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High Court of Judicature at Bombay
THE HONOURABLE CHIEF JUSTICE MR. SWATANTER KUMAR & THE HONOURABLE MR. JUSTICE A.M. KHANWILKAR
Girish Mulchand Mehta & Another
Versus
Mahesh S. Mehta & Another
Appeal No.338 of 2009 in Arbitration Petition Lodg No.493 of 2009
Decided on : 10-12-2009
Court has no hesitation in taking the view that since the appellants were members of the society and were allotted flats in question in that capacity at the relevant time are bound by the decision of the general body of the society as long as the decision of the general body is in force. As observed earlier, the appellants have not challenged the decisions of the General Body of the Society which is supreme, in so far as redevelopment of the property in question or of appointment of the respondent No. 1 conferring on him the development rights. The appellants have merely challenged the resolution which at best would raise issues regarding the stipulations in the development agreement. The General Body of the society has taken a conscious decision which in this case was after due deliberation of almost over 5 years from August 2002 till the respondent No. 1 came to be finally appointed as developer in terms of resolution dated 2nd March, 2008. Moreover, the General Body of the society by overwhelming majority not only approved the appointment of respondent No. 1 as developer but also by subsequent resolution dated 27th April 2008 approved the draft development agreement. Those terms and conditions have been finally incorporated in the registered development agreement executed by the Society in favour of respondent No. 1. That decision and act of the society would bind the appellants unless the said resolutions were to be quashed and set aside by a forum of competent jurisdiction. In other words in view of the binding effect of the resolutions on the appellants, it would necessarily follow that the appellants were claiming under the society, assuming that the appellants have subsisting proprietary rights in relation to the flats in their possession. It is noticed that as of today the appellants have been expelled from the basic membership of the society. Their right to occupy the flat is associated with their continuance as member of the society. It is a different matter that the decision of expelling the appellants from the basic membership of the society will be subject to the outcome of the decision of the superior authority where the appeals are stated to be pending. If the decision of the society to expel the appellants is to be maintained, in that case, the appellants would have no surviving cause to pursue their remedy even before the Co-operative Court much less to obstruct the redevelopment proposal. As a matter of fact those proceedings will have to be taken to its logical end expeditiously. Even if the appellants were to continue as members, they would be bound by the decision of the General Body whether they approve of the same or otherwise. In any case, keeping in mind that the development agreement does not absolutely take away the rights of the appellants in the flats in question, as after demolition of the existing building the appellants would be accommodated in the newly constructed flats to be allotted to them in lieu of the existing flats, on the same terms as in the case of other members provided the appellants continue to remain members of the society. Under the development agreement, the respondent No. 1 is obliged to complete the project within 18 months from the date of receipt of full commencement certificate from the Corporation. The full commencement certificate would be issued only upon the vacant possession of the entire building is delivered to the respondent No. 1 who in turn would demolish the same with a view to reconstruct a new building in its place. Significantly, out of twelve (12) members, ten (10) members have already acted upon the development agreement as well as have executed separate undertaking cum agreement with the respondent No. 1 Developer. They have already vacated flats in their occupation to facilitate demolition of the existing building and have shifted to alternative transit accommodation as back as in February 2009. The project has been stalled because of the obstruction created by the appellants herein who are in minuscule minority. The said ten members of the society who have already shifted their premises, they and their family members are suffering untold hardship. At the same time, the respondent No. 1 who has already spent huge amount towards consideration of the development agreement and incurred other incidental expenses to effectuate the development agreement in addition will have to incur the recurring cost of paying monthly rent to the ten members who have already shifted to transit accommodation. The learned Single Judge has noted that the appellants are not in a position to secure the amount invested and incurred including the future expenses and costs of the respondent No. 1 herein in case the project was to be settled in this manner. Even before this Court the appellants have not come forward to compensate the respondent No. 1 herein and the other ten members of the society for the loss and damage caused to them due to avoidable delay resulting from the recalcitrant attitude of the appellants. Considering the impact of obstruction caused by the appellants to the redevelopment proposal, not only to the respondent No. 1 Developer but also to the overwhelming majority of members (10 out of 12) of the society, the learned Single Judge of this Court opined that it is just and convenient to not only appoint the Court Receiver but to pass further orders for preservation as well as protection and improvement of the property which is subject matter of arbitration agreement. Court has already noticed that the Court’s discretion while exercising power under Section 9 of the Act is very wide. The question is whether in the fact situation of the present case it is just and convenient to appoint Court Receiver coupled with power conferred on him to take over possession of the entire building and hand over vacant and peaceful possession thereof to the respondent No. 1 who in turn shall redevelop the property to as to provide flats to each of the members of the society in lieu of the existing flats vacated by them as per the terms and conditions of the development agreement, as ordered by the learned Single Judge. For the reasons noted by the learned Single Judge which Court has reiterated in the earlier part of this decision, Court finds that it would be just and convenient to not only appoint Court Receiver to take over possession of the property but also pass further order of empowering the Court Receiver to hand over vacant possession of the suit building to the respondent No. 1 to enable him to complete the redevelopment work according to the terms and conditions of the development agreement.
