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2014 SCC OnLine Bom 5068 : (2015) 3 AIR Bom R 270 : AIR
2015 (NOC 772) 289

In the High Court of Bombay

(BEFORE S.C. GUPTE, J.)

Vaidehi Akash Housing Pvt. Ltd.

Versus
New D.N. Nagar Co-op. Housing Society Union Ltd.
and Others
Notice of Motion No. 961 of 2013, in Suit No. 262 of 2012
Decided on December 1, 2014

Page: 272

ORDER
1. These Notices of Motion and the respective suits in which they
have been taken out, concern the development of a large property in
the suburb of Andheri in Mumbai. The property belongs to a co-
operative society of residents and consists of 8 buildings housing nearly
480 families together with the appurtenant land. The chief contest is in
respect of (i) the development rights claimed by two rival developers in
respect of this property, (ii) the rights of the original member residents
occupying tenements within the property of being rehabilitated and (iii)
the respective rights of new purchasers with whom agreements have
been entered into by the developers at various stages during the course
of the development of the property. Each of these different stakeholders
have filed their own suits or adopted proceedings, seeking inter alia
interim reliefs concerning their respective rights. All these interlocutory
applications are heard together. The main order, dealing with their
respective submissions, is being passed in Notice of Motion No. 961 of
2013 in Suit No. 262 of 2012, filed by M/s. Vaidehi Akash Housing Pvt.
Ltd. (the erstwhile developer, whose agreement has been terminated
by the society), against the society, the new developer with whom the
society has been dealing and some others. Based on the order, the
other Motions are being disposed of.
2. Short facts of the case: The suit plot, bearing Survey No. 106 at
New D.N. Nagar, Andheri (West), Mumbai 400 058, admeasuring in the
aggregate about 20,218 sq.mtrs. is owned by MHADA. MHADA has
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erected 8 buildings of 3 wings each, each wing comprising of 20

tenements. The buildings in the suit plot thus contain 480 tenements,
each admeasuring about 211.37 sq.ft. (carpet). The occupants of each
building, i.e. 60 members each, have formed their respective co-
operative societies, save and except building No. 4 (Sakalp Sagar), the
occupants of each wing of which have organized and formed
themselves into their own separate co-operative societies. There are,
thus, in all 10 registered co-operative societies in respect of the 8
buildings on the suit plot. These 10 societies, in turn, have established
an apex or federal society called “New D.N. Nagar Cooperative Housing
Society Ltd.”, who is Defendant No. 1 in the suit. (Defendant No. 1 is
hereinafter referred to as the ‘Federal Society’ or simply ‘Society’.)
MHADA has executed lease deeds in favour of the 10 societies in
respect of the respective plots and sale deeds in respect of the
respective buildings. In or about July, 2005, the 10 societies
amalgamated with the Federal Society, who now claims to be the lessee
of the suit plot and owner of the 8 buildings therein.
3. The buildings have become dilapidated and are beyond repairs
(though some of the resident members contest this position). The suit
plot, however, has a development potential. Under DCR 33(5) of the
Development Control Regulations for Greater Mumbai, applicable to low
cost housing under schemes devised by MHADA, the development,
earlier permissible up to 1.2 FSI, now can consume up to 2.5 FSI on
the gross plot area.
4. The Society was desirous of exploiting this development potential
and reconstructing new buildings to house the existing member
occupants and also providing for allotment of free sale areas to new flat
purchasers. In 2005, the Society discussed various redevelopment
proposals. In April, 2005, bids/offers were invited in sealed covers for
redevelopment of the suit property. Various developers including the
Plaintiff submitted their bids. (The Plaintiff, Vaidehi Akash Housing Pvt.
Ltd., is hereinafter referred to as ‘Vaidehi’.)
5. On 7 August, 2005, Vaidehi's bid was accepted by the Society. On
31 December, 2005, a development agreement was executed between
the individual societies, the Federal society (Defendant No. 1) and
Vaidehi. (For convenience of reference, this agreement will hereinafter
be referred to as the ‘Society Development Agreement’). This
agreement envisaged redevelopment of the suit plot by utilizing the
plot FSI together with TDR FSI (i.e. FSI available by virtue of transfer
of development rights permissible under the relevant DCR) and
additional FSI permissible for redevelopment under DCR 33(5). Under
the
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Page: 273

agreement, the members of the Society were each to be given a flat

admeasuring 540 sq.ft. plus 100 sq.ft (non FSI area) as permanent
alternative accommodation free of cost. In addition, Vaidehi agreed to
give corpus fund, deposit for transit accommodation rent, shifting
expenses etc. to the Society and its members.

6. On or about 16 January, 2006, a proposal for redevelopment of

the suit property by utilizing 2.5 FSI was submitted by Vaidehi
(through the Project Management Consultant) to MHADA. On 28
February, 2006, a letter of acceptance was issued by MHADA, directing
inter alia payment of Rs. 9 crores as a premium. On 16 May, 2006, this
premium was paid by Vaidehi. On 1 July, 2006, MHADA granted its
permission for construction of built up area of 48524.76 sq.mtrs. on the
suit property (on the basis of 2.4 FSI). This built up area had a rehab
component of 12523.12 sq.mtrs. (i.e. residential area for rehousing the
members of Defendant No. 1) and 36001.64 sq.mtrs. of free sale
component (i.e. 10114.70 sq.mtrs. of commercial area and 25886.94
sq.mtrs. of residential area, for sale to third party purchasers). On 17
July, 2006, plans submitted by Vaidehi to the Municipal Corporation
were sanctioned and an IOD was is sued for construction up to 1.2 FSI.
7. According to Vaidehi, the redevelopment project, however, could
not proceed further as proposed, because of several impediments
including refusal of the Municipal Corporation to issue an IOD beyond
1.2 FSI due to the CRZ notification, restriction of the area to be allotted
to each member towards the Rehab component under the amended
DCR, cases filed by members in Court, etc. In between, there was an
enormous increase in the cost of the project. In the premises, Vaidehi
decided to involve investors and other developers to finance the
project.
8. On or about 4 April, 2007, Vaidehi entered into an agreement with
Defendant No. 2 (i.e. Rustomjee Realty Pvt. Ltd., hereinafter referred to
as ‘Rustomjee’) agreeing to assign the rights to exploit the FSI of about
2,53,500 sq.ft to the latter from out of the total FSI of 5,22,320.52
sq.ft. (equivalent to 48524.76 sq.mtrs.) available on the suit plot at or
for an agreed consideration of Rs. 112 crores. The balance F.S.I. of
2,68,820.52 sq.ft. was retained by Vaidehi for construction of the rehab
portion to be allotted to the members of the Society. (For convenience
of reference, this agreement will hereinafter be referred to as the
‘Rustomjee Agreement’.) Under this agreement, Rustomjee agreed to
construct and allot a saleable area of 57,050 sq.ft. carpet to Vaidehi,
comprising of 20000 sq.ft. of commercial area and 37,050 sq.ft. of
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residential area.
9. On or about 28 March, 2008, Vaidehi commenced construction of
rehab buildings on the suit property for rehousing the members of the
Society. Vaidehi claims to have demolished all 8 buildings and
constructed 6 rehab buildings of ground and four floors and 2 rehab
buildings upto plinth, between March, 2008 and January, 2010. It is
Vaidehi's case that Vaidehi incurred aggregate costs of over Rs. 200
crores towards the project.
10. On or about 17 January, 2010, a Special General Body resolution
was passed by the members empowering the Society to execute a
confirmation agreement and a supplementary agreement with
Rustomjee. In pursuance of this resolution a tripartite confirmation
agreement was executed between Vaidehi, Society and Rustomjee on 3
February, 2010 confirming inter alia the terms and conditions of the
Rustomjee Agreement. Further to this confirmation agreement, on 9
February, 2010 Vaidehi executed a writing in favour of Rustomjee that
Vaidehi was not interested in any additional F.S.I. that may become
available in respect of the suit plot in future and that the same could be
exploited by Rustomjee, under the Rustomjee Agreement as confirmed
by the Society.
11. On or about 10 February, 2010, a Tri partite Supplementary
Agreement was executed between Vaidehi, Society and Rustomjee, by
which the Society granted unto Rustomjee the right and entitlement to
exploit full development potential of the suit plot by utilization of such
FSI and/or TDR as may be permissible in law, i.e. without any
restriction of 2.4 FSI. The agreement inter alia provided for payment of
consideration of Rs. 5500 per sq.ft. of FSI in excess of 2.4 FSI in the
manner stipulated therein.

