- Case
- KRUPA ZUBIN AND ANR v. THE DIVISIONAL JOINT REGISTRAR CO OP. SOC. AND ORS (Bombay High Court, 01-04-2025)
- Law
- Constitution of India, Maharashtra Ownership Flats (Regulation of the promotion of Construction Sale Management and transfer) Act, Maharashtra Co-operative Societies Act, Companies Act.
Facts: Petitioners, flat purchasers in a building developed under the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 ("MOFA Act"), challenged the registration of a co-operative housing society formed by other flat purchasers. The petitioners claimed they were compelled by a clause in their agreement with the developer to become members of an existing company, which, though dissolved in 2018, continued to function. They argued that the applicants for the co-operative society suppressed the existence of this company.
Procedural Posture: The petitioners filed a Writ Petition under Article 226 and 227 of the Constitution of India in the High Court of Judicature at Bombay, challenging the order of the District Deputy Registrar, Co-operative Societies, which registered the co-operative housing society, and the subsequent dismissal of their appeal by respondent No.1.
Issue: (1) Can a clause in an agreement compelling flat purchasers to join an existing company override the statutory mandate of Section 4(1A)(v) of the MOFA Act, which emphasizes the formation of a new and independent organization of flat purchasers? (2) Does the non-disclosure of a dissolved company's existence vitiate the registration of a co-operative housing society under Section 10 of the MOFA Act? (3) Does the pendency of proceedings before the NCLT regarding the company's dissolution affect the Competent Authority's jurisdiction under the MOFA Act?
Holding: The High Court dismissed the writ petition, holding that (1) such a clause is repugnant to Section 4(1A)(v) of the MOFA Act; (2) the non-disclosure of the dissolved company is not material enough to vitiate the registration; and (3) the NCLT proceedings do not affect the Competent Authority's jurisdiction under the MOFA Act.
Reasoning: The Court reasoned that Section 4(1A)(v) of the MOFA Act intends to empower flat purchasers to form an independent body. A clause compelling membership in an existing company, especially one controlled by the developer, undermines this intent. The Court emphasized that MOFA is a consumer-protection statute, and any clause perpetuating the promoter's control must be viewed with circumspection. The Court also held that since the company was dissolved, its non-disclosure was not a material suppression. Finally, the Court stated that remedies under the MOFA Act and the Companies Act operate in distinct legal spheres, and the NCLT proceedings do not bar the Competent Authority from acting under Section 10 of the MOFA Act. The court stated, "the alleged non-disclosure of the historical fact of formation of the company is of no relevance or consequence while considering an application under Section 10 of the MOFA Act."
