The Bombay High Court has ruled that a cooperative housing society’s right to seek unilateral deemed conveyance under Section 11(3) of Maharashtra Ownership Flats Act, 1963 (MOFA) survives the moratorium under Section 14 of the IBC, because once all flats are sold and a society is formed, the developer’s title in the land stands virtually divested and the land ceases to be an ‘asset’ of the corporate debtor.
The Court clarified that mere pendency of CIRP against a promoter does not suspend or extinguish the right of a cooperative housing society to seek unilateral deemed conveyance of land and building under Section 11(3) of the Maharashtra Ownership Flats Act, 1963. Once all flats in a building are sold and a society of flat purchasers is formed, the developer’s title in the land stands virtually divested by operation of Sections 4 and 11 of MOFA, and the land ceases to be an ‘asset’ of the corporate debtor within the meaning of Section 14 of the IBC.
The Competent Authority under Section 11 of MOFA can conduct a prima facie inquiry into the existence of consents under Section 7 of MOFA, even though it cannot determine the validity of such consents, and blanket consent letters, whether embedded in flat purchase agreements or extracted into separate letters, that do not disclose the nature, extent, or details of additional construction are unenforceable, added the Court.
Further, the Court asserted that any additional development potential made available under the Development Control and Promotion Regulations for Greater Mumbai, 2034 (DCPR 2034) after the building has been completed and the Occupation Certificate obtained belongs to the society and not to the developer, who cannot milk future FSI by relying on anticipatory consents secured before any approved plan for vertical extension existed.
The Bombay High Court accordingly set aside the order dated 29 July 2024 of the Competent Authority rejecting the deemed conveyance application and remanded the matter with a direction to issue the certificate of unilateral deemed conveyance in favour of the Petitioner-society preferably within three months.
Briefly, the dispute arises from a housing project at Village Ambivali, Andheri, Mumbai, where Respondent No. 2 i.e., Can Enterprises Private Limited, purchased a plot on 8 December 2009 and demolished the existing Rose Villa building (ground plus six floors) to construct a new one. After initial plans for four floors were revised, the Municipal Corporation of Greater Mumbai sanctioned construction up to the sixth floor on 30 January 2015, and Respondent No. 2 secured a full Occupation Certificate on 7 September 2016.
Flats were sold between 2016 and 2020 under Agreements executed under Section 4 of the Maharashtra Ownership Flats Act, 1963 (MOFA), which reserved the developer’s right to use additional FSI/TDR for vertical extension. Respondent No. 2 also secured individual No Objection Certificates (NOCs) from flat purchasers referring to a Notification dated 16 November 2016 for TDR use, and in 2020 obtained approval for construction of the 7th and 8th floors by paying premium for consumable FSI.
Meanwhile, Corporate Insolvency Resolution Process (CIRP) was initiated against Respondent No. 2 by NCLT order, imposing a moratorium and suspending the Board of Directors. The Petitioner-society was registered on 10 November 2022, and its challenge to the developer’s opposition to registration was repelled by the Bombay High Court. The Petitioner-society then filed application before the Competent Authority under Section 11(3) of MOFA seeking a certificate of unilateral deemed conveyance, which was opposed by the Resolution Professional relying on the flat purchaser NOCs. Later, the Competent Authority dismissed the application on two grounds, i.e., pendency of CIRP against Respondent No. 2 and the developer’s alleged entitlement to construct additional floors.
A Single Judge Bench of Justice Sandeep V. Marne observed that the Competent Authority had rejected the deemed conveyance application on twin grounds, pendency of CIRP against Respondent No. 2 and the developer’s alleged right to put up additional construction, and that both grounds required independent scrutiny. On the first ground, the Court noted that the issue was no longer res integra, having been settled by its earlier judgment in Darshan Mandir Co-operative Housing Society Limited vs. District Deputy Registrar, Co-operative Societies, Mumbai [Writ Petition No.16318 of 2025], wherein it was held that statutory rights of third parties and statutory duties of authorities continue despite insolvency or moratorium.
The Court emphasised that the concept of deemed conveyance was introduced precisely because developers were deliberately delaying conveyance to milk additional development potential, and that this statutory objective could not be defeated by Section 14 of the IBC. The Court further observed that once all flats in a building are sold and a society is formed, the developer’s title in the land gets virtually divested by operation of Sections 4 and 11 of MOFA, and the land ceases to be an ‘asset’ of the corporate debtor within the meaning of Section 14 of the IBC.
The Court also relied on the Supreme Court’s judgment in AA Estates P. Ltd. v. Kher Nagar Sukhsadan CHSL [2025 SCC OnLine SC 2579], which held that mere expectant, contingent or uncrystallised contractual rights do not constitute ‘assets’ of the corporate debtor. The Court further observed that the housing society’s non-registration could not be treated as a legal disability for conveyance during CIRP, since the developer itself had violated its statutory obligation under Section 10 of MOFA to form the society and could not benefit from its own wrong.
On the second ground regarding the developer’s alleged right to additional construction, the Court observed that the consent letters produced by Respondent No. 2 were essentially blanket consents, since they referred to ‘approved plans’ for vertical extension but no such approved plan existed when most of the consents were obtained. The Court noted that out of 23 sold flats, consent letters in respect of 16 flats were executed before the alleged sanction of the plan on 8 November 2017, and that the letters specifically referred to DCPR 2034 and future circulars, making them anticipatory consents rather than informed consents to a specific construction.
The Court further observed that the building had received its Occupation Certificate in 2016 with construction complete up to the sixth floor including an overhead tank and terrace, and that 10 years had elapsed since then, making it difficult to conclude that the building was incomplete. The Court noted that the additional development potential made available under DCPR 2034 belonged to the society and not to the developer.
