Vardhman Developers LTD Vs Borla Co-Operative

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2013 SCC OnLine Bom 1925 : (2014) 2 Bom CR 420 : (2014) 1 AIR Bom R 472
In the High Court of Bombay

(O.S.)
(BEFORE DHANUKA R.D., J.)
Vardhman Developers Ltd. … Plaintiff;

Versus
Borla Co-operative Housing Society Ltd. & ors. … Defendants.
Notice of Motion No. 1081 of 2010 in Suit No. 1442 of 2009
Decided on October 11, 2013 and October 22, 2013
Page: 421
The Judgment of the Court was delivered by

DHANUKA R.D., J.:— By this motion, the applicants (some of the original
defendants) seek rejection of the plaint under Order VII, Rule 11(d) of the Code of
Civil Procedure, 1908. Plaintiffs have filed a suit inter alia praying for declaration that
the development agreement dated 21st October, 2007 executed by and between the
plaintiffs and defendant No. 1 is binding on all the defendants, their servants, agents
and any persons claiming through them including all the members of the defendant
No. 1 society. Plaintiffs have also prayed for order and decree against defendant Nos. 2
to 72 to execute their consent for redevelopment in favour of the plaintiffs in terms of
the development agreement.
2. This motion has been filed by the applicants on the ground that though in the
plaint and in particular paragraph 17, it is averred by the plaintiffs that in view of the
urgency in the matter, notice under section 164 of the Maharashtra Co-operative
Societies Act, 1960 (hereinafter referred to as the “Said Act”) has not been given to
defendant No. 1 and that the same be dispensed with, plaintiffs have not applied for
dispensing with the said notice. It is submitted that though the plaintiffs have sought
reliefs against defendant No. 1 society, notice under section 164 of the said Act has
not been issued. It is submitted that the notice under section 164 of the said Act is
mandatory and cannot be waived and/or dispensed with and this suit is barred under
section 164 of the said Act and is liable to be rejected under Order VII, Rule 11(d) of
the Code of Civil Procedure, 1908. Mr. Mehta, the learned Counsel for the applicants
invited my attention to prayer Clause (a) by which the plaintiff seeks declaration that
the development agreement entered into between plaintiffs and defendant No. 1 is
binding on all the defendants including members of defendant No. 1. It is submitted
that thus prayer (a) in the plaint is barred for want of mandatory notice under section
164 not issued by the plaintiffs before filing of suit. Mr. Mehta, learned Counsel placed
reliance on the judgment of this Court in the case of (Suprabhat Co-op. Housing
Society Ltd. v. Span Builders)1 , 2002 (6) Bom.C.R. 257 : 2002 (3) Mh.L.J. 837 and in
particular paragraphs 7, 8, 9, 10, 12 and 13 in support of his submission that the suit
is not maintainable if no notice under section 164 of the said Act was served upon the
society and the suit is thus liable to be rejected for want of notice under section 164 of
the said Act. The relevant paragraphs read thus:
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“7. Section 164 provides that no suit shall be instituted against a society, or any
of its office bearers in respect of any act touching the business of the society, until
after the expiration of two months after the stipulated notice has been delivered.
The notice is to specify the cause of action and the other particulars which are set
out in section 164. The plaint is to then contain a statement that a notice was so
delivered.
