Housing Society Cancels Chairman’s Two Flats for Non-Payment, Gives Four Flats to Contractor’s Relatives; Bombay High Court Calls Allotments Arbitrary
Chairman Loses Two Additional Flats After Payment Default; Bombay High Court Says Society Could Not Simply Hand Them to Contractor’s Relatives
Facts
The Bombay High Court itself described the case as presenting a “bizarre situation”: the chairman of a housing society, which had constructed additional flats for its members, was left without an additional flat, while the contractor engaged for construction ultimately received four flats through its directors. The contractor’s directors were close relatives of a family holding about 50% of the flats in the building.
Petitioners Dr. Omprakash B. Soniminde and Mrs. Chandrakala Omprakash Soniminde owned Flats 601 and 602 in Le Chateau Co-operative Housing Society, Santacruz. The society comprised 12 flats, about six of which were held by the Mankani family and their relatives.
In 1994–96, the society decided to acquire additional TDR/FSI and construct additional floors. The additional flats were to be offered to existing members on payment of construction and TDR/FSI costs. Jet Speed Developers Pvt. Ltd. was appointed as contractor, and the petitioners were allotted proposed Flats 701 and 702.
The petitioners did not make the required contributions despite repeated demands. Eventually, at an AGM on 24 July 1998, Flats 701 and 702 were allotted to Ramesh C. Mankani and Renu R. Mankani, directors of the contractor, towards adjustment of the contractor’s alleged outstanding construction dues.
The controversy deepened when two further flats—801 and 802—were constructed on the eighth floor of Shamrock and were also allotted to the contractor’s directors.
The petitioners’ challenge failed before both the Co-operative Court and Co-operative Appellate Court, resulting in the writ petition before the Bombay High Court.
Issues
The central issues were whether the society could cancel the petitioners’ allotment of Flats 701 and 702 for non-payment and thereafter directly allot those flats to directors of its contractor; whether such allotment was arbitrary when the original scheme contemplated additional flats for existing society members; and whether the later construction and allotment of Flats 801 and 802 to the same contractor’s directors could be sustained.
The case therefore involved a distinction between the petitioners’ default in making payment and the legality of what the society did with the flats after that default.
Petitioners’ Arguments
The petitioners contended that the 24 July 1998 resolution was illegal because they were not properly notified, cancellation of their allotment was not part of the agenda, and the meeting lacked the necessary quorum.
They emphasised that the society’s 24 April 1996 resolution expressly contemplated allotment of additional flats to existing members, whereas Respondent Nos. 4 and 5—the directors of the contractor—were admittedly not original members.
They further contended that they had initially paid ₹5 lakh and had never refused to contribute. According to them, they merely sought particulars concerning the TDR and the payment schedule and subsequently offered to deposit ₹62 lakh with interest.
The petitioners alleged that the contractor had already been adequately or excessively compensated for construction and TDR expenses, yet its directors received Flats 701, 702, 801 and 802. They characterised this as unjust enrichment and sought, at minimum, allotment of Flats 801 and 802.
Respondents’ Arguments
The respondents maintained that the petitioners themselves were responsible for losing Flats 701 and 702 because they repeatedly failed to make the required construction contributions.
They relied upon the 1996 resolution making allotments conditional upon prompt payment and argued that all other participating members had paid while the petitioners defaulted. The society therefore had to find somebody willing to fund the construction and discharge the contractor’s dues.
They also disputed the alleged ₹5 lakh payment and argued that the petitioners’ claim concerning Flats 801 and 802 was barred or otherwise unavailable because a separate dispute challenging those allotments had already been dismissed.
The respondents further contended that the litigation had continued for approximately 27 years and that Flats 801 and 802 had become extremely valuable, estimating their value at approximately ₹7.31 crore.
Analysis of the Law
Petitioners were themselves at fault for non-payment
The High Court did not completely accept the petitioners’ version.
The record showed that the original allotment was expressly conditional upon prompt and regular payment of TDR/FSI acquisition and construction costs. The 1996 resolution specifically allotted Flats 701 and 702 to the petitioners on that basis.
