The Bombay High Court set aside cooperative housing society orders that allotted flats to a contractor's directors instead of member-petitioners, holding that non-payment of dues cannot justify preferential allotment to outsiders. The court directed the society to cancel allotment of flats 801 and 802 to respondents 4 and 5 and allot them to petitioners upon payment of Rs.2.5 crores within six weeks, balancing equities in a long-standing housing society dispute.
Background & Facts
The Genesis
The dispute originates from a 1996 decision by Le Chateau Co-operative Housing Society Limited (Respondent No.1) to construct additional floors on its buildings "Shamrock" and "Le Chateau" using TDR/FSI. At an Extraordinary General Body Meeting (EGM) held on 24 April 1996, the society resolved to undertake development through M/s. Jet Speed Developers Private Limited (Respondent No.6) and allot the additional flats exclusively to existing members, subject to prompt and regular payments for TDR/FSI acquisition and construction costs.
The Parties and Allotment
Dr. Omprakash B. Soniminde and Mrs. Chandrakala Omprakash Soniminde (Petitioners) purchased flat Nos.601 and 602 from the developer and were subsequently allotted flat Nos.701 and 702 in the additional construction over Le Chateau building. The Petitioners made an initial payment of Rs.5,00,000/- towards the cost of these flats. Respondent Nos.4 and 5 (Mr. Shivam Mahade and Mr. Kumaraswami K.S.) were appointed as directors of Respondent No.6, the contractor engaged for the construction work.
Key Financial Transactions and Correspondence
- By letter dated 26 August 1997, the Society demanded Rs.35,00,000/- from Petitioners for TDR/FSI acquisition payable by 15 June 1996
- By letter dated 21 October 1997, the Society communicated a payment schedule and demanded Rs.43,00,000/-
- By letter dated 18 November 1997, the Society demanded Rs.43,09,000/-
- Petitioners served an advocate's notice dated 11 October 1997 raising objections to the demands
- On 6 November 2002, Petitioners filed an application to deposit Rs.62,00,000/- with interest in the dispute
Procedural History
- 24 April 1996: EGM held resolving to construct additional floors and allot flats only to members subject to prompt payments
- 20 June 1996: Agreement executed between Society and Jet Speed Developers Pvt. Ltd. for construction at Rs.4000/- per sq.ft.
- 1997-1998: Multiple correspondence regarding payment demands for flat Nos.701 and 702
- 4 July 1998: Society published notice proposing AGM on 19 July 1998
- 13 July 1998: Notice issued changing AGM date to 24 July 1998
- 24 July 1998: AGM held where resolution adopted to allot flat Nos.701 and 702 to Respondent Nos.4 and 5
- 6 November 2002: Petitioners applied to deposit Rs.62,00,000/- with interest
- 30 January 2017: Co-operative Court dismissed Dispute No.CC/I/179/2014
- 11 January 2018: Co-operative Appellate Court dismissed Appeal No.18/2017
- 13 July 2018: Co-operative Appellate Court rejected Review Application No.3/2018
- 24 September 2026: Present judgment pronounced by Bombay High Court
Relief Sought
Petitioners sought to set aside the orders of the Co-operative Court and Co-operative Appellate Court, declare the resolution dated 24 July 1998 illegal, and obtain allotment of flat Nos.701 and 702 (or alternatively flat Nos.801 and 802) upon payment of construction costs and TDR charges.
The Legal Issue
The central question was whether the resolution dated 24 July 1998 allotting flat Nos.701 and 702 to Respondent Nos.4 and 5 (directors of the contractor) was illegal and whether Petitioners, despite alleged non-payment of dues, are entitled to allotment of flat Nos.801 and 802 in the Shamrock building upon payment of construction costs and TDR charges.
Arguments Presented
For the Petitioners
Dr. Tulzapurkar, Senior Advocate for the Petitioners, argued that the Co-operative Court and Appellate Court grossly erred by failing to adjudicate the Petitioners' main prayer challenging the resolution dated 24 July 1998 as illegal. He contended that the resolution was adopted without proper notice or agenda for cancellation of allotment, and that Petitioners were not served with notice of the meeting or its modified date. He submitted that the Mankani family (who controlled 50% of the flats) colluded with the contractor's directors to deprive Petitioners of their entitlement. He further argued that Petitioners had paid Rs.5,00,000/- initially and offered to deposit Rs.62,00,000/- with interest on 6 November 2002, and that alleged non-payment could not justify allotment to outsiders when the society should have auctioned the flats instead.
For the Respondent
Mr. Kanade, Counsel for Respondent Nos.2(b) and 4 to 6, argued that concurrent findings across three orders established that Petitioners failed to make payments despite repeated demands. He contended that the EGM resolution of 24 April 1996 made allotment subject to prompt payments, and that Petitioners' failure to pay justified the Society's action. He submitted that the Society issued multiple demands and that Petitioners' obstructive attitude as Chairman warranted the allotment to the contractor's directors to ensure project completion. He further argued that Petitioners never deposited the alleged Rs.62 lakh amount in the Co-operative Court, and that even if paid, it would not satisfy the market value of flat Nos.801 and 802.
The Court's Analysis
The Court began by noting the bizarre situation where the contractor received a windfall gain of four flats while the Petitioners, who were allotted flats, received none. The Court examined the core illegality of the 24 July 1998 resolution.
