The Bombay High Court has clarified that where a company authorizes a specific individual to execute agreements and receive payments under a transit accommodation arrangement, that individual’s entitlement cannot be overridden by familial disputes or unchallenged allegations of document fabrication. The judgment reinforces the primacy of contractual and corporate authorizations over post-hoc claims in property-related litigation.
Background & Facts
The Dispute
The dispute arises from the acquisition of properties for the Mumbai Metro Line 3 Project. MMRCL entered into a Provisional Agreement for Permanent Alternate Accommodation (PAAA) dated 14th August 2018 with Defendant No.2, Hukumchand Kushalraj Kothari, acting on behalf of Model Sales Agency Pvt. Ltd., for the surrender of Shop No.3 at Surya Mahal, JSS Road, Mumbai. The PAAA obligated MMRCL to pay monthly compensation in lieu of transit accommodation at Rs.47,300, escalating annually by 10% on the prior year’s amount, until permanent alternate accommodation was provided.
Key Facts
- Shop No.3 was leased to Model Sales Agency Pvt. Ltd., with Defendant No.2 listed as the authorized representative in MHADA’s certified tenant list and MBRRB’s NOC dated 8th October 2018.
- The company’s Board Resolution dated 25th April 2018 (certified on 28th April 2018) authorized Defendant No.2 to execute all documents related to Shop No.3, including receiving compensation from MMRCL.
- MMRCL took possession of Shop No.3 on 14th August 2018 and demolished it in 2018 - 2019.
- MMRCL paid compensation to Defendant No.2 on: 19th September 2018, 16th July 2019, 1st October 2020, 7th October 2021, and Rs.8,72,574 for 2022 - 2023 on 13th October 2022.
- The Plaintiff, Ashok Kushalraj Kothari, was a minority shareholder in Model Sales Agency Pvt. Ltd. and resided in Surya Mahal but was not named as an authorized signatory.
- The Plaintiff received a copy of the PAAA from MMRCL on 26th April 2022 and did not object to payments to Defendant No.2 until after filing the Suit.
- The Plaintiff filed Suit No.99 of 2024 on 10th April 2023 seeking administration of his parents’ estate and partition of properties, but did not include Shop No.3 in the schedule of properties.
- On 10th April 2023 and 3rd May 2023, the Plaintiff wrote to MMRCL demanding cessation of payments to Defendant No.2 and redirection to himself, attaching a purported Board Resolution dated 14th March 2023.
- MMRCL halted payments from October 2023 onward pending judicial clarity.
- Defendant No.1, a 95% shareholder, confirmed the validity of the 25th April 2018 Resolution in a letter dated 29th September 2023.
- Defendant No.2’s reply dated 27th September 2023 challenged the 14th March 2023 Resolution as fabricated.
Procedural History
- 14th August 2018: PAAA executed between MMRCL and Defendant No.2 (on behalf of Model Sales Agency Pvt. Ltd.)
- 8th October 2018: MBRRB issued NOC for Metro Project; MHADA certified tenant list named Model Sales Agency Pvt. Ltd. (Hukumchand Kushalraj Kothari)
- 25th April 2018: Board Resolution passed authorizing Defendant No.2 to receive compensation (certified 28th April 2018)
- 13th October 2022: Last payment made by MMRCL to Defendant No.2
- 10th April 2023: Plaintiff filed Suit No.99 of 2024; same day, Plaintiff wrote to MMRCL demanding stoppage of payments
- 20th April 2023: Bombay HC passed interim order in I.A. No.9946 of 2023: "status quo in respect of properties controlled by the parties be maintained"
- 22nd September 2023: MMRCL wrote to Defendant No.2 seeking clarification after Plaintiff’s letters
- 27th September 2023: Plaintiff wrote again to MMRCL demanding payment redirection
- 1st January 2024: MMRCL suspended payments pending court direction
- 24th November 2025: Interim Application No.1045 of 2024 reserved for judgment
- 9th June 2026: Judgment pronounced
The Parties' Positions
- Defendant No.2 (Applicant): Argued he was the duly authorized signatory under the 25th April 2018 Resolution, had physical possession of Shop No.3, and had received payments for five years without objection. The 14th March 2023 Resolution was fabricated and superseded.
- Plaintiff: Contended that Shop No.3 was jointly possessed by all four brothers, the 25th April 2018 Resolution was invalid (due to certification by Defendant No.1 after his directorship ended), and compensation should be deposited in court pending partition.