Page: 274

12. Soon after the execution of these agreements, disputes arose

between the parties which were followed by separate notices published
in newspapers by Rustomjee, Vaidehi and some of the members of the
Managing Committee of the Society asserting their respective rights
and affirming or questioning the agreements referred to above, as the
case may be. Correspondence also ensued between their respective
advocates.
13. On or about 16 April, 2010, the Society terminated the Society
Development Agreement with Vaidehi, after purportedly passing a
Managing Committee resolution in that behalf.
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14. Pursuant to a Notice of Special General Body of the Society

dated 17 April, 2010 called for the purpose, a Special General Body
resolution was passed on 25 April, 2010 ratifying and confirming the
termination of the Society Development Agreement with Vaidehi. (This
resolution is one of the subject matters of contest between the parties
and will be discussed later.)
15. On or about 29 January, 2011, an agreement was executed
between the Society and Rustomjee providing for construction of the
rehab portion at the cost of Rustomjee. The agreement inter alia
provided for sale of 57,050 sq. ft. of F.S.I. by Rustomjee in the market
and reimbursement of its costs for construction of the rehab portion
from out of the sale proceeds by Rustomjee.
16. Rustomjee was thus seized of the construction of both the free
sale portion and the rehab portion of the redevelopment project.
Rustomjee claims to have paid a sum of Rs. 70 crores to/under the
instructions of Vaidehi and further incurred a sum of Rs. 47.94 crores
towards obtaining approvals and permissions for and construction of
the rehabilitation buildings for rehousing the 480 members of the
Society. Rustomjee also claims to have spent for temporary alternative
accommodation of the 480 families. Rustomjee claims to have
expended more than Rs. 160 crores towards all these costs. It claims to
be incurring an expense of Rs. 8.64 crores per annum as and by way of
rent for the temporary alternative accommodation of the 480 families.
17. Proceedings between the parties under the Co-operative
Societies Act and some of the orders passed, which are relevant in the
context of these Notices of Motion:
18. Proceedings were initiated against the Society and its Managing
Committee under Section 78(1) of the Maharashtra Co-operative
Societies Act, 1960 and other provisions. The earlier Managing
Committee of the Society was superseded and an administrator was
appointed. The matter was carried in appeal and revision. Finally, by an
order dated 23 June, 2008 passed in a writ petition, Writ Petition No.
1570 of 2008, the then Managing Committee was allowed to continue
and manage only the day to day and routine affairs of the Society
subject to certain directions. These directions included (i) convening of
a general body of the Society, (ii) framing and passing of new bye-laws
and adoption of Model Bye-laws including election rules and (iii)
initiation of a fresh election process after approval of these bye-laws. All
contentions of the parties concerning the redevelopment were kept
open.
19. The process of new elections in pursuance of the directions
referred to above was duly completed during the pendency of the above
mentioned Writ Petition and the newly elected Managing Committee of
the Society was duly constituted. By his order dated 11 November,
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2008, a Learned single Judge of this Court accordingly permitted the

Petitioners to withdraw the Writ Petition, observing inter alia that once
the election has been duly conducted and the newly elected Managing
Committee duly constituted, the order passed by the appropriate
authority under Section 78 of the Act stood worked out by itself.
20. The order of the Learned single Judge dated 11 November, 2008
was carried in appeal before a Division Bench of this Court. By its order
dated 7 September, 2009, the Appellate Bench set aside the order and
remitted the petition back to the Learned single Judge for de novo
consideration and decision in accordance with law. The Appellate Court
inter alia observed whilst setting aside the order that if the interim
order, pursuant to which the elections were held by the Managing
Committee (which was removed from office by the order impugned in
the petition), is not confirmed

Page: 275

at the final hearing and the petition is (simply) withdrawn, then the
order passed under Section 78 of the Act removing the Managing
Committee would remain in the field and may render the election held
in the interregnum invalid. The Court held that the learned single Judge
should have, if the Petitioners wanted to withdraw the petition, either
vacated the interim order or should have made an appropriate order in
relation to the interim order. It was in the light of these observations
that the order was set aside and a fresh decision was directed to be
taken in accordance with the said observations.

21. Finally by consent of the parties, the Writ Petition was disposed
of on 13 October, 2010 by directing the Deputy Registrar of Cooperative
Societies, MHADA, to appoint an administrator to hold elections for the
Managing Committee of the Society and the existing Managing
Committee to hand over the charge to the new Managing Committee
upon it being so elected. This Court further directed by consent of the
parties that the impugned orders of the Co-operative Authorities under
Section 78(1) and other provisions of the Act would not survive in view
of the order passed on the Writ Petition.
22. Contentions of the Plaintiff (‘Vaidehi’):
23. Having noted the brief facts and relevant orders of Courts in the
proceedings under the Co-operative Societies Act, Vaidehi's
submissions in the Notice of Motion may now be noted briefly. In his
opening address, Mr. Anturkar, learned Senior Counsel appearing for
Vaidehi, only made the following submissions:
(i) The actions of the Society in terminating the Society
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Development Agreement with Vaidehi and executing confirmation

and supplementary agreements with Rustomjee, were in violation
of the orders of the Court noted above;
(ii) The termination of the Society Development Agreement was
without the authority of law, since there was neither a resolution
of the Managing Committee nor of the General Body of the Society
authorizing such termination;
(iii) Vaidehi was entitled to specific performance of the Society
Development Agreement, particularly having regard to the fact
that Vaidehi as a promoter under the Maharashtra Ownership Flats
Act (“MOFA”) had entered into agreements for sale of flats with
third party flat purchasers, who had no privity with the new
developer, Rustomjee and who could look to Vaidehi alone for
compliance of their respective agreements as well as of the
provisions of MOFA.
24. Of course, in his rejoinder, Vaidehi's Counsel advanced
submissions in detail on various other aspects of the matter,
particularly dealing with the submissions of the Defendants. These will
be considered in the order below in the context of the Defendants'
submissions.
25. Submissions of Defendant No. 1 (‘Society’):
26. The principal submissions advanced by Mr. Seervai, learned
Senior Counsel appear ing for the Society, were these:
(i) Vaidehi has not made out any prima facie case of its readiness
and willingness to perform its obligations under the Society
Development Agreement.
(ii) Various breaches of the Society Development Agreement by
Vaidehi were pointed out by the Society. (These will be taken up
and discussed in the light of the answers by Vaidehi in the order
below.)
(iii) The termination of the Society Development Agreement by the
Society was legal and proper.
(iv) The considerations of balance of convenience and irreparable
injury were against Vaidehi and in favour of the Society.
27. In addition to these submissions, which were specifically
advanced against the Plaintiff's case, the learned Counsel for the
Society made detailed submissions in connection with the cases set up
by the various categories of third parties as well as members of the
Society opposing the redevelopment of the suit plot through
Rustomjee. These will be dis cussed later in this order.
28. Submissions of Defendant No. 2 (‘Rustomjee’):
29. Principal submissions of Mr. Tulzapurkar,
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Page: 276

learned Senior Counsel appearing for Rustomjee, were these:

(i) Vaidehi committed several breaches of the Society Development

Agreement and was not entitled to specific performance of that
agreement. (The breaches are dealt with in the order below.)
(ii) Rustomjee duly performed all its obligations under the
Rustomjee Agreement, but Vaidehi failed to perform its
obligations thereunder.
(iii) Rustomjee is entitled to develop the free sale component by
virtue of the Rustomjee Agreement as confirmed by the
confirmation Agreement (to which all three, namely, Vaidehi, the
Society and Rustomjee, were parties).
(iv) The considerations of balance of convenience/irreparable injury
were clearly in favour of Rustomjee and the Society.
30. Rustomjee's Counsel also made submissions on the respective
case set up by the third party purchasers and the disgruntled members
opposing the redevelopment. These will be separately discussed below.
31. Submissions of some of the members of the Society opposing
the present Redevelopment Scheme:
32. Some of the members of the Society have filed their own suit,
Suit No. 674 of 2013. They have been joined in the suit by some
‘occupiers’ of tenements in the Society's buildings, who have also
surrendered their respective flats (occupied by them) by entering into
individual agreements with Vaidehi for permanent alternative
accommodations. These Plaintiffs basically challenge the various notices
of General Body Meetings, Resolutions passed therein and agreements
entered into with Rustomjee on the basis thereof as well as the NOC of
MHADA to redevelopment by Rustomjee and the IOD and CC issued by
the Municipal Corporation to the redevelopment. In other words, every
aspect of the redevelopment scheme being implemented by Rustomjee
is challenged as illegal, null and void.
33. The jurisdiction of this Court, having regard to the reliefs sought
in these plaintiffs' suit, is challenged by both the Society and
Rustomjee. These preliminary objections are dealt with by learned
Counsel for these members/occupiers. It is submitted that the
challenge to the resolutions of a cooperative society and redevelopment
agreements executed in pursuance thereof fell very much within the
jurisdiction of the Civil Court.
34. Learned Counsel for the members/occupiers relied on several
provisions of the Cooperative Societies Act and the circular issued by
the State Government under Section 79A of the Act as also the bye-
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laws of the Society and submitted that actions taken on the basis
thereof were contrary to these provisions/directions/bye-laws etc. and
thus, illegal. Learned Counsel also argued that the directions/actions
were in breach of the provisions of DCR 33(5) applicable in this case.
Learned Counsel also contended that there was non compliance by the
Society and Rustomjee with the offer letter of MHADA as well as the
booklet and directives of MHADA. Learned Counsel also relied on certain
provisions of the Society Development Agreement, in particular Clause
52 thereof and contended that the agreement did not permit sale of
F.S.I. above 2.4 to any third party and that even otherwise, the
Rustomjee Agreement was bad in law and unenforceable. Learned
Counsel also contended that the Confirmation Agreement of 3 February,
2010 and the Supplementary Agreement of 10 February, 2010 were
illegal, null and void. Learned Counsel produced several charts to claim
that the use of various components of the FSI proposed by Rustomjee
was illegal and unauthorized. It is submitted that certain FSI generated
on roads/public amenities/open spaces in the layout belongs to
members of the society in their individual capacity as the
owners/occupiers of their respective tenements; that FSI is not
available to the society and through it to Rustomjee on the suit
property. It is submitted that Rustomjee is liable to pay for the use of
the pro-rata/additional FSI and fungible FSI thereon on the suit
property. It is submitted that there have been several illegal and
unjustified changes in the areas of rehab portion/plot and the free sale
portion/plot in various documents/agreements rendering the same
illegal and void. A large scale usurpation of areas and violation of FSI
norms by Rustomjee are claimed so far as the redevelopment project is
concerned. These concern

Page: 277

the loading factor to arrive at the built up area, the fungible FSI usable
in the project, parking spaces etc.