It was also argued that the property was in good condition and there was no need to redevelop the existing building. In the first place, as noted earlier, the decision of the general body of the society to redevelop the suit property has not been challenged at all. Besides, no provision in the Cooperative Societies Act or the rules or any other legal provision has been brought to our notice which would curtail the right of the society to redevelop the property when the General Body of the Society intends to do so. Essentially, that is the commercial wisdom of the general body of the society. It is not open to the Court to sit over the said wisdom of the general body as an appellate authority. Merely because some members in minority disapprove of the decision, that cannot be the basis to negate the decision of the General Body, unless it shows that the decision was the product of fraud or misrepresentation or was opposed to some statutory prohibition. That is not the grievance made before Court. In the present case, the General Body took a conscious decision after due deliberations for over five years to redevelop its property. Even with regard to the appointment of the respondent No. 1 as the developer, the record shows that it was decided by the General Body of the society after examining the relative merit of the proposals received from the developers and interviewing them. Even the proposed development agreement to be entered with the developer (respondent No. 1) was approved by the general body. The appellants raised untenable pleas to cause obstruction and have belatedly filed proceedings in the co-operative Court as a counter blast only to protract the redevelopment work to be carried out by the respondent No. 1 herein. Accordingly, Court find no infirmity in the conclusion reacted by the learned Single Judge in making the petition absolute in terms of prayer clause (a) in the fact situation of the present case.
Certainly. Based on the provided legal document, here are the key points:
The case involves a dispute under Section 9 of the Arbitration and Conciliation Act, 1996, concerning interim measures related to redevelopment of a building owned by a cooperative society (!) (!) .
The society’s General Body had taken a conscious, long-term decision to redevelop the property and appointed a developer through a resolution supported by the majority of its members. These resolutions were not challenged by the appellants and are binding on all members, including those who oppose the redevelopment (!) (!) .
The appellants, who are members of the society, have only challenged the terms of the development agreement, not the decision to redevelop or the appointment of the developer. Their challenge is limited to the stipulations in the development agreement, which were approved by the majority and incorporated into a registered contract (!) (!) .
The appellants have been expelled from the society’s membership, which affects their right to occupy the flats. Their right to occupy is linked to their membership status, and expulsion proceedings are pending before a higher authority. If their expulsion is upheld, their cause to oppose the redevelopment diminishes further (!) (!) .
The majority of members, including those who have already vacated their flats, have acted in accordance with the development agreement, incurring expenses and shifting to alternative accommodations. The obstruction by the appellants has caused delays and financial hardship to the developer and other members (!) (!) .
The court exercised its wide discretion under Section 9 to appoint a receiver and take possession of the property, considering the need for protection, preservation, and to facilitate the redevelopment process. The order aimed to balance the interests of the developer, the majority members, and the overall progress of the project (!) (!) .
The court emphasized that the decision of the society’s General Body to redevelop was a well-considered, democratic decision, and the minority’s disapproval alone does not justify interference unless there is evidence of fraud, misrepresentation, or statutory violation (!) (!) .
