The Bombay High Court has delivered a decisive ruling affirming that the bifurcation of an existing cooperative housing society cannot proceed without adherence to statutory procedure and the fundamental principle of natural justice. The judgment invalidates both an exemption order under Section 7 of the Maharashtra Co-Operative Societies Act and the subsequent bifurcation and deemed conveyance orders, establishing that procedural compliance is non-negotiable even in administrative decisions affecting property rights.
Background & Facts
The Dispute
The dispute arose between two factions of the Jay Anand Co-Operative Housing Society Ltd., a registered society with 22 members occupying two distinct structures on a single plot: Wing A (constructed in 1954) and Wing B (constructed in 1985). A minority group of members, including Respondent No.4 who was then Secretary of the Society, sought to bifurcate the Society to form a separate entity, Jay Anand Bungalow CHS, claiming distinct ownership and operational needs. This led to a chain of contested administrative actions: an exemption under Section 7 of the MCS Act, a bifurcation order under Section 18, and a deemed conveyance under MOFA - all challenged by the original Society.
Procedural History
- 2015: Application for Deemed Conveyance filed by the Society; Respondent No.4 signed as member.
- 2016: Deemed Conveyance granted to the Society over the entire plot.
- 2017: Respondent Nos.4 - 6 applied for exemption under Section 7 of the MCS Act to form a new society; no notice given to the existing Society.
- 2017: Commissioner of Cooperative Societies opined that formation of a society with only three members was improper.
- 2017: Exemption granted under Section 7 without hearing the Society.
- 2018: Bifurcation order passed under Section 18(1) read with Section 17 without a draft scheme, without consultation with the Federation, and without personal hearing to the Society.
- 2020: Deemed Conveyance granted to the newly formed Jay Anand Bungalow CHS under Section 11(3) of MOFA.
- 2021: Bombay High Court ordered status quo on the 330.30 sq. mtrs. covered by the 2020 Deemed Conveyance.
- 2022: Contempt petition filed alleging violation of status quo through a Development Agreement.
Relief Sought
The Petitioner sought quashing of the exemption order (8 December 2017), the bifurcation order (3 November 2018), and the deemed conveyance order (5 November 2020), arguing they were procedurally invalid, violative of natural justice, and contrary to statutory mandates under the MCS Act and MOFA.
The Legal Issue
The central question was whether an exemption under Section 7 of the Maharashtra Co-Operative Societies Act can be granted to form a new society from an existing one, without providing a hearing to the original society, and whether such an exemption can serve as the legal basis for bifurcation under Section 18.
Arguments Presented
For the Petitioner
Mr. Pravin Samdhani argued that Section 7 applies only to registration of new societies, not to bifurcation of existing ones. He contended that Section 157 governs modifications to existing societies and mandates a hearing before any prejudicial order. He cited State Bank of India v. Rajesh Agarwal to emphasize that natural justice is mandatory. He further argued that the exemption failed to meet the conditions of the 1995 Notification (flat size >700 sq. ft., FSI available), and that the Commissioner’s report opposing formation of a three-member society was ignored. He relied on Janata Dal v. H.S. Chowdhary to assert that bifurcation requires majority consent or public interest, neither of which existed.
For the Respondent
Dr. Virendra Tulzapurkar contended that Section 7 is a special provision for exemption from minimum membership requirements and overrides the general provisions of Section 157. He argued that the Petitioner had no locus to challenge the exemption, as it was an application between the applicants and the State. He maintained that the bifurcation order was well-reasoned, based on separate infrastructure (water, electricity, entrances), and that the appeal under Section 152 barred the writ petition. He relied on Maharashtra State Board v. Paritosh Sheth to argue that special provisions prevail over general ones.
The Court's Analysis
The Court undertook a rigorous statutory interpretation, distinguishing between provisions governing new registrations and those governing existing societies. It held that Section 7 is confined to the registration of new societies under Chapter II of the MCS Act and cannot be invoked to facilitate the bifurcation of an already registered society. The Court emphasized that Section 157, which explicitly requires a hearing before any order prejudicial to a society, is the only applicable provision in such cases.
"The exemption could, if at all, have been granted under Section 157 of the MCS Act which is a specific provision for an existing society. Under the said Section, the Petitioner was required to be heard prior to the passing of the impugned Order of exemption."
The Court found that the exemption order was passed without any opportunity to the Petitioner, despite the Secretary of the Society being one of the applicants - a clear violation of audi alteram partem. It further held that the exemption failed to satisfy the conditions of the 1995 Notification: flats exceeded 700 sq. ft. and 12.10 sq. ft. of FSI remained unused. The Commissioner’s report, which concluded that a three-member society was improper, was disregarded without reasons, rendering the order arbitrary.
The Court also rejected the Respondents’ argument that Section 7 overrides Section 157, noting that the two provisions operate in distinct domains: registration versus modification. It held that Section 18 requires a 3/4th majority resolution or compelling public interest, neither of which was established. The absence of a draft scheme, failure to consult the Federation, and non-compliance with Rule 17 further vitiated the bifurcation order.
Regarding the deemed conveyance, the Court held that once a society is granted deemed conveyance under MOFA, the authority cannot entertain a second application for the same property by a faction that was not a society under Section 10. The 2020 conveyance was thus a legal nullity, as it was predicated on an invalid bifurcation.
The Verdict
The Petitioner won. The Court quashed the exemption order dated 8 December 2017, the bifurcation order dated 3 November 2018, and the deemed conveyance order dated 5 November 2020. The Court held that natural justice and statutory procedure under Section 157 and Section 18 are mandatory prerequisites for bifurcation of an existing cooperative housing society, and that administrative convenience cannot override statutory safeguards.
What This Means For Similar Cases
Hearing Is Mandatory Before Bifurcation
- Practitioners must now insist on compliance with Section 157 whenever a cooperative society seeks to alter its structure.
- Any order passed without notice to the existing society is void ab initio, regardless of whether the applicant is a member.
- Administrative bodies cannot rely on "ministerial function" to bypass hearings - this is now legally untenable.
Deemed Conveyance Cannot Be Reopened Without Valid Bifurcation
- A deemed conveyance granted to a society cannot be reissued to a faction unless the bifurcation is legally valid.
- Applications under Section 11(3) of MOFA are barred if the applicant is not a duly constituted society under Section 10.
- Practitioners should challenge subsequent conveyance applications as ultra vires if the underlying bifurcation is defective.
Statutory Conditions for Exemption Are Strictly Enforced
- The 1995 Notification’s conditions (flat size ≤700 sq. ft., no residual FSI) are mandatory, not directory.
- FSI calculations must account for all available development rights, including TDR and fungible FSI.
- Courts will scrutinize whether expert reports (e.g., Commissioner’s opinion) were ignored without reasons, rendering orders arbitrary.