35. Submissions of various sets of flat purchasers who claim to have

purchased premises in the proposed free sale buildings from Vaidehi:
36. Various flat purchasers have either filed their own suits or have
intervened in the different suits and have been claiming diverse reliefs
against Vaidehi, the Society and Rustomjee. These purchasers claim
through Vaidehi under diverse agreements/arrangements entered into
with the latter. There are purchasers who hold (i) allotment letters
issued by Vaidehi, (ii) unregistered agreements and receipts for
payment towards them issued by Vaidehi, (iii) registered agreements
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and allotment letters, (iv) registered agreements and (v) unregistered

agreements with Vaidehi, for different premises in the buildings to be
constructed as part of the redevelopment project and available as free
sale component of the project.
37. Counsel appearing for different sets of these purchasers/allottees
have made diverse submissions. Broadly it is contended that many of
these purchasers/allottees have entered into agreements with Vaidehi
during the period Vaidehi was entitled to enter into agreements for sale
with third parties for the free sale component of the redevelopment
project under the Society Development Agreement and the latter
agreement was very much valid and subsisting. It is submitted that
these agreements/allotments are binding on both Vaidehi and the
Society in terms of the Society Development Agreement as well as the
provisions of MOFA. It is submitted that the Rustomjee Agreement
inasmuch as the same is in breach of the provisions of the Society
Development Agreement and MOFA is illegal, null and void. The
purchasers/allottees also contend that the termination of the Society
Development Agreement by the Society was unlawful and at any rate,
could not affect the rights of the third party purchasers/allottees. It is
submitted that the Society is also a co-promoter of the redevelopment
project and a ‘promoter’ within the meaning of MOFA and even if the
Society Development Agreement is validity terminated, the Society is
bound to fulfill its responsibility as a promoter towards the
purchasers/allottees and cannot enter into any agreement with
Rustomjee contrary to its obligations towards the purchasers/allottees.
38. These contentions of various stakeholders are considered below
under particular topics relevant for their respective cases.
39. Breaches of the Society Development Agreement by Vaidehi:
40. Under the Society Development Agreement, it was the obligation
of Vaidehi to utilize the FSI of the suit property as well as the FSI of
MHADA layout area by utilizing TDR/FSI/MHADA FSI and construct a
new building consisting of ground podium/stilt 1 and 2 parking and 2
to 17 upper floors. The total FSI to be utilized for redevelopment was
reckoned at 5,27,696.23 sq. ft. An area of about 2,59,250 sq. ft. carpet
(FSI area) and 48,000 sq. ft. in the form of niches, flower beds, dry
balconies, etc. (non - FSI area) was to be constructed and provided by
Vaidehi free of all costs to the Society for rehousing of its members.
Each individual member was to get one flat of 540 sq. ft. carpet area
comprising of two bedrooms, hall, kitchen with two baths/toilets plus
100 sq. ft. of dry balcony, flower BEd. area etc. The entire construction
was to be completed and possession of flats to be handed over not later
than 36 months from the date of the execution of the Society
Development Agreement. None of these commitments has been fulfilled
by Vaidehi. Non-completion of the construction of rehab building is
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sought to be explained by Vaidehi on various grounds. Vaidehi claims

to have constructed 6 rehab buildings upto 4 floors and 2 rehab
buildings upto plinth from out of 8 wings of stilt & 1 to 5 upper floors in
accordance with the plans got sanctioned by Vaidehi from the Municipal
Corporation for the rehab portion. It is submitted by learned Counsel
for Vaidehi that one of the reasons for noncompletion was that the
Society itself could not fulfill its obligations under the Society
Development Agreement. For example, there was delay in starting
construction due to all members of the Society not handing over their
respective tenements in time. Then there were consumer complaints by
some members; there was some difficulty with the then existing rules
of

Page: 278

MHADA relating to tenements to be allotted to the members/occupants;

there was cancellation of NOC by MHADA; even Municipal Corporation
issued a stop work notice; and finally, though the construction was
made as per IOD (except for building No. 4 C), the construction was
illegally demolished by the Society and Rustomjee.

41. It is a matter of fact that all 8 buildings of the Society have been
demolished. Vaidehi was bound to construct the rehab building in
accordance with the sanctioned plans. The MHADA related and CRZ
issues had to be handled by Vaidehi. It could not hold the Society
responsible for these impediments. There is no substance in Vaidehi's
submissions regarding MHADA area restriction. There was no
impediment in granting additional area to the members/occupiers.
Vaidehi had to take effective steps to deal with CRZ issues, as was
successfully done by Rustomjee in its turn. Even otherwise, Vaidehi has
not explained why Vaidehi could not construct upto 1.2 FSI, which was
admittedly permissible. The commencement certificate granted by
MCGM was admittedly upto plinth for building No. 2 and yet the
building was constructed for three levels above the plinth. The stop
work notice issued by MCGM was, therefore, in order and Vaidehi alone
was responsible for the same. (The stop work notice was never disputed
or challenged by Vaidehi.) It is claimed by Counsel for Vaidehi that
Vaidehi could have applied for regularization of the illegal construction
and there was no need or imperative for the Society to demolish the
construction. Any construction carried out beyond approvals or
sanctions and in violation of law, is very much a breach of both contract
(which required the construction to be in accordance with sanctioned
plans) and law and when such breach is alleged it is no answer that
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there could have been a regularization of such illegal construction.

Besides, regularization, if any, would be a matter of discretion for the
planning authority and could not be claimed as of right. Secondly,
admittedly no steps were taken for regularization; so the matter is, at
any rate, at worst merely academic and at best speculative.
42. Vaidehi, in consideration of the Society allowing it to exploit the
free sale component of the redevelopment project, agreed to pay each
of the members/flat owners/occupiers a sum of Rs. 1 lakh by way of an
interest free refundable security deposit and also a sum of Rs. 8500/-
per month in advance by postdated cheques to be deposited with the
Society's Solicitors. Vaidehi also agreed that in the event, the
construction of the rehabilitation component was delayed beyond a
period of 18 months, Vaidehi would continue to pay the said sum of Rs.
8500/- per month upto the period of 21 months plus a grace period of
three months and thereafter pay penalty of Rs. 500/- per day per flat to
all the members/flat owners/occupiers. In addition to these amounts,
Vaidehi also agreed to pay a corpus fund of Rs. 5,27,983 per
flat/member in stipulated installments. Vaidehi also agreed to furnish a
bank guarantee as specified in the bid document. In terms of the
stipulations of the Society Development Agreement, the bank
guarantee, which was originally stipulated to be for an amount of Rs.
32 crores, was subsequently reduced to Rs. 10 crores by the parties.
Vaidehi has not complied with its obligations in this behalf. Though
there have been several instances of delayed payments of rent and
instances of cheque bouncing in respect of these payments, it is
claimed by learned Counsel for Vaidehi that the entire liability of rent
for alternative temporary accommodation has been discharged by
Vaidehi. Learned Counsel for Vaidehi submitted that between June,
2006 and March, 2010, Vaidehi paid a total sum of Rs. 22.20 crores,
which was due and payable towards the rent. Vaidehi has not paid the
corpus fund. Vaidehi has not furnished any bank guarantee to the
Society. The explanation of Vaidehi that under the General Body
resolution of 23 November, 2008, the Society had agreed to take the
bank guarantee from Vaidehi after a certificate from Fire Brigade and
related documents in connection with Building Nos. 4B and C were
available and resolution of Consumer Dispute Nos. 370 and 371 of 2007
pending before the Bandra Consumer Forum and execution of
agreements with all members, does not explain non-furnishing of bank
guarantee at any time till 16 April, 2010. Admittedly, the possession of
all the existing buildings of the Society was handed over to

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Vaidehi for demolition and the buildings were in fact demolished and
work had started on all rehab buildings and yet no bank guarantee were
ever furnished.

