Bombay High Court Upholds Cooperative Society Registration Under MOFA: “Promoter’s Inclusion as Single Member Satisfies Membership Threshold, Protecting Flat Purchasers’ Rights”

Court’s Decision

The Bombay High Court dismissed the writ petition filed by the petitioner (a promoter) challenging the registration of a cooperative society under Section 10 of the Maharashtra Ownership Flats Act, 1963 (MOFA). The court concluded that the registration process complied with the law, including statutory and procedural requirements. It further clarified that the inclusion of the promoter as a single member of the cooperative society satisfied the membership criteria required under MOFA.

Facts

1. Leasing and Development Agreements: The City and Industrial Development Corporation (CIDCO) leased a plot in Navi Mumbai to the petitioner for development. The petitioner, in turn, entered into a development agreement with Respondent No. 3 to construct a multi-storied commercial building, in exchange for Rs. 75 lakh and 178 units in the property.
2. Completion of Construction:
   • Construction of the building was completed, and an occupation certificate was issued in 2007.
   • The petitioner retained ownership of 176 units while allowing the developer to sell 59 units in the open market.
3. Society Registration Process:
   • Respondent No. 1 (representing flat purchasers) applied for registration of a cooperative society under Section 10 of MOFA.
   • The Registrar initially rejected the application, but an appellate authority overturned the decision, and the society was registered.
4. Challenge by the Petitioner: The petitioner challenged the registration, arguing that:
   • Only 59 unit holders (out of 235 units) supported the society registration, failing the statutory threshold of 60%.
   • The petitioner’s 176 units should not be treated as a single membership unit, as this distorted the calculation of membership.
5. Judicial History: After multiple appeals and hearings at the appellate level, the registration order was confirmed by the Minister for Cooperation. This order was the subject of the present writ petition.

Issues

1. Did the registration process satisfy the statutory requirements under Section 10 of MOFA?
2. Could the petitioner, as a promoter, be treated as a single member for society registration purposes?
3. Were the procedural safeguards under MOFA and the Cooperative Societies Act upheld in this case?

Petitioner’s Arguments

• Non-compliance with Statutory Representation: The petitioner argued that the registration process did not meet the 60% unit holder representation requirement because it accounted for only 59 units, while 176 units under their ownership were wrongly treated as one membership unit.
• Invalid Allotments: The petitioner claimed that the allotment letters issued to 154 units lacked proprietary rights, making them ineligible for membership in the cooperative society.
• Erroneous Application of Law: The petitioner argued that the statutory process under Section 10 of MOFA had not been followed, making the registration invalid.

Respondent’s Arguments

• Compliance with Section 10 of MOFA: Respondent No. 1 argued that the inclusion of the petitioner as a member, along with the 59 valid unit holders, satisfied the minimum requirement of 10 members under the Maharashtra Cooperative Societies Act.
• Flat Purchaser Rights: Respondent No. 1 emphasized that they acted within their rights as flat purchasers to seek the registration of a cooperative society due to the developer’s failure to initiate the process.
• License vs. Ownership: The respondent contended that the petitioner retained ownership of 176 units but lacked valid agreements to transfer proprietary interests in most of these units, leaving the registration process unaffected.

Analysis of the Law

1. MOFA’s Objectives:
   • The court noted that MOFA aims to protect flat purchasers and ensure transparency and fairness in the promotion, construction, and transfer of flats.
   • Section 10 of MOFA mandates that promoters must facilitate society registration once the requisite number of flats has been sold or “taken.”
2. Key Provisions Examined:
   • Section 10(1) of MOFA: Requires that once the minimum number of persons to form a cooperative society has “taken flats,” the promoter must submit the application for society registration.
   • Rule 8 of the Maharashtra Ownership Flats Rules: Requires submission of society registration applications within four months.
3. Promoter’s Role:
   • The court highlighted that the petitioner, as a statutory promoter under MOFA, retains residual rights to unsold units but must still facilitate society registration by participating as a single member.

Precedent Analysis

The court referred to Gajraj Jain v. State of Bihar (AIR 2004 SC 3392), which distinguished between jus ad rem (a personal right) and jus in rem (a proprietary right). It emphasized that flat purchasers’ rights under MOFA are akin to a jus ad rem, enforceable against the promoter, even if full ownership has not been conveyed.

Court’s Reasoning

1. Statutory Representation:
   • The court held that the petitioner’s inclusion as a member satisfies the membership threshold under MOFA and the Cooperative Societies Act. The promoter is legally treated as one member for society registration purposes.
2. Valid Agreements:
   • The court rejected the petitioner’s argument regarding allotment letters, finding that the 59 agreements of sale were valid and sufficient for registration.
3. Regulatory Compliance:
   • The court found that the society registration process complied with the procedural requirements under MOFA and the Cooperative Societies Act.
4. Flat Purchaser Rights:
   • The court underscored that flat purchasers have a statutory right to form a cooperative society, which cannot be obstructed by the promoter’s procedural objections.

Conclusion

The court dismissed the petitioner’s writ petition, upholding the cooperative society’s registration. It found the process to be in compliance with MOFA and the Maharashtra Cooperative Societies Act, rejecting all procedural and substantive objections raised by the petitioner.

Implications

1. Clarification of Promoter Obligations:
   • The judgment reinforces the statutory obligations of promoters to facilitate society registration and comply with MOFA’s provisions.
2. Protection of Flat Purchasers:
   • The decision affirms the rights of flat purchasers to form cooperative societies, even when disputes arise with promoters.
3. Precedent for Society Registration:
   • The ruling provides clarity on the statutory interpretation of membership requirements under MOFA, setting a precedent for future cases.

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