The order to appoint a Court Receiver and to facilitate the redevelopment was justified by the circumstances, including the obstruction by the appellants, the expenses incurred, and the hardship faced by the majority members and the developer (!) (!) .
The appeal was dismissed, affirming that the relief granted was within the court’s jurisdiction and that the appellants’ objections did not warrant overturning the order, especially given their limited participation and the procedural context (!) (!) .
The court clarified that its observations do not prejudice the ongoing proceedings and that each case must be decided on its own merits in accordance with law (!) .
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Khanwilkar, J.
This appeal takes exception to the Judgment dated 3rd July, 2009 in Arbitration Petition
(L) No. 493/2009. The said petition was filed by the Respondent No. 1 under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’ for short). The reliefs claimed in the said Petition read thus:
“a) That during pendency of arbitral proceeding between the Petitioner and the Respondent No. 1, before the Ld. Sole Arbitrator Shri L.H. Patil, this Hon’ble Court may be pleased to appoint Court Receiver High Court Bombay or any fit and proper person as Receiver of the said property i.e. plot of land bearing city survey No. 5728 final plot No. 257 of Ghatkopar T.P.S.III, R.N.Narkar Marg, Ghatkopar (E) Mumbai-400 077 and the building known as “Harini” standing thereon with all powers under order 40 Rule 1 of the Code of Civil Procedure including power to take physical possession by physically removing the Respondent Nos. 2 and 3 and their family members occupying flat No. 1 and Flat No. 3 or anybody else found occupying any part of the Building known as “Harini” and/or any part of the said property and to hand over vacant and peaceful possession of the said property i.e. plot of land bearing city survey No. 5728 final plot No. 257 of Ghatkopar T.P.S. III, R.N.Narkar Marg, Ghatkopar (E) Mumbai-400 077 and the building known as “Harini” standing thereon to the Petitioner for the purpose of demolition and construction of new building as provided in the said Development Agreement Exhibit “A” hereto.
b) that the ad-interim measures in term of prayer clause (a) above.
c) that for such other and further reliefs as the nature and circumstances of the case may require.”
2. The Respondent No. 1 asserted that the Respondent No. 2 Society entered into a Development Agreement dated 7th May, 2008 authorising him to redevelop the building standing on piece and parcel of land admeasuring 644.60 sq. meters bearing City Survey No.5728, Final Plot No. 257 of Ghatkopar T.P.S. III, R.N. Narkar Marg, Ghatkopar (E), Mumbai 400 077. The building standing on the said plot consists of three floors comprising of 12 residential flats. Since the building was constructed in the year 1964, due to passage of time its condition had deteriorated. As a result, the members of the Society after due deliberation unanimously decided to redevelop the building. Further, to effectuate the said decision the Society appointed Respondent No. 1 to develop the said building. Pursuant to the decision of the Society, the Respondent No. 2 Society entered into registered Development Agreement with Respondent No. 1 dated 7th May, 2008 thereby granting development rights to develop the property by demolishing the existing building “Harini” standing on the said property on terms and conditions referred to in the said agreement. The Respondent No. 1 paid the stamp duty of Rs. 1,75,030/- and also registration fees of Rs. 31,440/-. The said agreement was executed by the authorised person of the Society (Respondent No. 2) and also by ten (10) members out of twelve (12) members as token of confirmation thereof in favour of Respondent No. 1. The said 10 members have also signed and executed individual undertaking-cum-affidavit thereby confirming the Development Agreement and undertaking to perform the Development Agreement. According to Respondent No. 1, consequent to the execution of the agreement, he has already spent amount of Rs. 12,00,000/-. and also Rs. 2,30,000/- per month (approximately) towards monthly compensation paid to the 10 members who have already vacated their respective flats since February 2009. It is the case of the Respondent No. 1 that he has already paid monthly compensation to the tune of Rs. 16,10,000/- and would be obliged to pay the future monthly compensation to the said 10 members. Further, the plans for redevelopment of the building have been duly approved and accepted by the General Body of the Society and wher
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