8. The expression “touching the business of the society”, which is employed in
section 164 has also been used in section 91 of the Act. Section 91, it would be
material to note, falls in Chapter IX of the Act which is entitled “Statement of
Disputes”. Section 91 provides that notwithstanding anything contained in any
other law for the time being in force any dispute touching the constitution, elections
of the committee or its officers other than elections of committees of specified
societies including its officers conduct of general meetings, management or
business of a society shall be referred by any of the parties to the dispute to a Co-
operative Court if the parties thereto are one or the other of the parties specified in
Clauses (a) to (e) of the section. The expression “touching the business of the
society” came up for consideration before the Supreme Court in (Deccan Merchants
v. Dalichand]2 , 1968 Bom.L.R. 418 reported in the Supreme Court held that in the
context of section/91, the expression “touching the business of the society” would
not mean the affairs of a society because election of office-bearers, conduct of
general meetings and management of a society could be treated as affairs of a
society. Therefore, the Court was of the view that the word “business” has been
used in a narrower
Page: 422
sense and it means the actual trading, commercial or other similar business activity of
the society which the society is authorised to enter into under the Act and the Rules
and its Bye-laws. In the present case, the Court is concerned with the construction to
be placed upon the meaning of the expression “touching the business of the society”
not in the context of section 91 but in section 164. Nevertheless, the principle which
has been laid down by the Supreme Court must illuminate the interpretation to be
placed by this Court on the expression” touching the business of the society”. In that
context, it would be necessary to advert to the following observations of the Supreme
Court, in Deccan Merchants (supra):
“The question arises whether the dispute touching the assets of a society
would be a dispute touching the business of the society. This would depend on
the nature of the society and the rules and Bye-laws governing it. Ordinarily, if a
society owns buildings and lets out parts of buildings which it does not require
for its own purpose it cannot, be said the letting out of those parts is a part of
the business of the society. But it may be that it is the business of a society to
construct and buy houses and let them out to its members. In that case letting
out property may be part of its business. In this case, the society is a co-
operative bank and ordinarily a co-operative bank, cannot be said to be engaged
in business when it lets out properties owned by it. Therefore, it seems to us that
the present dispute between a tenant of a member of the bank in a building
which has subsequently been acquired by the bank cannot be said to be a
dispute touching the business of the Bank, and the appeal should fail on this
short, ground.”
9. The basic principle which has been formulated by the Supreme Court is that
whether a particular dispute touches the business of the society would depend upon
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the nature of the society and the rules and Bye-laws governing it. In the case
before the Supreme Court, the society was a Co-operative Bank. The Supreme Court
held that ordinarily, a Co-operative Bank cannot be said to be engaged in a
transaction which touches the business of the society when it lets out properties
owned by it. Therefore, a dispute between a tenant of a member of the Bank in a
building which had subsequently been acquired by the Bank was held. not to touch
the business of the Bank. The Supreme Court in the observation which has been
extracted above, however, also considers a case where it is the business of a society
to construct and buy houses and let them out to its members. The Supreme Court
held that in such a case letting out of property is the business of the society. The
distinction between the two types of cases has to be borne in mind. The distinction
is premised in the nature of the society as evidenced by its objects and Bye-laws.
10. In the present case, the first applicant is a Co-operative Housing Society and
has been registered, as such under the Act A housing society is defined by section 2
(16) to mean a society, the object of which is to provide its members with open
plots for housing, dwelling houses or flats; or if open plots, the dwelling houses or
flats are already acquired, to provide its members common amenities and services.
The first applicant is a co-operative housing society and falls within the
subclassification of a Tenant Co-partnership Housing Society within the meaning of
Rule 10 of the Rules. The objects of the first applicant inter alia include to buy or
take on lease the plot, bearing No. C-39 of Sector 12, Kharghar, admeasuring 7252
Sq. metres and to construct, flats thereon for allotment to the members of the
society for their authorised use. The construction contract which was entered into
with the respondents was clearly in pursuance of the basic object of the applicants.
The contractual relationship which was entered, into between the applicants and the
respondents was thus in furtherance of and towards implementing the basic object
of the applicants as a Tenant Co-partnership Housing Society. The dispute which
has arisen between the parties is in the performance of the contract which was thus
entered into.
Therefore, having regard to the principle incorporated in section 164 of the Act,
the suit which has been instituted by the respondents is clearly one which touches
the business of the society. The suit was in the circumstances, clearly not
maintainable since it is an admitted position that no notice under section. 164 of
the Act was served.
