Deemed Conveyance Cannot Jeopardize Phased Development; Conveyance Limited to Constructed Area Until Project Completion: Bombay High Court

Bombay High Court Quashes Deemed Conveyance Order, Upholds Developer's Right to Phased Development

Mumbai: In a significant ruling clarifying the scope of deemed conveyance under the Maharashtra Ownership Flats Act (MOFA), 1963, the Bombay High Court has quashed an order that granted a co-operative housing society ownership of a substantial portion of land, thereby jeopardizing a developer's approved plans for further construction on the same plot.

Justice Milind N. Jadhav held that where development is planned in phases and flat purchase agreements contain clauses permitting further construction, a society is entitled to deemed conveyance only for its constructed building area until the entire project is complete. The court set aside the order of the District Deputy Registrar, Pune, and the subsequent registered conveyance deed, terming the society's stance an "extortionist attitude."

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Case Background

The dispute involved M/s S & M Enterprises (the Petitioner/Developer) and The Palazzo Building No. 1 Co-operative Housing Society Ltd. (the Respondent/Society). The developer had undertaken a phased development project on a 3,880 sq. m. plot in Pune. The first building, "Palazzo," was completed, and its 55 flat purchasers formed the respondent society.

The society subsequently applied for deemed conveyance and was granted ownership of 3,422 sq. m. of land by the District Deputy Registrar on June 17, 2022. The developer challenged this order, arguing that it critically hampered their plans to construct a second, 18-storey building on the remaining portion of the plot, for which they had secured a Commencement Certificate from the Pune Municipal Corporation in November 2021.

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**Key Arguments

Petitioner's Submissions (The Developer):

• Senior Advocate G.S. Godbole, representing the developer, argued that the MOFA agreements signed with each flat purchaser explicitly permitted the developer to carry out further construction on the plot by utilizing additional FSI and TDR.
• He pointed to specific clauses (Recital 7 and Clause 28) where flat buyers gave express consent for future development, agreeing that the final conveyance would occur only after all proposed buildings were completed.
• The developer contended that the grant of deemed conveyance for a large land area prematurely stripped them of their right to complete the sanctioned second phase of the project.

Respondent's Submissions (The Society):

• Advocate S.S. Panchpor, for the society, argued that the developer had not made full disclosure about the second building in the original plans.
• The society claimed that the developer was not entitled to construct further without obtaining fresh consent from the society members.
• It was submitted that the proceedings under Section 11(3) of MOFA are summary in nature and the developer could establish their title claims in a separate civil suit, which they had already filed.

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Court's Analysis and Pivotal Findings

Justice Jadhav conducted a detailed analysis of the agreements executed between the developer and the flat purchasers, finding them to be a "complete answer" to the society's contentions.

The court highlighted several crucial clauses in the agreement:

"The Promoters are proposing to carry out development and construction on the said Property by utilizing the Floor Space Index... and for these purposes the Promoters shall be entitled to and be at liberty to get further amended/revised plans sanctioned... and the Flat Purchaser/s give/s his/her/their/its consent to the aforesaid..." (Recital 7)

The judgment noted that these clauses constituted express, unconditional consent from the flat buyers for phased development. The court observed that the developer’s right to use residual FSI and TDR was protected "till the execution of the Deed of Conveyance... in favour of the Co-operative Society."

Justice Jadhav found the society's primary grievances stemmed from other issues like alleged non-provision of promised amenities and parking disputes, which were being improperly conflated with the issue of deemed conveyance.

The court remarked sternly on the society's arguments:

"While the matter is argued by the Society before me, I get a distinct feeling that the Society is adopting an extortionist attitude when none of the submissions advanced by Mr. Panchpor are supported in law."

The court concluded that the Registrar's order was flawed as it failed to consider the binding agreements and the developer's subsisting right to complete the project.

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Final Decision and Implications

The Bombay High Court allowed the writ petition, delivering the following directives:

1. Quashed and Set Aside: The deemed conveyance order dated June 17, 2022, and the registered conveyance deed dated July 1, 2022, were quashed and set aside.

2. Limited Conveyance: The court ruled that the society is entitled to deemed conveyance only for the constructed area of its building (3648.23 sq. m.) at this stage, along with proportionate rights in common areas.

3. Future Conveyance: The developer was directed to execute the final conveyance of the land in favour of the societies of both buildings (jointly or severally) within one month after the completion of the second building.

4. Cancellation of Deed: The registered deemed conveyance was ordered to be immediately cancelled.

The court has stayed the operation of its judgment for six weeks to allow the society to approach a superior court. This ruling reinforces the legal standing of phased development agreements under MOFA and protects developers from premature claims that could derail sanctioned projects.