43. In the premises, it must be held that Vaidehi has prima facie
committed breaches of the Society Development Agreement. Two
consequences would follow from such breaches. One, the society would
be entitled to terminate the Agreement and two, Vaidehi could not be
said to be ready and willing to perform its obligations under the
Agreement.
44. Legality of the termination of the Society Development
Agreement by the Society:
45. As observed above, the Society was clearly within its rights to
terminate the Agreement on account of breaches by Vaidehi. But it is
the case of Vaidehi that the termination was not legal or proper. Two
reasons are cited in support. Firstly, it is contended that the Managing
Committee of the Society was not within its rights to take such a
decision by reason of restrictions on its powers placed under the orders
of this Court passed in Writ Petition No. 1570 of 2008. Secondly, it is
submitted that there is no authority for such action, since it is not
backed by any valid resolution of either the Managing Committee or the
General Body of the Society. These objections may now be considered.
46. In support of his contention that the action of the Managing
Committee is in breach of the orders of this Court, learned Counsel of
Vaidehi mainly relied on the order dated 23 June, 2008 passed in Writ
Petition No. 1570 of 2008. The argument is that the Managing
Committee (which was dissolved by the order impugned in the writ
petition) was allowed to continue and manage only the day to day and
routine affairs (subject to directions noted in the order) and a decision
to terminate the Society Development agreement cannot be a matter of
day to day or routine management.
47. The order of 23 June, 2008 was clearly an interim measure and
was to operate pending appointment of a new Managing Committee,
which was proposed to be constituted after fresh elections were held in
accordance with the directions of this Court in that order itself. The
decision to terminate the Society Development agreement was taken by
the new Managing Committee which came into existence after the
elections were held. It is futile to contend that the restrictions
applicable to the earlier Managing Committee operating under the
interim measure ordered by this Court were also applicable to the new
Managing Committee, which came into being after the bye-laws were
amended and elections were duly held for the constitution of the
Committee thereafter.
48. Counsel for Vaidehi, however, contended that the interim order
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dated 23 June, 2008 stood revived when the disposal of the writ
petition by order dated 11 November, 2008 was set aside by the
Division Bench of this Court by its order dated 7 September, 2009.
Learned Counsel relied upon the order of this Court dated 27 January,
2012 passed in contempt proceedings arising out of Writ Petition No.
1570 of 2008, to support his contention. The observation of this Court
in its order dated 27 January, 2012 in the contempt proceedings about
the revival of the order of 23 June, 2008 post the Division Bench order
of 7 September, 2009, was in an altogether different context. In the
contempt proceedings, the Deputy Registrar of Co-operative Societies
insisted upon the assets, records and property being handed over to
the Administrator after the passing of the Division Bench order of 7
September, 2009. This Court held in its order of 27 January, 2012 that
this was not necessary since the setting aside of the disposal order
revived the writ petition and along with it the interim orders operating
till its disposal. The point I have noted above is that under the very
interim order of 23 June, 2008, the powers of the new Managing
Committee appointed after duly holding elections were not subject to
any restrictions (which were applicable to the earlier Managing
Committee). If that is so, revival of that order is neither here nor there
so far as the powers of the new Managing Committee are concerned.
49. Besides, having regard to the scope of the dispute between the
parties in the writ petition and the reliefs claimed therein, it is quite
clear that the writ petition did not concern the controversy between the
society and Vaidehi and it cannot possibly be suggested that the

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interim order of 23 June, 2008 had anything to do with the Society

Development Agreement and its continuation or termination by the
society.

50. In that view of the matter, there is no substance in Vaidehi's

contention that the orders of this Court barred the Managing Committee
of the society from taking the decision of termination.
51. It is contended next by the learned Counsel for Vaidehi that
there is no valid resolution of either the General Body or the Managing
Committee of the Society regarding the termination of the Society
Development Agreement and in the absence of such resolution/s the
action of termination of the Agreement is illegal, null and void. Vaidehi
also challenges the execution of the Confirmation and Supplementary
Agreements by the Society in favour of Rustomjee for want of such
authority.
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52. The contention of Vaidehi in this behalf is also supplemented by

the Plaintiffs in Suit No. 674 of 2013, who, as noted above, are some of
the members/occupiers of tenements. These Plaintiffs inter alia
challenge the various resolutions purportedly passed by the General
Body of the Society in that behalf on various grounds. It is submitted
that the notices dated 2 January, 2010, 17 April, 2010 and 1 January,
2011 of Special General Body Meetings were bad in law; they were
without any specific or clear agenda. It is submitted that the Special
General Body Meetings held in pursuance of these notices were also in
breach of the State Government directive of 3 January, 2009 and also
bye-law Nos. 97 and 99 of the Society. It is submitted that the
Managing Committee of the Society did not disclose various material
documents and facts and circumstances to the members in those
notices or SGMs, thereby vitiating the whole process. It is submitted
that the actions of the Society in pursuance of these notices and SGMs
are illegal, null and void.
53. All these contentions are being considered under the present
topic, since they together reflect on the Society's authority to terminate
the Society Development Agreement and also to execute the
Confirmation and Supplementary Agreements in favour of Rustomjee.
54. At the outset, it must be noted that prima facie there is material
on record to show that there was a resolution passed by the Man aging
Committee on 22 March, 2010 to terminate me Society Development
Agreement. This resolution has been referred to by the Society in its
affidavit in reply filed in Notice of Motion No. 216 of 2010 in Writ
Petition No. 1570 of 2008. The resolution has also been referred to by
the Society's Advocate in his letter of termination addressed to Vaidehi.
Secondly, the Managing Committee's resolution and its action of
termination of the Society Develop ment Agreement in pursuance
thereof have been ratified by the society in its Special General Body
meeting held on 25 April, 2010. This Special General Body meeting was
called by a notice dated 17 April, 2010 which had a specific agenda,
namely, “to confirm the decision taken by the Managing committee to
terminate the agreement entered into with the developer, Vaidehi
Akash Housing Ltd.” The General Body considered this item and
confirmed the decision in its meeting of 25 April, 2010.
55. The General Body resolution has, however, been faulted on
several grounds by Vaidehi and the Plaintiffs in Suit No. 674 of 2013.
These may now be considered.
56. At the outset the society and Rustomjee question the
maintainability of Suit No. 674 of 2013. It is submitted that challenge
to the resolution of the society at the instance of individual members
cannot he before a Civil Court, since it is squarely covered by Section
91 of the Maharashtra Co-operative Societies Act and lies before the
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special forum created under that Act. In view, however, of the fact that
this suit and the relief claimed therein involve third parties and go
much beyond the jurisdiction of the special forum created under
Section 91 of the Act, I have thought it fit to delve into the merits of
these objections rather than throw the Plaintiffs out at the threshold on
a plea of jurisdiction. Besides, the pleas raised, really speaking, reflect
on the authority and power of the Court to grant some of the reliefs
claimed in the suit rather than maintainability of the suit as a whole.
Secondly, these pleas are also to some extent common to Vaidehi's
suit, which in any event have to be determined prima facie at this
interim stage. In that view

Page: 281

of the matter, we may proceed to consider the prima facie merits of the
respective cases in this behalf.

57. The Plaintiffs in Suit No. 674 of 2013 challenge the decision in
the SGM of 25 April, 2010 on several grounds. Firstly, it is claimed that
Bye-law No. 97 and 99 of the Bye-laws of the Society require a
requisition of at least 1/5th of the members of the society for an SGM
and that there was no such requisition for this SGM. Secondly, it is
claimed that Bye-law No. 100 requires a notice of 5 clear days for an
SGM. Prima facie a meeting of Special General Body called to transact a
special business by a Managing Committee of a Society cannot be
faulted on the ground of want of a requisition. Merely because an SGM
can be called on such a requisition does not imply that no SGM can be
called otherwise that on such a requisition. The notice issued on 17
April, 2010 of SGM of 25 April, 2010 prima facie fulfills the requirement
of 5 clear days' notice. The judgments cited in this behalf by the
Plaintiffs in M.I. Builders Pvt. Ltd. v. Radhey Shyam Sahu, (1999) 6
SCC 464 : (AIR 1999 SC 2468), Kedar Shivkumar Kale v. Digambar
Shridhar Mhapsekar Appeal from Order No. 56/2007 in Civil Application
No. 84/2007 dt. 7.3.2007 : ((2007) 4 AIR Bom R (NOC) 640), Kaye v.
Croydon Tranmways Company, [1898] 1 Ch. 358, Baillie v. Oriental
Telephone & Electric Co. Ltd., [1915] 1 Ch. 503 and Narayanlal Bansilal
v. The Maneckji Petit Mfg. Co. Ltd., (1981) 33 Bom LR 556 do not help
the Plaintiffs in the facts of this case. In M.I. Builders' case ((1999) 6
SCC 464 : AIR 1999 SC 2468) (supra), the Court was concerned with
the case of a meeting held by a Municipal Corporation governed by U.P.
Municipal Corporation Act, 1959. In that case, in breach of the statutory
requirement of a clear notice of the agenda, no agenda was notified for
the consideration of the members of the Executive Committee in the
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notice of the meeting. In our case, not only was the notice issued in
time, but the agenda stated in it included the specific resolutions
proposed, namely, ratification of cancellation of the Society
Development Agreement by the Managing Committee and taking a
decision on the subject of redevelopment of the society's property. In
Kedar Shivkumar Kale's case ((2007) 4 AIR Bom R (NOC) 640) (supra),
the Court was concerned with the case of removal of a chairman of a
trust without following due procedure and in contravention of the
principles of natural justice. The notice of the meeting did not contain
any item of business concerning removal of the chairman or
appointment of a new chairman. The cases of Kaye v. Croydon
Transways Co. (supra) and Baillie v. Oriental Telephone & Electric Co.
(supra) also dealt with sufficiency of a notice of a meeting, having
regard to the general nature of the business proposed, not disclosing
the special business actually transacted and are clearly distinguishable.
Even in Narayanlal Bansilal v. The Maneckji Patil Mills Ltd. (supra),
there were material changes proposed in the Articles, of which the
shareholders were not given any notice and in fact the circular sent in
that behalf was misleading. That decision has no bearing on our facts.
Prima facie having regard to the peculiar facts of our case, some of
which are noted below, the notice of 17 April, 2010 cannot be said to
be vague or suffering from non-disclosure of important events or
documents. For the selfsame reasons challenge to other meetings of
the Society in connection with the redevelopment through Rustomjee,
on the ground breach of bye-laws, has no force. All these meetings had
been convened after adequate notice of the business to be transacted
at the meetings; the Managing Committee had the requisite authority
to convene these meetings.
58. It was next contended that the notice dated 17 April, 2010 and
the SGM of 25 April, 2010 were illegal and void by reason of being in
breach or violation of the State Government directive issued on 3
January, 2009 under Section 79A of the Co-operative Societies Act. This
argument really concerns the appointment of the new developers,
namely, Rustomjee and not so much the cancellation of the Society
Development Agreement. The gravamen of the charge is that after
termination of the Society Development Agreement on 16 April, 2010,
there was no developer on record and therefore, for taking decisions on
the redevelopment scheme, which was nowhere near completion, the
society had to follow the