The Court held that the resolution allotting flat Nos.701 and 702 to Respondent Nos.4 and 5 was itself illegal, as Respondent Nos.4 and 5 were not members of the Society and had no entitlement to flats under the 1996 EGM resolution which restricted allotment to existing members. The Court found that the Society, controlled by the Mankani family, illegally allotted flats to their relatives (the contractor's directors) behind the backs of the Petitioners.
Regarding the Petitioners' payment obligations, the Court acknowledged that Petitioners had not made the full payment but found that this did not justify the Society's illegal allotment to outsiders. The Court noted that Petitioners had made an initial payment of Rs.5,00,000/- and had offered to deposit Rs.62,00,000/- with interest on 6 November 2002. The Court rejected the Respondent's argument that Petitioners' non-payment justified the allotment, stating that the remedy for non-payment was to pursue legal recovery, not to allot flats to contractors' directors.
The Court then turned to the prayer for allotment of flat Nos.801 and 802. It found that Dispute No.CC/I/210/2014 (challenging the resolution to construct additional flats on the 8th floor) did not contain a prayer for allotment of these flats to Petitioners, and its dismissal could not be used to deny relief in the present proceedings. The Court held that the entitlement to allotment of flat Nos.801 and 802 had to be decided in the present writ petition.
The Court accepted Mr. Kanade's calculation that the market value of flat Nos.801 and 802 was approximately Rs.7.31 crores but found that, as per the Society's original agreement, Petitioners were only liable to pay cost of construction and TDR (Rs.4000 per sq.ft.), not market value. The Court noted that Petitioners had shown willingness to pay Rs.2.5 crores for these flats, which represented the cost of construction and TDR at the agreed rate.
The Court emphasized that allowing Respondent Nos.4 and 5 to retain flat Nos.801 and 802 would compound the initial illegality by granting them additional benefits for which they had no entitlement. It held that the equitable solution was to direct the Society to cancel the allotment to Respondent Nos.4 and 5 and allot the flats to Petitioners upon payment of Rs.2.5 crores.
"Thus, allotment of 2 additional flats (801 and 802) free of cost to Respondent Nos.4 and 5 was clearly an arbitrary act on the part of the society. In such situation, the Cooperative Court ought to have granted prayer CC(iii) by directing allotment of Flat Nos.801 and 802 to the Petitioners upon payment of cost of TDR and cost of construction."
The Court further noted that Respondent Nos.4 and 5 had no right to retain the flats as they were not entitled to any flat in the building, and that the Society should have auctioned the flats to recover dues rather than allotting them to relatives.
The Verdict
The Petitioners succeeded in part. The Court set aside the judgment and order dated 30 January 2017 passed by the Co-operative Court in Dispute No.CC/I/179/2014, the judgment and order dated 11 January 2018 passed by the Co-operative Appellate Court in Appeal No.18/2017, and the order dated 13 July 2018 passed by the Co-operative Appellate Court in Review Application No.3/2018. The Court declared that Petitioners are entitled to allotment of Flat Nos.801 and 802 in the building Shamrock and directed the Respondent-Society to formally cancel the allotment of flat Nos.801 and 802 made in favour of Respondent Nos.4 and 5 and enter the names of Petitioners in its membership register in respect of these flats. The Court directed Petitioners to pay Rs.2,50,00,000/- to Respondent Nos.4 and 5 within six weeks, and directed Respondent Nos.4 and 5 to hand over possession of flat Nos.801 and 802 to Petitioners upon receipt of the amount. The Court further directed that if Respondent Nos.4 and 5 refuse to accept the amount, Petitioners shall deposit it with the Society which shall invest it in interest-bearing deposits, after which Petitioners shall be entitled to take over possession with assistance of local police. Petitioners shall be liable to pay maintenance dues to the Society only from the date of handing over possession, and neither the Society nor Respondent Nos.4 and 5 shall demand any amounts for the past period. In the event of failure by Petitioners to pay the amount within six weeks, the allotment of flat Nos.801 and 802 shall revive in the name of Respondent Nos.4 and 5.
What This Means For Similar Cases
Illegal Allotment Cannot Be Justified by Non-Payment
This judgment establishes that a housing society's failure to recover dues from members does not justify the illegal allotment of flats to outsiders, particularly relatives of contractors. Societies must pursue legal remedies for recovery rather than conferring windfall benefits on contractors' directors. The Court made clear that non-payment of dues, while a breach of obligation, cannot be used as a pretext for arbitrary allotment that defeats the very purpose of cooperative housing.
Equitable Relief Based on Original Agreement Terms
When granting relief for allotment of flats, courts must adhere to the original terms of the agreement between the society and members. Petitioners were not required to pay market value for flat Nos.801 and 802 but only the cost of construction and TDR as per the 1996 agreement (Rs.4000 per sq.ft.). This prevents unjust enrichment of members who acted in accordance with the original bargain while preventing windfall gains to contractors' relatives.
Separate Disputes Do Not Bar Relief
The dismissal of a separate dispute (CC/I/210/2014) challenging the society's resolution to construct additional flats on the 8th floor cannot be used to deny relief for allotment of those flats in a different proceeding where such relief is specifically sought. Each dispute must be judged on its own prayers and facts, and courts cannot use unrelated proceedings to defeat legitimate claims.