- Defendant No.1: Supported Defendant No.2, confirming the 25th April 2018 Resolution and his role as 95% shareholder.
- MMRCL: Stated it was ready to pay as directed by the Court and had suspended payments only due to conflicting claims.
Relief Sought
Defendant No.2 sought: (a) immediate release of all arrears and future compensation under the PAAA; (b) interest at 18% per annum from the date each installment became due.
The Legal Issue
The central question was whether an individual authorized by a corporate tenant under a valid Board Resolution to receive transit accommodation compensation is entitled to such payments despite familial disputes and unchallenged allegations of document fabrication.
Arguments Presented
For the Appellant/Petitioner
Defendant No.2 relied on the 25th April 2018 Board Resolution, certified by Defendant No.1 as authorized signatory, which explicitly empowered him to execute agreements and receive compensation from MMRCL. He emphasized that MMRCL had paid him consistently for five years, MHADA and MBRRB records identified him as the tenant representative, and possession was delivered by him alone. He argued that the Plaintiff’s silence until 2023 constituted acquiescence, and the 14th March 2023 Resolution was a post-litigation fabrication. He further contended that the status quo order of 20th April 2023 barred the Plaintiff from unilaterally altering payment channels.
For the Respondent/State
The Plaintiff argued that the 25th April 2018 Resolution was invalid because Defendant No.1 was no longer a director when he certified it, and that the same date appeared twice in conflicting documents. He claimed joint possession under Clause 5 of the PAAA and asserted that since Model Sales Agency Pvt. Ltd. had liabilities, compensation should be deposited in court. He contended that the status quo order did not bind him, as it pertained only to property control, not financial disbursements.
The Court's Analysis
The Court undertook a meticulous review of documentary evidence, corporate authorizations, and conduct over time. It found that the PAAA was executed by Defendant No.2 as authorized signatory for Model Sales Agency Pvt. Ltd., and that MMRCL’s payment history confirmed recognition of his authority. The Court rejected the Plaintiff’s claim that the 25th April 2018 Resolution was fabricated, noting that Defendant No.1’s certification as an authorized signatory - not as a director - was legally sufficient under company law principles.
"The explanation given by Defendant No.2 in the Affidavit in Rejoinder prima facie shows that there is no fabrication of the Resolutions."
The Court emphasized that the Plaintiff had received the PAAA in April 2022 and yet failed to challenge the 25th April 2018 Resolution or include Shop No.3 in his Suit. The Court held that the Plaintiff’s subsequent letters to MMRCL constituted a clear breach of the status quo order dated 20th April 2023, which mandated maintenance of the existing arrangement.
"All these facts clearly show that Defendant No.2 was in possession of Shop No.3 at Surya Mahal and all four brothers were not in joint possession."
The Court further noted that the 14th March 2023 Resolution, even if genuine, was subsequent and could not override the earlier, validly executed resolution. The Court declined to grant interest at 18% per annum, observing that MMRCL had suspended payments in good faith due to conflicting claims, and thus could not be held liable for delay.
The Verdict
Defendant No.2 succeeded. The Court directed MMRCL to pay all arrears and future compensation under the PAAA dated 14th August 2018 within four weeks of the order. Defendant No.2 was required to furnish a written undertaking within two weeks to return the amounts if so directed by the Court in the final suit. No interest was awarded. The Interim Application was allowed in these terms, with no order as to costs.
What This Means For Similar Cases
Authorized Signatories Prevail Over Familial Claims
- Practitioners must prioritize corporate authorizations over familial or equitable claims in property compensation disputes.
- Payments made to an authorized signatory under a valid resolution cannot be unilaterally redirected by co-owners absent a court order.
- Silence for years, followed by post-litigation objections, constitutes acquiescence under equitable principles.
Status Quo Orders Bind All Parties, Including Plaintiffs
- Interim status quo orders apply to financial disbursements tied to disputed properties, not just physical possession.
- Any attempt to alter payment channels after such an order constitutes contempt risk.
- Courts will enforce status quo strictly where payments are tied to contractual rights.
Document Fabrication Claims Require Formal Challenge
- Allegations of forged resolutions must be challenged through specific pleadings or applications; mere denial in affidavits is insufficient.
- Unchallenged resolutions retain legal effect even if contested later in litigation.
- Certification by an authorized signatory (not necessarily a director) is sufficient to validate corporate resolutions.