Page: 282

Government directive of 3 January, 2009. This argument is commonly

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advanced to challenge not only the resolutions passed in the meeting of

25 April, 2010, but even other meetings held by the Society in
connection with the redevelopment of the suit property by Rustomjee.

59. It is submitted that there was no proper quorum for these

meetings. For example it is submitted that the quorum required was
¾or 75 % of the total number of members (i.e. 360 in the present
case) under the directive of 3 January, 2009, whereas only 231, 320
and 313 members attended the SGMs of 17 January, 2010, 25 April,
2010 and 9 January, 2011, respectively. In the first place, prima facie
in the present case we are not concerned with a redevelopment process
initiated after 3 January, 2009. The redevelopment process was already
initiated in 2005 and an agreement was arrived at with the developer,
Vaidehi, on 31 December, 1995. Further that developer, i.e. Vaidehi,
had already entered into the Rustomjee Agreement with Rustomjee on
4 April, 2007. On 17 January, 2010, 25 April, 2010 and 9 January,
2011 the Society was considering transactions with Rustomjee in
confirmation or supplementation of the Rustomjee Agreement. MHADA
had approved FSI of 2.5 on 23 April, 2010. A supplementary agreement
of 10 February, 2010 was already executed by the Society with
Rustomjee for FSI over 2.4 by way of a tripartite agreement between
Vaidehi, Society and Rustomjee, after executing a tripartite
confirmation of the Rustomjee Agreement on 3 February, 2010. In the
light of these facts, the reconstruction of the Society's building, i.e. the
rehab portion, had to be accomplished in co-operation with Rustomjee
and financed from the monies available from exploitation of the
additional FSI. The meeting of 17 January, 2010 gave authority to the
Managing Committee of the Society to go ahead with supplementary
and confirmatory agreements with Rustomjee. The meeting of 25 April,
2010 passed suitable resolutions for ratifying the termination of the
Society Development Agreement and take suitable steps in connection
with redevelopment through Rustomjee. The meeting of 9 January,
2011 passed a resolution to propose a draft agreement with Rustomjee
after inputs from the society's consultants. These resolutions do not in
any way fall foul of the Government directive of 3 January, 2009.
Besides, it is clear from the records of the case and the respective
stands adopted by the various stakeholders in this Court that more
than 75 % members of the society are standing by the Rustomjee
Agreement, the Confirmation and Supplementary Agreements as also
the Agreement between the Society and Rustomjee executed on 29
January, 2011. It is not possible or in the interest of justice to now
unsettle the apple-cart on the ground of technical pleas such as this,
when not only is there a serious doubt as to the applicability of the 3
January, 2009 directive but there is a broad and substantial compliance
with its purpose.
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60. After all, the purpose of the directive is to ensure transparency

and adequate sup port to the redevelopment project on the part of the
members. The procedure adopted by the Society was transparent and
bona fide in light of the circumstances it found itself in. There is an
overwhelming support of a large majority of its members to the
resolutions adopted by the society in duly convened meetings. This
majority of members (which incidentally accounts for more than ¾th of
the members) even today stands by these resolutions. Besides, several
irreversible steps have been taken by the various stakeholders in
pursuance of these resolutions.
61. The SGMs of 17 January, 2010, 25 April, 2010 and 9 January,
2011 and the decisions taken therein as also the actions follow ing such
decisions cannot be, thus, faulted on the ground of breach of bye-laws
or Govern ment directive of 3 January, 2009. The question of the
alleged breach of court orders in this behalf has already been dealt with
above and answered prima facie in favour of the Society and
Rustomjee.
62. Challenge to the agreement dated 4 April, 2007 between Vaidehi
and Rustomee (“Rustomjee Agreement”):
63. Plaintiffs in Suit No. 674 of 2013 claim that the Rustomjee
Agreement is illegal, null and void. They mainly rely upon some of the
clauses of the Society Development Agreement, particularly Clause 36
thereof read with

Page: 283

Clauses 17 and 27 and claim that Vaidehi was not entitled to transfer or
assign the beneficial interest of it under the Society Development
Agreement without prior written consent of the Society, which consent
was not obtained. It is submitted that even in the reply affidavit of the
society in the plaintiffs' Notice of Motion, the Society had admitted to
the lack of right or authority in Vaidehi to transfer or assign its
beneficial interest without consent of the Society and that the
Rustomjee Agreement was in material breach of the terms and
conditions of the Society Development Agreement. In reply, it is urged
by the Society that this particular clause, Clause 36, was for the
protection of the society and absent any objection raised by the Society
for breach of that clause, there is no case for illegality of the Rustomjee
Agreement on account of such breach. It is submitted that the Society
has not only not objected to the assignment of the free sale component
by Vaidehi to Rustomjee under the Rustomjee Agreement, but it has
expressly approved the same under the Confirmation Agreement,
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followed by the Supplementary Agreement. The Society has also passed

a resolution to that effect at its Special General Body meeting followed
by authority conferred by its members to execute a tripartite
Confirmation and Supplementary Agreements in that behalf with
Vaidehi and Rustomjee.

64. The particular clauses, namely, Clauses 17, 27 and 36 of the

Society Development Agreement, are quoted below:
“17. The Developers shall be entitled to bring in the project his
own financiers, associates, partners and bankers for the aforesaid
construction and the society has consented for the same and co-
operate with the Developers for the same and shall execute all the
necessary documents for the Developers area.
27. The Developers shall be entitled to sell to the persons of its
Choice flats/commercial area, car parking spaces and other premises
being the Developers area and more particularly described in the
Annexure “G” and to receive and appropriate the sale consideration
amount receivable from such Allottees/purchasers of the office
premises, flats/Commercial area and car parking spaces in the said
new building on the said property without in any way being required
to give any amount for the same to the Society or the Union.
36. The Developers shall be entitled to carry out the construction
of the said new building on their own, either departmentally or by
appointing sub-contractors. However, the Developers shall not be
entitled to transfer or assign their beneficial interest under this
Development Agreement to any one without obtaining prior written
consent from the said Society and Union.”
65. Vaidehi was entitled, on the basis of the above clauses, to deal
with the free sale component of the project. By Rustomjee Agreement,
Vaidehi agreed to sell the free sale component to Rustomjee. Prima
facie the authority of Vaidehi to enter into Rustomjee Agreement for
sale of the free sale component cannot be doubted. After all, the
Society Development Agreement is a commercial document and has to
be read as such, in its entirety and harmoniously. If individual premises
forming part of the free sale component could be dealt with by Vaidehi,
it is difficult to contend that the free sale component as a whole could
not be dealt with by it. Vaidehi, even after the Rustomjee Agreement,
is bound by all covenants of the Society Development Agreement, the
essential of obligation of Vaidehi under which consists in construction of
the rehab portion free of cost for the members of the Society. That
obligation is not transferred to Rustomjee under the Rustomjee
Agreement. The society is not concerned and is not required to assent
to the manner in which the free sale component, which was to be
exploited by Vaidehi in consideration of its aforesaid obligation, would
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be dealt with by Vaidehi.

66. Even otherwise, a party for whose benefit a particular contractual
stipulation is made is entitled to waive the same. In our case, there is a
clear waiver on the part of the Society. The Society has confirmed the
Rustomjee Agreement and supplemented the same by a
Supplementary Agreement in favour of Rustomjee after duly passing
resolutions of its general body in duly convened Special General Body
Meetings. On ratification of the Rustomjee Agreement by the Society, it
hardly lies in the mouth of anyone, particularly anyone

Page: 284

other than the two contracting parties of the Society Development

Agreement, that the Rustomjee Agreement is in breach of the
restrictive covenants of the Society Development Agreement.