12. In the facts and circumstances, the view which has been taken by the
learned trial Judge is manifestly incorrect the learned
Page: 423
trial Judge has thus, committed a material irregularity in the exercise of his
jurisdiction, which would warrant the interference of this Court under section 115 of
the Code of Civil Procedure, 1908.
13. The impugned order of the learned trial Judge dated 17th October 2001 is
quashed and set aside. The application filed by the applicants, Exh. 18 in Special
Civil Suit No. 28 of 2001 shall in the circumstances, stand allowed. In pursuance of
the provisions contained in Order 7, Rule 11(d) of the Code of Civil Procedure,
1908, the plaint is liable to and is accordingly rejected for want of notice under
section 164 of the Maharashtra Co-operative Societies Act, 1960. It is needless to
add that it would be open to the respondents to institute a fresh suit after due
notice as required under section 164 of the Maharashtra Co-operative Societies Act,
1960. The civil revision application is accordingly allowed.
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Parties to act on a copy of this order duly authenticated by the Sheristedar/P.S.

of this Court.”
3. Mr. Mehta placed reliance on the judgment of this Court in the case of (C.F.
Marconi v. Madhav Co-operative Housing Society Ltd.)3 , 1985 (2) Bom.C.R. 357 and in
particular paragraphs 4 and 7 in support of his submission that notice under section
164 of the said Act was mandatory. It is submitted that the resolution of the society
by which the society had agreed to enter into agreement for redevelopment with the
plaintiff was in respect of the act touching the business of the society and thus notice
was mandatory. Paragraphs 4 and 7 read thus:
“4. This suit was resisted by the defendant on various grounds. One of the
grounds is that the suit is not tenable in the absence of a notice under section 164
of the Act. This point was heard as a preliminary point. The learned Judge of the
City Civil Court, Bombay, accepted this contention and the suit was dismissed.
7. It was next urged by Shri Dalvi that the contention about the necessity of the
notice under section 164 of the Act should be deemed to have been waived by the
defendant and that it would not be open for the defendant to urge for it. The suit in
question was filed on May 11, 1963. The plaintiff filed a notice of motion in that suit
claiming certain temporary reliefs. That notice of motion was opposed by the society
by raising a number of contentions. However, the plea of non-maintainability of the
suit on account of the absence of the notice under section 164 of the Act has been
taken. But such a plea was specifically taken when the defendant filed a written
statement to the suit. The argument of Shri Dalvi is that an omission to take plea in
the notice of motion proceedings should be held to be a conduct suggesting that
the plaintiff gave up that plea. We are not able to accept this contention for a
simple reason that pleas for the suit are to be raised in the written statement. In
the present case the concerned plea about the necessity of the notice has been so
taken. An omission to raise it in the interlocutory matter would be irrelevant.”
4. Mr. Mehta also placed reliance on the judgment delivered by the learned Single
Judge in the case of (Homi Nariman Bhiwandiwala v. Zoroastrian Co-operative Credit
Bank Ltd.)4 , 2001 (3) Bom.C.R. 352 (O.S.) in support of his submission that notice
under section 164 of the said Act was mandatory and the suit is not maintainable for
want of notice. Reliance is placed on paragraph 16 of the said judgment which reads
as under:
“16. Issue Nos. 13, 15 & 21: — Defendant No. 2 is a trust and in case of a trust
which is not a legal entity, all the trustees should be joined if a legal action is
initiated against a trust. This view is taken by a Division Bench of the Gujarat High
Court, reported in (Atmaram Ranchhodbhai v. Gulamhusein Gulam Mohiyaddin)5 ,
A.I.R. 1973 Guj. 113. Same view is also taken by this Court in a decision reported
in (Venkatesh Iyer v. Bombay Hospital Trust)6 , 1998 (2) Bom.C.R. 798. The suit is
also not maintainable for want of under section 164 of the Maharashtra Co-operative
Societies Act. The notice is mandatory which is clear from the provisions of section
164 of the M.C.S. Act. This is laid down by the Division of this Court in the
judgment reported in (Mohan Meakin Ltd. v. The Pravara Sahakari Sakhar
Page: 424
Karkhana Ltd.)7 , 1987 Mh.L.J. 503 and in head note (b) the Court has held thus:
“Held, that the defendant was a society which was carrying on the business of
manufacturing Alcoholic products viz. Whisky and that being the business of the
society it was clear that the provisions of section 164 of the Maharashtra Co-
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operative Societies Act were attracted. One of the objects of the society in
addition to manufacture of sugar was the manufacture of complementary
products and in that behalf to erect the necessary machinery. The alcoholic
products manufactured out of molasses by the defendant Co-operative Society
was a complementary product and the said business fairly and squarely fell
within the ambit of the Bye-laws of the society. The provisions of the
Maharashtra Co-operative Societies Act, and in particular section 164 of the said
Act must apply and in the absence of statutory notice under section 164 the suit
was not maintainable.”
