v. Utility Users Welfare Association to determine that the relied-upon observations in Waghmay Mahila were not binding.
• Lodha Belmondo was also found distinguishable, as it concerned an incomplete layout and was based on a different factual matrix.
• Relied on Lok Housing and Flagship Infrastructure to emphasize that developers cannot postpone conveyance or formation of societies indefinitely through contractual clauses.

Court’s Reasoning

• The Registrar had no jurisdiction to act solely based on an agreement clause; no foundational fraud or material misrepresentation was shown.
• Deregistration was improperly motivated to obstruct the deemed conveyance application.
• Developer’s interference in society formation post-sale undermines MOFA’s intent.
• The petitioners acted lawfully to protect their rights under welfare legislation.
• Judicial review under Article 226 was warranted given the mala fides, injustice, and possible abuse of power.

Conclusion

The High Court quashed the order of deregistration dated 28th February 2025. It affirmed that the rights of registered housing societies to form an apex body under the MCS Act cannot be negated by a developer’s belated objections or private contract clauses. The use of Section 21A in the case was found legally impermissible and unjustified.

Implications

• Reinforces the autonomy of registered cooperative housing societies to federate under statutory rights.
• Prevents misuse of Section 21A by developers seeking to delay conveyance or disrupt society functioning.
• Clarifies that private agreements cannot dilute statutory mandates under MOFA and the MCS Act.
• Strengthens the legal position of home-buyers and cooperative societies in township projects.

Also Read – Delhi High Court Dismisses Civil Revision Petition Under Section 115 CPC, Holds That Revision Not Maintainable Against Interlocutory Orders: “Order does not finally decide the lis and is not amenable to revision”