Supreme Court Resolves Cooperative Society Redevelopment Dispute: Kamgar Swa Sadan Co-operative Housing Society Ltd. vs. Vijaykumar Vitthalrao Sarvade & Ors. (2022)

Date of the Judgment: 08 February 2022
Citation: Kamgar Swa Sadan Co-operative Housing Society Ltd. v. Mr. Vijaykumar Vitthalrao Sarvade & Ors., Civil Appeal No. 1222 of 2022 (arising out of SLP (Civil) No. 21964 of 2017)
Judges: Hon’ble Justices Abhay S. Oka and Ajay Rastogi. The judgment was authored by Justice Abhay S. Oka.

Can a few dissenting members stall a crucial redevelopment project of a cooperative housing society, especially when the buildings are in a dilapidated condition? The Supreme Court of India recently addressed this critical issue, balancing the rights of dissenting members with the urgent need for safe housing for the majority. This case revolves around a dispute concerning the redevelopment of a cooperative housing society in Mumbai, where a few members opposed the project, leading to significant delays.

Case Background

The case involves a dispute over the redevelopment of buildings belonging to Kamgar Swa Sadan Co-operative Housing Society Ltd. (the appellant), a society registered under the Maharashtra Co-operative Societies Act, 1960. The respondent nos. 1 to 11 are the original plaintiffs and members of the society, while the respondent nos. 12 to 25 are office bearers of the society. Respondent nos. 26 to 29 are the developers/builders, and respondent nos. 30 to 38 are officials and members of a High Power Committee constituted by the Government of Maharashtra. The last respondent is the Project Consultant and Architect. The core issue revolves around the redevelopment of the society’s buildings under Regulation 33(7) of the Development Control Regulations for Greater Mumbai, 1991.

Initially, on 12th February 2011, the society passed a resolution to accept the tender of respondent no. 26 for the redevelopment. Subsequently, on 2nd December 2012, a resolution was passed to appoint respondent no. 27, a sister concern of respondent no. 26, as the developer. An agreement for development was executed on 24th December 2012, promising free ownership of redeveloped premises to eligible members and a corpus of Rs. 5,00,000 per member. The Assistant Registrar of Co-operative Societies granted permission for the redevelopment on 27th December 2012 and further permission on 7th January 2013, noting that 165 members supported the proposal.

Timeline

Course of Proceedings

Respondent nos. 2, 3, and 8, along with other members, filed a revision application under Section 154 of the Maharashtra Co-operative Societies Act, 1960, challenging the permissions granted by the Assistant Registrar. The revisional authority allowed the application on 14th May 2013. The appellant-Society challenged this order in the Bombay High Court, which stayed the revisional authority’s order on 11th December 2013. The Supreme Court dismissed the Special Leave Petition against the High Court’s stay order, directing the High Court to expedite the writ petition. In the pending writ petition, an application for interim status quo was rejected by the High Court.

Subsequently, respondent nos. 1 to 11 filed a suit in the City Civil Court at Mumbai on 20th February 2016, contesting the resolutions passed in the Special General Body Meetings held on 12th February 2011 and 2nd December 2012. They argued the resolutions were illegal and sought a declaration to that effect, along with a direction for a fresh tender process. The Trial Court did not grant interim relief. The appellant-Society argued that the Civil Court lacked jurisdiction under Section 91 of the Maharashtra Co-operative Societies Act, 1960, and that the suit was barred by limitation, invoking Section 9A of the Code of Civil Procedure, 1908. The Trial Court held that the suit was maintainable and within limitation. The High Court dismissed the revision application against the Trial Court’s order, leading to the present appeal before the Supreme Court.

Legal Framework

The primary legal framework in this case involves the interpretation of Section 91 of the Maharashtra Co-operative Societies Act, 1960, which deals with disputes related to cooperative societies, and Section 9A of the Code of Civil Procedure, 1908, as applicable in Maharashtra, which pertains to preliminary issues of jurisdiction. Additionally, the Limitation Act, 1963, particularly Section 14, concerning exclusion of time in certain cases, is relevant.

Section 91 of the Maharashtra Co-operative Societies Act, 1960, provides the jurisdiction of the Cooperative Court to entertain disputes related to the society. The appellant-Society contended that the dispute in the present case was covered under this provision, barring the jurisdiction of the Civil Court. Section 9A of the Code of Civil Procedure, 1908 (as applicable in Maharashtra), allowed for preliminary issues of jurisdiction to be decided before granting interim relief. However, this section was repealed, and the Supreme Court had to determine the impact of this repeal on the case.

The Court also considered the implications of Section 14 of the Limitation Act, 1963, which allows for the exclusion of time spent in prosecuting a civil proceeding in a court without jurisdiction. The original plaintiffs relied on this section to argue that their suit was within the limitation period, despite being filed several years after the resolutions they were challenging.