Head Note (C) of the above judgment also mentions the same position. Thus the
suit is not maintainable in the absence of notice and notice given after filing of the
suit by the plaintiff makes no difference in the situation as the suit as filed was not
maintainable and the defect is not curable by giving notice on presentation of the
plaint. Issues Nos. 13, 15 & 21 are therefore answered accordingly.”
5. Mr. Mehta placed reliance on the judgment of the Single Judge of this Court in
the case of (Gurudev Developers v. Kurla Konkan Niwas Co-op. Hsg. Society)8 , 1999
(Supp.) Bom.C.R. 257 (O.S.) : 2000 (3) Mh.L.J. 131 and relevant paragraph on page
140 which reads thus:
“In my view, the observations made in the aforesaid judgments make it clear
that the suit filed by the plaintiff would not be maintainable on the ground that the
requisite notice as required under section 164 of the Maharashtra Co-operative
Societies Act has not been served. Counsel has further submitted that even if the
suit is said to be maintainable yet no relief can be granted to the plaintiff in the suit
as the agreement dated 18th January, 1985 is merely a development agreement
and the same cannot be specifically performed. Learned Counsel has relied on a
judgment given in Notice of Motion No. 2716 of 1987 in Suit No. 2673 of 1987.”
6. Mr. Mehta submits that even if the society has entered into an agreement with
the developer for redevelopment of the property of the society, dispute arising out of
such resolution passed by the society was touching the business of the society and
under section 164 of the said Act notice was mandatory and the suit deserves to be
set aside for want of notice. Mr. Kamdar, learned Senior Counsel appearing on behalf
of the plaintiffs on the other hand submits that if the society is constituted for
construction of buildings and for providing flats, any dispute arising out of such
decision taken by the society would amount to touching the business of the society
and notice under section 164 in such event would be mandatory. It is submitted that
once the building is constructed and society seeks to redevelop the property of the
society in the capacity as owner, dispute arising out of such resolution would not
amount to business of the society. Mr. Kamdar submits that the object clause of the
society must provide for redevelopment as business which in this case is absent. It is
submitted that in any event, only society can raise such objection that the suit is liable
to he dismissed for want of notice and no third party. It is submitted that there is no
dispute between the plaintiff and defendant No. 1 society. The society is ready and
willing to comply with their part of obligation. The dispute is however, raised by some
of the members of the society who are applicants in this notice of motion.