67. All parties have duly acted under the Rustomjee Agreement and
the confirmation and Supplementary Agreements, which followed it.
Rustomjee has paid about Rs. 70 crores to Vaidehi and a substantial
sum to MHADA in pursuance thereof.
68. For all these reasons, prima facie there is no merit in this
objection.
69. Other miscellaneous challenges to the Confirmation and the
Supplementary Agreements and the final Agreement of 29 January,
2011 with Rustomjee:
70. The Plaintiffs in Suit No. 674 of 2013 have challenged the
various agreements executed by the Society in favour of Rustomjee on
various other grounds as well.
71. It is contended by the Plaintiffs in Suit No. 674 of 2013 that the
resolution of 17 January, 2010, particularly, Resolution No. 4A, as also
other resolutions suffer from non-compliance with para 7.15 of
MHADB's booklet and also the offer letter of MHADB of 20 May, 2010. It
is submitted that the resolution of 17 January, 2010 was also
fraudulent by reason of the proposer thereof not being a member of the
society and having regard to the various alleged machinations on the
part of the society to transfer a share certificate to his name.
72. MHADB directive in its booklet and offer letter is a general
instruction in keeping with the State Government directive of 3
January, 2009. I have already dealt with the question of applicability of
the Government directive to the dealings of the Society with Rustomjee
and held that prima facie the directive does not come in the way of the
various dealings of the Society with Rustomjee in the peculiar facts of
our case. My observations in that behalf would apply with equal force to
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the objections based on the MHADB directives.

73. As for the membership of the proposer and allegations in
connection with, these contentions can hardly sustain a challenge to
the resolution which is not only affirmed by an overwhelming majority
of the society, but acted upon by various stakeholders as shown above.
74. The Plaintiffs in Suit No. 674/2013 next contended that there
has been illegal and unauthorized use of FSI in the project by
Rustomjee on the basis of the chart submitted by the Plaintiffs. In the
first place, this chart is based on certain assumptions which are not
sustainable either in law or on facts. Firstly, the chart proceeds on the
fallacious understanding that each member is personally entitled to a
proportionate share in the FSI generated on roads/public
amenities/open spaces in the layout of D.N. Nagar or to the fungible
FSI arising in connection with the suit property. Prima facie the entire
FSI/development potential in respect of the layout of the suit property
as also the fungible FSI belongs to the Society. Besides, the fungible
FSI, which cannot be termed as inherent or basic in connection with the
suit plot, is an incidence available only if new construction is put up on
the suit plot. In other words, the availability of fungible FSI is directly
attributable to and arises in connection with the new construction which
is being put up by Rustomjee on the suit property and not an incidence
of the land plate of the suit plot. Secondly, fungible FSI is subject to
payment of premium to the Municipal Corporation of Greater Mumbai. It
becomes available and can be used only upon such premium being
paid. There is no compulsion on the developer that can be spelt out
from any of the development agreements in the present case to pay
any premium at all. Thus, there is no inherent right in the society,
much less in any member of the Society, to any fungible FSI. In any
event, the offer of Rustomjee to make fungible FSI available to the
Society for the benefit of its members by allotting an area of 640 sq.ft.
carpet, which includes not just the FSI/TDR/MHADA layout FSI, but
also fungible FSI, has been duly accepted by the Society and no
individual member can claim any right to any other area/FSI. After all,
the agreement between the Society and Rustomjee is a commercial
document, which has been worked out between the two after taking
into account various considerations of their respective

Page: 285

entitlements and commercial feasibility of the project. No individual

member can take a stand alone position contrary to this agreement.
Besides, the calculations in the chart cannot be founded on any legal
principles or provisions and seem to be nothing but mere ipse dixit on
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the part of the dissenting members. Except these few disgruntled

members, no other member of the Society has raised any grievance in
respect of these so called FSI violations or usurpations. Lastly, all
contentions of the Plaintiffs in Suit No. 674/2013 in this behalf, at the
highest, reflect on the members' right to receive compensation. If the
plaintiffs' contentions are accepted at the hearing of the suit, an
adequate monetary relief can always be granted to the Plaintiffs in
respect of these claims. The entire project of redevelopment need not
be held up on account of these claims.

75. Rule of majority:

76. This discussion brings us to the issue of the rule of majority to
be followed in the actions of the society in matters including the
redevelopment of the Society's property. Shareholder members of a co-
operate society are bound by a decision of the majority in such matters,
until such decision is overturned by a forum of competent jurisdiction
and cannot take a stand alone position in opposition to such decision.
77. We shall do well in this behalf to simply recall the observations
of this Court in the case of Girish Mulchand Mehta v. Mahesh Mehta,
(2010) 2 Mah LJ 657, which are to the following effect:
“16. In the present case, it is not in dispute that the General Body
of the Society which is supreme, has taken a conscious decision to
redevelop the suit building. The General Body of the Society has also
resolved to appoint the respondent No. 1 as the Developer. Those
decisions have not been challenged at all. The appellants who were
members of the Society at the relevant time, are bound by the said
decisions. The appellants in the dispute filed before the Co-operative
Court have only challenged the Resolution dated 27-4-2008, which
challenge would merely revolve around the terms and conditions of
the Development Agreement. As a matter of fact, the General Body
of the Society has approved the terms and conditions of the
Development Agreement by overwhelming majority. Merely because
the terms and conditions of the Development Agreement are not
acceptable to the appellants, who are in minuscule minority (only
two out of twelve members), cannot be the basis not to abide by the
decision of the overwhelming majority of the General Body of the
Society. By now it is well established position that once a person
becomes a member of the Co-operative Society, he looses his
individuality with the Society and he has no independent rights
except those given to him by the statute and Bye-laws. The member
has to speak through the Society or rather the Society alone can act
and speaks for him qua the rights and duties of the Society as a
body (see Daman Singh v. State of Punjab, reported in (1985) 2 SCC
670 : AIR 1985 SC 973). This view has been followed in the
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subsequent decision of the Apex Court in the case of State of U.P. v.

Chheoki Employees Co-operative Society Ltd., reported in (1997) 3
SCC 681 : AIR 1997 SC 1413. In this decision the Apex Court
further observed that the member of Society has no independent
right qua the Society and it is the Society that is entitled to
represent as the corporate aggregate. The Court also observed that
the stream cannot rise higher than the source. Suffice it to observe
that so long as the Resolutions passed by the General Body of the
respondent No. 2 Society are in force and not overturned by a forum
of competent jurisdiction, the said decisions would bind the
Appellants. They cannot take a stand alone position but are bound
by the majority decision of the General Body. Notably, the appellants
have not challenged the Resolutions passed by the General Body of
the Society to redevelop the property and more so, to appoint the
respondent No. 1 as the Developer to give him all the redevelopment
rights. The propriety rights of the appellants herein in the portion (in
respective flats) of the property of the Society cannot defeat the
rights accrued to the Developer and/or absolve the Society of its
obligations in relation to the subject matter of the Arbitration
Agreement. The fact that the relief prayed by the respondent No. 1
in section-9 Petition and as granted

Page: 286

by the Learned single Judge would affect the propriety rights of the
appellants does not take the matter any further. For, the propriety
rights of the Appellants in the flats in their possession would be
subservient to the authority of the General Body of the Society. Moreso,
such rights cannot be invoked against the Developer (Respondent No.
1) and in any case, cannot extricate the Society of its obligations under
the Development Agreement.”

78. The various decisions of the Society referred to above in

connection with the present dispute are prima facie taken bona fide and
are not oppressive to the minority or amounting to mismanagement.
Members of the Society have challenged some of these decisions before
co-operative courts, but have been unable to secure any reversal or
even a stay thereof. Years have passed since the taking of these
decisions and the follow-up actions on the basis thereof. It is too late in
the day for this Court to even entertain a challenge now to these
decisions, though in the facts of the case this Court has considered the
merits of the various challenges in connection with these decisions and
found these challenges to be prima facie unsustainable.
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79. Challenges to the redevelopment by the Society and Rustomjee

