Co-operative Court can hear housing-society redevelopment disputes only if bylaws cover redevelopment and no third-party rights have arisen, Bombay High Court rules

The Petitioners, members of the Respondent housing society, challenged the society’s self-redevelopment project.

They alleged procedural and financial irregularities in the appointment of a Development Manager and Financer, and contended that the project effectively transferred a substantial share of the additional built-up area to those entities.

The Petitioners filed a dispute under Section 91 of the Maharashtra Co-operative Societies Act, 1960 (MCS Act), seeking, among other reliefs, production of project documents, compliance with government guidelines and restraint on further project activity.

The society and its office-bearers sought rejection of the dispute under Order VII Rule 11 of the Code of Civil Procedure, 1908.

The Co-operative Court rejected that application and refused interim relief; the Co-operative Appellate Court subsequently allowed the society’s appeal, rejected the dispute and dismissed the Petitioners’ appeal against refusal of interim relief.

The Petitioners challenged both appellate orders before the High Court.

Whether the dispute challenging decisions and acts connected with the society’s redevelopment was maintainable under Section 91 of the MCS Act, particularly where the pleadings did not allege that the society’s bylaws had been amended to include redevelopment as its business?

Whether the dispute could be maintained before the Co-operative Court where agreements had created rights in favour of the Development Manager and Financer before the dispute was filed, but those entities were not parties to it?

Whether the Petitioners were entitled to interim relief restraining further redevelopment activity?

Section 91 of the MCS Act requires both that the parties fall within the categories specified in that provision and that the subject matter relate to a dispute specified there.

Following the 2019 amendments to the MCS Act, redevelopment may support a dispute under Section 91 as the society’s business only where the society’s bylaws have been amended to include redevelopment; the amendment does not automatically alter existing bylaws.

The Court held that a redevelopment dispute under Section 91 must plead that redevelopment has been included as the society’s business through a post-amendment bylaw change and that no document has created third-party rights in the society’s property. Both statements must appear in the dispute application.

Under Section 94(3)(a), as interpreted in Margret Almeida v. Bombay Catholic Co-operative Society Ltd., (2012) 5 SCC 642, a person who acquired an interest in the property before the dispute was filed cannot be impleaded in that dispute.

Parimal H. Solanki v. Bhoumik Co-operative Housing Society Ltd. and Baliram Totaram Misal v. Saujanya Co-operative Housing Society Ltd. were relied on for the bylaw requirement and the need to bring challenges to relevant resolutions and redevelopment agreements before the appropriate forum.

Anthony Irineus Carneiro v. Francis Colaco clarified that redevelopment alone does not oust the Co-operative Court’s jurisdiction; the nature of the challenge, the stage of redevelopment and the existence of third-party rights must be assessed on the facts.

The Court read the dispute application as a whole and found that, despite the Petitioners’ characterisation of their claims as requests for documents and compliance with guidelines, its substance challenged the selection and appointment of the Development Manager and the implementation of the redevelopment project.

The pleadings acknowledged the Development Manager Agreement and Finance Agreement, which the Court found created rights in favour of the Development Manager and Financer before the dispute was filed.

As those entities were not parties, the dispute could not effectively determine the challenge to those rights; Section 94(3)(a) precluded their joinder in the circumstances.

Independently, the dispute contained no averment that the society had amended its bylaws after the 2019 amendments to make redevelopment its business.

The Court therefore held that the dispute failed the requirements for maintainability under Section 91 and was liable to rejection under Order VII Rule 11.

Because the underlying dispute was not maintainable, the claim for interim relief could not survive.

The Court upheld the Co-operative Appellate Court’s order rejecting the dispute under Order VII Rule 11.

It dismissed the connected petition challenging refusal of interim relief as infructuous, observing that the Petitioners would have to pursue their remedy in a civil suit and seek interim relief there.

Both writ petitions were dismissed with no order as to costs.