7. Mr. Kamdar placed reliance on the judgment of this Court in the case of (Disha
Construction v. Jaysen S. Mastakar)9 , delivered by the learned Single Judge of this
Court on 16th September, 2013 in Notice of Motion No. 859 of 2013 in Suit No. 397 of
2013, reported in 2013 (6) Bom.C.R. 11 (O.S.) and in particular paragraph 27 which
read thus:
Page: 425
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“27. Mr. Chinoy the learned Senior Advocate appearing for the plaintiff has at the
outset correctly submitted that as held in a plethora of judgements passed by this
Court, the present suit filed by the Developer is maintainable. In fact the Hon'ble
Supreme Court has in the case of (Margaret Almeida v. Bombay Catholic
Cooperative Housing Soc. Ltd.)10 , 2012 B.C.I. (soft) 4 (S.C.) : (2012) 5 SCC 642
followed by a Division Bench of this Court in (Mohinder Kaur Kochar v. Mayfair
Housing Pvt. Ltd.)11 , 2012 (6) Bom.C.R. 194 (O.S.) has held that the suit between a
developer and the society or its members cannot be a dispute which can be
adjudicated by the Co-operative Court under section 91 of the Maharashtra Co-
operative Housing Societies Act, 1960 (“MCS Act”). Mr. Chinoy has at the outset
also relied on the decision of the learned Single Judge (Coram: Dr. D.Y.
Chandrachud, J.) dated 7th March, 2011, in (Vardhman Developers Ltd. v.
Thailambal Co-op. Hsg. Socy. Ltd.)12 , in Notice of Motion No. 3274 of 2010 in Suit
No. 2725 of 2010 in support of his submission that the process of redeveloment of
the society by the Developer does not constitute the business of the society within
the meaning of section 91 of the MCS Act and in view thereof no notice under
section 164 of the MCS Act is required.”
8. The learned Single Judge of this Court has referred to the earlier judgment of the
learned Single Judge delivered on 7th March, 2011 in the case of Vardhaman
Developers Ltd. v. Thailambal Co-op. Hsg. Socy. Ltd., and held that no notice under
section 164 of the said Act would be required in respect of the redevelopment of the
society by the developer.
9. Mr. Kamdar also placed reliance on the judgment of the learned Single Judge of
this Court delivered on 26th August, 2013 in the case of (Akash Pruthvi Lifestyle v.
Akash Co-op. Hsg. Soc. Ltd.)13 , in Notice of Motion (L) No. 1518 of 2013 and in
particular paragraph 15 which reads as under:
“15. The submission made on behalf of defendant No. 2 that this Court has no
jurisdiction to entertain and try the above suit and that it is only the Co-operative
Court which has jurisdiction to try the present suit, cannot be accepted. The Hon'ble
Supreme Court in the case of Margaret Almeida v. Bombay Catholic Co-operative
Housing Soc. Ltd. (which is also followed by a Division Bench of this Court in
Mohinder Kaur Kochar v. Mayfair Housing Pvt. Ltd. has held that the suit between a
developer and the society or its members cannot be a dispute which can be
adjudicated by the Co-operative Court under section 91 of the Act. Again in the
case of Vardhman Developers Limited v. Thailambal Coop. Hsg. Socy. Ltd., a
learned Single Judge of this Court (Coram: Dr. D.Y. Chandrachud, J.) has, whilst
rejecting the contention that in view of the provisions of section 91 of the Act this
Court would not have jurisdiction to entertain and try the suit filed by the
developer, held that section 91 of the Act brings within its purview disputes
touching inter alia the constitution, management or business of a society. The
process of re-development of the society by the developer does not constitute the
business of the society within the meaning of section 91 of the Act. Section 91 of
the Act is therefore not attracted. In view thereof, the submission advanced on
behalf of defendant No. 2 that this Court has no jurisdiction to entertain and try the
present suit is rejected.”
10. The learned Single Judge has followed the judgment of the Supreme Court in
the case of Margaret Almedia v. Bombay Catholic Co-operative Housing Soc. Ltd.,
(2012) 5 SCC 642 holding that the suit between the developer and the society or its
members cannot be a dispute which can be adjudicated by the Co-operative Court
under section 91 of the Maharashtra Co-operative Societies Act. This Court followed
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the said judgment and the earlier judgment of this Court in the case of Vardhaman
Developers Limited and held that the process of re-develop ment of that society by the
developer does not constitute the business of the society within the meaning of
section 91 of the Act.
11. Mr. Kamdar also placed reliance on the judgment of the learned Single Judge of
this Court in the case of Gurudev Developers v.