on the basis of third party rights created by Vaidehi in favour of various
purchasers:
80. This brings us to an important aspect of this group of matters
and which has engaged anxious attention of this Court. During the
subsistence of the Society Development Agreement and in pursuance of
various rights conferred upon it thereunder with reference to disposal of
the free sale component of the project, Vaidehi has created third party
rights in favour of various flat purchasers and others. These flat
purchasers and others themselves consist of different categories. There
are those who have come in between the dates of the Society
Development Agreement and the Rustomjee Agreement. During this
period the entire free sale component, i.e. nearly 2,53,500 sq.ft. of real
estate, was at the disposal of Vaidehi and it was free to deal with the
same the way it liked. Third party rights have been created by it in
favour of various parties during this period. Then there are others who
have come in after the Rustomjee Agreement but before the Society
Development Agreement was terminated by the Society. During this
period Vaidehi had a limited right, namely, the right to deal with an
area of 37050 sq.ft. for residential use and 20000 sq.ft. for commercial
use. Different considerations may apply to those third parties whose
rights have been created within or beyond this limitation on Vaidehi's
rights, as the case may be, for Vaidehi seems to have gone much
beyond its limitation during this period and oversold its position. It
purports to have created rights over an area far in excess of this limited
F.S.I. available to it for disposal. Another distinction as between the
various third parties is on the basis of the kinds of arrangements
entered into with them by Vaidehi. There are purchasers who hold
registered agreements with Vaidehi, whilst there are those who have
unregistered agreements and there are others who have simply
allotment letters in their favour. The rights of these various
stakeholders vis-a-vis the entitlement of the Society and through it of
Rustomjee to go ahead with the redevelopment project need an anxious
thought. Whilst some of these third parties appear to be investors,
there may certainly be those who are genuine buyers who have staked
their hard-earned money to obtain premises within the project.
81. The flat purchasers' main arguments are that under the Society
Development Agreement, which was at any rate valid upto 16 April,
2010, Vaidehi had the authority to deal with the entire free sale
component, i.e. nearly 2,53,500 sq.ft. of area; that even if such
authority could be treated as having been divested by it under the
Rustomjee Agreement, between 4 April, 2007 (i.e. the date of
Rustomjee Agreement) and 16 April, 2010 (i.e. the date of termination
of the Society Development Agreement), Vaidehi had the authority to
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deal with 57050 sq.ft of area as shown above; that the agreements
entered into by Vaidehi during these periods were lawful and binding
on the Society, since during these periods Vaidehi was an agent of the
Society and the former's acts within; its authority were binding on the
latter; and that at any rate, the Society itself being a ‘promoter’ within
the meaning of MOFA, the

Page: 287

rights of the purchasers under MOFA were binding on the Society and
the latter could not enter into any agreement with Rustomjee in breach
of these rights.

82. The purchasers' rights may, thus, be examined from two angles,
one from the standpoint of the contract between the Society and
Vaidehi (who was their vendor) and the other from the standpoint of
the obligations of the Society, if any, under MOFA.
83. No doubt Vaidehi had been conferred with the authority to deal
with the free sale component of the project by the Society under the
Society Development Agreement, but the question is whether such
authority was to be exercised by Vaidehi for its own sake or on its own
account as an independent contractor or as an agent of the Society.
Some of the important clauses of the Society Development Agreement
may be noted in this behalf. These are as follows:
“5. The party of the first part i.e. the eleven individual societies
and the party of the second part i.e. the new D.N. Nagar Co-
operative Housing Societies Union Limited hereby agree to execute a
sublease in favour of the party of the third part i.e. M/s. Vaidehi
Akash Housing Private Limited in respect of the construction of the
saleable part immediately after the party of the third part puts the
party of the first part in their respective possession of the individual
premises.
11. The Developers will be entitled to utilize the balance FSI
including additional area available for construction by way of
balcony, servant rooms and area in lieu of staircase, passage, lift
wells and such other area available free of F.S.I. etc., on payment of
premium to BMC in the separate new building/s to be constructed on
the said property and to sell the said area in the separate new
building to be constructed on the said property, hereinafter referred
to as the “the Developers' area/flats” and appropriate the sale
proceeds to itself.
13. The remaining flats shall being to the Developers, Hereinafter
referred to as “the Developers' area”. The location of the Developers'
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flats are given in Annexure-“G” and the Developers alone will be

entitled to sell/allot the same and appropriate the sale proceeds to
itself.
27. The Developers shall be entitled to sell to the persons of its
Choice flat/commercial area, car parking spaces and other premises
being the Developers area and more particularly described in the
Annexure “G” and to receive and appropriate the sale consideration
amount receivable from such Allottees/purchasers of the office
premises, flats/Commercial area and car parking spaces in the said
new building on the said property without in any way being required
to give any account for the same to the Society or the Union.
28 It is expressly agreed by and between the parties hereto that
only after the Occupation Certificate in respect of the said new
building shall have been obtained and the Developers shall have paid
to the amount becoming payable as specified in Clause 19
hereinabove and after the Developers shall have offered to put the
Members herein in possession of their respective flats thereafter the
Developers shall be entitled to handover vacant possession of the
Developers' flats to the respective purchasers thereof.
30. The said Society and the Members herein hereby agree that In
Developers alone shall be entitled to sell on ownership basis in their
own name and in their own right the flats/commercials and other
premises and the car parking spaces being the Developers' area
[which are specified in Annexure-“G”] and appropriate the sale
proceeds to itself and for that purpose, the Developers shall be
entitled to enter into Agreement for Sale of the Commercial
premises, flats in their own name.
32. The Society on its own will not execute any Agreement and/or
any writing with the prospective purchaser/s in respect of Developers
area.
33 The said Society its members and union herein hereby agree
and undertake with the Developers they will not to do deal with or
dispose off or create any third party right, title and interest in
respect of the said flats and other premises, the car parking spaces
which are earmarked for sale by the Developers being the
Developers' area more particularly described in Annexure-“G”.
38. It is agreed by the hereto that since the basis of this
Agreement, the Developers shall

Page: 288

have incurred several obligations [including financial obligations a

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herein mentioned], the said Society and the Members herein will be
entitled to cancel terminate and/or rescind this Agreement for the grant
of Development Rights or any other Agreement as shall be executed
pursuant to this Agreement under circumstances stated herein only and
no other circumstances.

41. It is further agreed that the Developers alone shall be

responsible for any claim made by any third party in respect of any
flats and other premises sold to the prospective purchaser/Allottee of
the flat and other premises in the said new building constructed on
the said property and the Developers agree to indemnify and keep
indemnified and harmless the said Society and the Union herein from
all costs, charges and expenses and legal fees by any third party
and/or any damage caused to the prospective purchasers/Allottees.
45. This Agreement for Grant of Development Rights does not
constitute a partnership and/or a joint venture between the parties
hereto. Each of the parties hereto shall be liable to pay and
discharge their respective liabilities and debts including their
respective income-tax liabilities and each shall indemnify and keep
indemnified the other there from.”
84. The clauses quoted above, read together and in their proper
perspective to be gathered from the whole agreement, clearly envisage
the development and sale of the free sale component of the project by
Vaidehi on their own account and as an independent contracting party
and not as agents of the Society. The contract between Vaidehi and the
Society is on a principal to principal basis; it neither constitutes a
partnership nor a joint venture or agency between the two. The third
party purchasers with whom Vaidehi might enter into agreements for
sale would have no privity of contract with the Society and the Society
would in no way be responsible for any claim made by such purchasers
against Vaidehi under their respective agreements for sale.
85. There being no privity of contract between the Society and the
third party purchasers claiming under Vaidehi, the third party
purchasers cannot claim specific performance of their respective
agreements for sale except through Vaidehi. They stand or fall by
Vaidehi. If the rights of Vaidehi are brought to an end upon a lawful
termination of the Society Development Agreement, the third party
purchasers cannot lay any independent claim against the Society or
anyone claiming through the Society. The agreements with third party
purchasers are premised upon a valid, subsisting and enforceable
agreement between their vendors, namely, Vaidehi and the owners,
namely, the Society and in fact refer to the Society Development
Agreement in this behalf. Admittedly, therefore, the third party
purchasers had, or at any rate, ought to have, notice of the Society
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Development Agreement and its terms and conditions and Vaidehi's

obligations to perform the same. If Vaidehi fails to perform these
obligations, the purchasers cannot but suffer the consequences. In
other words, the purchaser's rights are subject to Vaidehi's rights and
not higher than those. Therefore, from a contractual standpoint, the
third party purchasers have no case against the Society or Rustomjee,
who claim through the Society.
86. Let us now consider if these third party purchasers have any
rights under MOFA against the Society. It is submitted on their behalf
that the Society is very much a ‘promoter’ within the meaning of MOFA
as regards their respective agreements for sale. Learned Counsel for the
purchasers rely upon the definition of “promoter” contained in Section 2
(c) of the MOFA. The definition is in the following terms:
“promoter” means a person and includes a partnership firm or a
body or association of persons, whether registered or not who
constructs or causes to be constructed a block or building of flats, or
apartments for the purpose of selling some or all of them to other
persons, or to a company, co-operative society or other association of
persons and includes his assignees; and where the person who
builds and the person who sells are different persons, the term
includes both.”
87. It is submitted that the Society can at any rate be said to have
caused the building of flats to be constructed for the purpose of selling
the same and as a person, who causes such building to be built, is as
much a promoter as a person who sells premises in such building.

