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2010 Supreme(Bom) 252
High Court of Judicature at Bombay
THE HONOURABLE MRS. JUSTICE ROSHAN DALVI
Bharatiya Bhavan Cooperative Housing Society Limited & Another
Versus
Krishna H. Bajaj & Others
WRIT PETITION NO.1094 OF 2004
Decided on : 17-02-2010
For the Petitioners:A.Y. Sakhare, Sr. Counsel i/b. M.N.Bhadrashete, Advocate.
For the Respondents:R1, Zal Andhyarujina with Duhita Lewis i/b. Goenka Law. Asso., Advocates.
Headnote:Maharashtra Control of Organised Crimes Act, 1999 - Sections 91 and 92 - Maharashtra Co-operative Societies Model Bye-laws, Bye-law 40(d)(vii) - Contract Act, 1872, Section 23 - Transfer of shares and premises - Jurisdiction of Co-operative Court challenged by petitioner/society - Payment of premium by member of society to society at rate fixed in AGM not exceeding Rs. 25,000/- required under Bye-law 40(d)(vii) - Consideration paid under Section 23 of Act 1872 by way of transfer fee in excess of Rs. 25,000/- to be paid - Respondent-1, purchasing flats of society/petitioner, put up some unauthorised construction on terraces of her flats without permission of society - No proof of any coercion allegedly practised upon r espondent - Donation given by respondent to society, valid - Cannot be refunded - Impugned judgments of Co-operative Court as well as Co-operative Appellate Court - Set aside. - It is for the respondent to prove the coercion that she alleged. She has led evidence in that behalf. Aside from the oral evidence of her constituted attorney, no other independent evidence of coercion is produced by her. The evidence inter alia shows that the number of meetings were arranged and held between the Chairman and Secretary of the Society, Khimji and the respondent’s constituted attorney at the time she entered into the contract and sought transfer of membership to herself. The evidence shows what was told by the Society Chairman and the Secretary to the respondent’s constituted Attorney. It also shows that the respondent was represented by her Attorney at the time of the agreement and thereafter. The attorney has witnessed the agreement. The evidence also shows that the respondent has not asked anything in writing from the Society the respondent was orally asked to pay 3% of the total value of the flats as per a resolution passed at the AGM dated 9th February, 1986 for which the respondent had not taken legal assistance. The respondent had not objected for the contribution/transfer fee etc. the evidence shows that the gracious contribution was mentioned in the letter dated 8th July 1992 as the Society compelled them to write so in that letter. The letter dated 8th July, 1992 is a type written letter annexing 7 documents.
It is upon this evidence that the respondent seeks to prove coercion practiced upon her. The aforesaid oral and documentary election, if appreciated show that there was no coercion practiced upon the respondent. The respondent entered into the contract of her free will. She paid the amounts to the Society under an incorrect misleading description. She knew that she was required to pay nothing other than "transfer fees" the expression used since her initial agreement dated 20th March, 1992. Knowledge of the fact that the transfer fees was illegal and could not have been paid as such must, therefore be imputed upon her. That knowledge is reflected from the very inception when she signed the agreement dated 30th March, 1992 under legal advise and in the presence of her Solicitor. The meetings held between the parties show deliberation and thought. The presence of her attorneys rule out coercion. The Resolution of 9th February, 1986 shows the Society’s practice. Her letter dated 8th July, 1992 annexing all the required documents could not have been written under detention. It does not even show any prejudice caused to her in fact it caused immediate transfer of the shares and premises to her and gave her the status of a member, which she would have otherwise to fight for. The requirements of coercion as defined in Section 15 of the Contract Act are far from being satisfied.
The payment of transfer fees to the society of such a large amount which is by way of percentage of the sale price is illegal under the Co-operative Societies Act and the model Bye-laws issued thereunder being model Bye law No. 40 adopted by the Society as their Bye laws. The premium required to be paid to the Society is allowed up to the maximum amount of Rs. 25,000/- only. Any amount in excess of that payment is, therefore illegal contribution. The only exception under the aforesaid Bye-laws is the donation which would be given only with the consent of the member. Hence if the amount is taken to be not the illegal transfer fee, but donation in the name of contribution to the society towards the repair fund, it would be a valid contract. It could then be avoided as voidable at the option of the respondent only if she proved the coercion alleged. The intrinsic oral as well as documentary evidence unmistakenly shows lack of that vitiating factor. The respondent having sent the typewritten letter dated 8th July, 1992 annexing as many as 7 documents shows that the latter was not prepared under detention. The circumstantial evidence points to the irresistible conclusion of lack of any coercion. In that case the valid donation given by the respondent to the Society cannot be refunded or repaid to her.
Consequently, the judgment of the Co-operative Court as well as the Co-operative appellate Court are required to be set aside. The award passed under the judgment dated 10th September, 2003 and confirmed in appeal under the judgment dated 28th October, 2003 are set aside.
Certainly. Based on the provided legal document, here are the key points:
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The transaction involved a transfer of shares and premises in a cooperative housing society, with the respondent paying a significant amount as a contribution to the society’s repair and maintenance fund, which was later challenged as an illegal transfer fee (!) (!) .
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The respondent claimed that she paid the amount under coercion and that the demand for transfer fees exceeding the permissible limit was illegal. She alleged that she was pressured into making the payment, which she later discovered was unlawful (!) (!) .