Page: 426
Kurla Konkan Niwas Chs Ltd., 2013 (4) Bom.C.R. 671 (O.S.) : 2013 (3) Mh.L.J. 178
and in particular paragraph 20 holding that the plaintiff developer had not given notice
under section 164 of the said Act. The said developer had to construct society building
which was not business of the society. It is held that notice under section 164 was
thus not required to be issued and the suit was thus maintainable without such notice.
12. Mr. Kamdar, the learned Senior Counsel placed reliance on the judgment of the
Division Bench of this Court delivered on 1st August, 2012 in the case of Mohinder
Kaur Kochar v. Mayfair Housing Pvt. Ltd., in Appeal (L) No. 474 of 2012 and in
particular paragraphs 9, 11, 12, 13, 14, 15 to 19 which read thus:
“9. Very recently, by judgment dated 30 January, 2012 in Civil Appeal Nos. 1175
-1177 of 2012 Margret Almeida, Etc. Etc. v. the Bombay Catholic Co-operative
Housing Society Ltd. Etc. Etc., the Supreme Court has interpreted the provisions of
sections 91 and 163 of the Act, and has held that, for a suit to be maintainable
under section 91, and to be barred by section 163 of the Act, both the following
tests must be satisfied:—
(a) the subject-matter of the suit must be covered by the opening words of sub-
section (1) of section 91 and if at all the dispute must fall in any of the
following categories:—
(1) Constitution of the society
(2) Elections of the “Committee or its Officers”
(3) General Meetings
(4) Management of the society or
(5) Business of the society.
The second test is that the dispute must have arisen between the parties, who
shall belong to one or the other categories specified under Clauses (a) to (e) of sub-
section (1) (hereinafter referred to as “enumerated persons”). Hence, it can be seen
from the scheme of section 91 that to confer exclusive jurisdiction on the Co-
operative Court, the dispute must satisfy two requirements, i.e., the subject-matter
of the dispute as well as the parties to the same must be those specified herein-
above. In other words, if either of the above mentioned two requirements is not
satisfied, then the dispute cannot be adjudicated by the Co-operative Court. If it is
found in a given case that the subject-matter of dispute is not covered by section
91, an enquiry into the question whether the parties to the dispute fall under any of
the categories enumerated under that section would become irrelevant.
11. Without prejudice to the above submission, it is also submitted that, in any
view of the matter, the dispute arising from implementation of the re-development
Agreement cannot be considered as a dispute arising from the business of
respondent No. 4-society. In support of the said contention, strong reliance is
placed on the decision of learned Single Judge of this Court dated 7 March, 2011 in
Vardhaman Developers Limited v. Thailambal Co-operative Housing Society Ltd.,
Notice of Motion No. 3274 of 2010 in Suit No. 2725 of 2010 as confirmed by the
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judgment dated 26 April, 2011 of Division Bench of this Court in Appeal No. 277 of
2011.
12. The learned Counsel for the appellant (defendant No. 1), however, relied on
the following decisions in support of the contention that redevelopment is also a
part of the business of the society:— (a) Suprabhat Co-operative Housing Society
Ltd. v. Span Builders, 2002 (6) Bom.C.R. 257 : 2002 (3) Mh.L.J. 837, and (b) C.F.
Marconi v. Madhav Co-operative Housing Society Ltd., 1985 (2) Bom.C.R. 357.
13. As far as the position in Marconi's case (supra) is concerned, the object of
the society was as under:— “a) to engage in the business of real estate observing
principles of co-operation for the benefit of its members and in the particular
purchase and sale of land and/or buildings and owning, buying, selling, hiring,
letting, sub-letting, exchanging, mortgaging, accepting mortgage, renting, leasing,
sub-leasing, surrendering, accepting surrender, accepting lease, tenancy or sub-
tenancy and constructing, reconstructing, altering or demolishing buildings,
through its own agency or through licensed contractors and purchasing, holding in
stock or selling materials incidental to construction, repair, overhaul or maintenance
of land and building; to fix and collect rents;” It is, therefore, clear that the Co-
operative Society in the said case was engaged in the business of real estate
Page: 427
and, therefore, by the very nature of its business, it was engaged in the activities of
purchase, sale of flats and/or buildings, constructing, reconstructing, altering or
demolishing buildings, through its own agency or through licensed contractors and
even purchasing, holding in stock and selling materials incidental to construction,
repair, etc.
