The Bombay High Court has reaffirmed that statutory rights to membership in a cooperative housing society cannot be nullified by private contractual clauses between developers and purchasers. This judgment clarifies that the Maharashtra Cooperative Societies Act, 1960, establishes a complete code for admission, and regulatory authorities must apply it without regard to collateral agreements that seek to impose additional conditions.
Background & Facts
The Dispute
The petitioner, Snehal Tower Co-operative Housing Society Ltd., was formed in 1992 by thirty-six retired Air India employees to construct residential flats on a jointly owned property. A developer was appointed in 2001 under a construction agreement that stipulated the A-wing of the building would be reserved for permanent alternate accommodation for tenants, followed by construction of B-wing for society members. The developer halted construction after the fourth floor in 2010 and allegedly sold flats in A-wing to outsiders, including respondents, in violation of the agreement.
Procedural History
- December 2015: Respondent No.1 applied for membership under Section 22(2) of the MCS Act, submitting all required documents and fees.
- February 2016: The society rejected the application, citing a resolution that membership would be considered only after completion of B-wing.
- October 2016: Deputy Registrar dismissed the membership application.
- 2017: Divisional Joint Registrar remanded the matter for reconsideration.
- June 2018: Deputy Registrar allowed the application and directed the society to admit Respondent No.1.
- August 2018: Divisional Joint Registrar dismissed the society’s revision petition, upholding the admission order.
- 2020: The society filed writ petitions before the Bombay High Court challenging the admission order.
Relief Sought
The petitioner sought to set aside the orders directing it to admit respondents as members, arguing that private agreements with the developer barred outsiders from membership until the entire project was completed.
The Legal Issue
The central question was whether a person who acquires a flat in a cooperative housing society and complies with the statutory requirements under Section 22(2) of the MCS Act can be denied membership on the basis of private contractual restrictions imposed by the developer.
Arguments Presented
For the Petitioner
The society contended that the construction agreement dated 17 June 2001, and its supplementary agreement, explicitly prohibited the developer from transferring possession or granting membership rights to outsiders until all tenants received permanent alternate accommodation and B-wing was completed. It argued that admitting outsiders would violate the society’s founding purpose - to house retired Air India employees - and disrupt its internal governance. It relied on clause 21 of the construction agreement to assert that the developer lacked authority to sell flats to non-members.
For the Respondent
Respondent No.1 argued that the MCS Act, its Rules, and the society’s registered Bye-laws govern membership eligibility. He relied on clause 19 of the agreement for sale, which granted prospective purchasers the same rights as existing members upon payment of entrance fee and share money. He emphasized that he had fulfilled all statutory requirements under Section 22(2) and that the society’s grievance lay with the developer, not with him as a bona fide purchaser.
The Court's Analysis
The Court examined the statutory framework under the MCS Act, particularly Sections 22 and 23, which establish a comprehensive regime for admission, refusal, and deemed admission of members. It held that the Registrar’s role is strictly statutory: to determine whether an applicant meets the criteria laid down in the Act, Rules, and Bye-laws. Private agreements, even if binding between the developer and the society, cannot override these statutory rights.
"A clause in a private agreement cannot take away a right granted by statute."
The Court rejected the society’s argument that the developer’s alleged misconduct justified denying membership to innocent purchasers. It emphasized that Section 22(2) exists precisely to protect purchasers from arbitrary refusals by societies. The Court noted that the society’s reliance on the original purpose of housing retired employees was irrelevant once the statutory mechanism for admission was triggered. The Bye-laws may prescribe procedural conditions, but they cannot create substantive barriers inconsistent with the Act.
The Court further held that the concurrent findings of the Deputy Registrar and Divisional Joint Registrar, both of whom applied the statutory criteria correctly, were entitled to deference. The society’s attempt to use contractual disputes as a shield against statutory obligations was deemed legally untenable.
The Verdict
The writ petitions were dismissed. The Court held that membership under the MCS Act is a statutory right that cannot be conditioned by private agreements. Respondent No.1, having complied with all statutory requirements, was entitled to deemed membership.
What This Means For Similar Cases
Statutory Admission Overrides Private Covenants
- Practitioners must advise clients that any clause in a sale agreement or construction contract purporting to delay or deny membership under Section 22(2) is unenforceable.
- Cooperative societies cannot invoke developer-related breaches to refuse membership to bona fide purchasers.
- Legal challenges to membership must focus exclusively on compliance with the Act, Rules, and Bye-laws - not on third-party contractual disputes.
Registrar’s Role Is Limited to Statutory Criteria
- Registrars and Deputy Registrars must not entertain arguments based on development agreements, construction timelines, or societal composition.
- Applications under Section 22(2) must be decided on objective criteria: proof of purchase, payment of fees, and adherence to Bye-laws.
- Courts will not interfere with concurrent findings where the authority has applied the correct legal test.
Societies Cannot Create Closed Membership Groups
- The Court explicitly rejected the notion that a society may remain a closed group of original members indefinitely.
- Any attempt to restrict membership based on occupation, origin, or other non-statutory criteria violates the egalitarian spirit of the MCS Act.
- Bye-laws must be interpreted in harmony with the statute; they cannot be used to circumvent statutory rights.