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The evidence indicated that the respondent was represented by legal counsel during the transaction, attended meetings with society officials, and did not ask for written confirmation of coercion. This suggested that her consent was free and informed (!) (!) .
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The legal framework governing the transaction includes the relevant cooperative society laws, which specify that the premium or transfer fee should not exceed a certain maximum amount (Rs. 25,000), and any amount exceeding this is illegal. Payments made in excess are considered unlawful contributions (!) (!) .
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The contract for transfer was entered into with full knowledge of the legal restrictions, and the respondent was aware or had legal advice indicating the illegality of the excess amount paid. Therefore, the payment was made with knowledge of the law, rendering the contract void from inception under the relevant legal principles (!) (!) .
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The respondent’s claim for repayment under the grounds of mistake or coercion was rejected because the evidence did not support the existence of coercion, and the payment was made with awareness of its illegality or under legal advice. The contract was not merely voidable but void ab initio due to its unlawful nature (!) (!) .
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The legal principles clarify that amounts paid under a contract that is void from the outset cannot be recovered because such contracts are considered illegal and against public policy. The respondent’s assertion that she paid under coercion was not substantiated by sufficient independent evidence (!) (!) .
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The court emphasized that the respondent’s knowledge of the illegality and her participation with legal advice meant she could not claim protection under laws that allow for restitution in cases of mistake or coercion. The payments made were not recoverable because they stemmed from an unlawful agreement (!) (!) .
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The judgments of the lower courts were found to have erred in their understanding of the law relating to void contracts and the restitution of benefits under such agreements. The court set aside the impugned orders, clarifying that the transaction was void from the beginning and that the respondent could not claim a refund (!) .
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The legal reasoning underscores that when a party knowingly enters into an illegal contract, especially with full legal advice, the contract is void, and no restitution can be claimed for payments made under it. The court’s role is to uphold the law and prevent enforcement of unlawful agreements (!) .
These points collectively reflect the legal reasoning and conclusions of the case, emphasizing the importance of lawful consideration, informed consent, and the consequences of engaging in illegal contractual arrangements.
1. The Petitioner is the Cooperative Housing Society (Society) in which the Respondent No.1 (Respondent) is a member upon transfer of the membership of one Mrs. Preeti Umesh Khimji (Khimji) who held the shares of the Society in respect of flat Nos.24 and 25 in the Society building being Bhatia Bhawan at Marine Drive, Mumbai 400 020 (the premises).
2. The Respondent No.1 entered into an agreement with Khimji on 30th March 1992 for sale and transfer of the shares and the premises of Khimji to her for a consideration of Rs.3.21 Crores. It was agreed in the agreement dated 30th March 1992 by the parties that they would contribute equal to 3% of the consideration amount towards transfer fees. The parties had certain meetings with the office bearers of the Society being the Chairman (Petitioner No.2) and the Secretary. The parties have entered into correspondence with the Society as well as certain other authorities concerned with the transfer of the shares and the premises. Khimji contributed his share to the Respondent. The Respondent has paid the amount to the Society. This payment was made as a contribution to the Repair & Maintenance Fund of the Society. The Respondent was conferred membership of the Society and the share certificates duly transferred in her name was given to her. All this has transpired between April 1992 to July 1992 as shall be enumerated presently.
3. The Respondent challenged the receipt of the amount representing 3% of the consideration amount towards transfer fees as illegal demand for transfer fees having been paid under coercion in the guise and name of the building repair and maintenance fund for the first time by her Advocate’s notice dated 11th August 1994. Under that notice she demanded repayment of the amount paid to the Society with interest at 21% p.a thereon along with other amounts upon certain bills for repairs raised upon the Society. That having not been repaid by the Society the Respondent No.1 filed a dispute before the First Cooperative Court at Mumbai being C.C.No.1/1222/94. The learned Cooperative Court partly allowed the dispute for refund of the amount paid to the Society under coercion with interest at 12% p.a thereon.
4. The Society preferred an Appeal there from to the Maharashtra State Cooperative Appellate Court which came to be dismissed. Both these orders are, therefore, challenged in this Writ Petition.
5. The Petitioners claim that the Cooperative Court had no inherent jurisdiction to try the dispute because it related to the transaction prior to the Respondent becoming a member of the Society and hence was not a dispute between the Society and its member. That contention has been rightly negatived. The dispute was not only for and in respect of the coercion practiced upon the Respondent prior to her being a member which related to the payment of the amount on representing 3% of the consideration under the transaction payable as transfer fees, but was also in respect of other amounts incurred by way of repair work by the Respondent and claimed from the Society after she became a member. The dispute was filed after the Respondent became a member. As per the judgment in the case of Ramagauri Keshvlal Virani Vs. Walkeshwar Triveni Cooperative Housing Society Ltd. 1999 C.T.J.198 the Cooperative Court would have jurisdiction.
6. The Petitioners have challenged the question of fact relating to the exercise of coercion upon her for the illegal demand of transfer fees. This dispute has been raised by the Respondent for the first time in August 1994 though the payment was made in July 1992. The Respondent examined her constituted Attorney. His evidence has been considered by the Cooperative Court as well as the Cooperative Appellate Court with regard to the factum of the coercion, if at all, used. The parties have entered into extensive correspondence before and after the transaction of the Respondent with the Society for payment of that amount paid as transfer fees thou