The Court also noted that the petitioners did not pay the agreed amounts despite repeated correspondence and demands. The society had specifically warned them that continued default would lead to cancellation.
Thus, the judgment does not hold that the petitioners were innocent of default. The Court expressly observed that they were to be blamed for not making payments despite repeated opportunities.
Default did not justify giving flats to contractor’s relatives
This was the crucial distinction drawn by the Court.
Even if the petitioners’ allotments could no longer continue because of non-payment, that did not authorise the society to make an arbitrary allotment to the contractor’s directors—particularly when those directors were close relatives of the family controlling approximately half the society’s flats.
The High Court held that the proper course would have been to auction Flats 701 and 702. An auction could have fetched a substantially higher amount, from which the contractor’s genuine outstanding construction bills could have been discharged.
Contractor had no independent right in the property
The Court examined the society’s agreement with Jet Speed Developers. Under that arrangement, the contractor was to procure TDR and construct the additional floors for an agreed consideration.
The Court emphasised that the contractor’s role was restricted to that of a professional contractor, with no independent right or interest in the society’s land or building.
Therefore, the construction contract itself did not confer any inherent entitlement upon its directors to receive the additional flats.
Flats 801 and 802 aggravated the problem
The Court was particularly critical of the subsequent decision to construct Flats 801 and 802 and allot them to the same contractor’s directors.
The original scheme contemplated construction only up to the seventh floor of Shamrock. According to the respondents, the additional eighth-floor flats became necessary because the contractor’s dues remained unpaid even after Flats 701 and 702 were allotted.
The High Court described this as “adding premium to the illegalities already committed”, observing that the additional flats were constructed specifically for allotment to Respondent Nos. 4 and 5.
Precedent Analysis
The dispute turned predominantly on the society’s resolutions, the contractor’s contractual status, the petitioners’ payment default and the legality/arbitrariness of the subsequent allotments rather than on a single controlling precedent.
One legal principle invoked before the Court was that a litigant’s evidence must correspond with the case properly pleaded and that adjudicatory bodies must decide the substantive relief actually sought. The High Court’s scrutiny ultimately focused on whether the concurrent decisions below had adequately examined the legality of the society’s allotment decisions, rather than merely stopping at the petitioners’ payment default.
Court’s Reasoning
The High Court separated two questions that the lower forums had effectively treated together:
First, had the petitioners defaulted in making the required payments? The Court found substantial material showing that they had.
Second, did that default automatically legitimise allotment of society property to the contractor’s directors? The Court’s answer was no.
The original 1996 decision was to use additional FSI/TDR to construct flats for members. The contractor was engaged to perform construction work for consideration; it was not brought in as a developer having proprietary rights over the society’s land or additional flats.
The direct allotment of Flats 701 and 702 to the contractor’s directors—who were close relatives of the Mankani family—rather than disposal through a transparent mechanism such as auction was therefore treated as arbitrary. The later construction and allotment of Flats 801 and 802 to the same persons compounded the irregularity.
The Court’s opening description captures the essence of its concern: while a society member was left without the additional flats, the contractor engaged merely to construct them obtained a “windfall gain” of four flats, despite also receiving construction and TDR costs.
Conclusion
The judgment is significant because the Bombay High Court did not treat a member’s payment default as a licence for a housing society to dispose of valuable additional flats arbitrarily.
While recognising that the petitioners themselves had failed to make payments despite repeated opportunities, the Court found serious fault with the manner in which valuable society flats were diverted to directors of the contractor who were closely related to the family controlling a substantial portion of the society.
The Court particularly held that, once the petitioners were treated as defaulters, Flats 701 and 702 ought to have been auctioned, rather than directly allotted to the contractor’s directors against alleged outstanding bills.
Case: Dr. Omprakash B. Soniminde & Anr. v. Le Chateau Co-operative Housing Society Limited & Ors.
Court: Bombay High Court, Civil Appellate Jurisdiction
Case No.: Writ Petition No. 751 of 2019
Judge: Justice Sandeep V. Marne
Reserved: 31 August 2026
Pronounced: 24 September 2026
Citation: 2026:BHC-AS:39094
