The Bombay High Court has held that an exemption for the bifurcation of an existing cooperative society cannot be granted under Section 7 of the Maharashtra Co-Operative Societies Act, 1960 (MCS Act), which applies only to the registration of new societies. The appropriate provision is Section 157 of the MCS Act, which mandates that the existing society must be given an opportunity to be heard before any prejudicial order is passed.
The Court said that an order passed in violation of this principle of natural justice (audi alteram partem) is liable to be set aside. Consequently, a bifurcation order that is based on a legally flawed exemption order is also invalid.
Furthermore, the Court emphasised that once a competent authority has granted a Deemed Conveyance for a property to a society under Section 11 of the Maharashtra Ownership Flats Act, 1963 (MOFA), it becomes functus officio (ceases to have jurisdiction) and cannot entertain a second application for Deemed Conveyance for the same property or a part thereof.
Accordingly, the Court quashed the exemption order dated December 8, 2017, and the subsequent bifurcation order dated November 3, 2018. As a result, the Court also set aside the order of Deemed Conveyance dated November 5, 2020, which was granted in favour of Jay Anand Bungalow CHS.
A Single Judge Bench of Justice R.I. Chagla observed that the exemption for the formation of the new society was granted under Section 7 of the Maharashtra Co-Operative Societies Act, 1960 (MCS Act), which pertains to the registration of new societies. However, since the Petitioner was an already existing society, the correct provision for granting such an exemption would have been Section 157 of the MCS Act.
The Bench noted that Section 157 explicitly requires that no prejudicial order shall be passed against a society without giving it an opportunity to be heard. The exemption order was passed without hearing the Petitioner, which constitutes a violation of the principles of natural justice.
The Bench also found that the conditions for exemption under the relevant notification of March 10, 1995 (regarding flat size and available FSI) were not met. Furthermore, the bifurcation did not meet the criteria of being in the ‘public interest’ or in the ‘interest of members’ as required by Sections 17 and 18 of the MCS Act, especially since the majority of members opposed it.
Briefly, the case involves the Jay Anand Co-operative Housing Society Ltd. (the Petitioner), which owns a property with two wings, ‘A’ and ‘B’, comprising 22 tenements. The dispute arose when some members, primarily from the bungalow in Wing ‘A’ (Respondent Nos. 4-6), sought to bifurcate the society. The Petitioner society had already obtained an order of Deemed Conveyance for the entire property on May 27, 2016.
Subsequently, Respondent No. 4 proposed the bifurcation. The Ministry of Cooperation granted an exemption on December 8, 2017, for the formation of a new society (Jay Anand Bungalow CHS) with fewer than the minimum required members, without hearing the Petitioner society. Based on this exemption, an order for bifurcation of the Petitioner society was passed on November 3, 2018.
The newly formed Jay Anand Bungalow CHS then applied for and was granted a Unilateral Deemed Conveyance for a part of the property on November 5, 2020. The Petitioner challenged the bifurcation order and the Deemed Conveyance order. A contempt petition was also filed alleging a breach of a status quo order passed by the court.
Appearances:
Advocates Pravin Samdhani, Mayur Khandeparkar, Mehul Shah, Yatin Khochare, and Abhishek Nikharge, for the Petitioner
Advocates Uma Palsule Desai, Gaurangi Patil, Dr. Virendra Tulzapurkar, Akshay Deshmukh, Sanket Kadam, and Sumit Chaudhary, for the Respondent