Arguments

Appellant-Society’s Arguments:

• The suit filed by the respondent nos. 1 to 11 was barred by Section 91 of the Maharashtra Co-operative Societies Act, 1960, as the dispute was within the exclusive jurisdiction of the Co-operative Court.
• The suit was also barred by limitation. The appellant-Society argued that the original plaintiffs were not entitled to the benefit of Section 14 of the Limitation Act, 1963.
• The buildings of the society were in extremely dilapidated condition, and the redevelopment was necessary for the safety of the members.
• Except for the respondent nos. 1 to 11, more than 150 members of the society had consented to the redevelopment by respondent no. 27.

Respondent Nos. 1 to 11 (Original Plaintiffs) Arguments:

• The resolutions passed in the Special General Body Meetings were illegal and contrary to the law and guidelines issued by the State Government.
• The tender process conducted by the appellant-Society was also illegal.
• The Civil Court had the jurisdiction to entertain the suit, and the suit was not barred by Section 91 of the Maharashtra Co-operative Societies Act, 1960.
• The suit was within the limitation period, as the original plaintiffs were entitled to the benefit of Section 14 of the Limitation Act, 1963.
• The respondent no. 27 did not have adequate experience in developing properties in Mumbai.
• Considering the additional Floor Space Index (FSI) now available, the area offered by respondent no. 27 to the members of the society should be increased.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issues addressed by the Court were:

1. Whether the Civil Court had jurisdiction to entertain the suit in view of Section 91 of the Maharashtra Co-operative Societies Act, 1960?
2. Whether the suit was barred by limitation?
3. Whether the redevelopment of the society’s buildings was necessary and in the interest of the members?
4. Whether the offer made by the respondent no. 27 was fair and adequate?

Treatment of the Issue by the Court

Authorities

The Supreme Court referred to the following authorities:

Cases:

• Nusli Neville Wadia v. Ivory Properties & Ors., 2020 (6) SCC 557: The Supreme Court discussed the interpretation of the expression “jurisdiction to entertain” under Section 9A of the Code of Civil Procedure, 1908, as applicable in Maharashtra. The Court held that the issue of jurisdiction to entertain a suit has to be decided without recording evidence. The Court **overruled** the decision of the Full Bench of the High Court of Bombay in Meher Singh, which held that under Section 9A the issue to try a suit/jurisdiction can be decided by recording evidence if required. The Supreme Court **approved** the decision in Kamalakar Eknath Salunkhe, which held that the issue of jurisdiction should be decided without recording evidence.

Statutes:

• Maharashtra Co-operative Societies Act, 1960: Section 91, which deals with disputes related to cooperative societies and the jurisdiction of the Cooperative Court.
• Code of Civil Procedure, 1908: Section 9A (as applicable in Maharashtra), which pertains to preliminary issues of jurisdiction (now repealed).
• Limitation Act, 1963: Section 14, concerning exclusion of time in certain cases.

Judgment

The Supreme Court, exercising its powers under Article 142 of the Constitution of India, disposed of the appeal with the following directions:

How each authority was viewed by the Court:

• The Supreme Court relied on Nusli Neville Wadia v. Ivory Properties & Ors. [2020 (6) SCC 557]* to clarify the scope of Section 9A of CPC and held that issues of jurisdiction should be decided without recording evidence.
• The Court considered Section 91 of the Maharashtra Co-operative Societies Act, 1960* to understand the jurisdiction of the Co-operative Court, but did not make a final determination on whether the Civil Court had jurisdiction in this case.
• The Court noted Section 9A of the Code of Civil Procedure, 1908* (as applicable in Maharashtra) and its subsequent repeal but did not use it to decide the preliminary issue of jurisdiction.
• The Court considered Section 14 of the Limitation Act, 1963*, but did not give a final finding on whether the plaintiffs were entitled to its benefit.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following:

• Dilapidated Condition of Buildings: The Court was deeply concerned about the extremely poor condition of the society’s buildings, which posed a significant risk to the lives of the residents. The Court noted that the buildings were categorized as C2-A, requiring immediate major repairs and even evacuation.
• Urgency of Redevelopment: The Court recognized the urgent need for redevelopment to ensure the safety and well-being of the society’s members. The Court highlighted that the delay caused by the ongoing litigation was detrimental to the members.
• Majority Support for Redevelopment: The Court noted that the majority of the society’s members supported the redevelopment project through respondent no. 27. The Court emphasized that the objections of a few members should not stall a project that was beneficial for the majority.
• Fairness of the Offer: The Court acknowledged that the offer made by the respondent no. 27 was largely fair, especially after the increase in FSI. The Court also took into account the additional benefits offered, such as transit rent, shifting charges, and a corpus fund.
• Need for Complete Justice: The Court exercised its powers under Article 142 of the Constitution to do complete justice between the parties and to put an end to the ongoing disputes.

Logical Reasoning:

The Court considered the arguments of both sides and the factual matrix of the case. It noted that while the original plaintiffs had raised concerns about the legality of the resolutions and the tender process, as well as the experience of the developer and the adequacy of the area offered, the overriding concern was the safety of the members of the society. The Court also considered the fact that a large majority of the members had consented to the redevelopment by the respondent no. 27. The Court then balanced the need to do complete justice with the need to ensure the safety of the members. It used its powers under Article 142 of the Constitution to put an end to the disputes and facilitate the redevelopment process.