14. On the other hand, even according to defendant No. 1, the objects of
respondent No. 4-Society are as per the Model Bye-laws for Co-operative Housing
Societies. Bye-law No. 5 reads as under:—
“5. The objects of the society shall be as under: *(a) to obtain conveyance
from the owner/Promoter (Builder), in accordance with the provisions of the
Ownership Flats Act and the Rules made thereunder, of the right, title and
interest, in the land with building/buildings thereon, the details of which are as
hereunder: The building/buildings known/numbered as……………. constructed on
the plot/plots Nos…………………… of…………………. admeasuring………………sq. metres,
more particularly described in the application for registration of the society;
OR
(APPLICABLE FOR PLOT PURCHASED TYPE SOCIETY)
*(a) to buy or take on lease a plot or plot Nos. ……………of………….
admeasuring……………………. sq. metres and to construct flats thereon for
allotment to the members of the society for their authorised use. OR To
purchase a building or buildings known as……………… constructed on the
plot/plots Nos………………of……………admeasuring………………sq.metres for
allotment of flats therein to the members of the society for their authorised
use.
(b) To manage, maintain and administer the property of the society;”
(c) To raise funds for achieving the objects of the society;
(d) To undertake and provide for, on its own account or jointly with a co-
operative institution, social cultural or recreative activities;
(e) To do all things, necessary or expedient for the attainment of the objects
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of the society, specified in these Bye-laws. *Struck whichever is not

applicable”
15. It is thus clear that respondent No. 4, by the very nature of its object, had
purchased land and got the flats constructed in accordance with the provisions of
the Ownership Flats Act and the Rules made thereunder. The object of the society
was not to engage in the business of real estate and demolition of buildings, as it
was in Marconi's case (supra). When the society was formed in or about year 1965,
it had purchased land and got the flats constructed and allotted the same to its
members. After more than 40 years, when respondent No. 4-society has undertaken
the project of re-development of its property, it cannot be said that respondent No.
4-society has engaged in the business of re-development, i.e., as has specifically
been held by this Court in the decision dated 7 March, 2011 in Vardhaman
Developers Limited v. Thailambal Co-operative Housing Society Ltd., wherein the
learned Single Judge observed as under:—
“Section 91(of the Act) brings within its purview disputes touching inter alia
the constitution, management or business of a society. Now in the present case,
the process of re-development of the society by the Developer does not
constitute the business of the society within the meaning of section 91. The
demolition of the existing building and the reconstruction of the building of the
society is not the business of the society. Section 91 is therefore not attracted.”
16. The judgment dated 26 April, 2011 in Appeal No. 277 of 2011 clearly
expresses the agreement with the learned Single Judge as regards the reasoning
and conclusion of the learned Single Judge.
17. At this stage, we must deal with the submission of the learned Counsel for
the appellant in respect of the decision of the learned Single Judge of this Court in
Suprabhat Co-operative Housing Society Ltd. (supra). In that case, the object of the
society was, inter alia, to buy or take on lease the specified plot and to construct
flats thereon for allotment to the members of the society for their authorised use.
The Court, therefore, held that the construction contract, which was entered into
with the respondents, was clearly in pursuance of the basic object of the society.
The construction contract was in furtherance of and towards implementing the basic
object of the Co-operative Society as tenant Co-partnership Housing Society; and
the dispute, which had arisen between the parties, was
Page: 428
in pursuance of the contract which was further entered into. The Court, therefore, held
that the suit, which was instituted by the respondent-contractors, was one which
touched the business of the society, and the suit was not maintainable, as notice
under section 164 of the Act was not served.