Page: 289

88. The Society is the owner of the property and has entered into an
agreement with the developers, i.e. Vaidehi, for redevelopment of its
property. The redevelopment envisages construction of the Society's
building to accommodate its members and also construction of
building/s of flats/premises to be sold to outsiders. The agreement
authorizes or entitles the developers to construct such building/s and
sell flats/premises therein to outsiders. Such authority or entitlement is
to the developers' account and in their own right and as an
independent contractor. If in exercise of such authority or entitlement,
a building is constructed by the developers, it cannot be said that such
building is caused to be constructed by the Society within the meaning
of Section 2(c) of the MOFA.
89. Any other interpretation would lead to anomalous consequences,
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which could never have been contemplated by MOFA. The owners of

lands entering into agreements for sale or development agreements
with promoters/developers would be held as being subject to all
liabilities of a promoter, such as liability of disclosure of plans and
specifications, outgoings etc. under Section 3 of the MOFA, entering
into agreements in accordance with Section 4, giving possession of flats
and suffering the consequences of Section 8, forming co-operative
societies of flat purchasers under Section 10 and so on. This would be
plainly inconceivable.
90. Prima facie, thus, there is no case to treat the Society, who is
merely in the position of an owner vis-a-vis the third party purchasers,
as a ‘promoter’ within the meaning of MOFA and foist the obligations of
a promoter on the Society in relation to the purchasers.
91. Besides what is discussed above, there are many other
difficulties in the way of many of these third party purchasers. In the
first place, it now transpires from the various proceedings that their
vendor, Vaidehi, has proceeded to allot an area far in excess of its
entitlement, which was merely 2,53,500 sq.ft. FSI to start with and
thereafter restricted to 57050 sq.ft. (i.e. after the Rustomjee
Agreement). In fact, what Vaidehi appears to have dealt with is an area
far in excess of even the total FSI (at the rate of 2.4) available on the
entire land. Secondly, the individual transactions are evidenced only in
a few cases by registered agreements with Vaidehi. Many transactions
are contained in unregistered agreements or even allotment letters
which are not even stamped. Many of these transactions appear to be
simply financial arrangements. Each individual case of a third party
purchaser would thus be subject to different considerations based on
the entitlement of Vaidehi at the relevant point of time and the nature
and incidents of the individual transaction. But we are dealing here with
the rights of the individual purchasers vis-a-vis the Society and
Rustomjee claimed through Vaidehi and not their rights qua Vaidehi. All
these purchasers certainly have independent rights to claim damages
against Vaidehi, peculiar to their individual cases, but they have prima
facie no right to claim anything from the Society and Rustomjee, much
less specific performance of their individual agreements. In the
premises, the individual features of their respective cases, as noted
above, have no relevance to our discussion in this group of Motions and
need not be discussed any further. Even the best placed amongst them
have no leg to stand on as against the Society or Rustomjee.
92. That brings us to sum up the result of the above discussion on
the prima facie case on merits of individual stakeholders. Prima facie, it
is clear that Vaidehi has committed breaches of the Society
Development Agreement and that the termination of the Agreement by
the Society was legal and proper. Vaidehi has not made out any case of
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its readiness and willingness to perform its obligations under the

Society Development Agreement. Vaidehi is not entitled to specific
performance of the Society Development Agreement or restrain the
development of the suit property by the Society or Rustomjee. The
Rustomjee Agreement and its confirmation by the Society by the
Confirmation and Supplementary Agreements as well as further
Agreement dated 29 January, 2011 between the Society and Rustomjee
are valid and proper. Members of the Society opposing the development
through Rustomjee are not entitled to any interim relief either on the
basis of the aforesaid agreements being in breach of the Society
Development

Page: 290

Agreement or on the basis of breach of bye-laws or contravention of the

State Government circular dated 3 January, 2009 or on account of the
alleged non-performance of the offer letter by MHADA or the booklet or
directives of MHADA or indeed on account of any alleged FSI violation
or usurpation. The decisions of the Society in connection with the
present dispute are prima facie taken bona fide and none of the
challenges of the members opposing redevelopment are prima facie
sustainable. None of the third party purchasers, who claim through
Vaidehi under their respective agreements for sale/allotment letters,
have any case for specific performance of their respective agreements
against the society or Rustomjee. None of these purchasers has any
enforceable right under MOFA against the Society or Rustomjee.

93. Even the considerations of balance of convenience and

irreparable injury clearly weigh in favour of the Society and its
members, who support the redevelopment project. The fundamental
basis or rather the very raison d'etre of the entire redevelopment
project is the need for housing of 480 members of the Society. These
members have already surrendered their tenements to enable the
Society to carry out the redevelopment project first through Vaidehi
and later through Rustomjee, as noted above. Since 2006, these
members have been living in temporary alternative accommodations.
The buildings on the suit property occupied by these members have
since been demolished and a rehab building for their permanent
alternative accommodation is under construction. The development of
the free sale component is inextricably linked to the construction of the
rehabilitation component. The cost of the construction of the
rehabilitation component has to be necessarily funded from and out of
the development and sale of the free sale component. Any relief
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granted to either of the stakeholders, namely, Vaidehi or the members

opposing the redevelopment project or the third party purchasers, who
claim through Vaidehi, will necessarily impact the construction of the
rehabilitation component adversely and jeopardize the members' right
to their permanent alternative accommodation. The members cannot be
asked to wait indefinitely for years for getting something which they are
legally entitled to and which legal entitlement is not even questioned
by any other stakeholders.
94. We may now dispose of the individual applications forming part
of this group of Notices of Motion on the basis of the prima facie
conclusions noted by this Court above.
95. Notice of Motion No. 961 of 2013 taken out by Vaidehi in their
specific performance suit, the merits of which have been discussed
above as the lead matter, is dismissed with no order as to costs.
96. Notice of Motion No. 1477 of 2013 is taken out by the Plaintiffs
in Suit No. 674/2013. This suit, as noted above, has been filed by some
members of the society/occupants of flats in the buildings of the
Society, who have challenged the various resolutions of the Society,
noted above and actions of the Society on the basis of these
resolutions. They seek re-starting of the entire process of the
redevelopment of the property by appointing a new developer. They
seek various permanent injunctions and reliefs in this behalf. The
Notice of Motion inter alia seeks an interim restraint order against the
Society and Rustomjee from going ahead with the redevelopment
project or creating any third party rights in respect thereof. For the
reasons already discussed above, there is no merit in the Notice of
Motion and the same is dismissed. There shall be no order as to costs.
97. Learned Counsel for Rustomjee states that the statement made
by the learned Counsel and recorded in the order of this Court dated 9
May, 2014 shall continue upto 12 January, 2015. Learned Counsel for
Defendant No. 1 Society, on instructions from Mr. Bhushan Sarang,
Secretary of the Defendant society, states that in accordance with the
ad-interim orders passed in the suit so far, the Society shall continue to
pay rent for the temporary alternative accommodation to Plaintiff Nos. 1
to 7, 9 to 12 and 14 to 38 through the Advocates of these Plaintiffs and
deposit the rent payable to Plaintiff Nos. 8 and 13 in Court as is being
done presently under the ad-interim orders passed by this Court. The
rent deposited in Court shall abide by further orders that

Page: 291

may be passed in that behalf.

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98. Notice of Motion No. 1333/2011 in Suit 943/2011 - This suit

seeks a specific performance of the Memorandum of Understanding
executed by Vaidehi along with 37 letters of allotment. The Notice of
Motion seeks a restraint order on all the Defendants including the
Society and Rustomjee from creating third party rights in respect of 37
shops. For the reasons discussed above, the Notice of Motion is
dismissed with no order as to costs.
99. Notices of Motion Nos. 1886/2011,1900/2011, 1953/2011,
2002/2011 - These Notices of Motion have been taken out by the same
Plaintiff, who claims to be an agreement purchaser in respect of
premises from out of the sale components under Agreements for Sale
entered into by Vaidehi with the Plaintiff. All these suits seek specific
performance of the respective agreements for sale. The Plaintiff has
sought an interim injunction in these Notices of Motion against the
Defendants including the Society and Rustomjee from creating third
party rights in respect of these various premises. For reasons noted
above, there is no merit in the Notices of Motion and the same are
dismissed with no order as to costs.
100. Notices of Motion Nos. 2159/2011, 2160/2011, 216½011,
2162/2011, 2163/2011, 2164/2011,2169/2011,2170/2011,103½011,
1185/2013, 1186/2013, 1452/2013, 1544/2013, 1545/2013,
206/2014, 207/2014, 223/2014, 417/2014, 419/2014, 429/2014,
464/2014 and Notices of Motion (Lodging) Nos. 643/2014, 644/2014,
645/2014, 648/2014, 649/2014, 650/2014, 65½014, 652/2014,
655/2014, 722/2014, 724/2014, 728/2014, 323/2014, 766/2012,
686/2014— These Notices of Motion are taken out by the respective
Plaintiffs in these suits, who claim through Vaidehi under the
Agreements for sale executed between them and Vaidehi or letters of
allotment issued by Vaidehi in their favour in respect of sale of flats
from the free sale component of the redevelopment project. The
Motions seek appointment of Court Receiver and/or interim injunction
restraining the Defendants including the Society and/or Rustomjee
from creating third party rights in respect of the respective flats. For
reasons noted above, the Notices of Motion are dismissed with no order
as to costs.
101. Suit 322-2014 - Learned Counsel for Defendant No. 1 Society,
on instructions of Mr. Bhushan Sarang, Secretary of the Defendant
society, states that the arrears of rent as may be due in the case of
Plaintiffs in this suit as also future rent from October, 2011 will be paid
to these Plaintiffs. The Plaintiffs shall from time to time visit the office
of Defendant No. 1 society to collect the rent payable to them from
time to time as in the case of other members of Defendant No. 1
Society.
Order accordingly.
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