The Court considered alternative interpretations, such as sending the matter back to the Trial Court for a decision on the issue of limitation. However, it rejected this option because it would have further delayed the redevelopment process and kept the members in unsafe buildings for an extended period. The Court also rejected the argument that the respondent no. 27 lacked experience, noting that the respondent had given sufficient undertakings to protect the interests of the members.

The Court’s final decision was to allow the redevelopment to proceed with modifications to the offer made by the respondent no. 27. The Court increased the area of residential premises to 475 sq. ft. and directed the respondent no. 27 to pay transit rent for five years in advance. The Court also directed the disposal of the suit filed by the original plaintiffs and the quashing of the criminal complaint filed by them.

The Supreme Court quoted the following from the judgment:

“Therefore, this Court cannot countenance a situation that will delay the development work for an inordinately long time due to the objection by a handful of members.”

“To give finality and quietus to the controversy in the larger interests of members of the appellant-Society, considering the objection of the respondent nos. 1 to 11 to the area offered by the respondent no.27, we propose to direct the respondent no.27 to provide residential tenements having a carpet area of 475 sq. ft. (exclusive of service slab) to the eligible members occupying residential premises.”

“The undertakings of the appellant-Society and the respondent no.27 are taken on record as aforesaid with a modification that the area of residential premises to be provided to all eligible members of the appellant-Society occupying residential premises shall be 475 sq.ft. of carpet area (exclusive of service slab).”

There were no dissenting opinions in this case.

The Court’s reasoning was based on a holistic assessment of the facts and circumstances of the case, the need to balance the rights of all parties, and the need to ensure the safety and well-being of the members of the society. The Court’s decision was a practical solution to a complex problem.

The implications for future cases are that the Supreme Court has shown that it is willing to use its powers under Article 142 to do complete justice and to resolve disputes that are causing harm to the public. The Court has also shown that it will not allow a minority of members to stall a project that is in the best interests of the majority, especially when the project is necessary for the safety and well-being of the members.

The Court did not introduce any new doctrines or legal principles but re-emphasized the importance of balancing the rights of all parties and the need to ensure the safety of the public.

Key Takeaways

• Balancing Majority and Minority Rights: The Supreme Court emphasized that while the rights of dissenting members must be considered, they cannot be allowed to jeopardize the safety and well-being of the majority, particularly in cases involving dilapidated housing conditions.
• Use of Article 142: The Court demonstrated its willingness to exercise its plenary powers under Article 142 of the Constitution to ensure complete justice and resolve complex disputes, especially where there is an urgent need for intervention.
• Importance of Redevelopment: The judgment underscores the importance of timely redevelopment of dilapidated buildings to safeguard the lives of residents.
• Fairness in Offers: The Court ensured that the offer made by the developer was fair and adequate, taking into account the increased FSI and other benefits.
• Expeditious Resolution: The Court prioritized an expeditious resolution to the dispute, recognizing the potential harm caused by prolonged litigation.

Directions

The Supreme Court issued the following directions:

1. The undertakings of the respondent no. 27 and the appellant-Society were taken on record, with the modification that the area of residential premises should be 475 sq. ft. of carpet area (exclusive of service slab).
2. In case the appellant-Society needs to replace the developer, the new developer must abide by the directions in this order.
3. Respondent no. 27 shall offer transit rent for five years, shifting charges, and brokerage to all eligible members within two months.
4. The members shall hand over vacant possession of their premises within two months of receiving the aforementioned amounts.
5. The entire project shall be completed within five years from the date the respondent no. 27 takes possession of all tenements.
6. The suit filed by respondent nos. 1 to 11 in the City Civil Court at Mumbai stands disposed of.
7. The criminal complaint filed by respondent nos. 1 to 11 is quashed.
8. If the appellant-Society or the respondent no. 27 breach the directions or undertakings, the respondent nos. 1 to 11 can initiate proceedings. Similarly, if the respondent nos. 1 to 11 breach the directions, the appellant-Society and/or the respondent no. 27 can initiate proceedings.

Development of Law

The ratio decidendi of this case is that the Supreme Court can exercise its powers under Article 142 of the Constitution of India to do complete justice and to resolve disputes that are causing harm to the public. The Court also held that a minority of members cannot stall a project that is in the best interests of the majority, especially when the project is necessary for the safety and well-being of the members. There is no change in the previous positions of law, but the Court has emphasized the importance of balancing the rights of all parties and the need to ensure the safety of the public.

Conclusion

In conclusion, the Supreme Court’s judgment in Kamgar Swa Sadan Co-operative Housing Society Ltd. v. Mr. Vijaykumar Vitthalrao Sarvade & Ors. is a significant ruling that prioritizes the safety and well-being of cooperative society members, especially when they reside in dilapidated buildings. The Court’s intervention, using its powers under Article 142, demonstrates its commitment to resolving disputes that are causing harm to the public and ensuring that redevelopment projects are not stalled by a few dissenting members. The judgment provides a clear message that the larger interests of the community must be balanced with individual rights.