18. In the present case, as also pointed here-in-above, respondent No. 4-society
was formed in or about year 1965, and, therefore, the redevelopment work
undertaken after 40 years cannot be treated as a part of the business of respondent
No. 4-society. The dispute regarding development of property of a housing society
may touch the business of the society broadly in two categories. Firstly in the kind
of cases contemplated under the judgment of C.F. Marconi (supra), where the
object of the society was to engage in the business of real estate, purchase
properties and redevelop the purchased properties. Second type of cases where a
housing society undertakes activity of initial construction of the building where the
members would reside. In the case at hand, admittedly the object of the society is
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not like the one in the case of C.F. Marconi (supra) i.e. the business engaging in
real estate. Thus we are not concerned with the first category.
19. When a Co-operative Housing Society initially constructs the buildings for its
members, it is not a re-development, but the initial development of the property.
The initial construction of the property for a Co-operative Housing Society is one of
its prime objects. The two activities namely, initial construction of a building and its
redevelopment are different activities. By passage of time, as the building becomes
older, the Housing Society may take a decision to repair or re-develop the property.
Such activity is totally different from initial development of the building. The
dispute arising from such re-development, which becomes necessary by passage of
time, is not “business” of the society. Such activity cannot be considered as
touching the business of the society. The dispute involving members, developers,
managing committee in respect of re-development of the property which becomes
necessary in view of passage of time, is not relatable to the business of the society.
The initial development of the Co-operative Housing Society of constructing the
building may be business of the society, but the subsequent re-development is
not.”
13. Learned Senior Counsel submits that this Court has dealt with the judgments
referred to and relied upon by Mr. Mehta appearing for the applicants in the said
judgment of the Division Bench and has categorically held that if the society has
undertaken the project of re-development of the suit property, it cannot be said that
the said society is engaged in the business of re-development. The Division Bench of
this Court in the said judgment has followed the judgment of the Supreme Court in
the case of Margret Almeida etc. v. Bombay Catholic Co-operative Housing Society
Ltd.. while interpreting section 91 of the Maharashtra Co-operative Societies Act and
held that the same principles also apply to section 164 of the said Act and held that
the project of re-development would not amount to society engaging in the business
of such re-development.
14. Mr. Kamdar, the learned Senior Counsel also placed reliance on the judgment of
the learned Single Judge of this Court in the case of (Harsha Coop. Housing Society
Ltd. v. Kishandas Rajpal.)14 , in Writ Petition No. 10285 of 2009 in support of his
submission that the re-development project would not amount to business of the
society and no notice under section 164 is maintainable. Mr. Kamdar, learned Senior
Counsel also placed reliance on the judgment of the learned Single Judge delivered on
7th March, 2011 in the case of Vardhaman Developers Limited v. Thailambal Co-op.
Hsg. Soc. Ltd.., in Notice of Motion No. 3274 of 2010 and more particularly in
paragraph 6 thereof by which it has been held by this Court that the demolition of the
existing building and reconstruction of the building of the society is not business of
the society. Section 91 of the said Act is thus not attracted. For the same reasons, no
notice under section 164 is required. Paragraph 6 of the said judgment read as under:
Page: 429
“6. There is no merit in the contention based on section 91 of the Maharashtra Co

-operative Societies Act, 1960. Section 91 brings within its purview disputes
touching inter alia the constitution, management or business of a society. Now in
the present case. The process of re-development of the society by the Developer
does not constitute the business of the society within the meaning of section 91.
The demolition of the existing building and the reconstruction of the building of the
-----------------------------------------------------------------------------------------------------------------------------------------------------------
society is not the business of the society. Section 91 is therefore not attracted. For
the same reason, no notice under section 164 is required. The contention based on
the guidelines of the State Government dated 3 January 2009 is without any
substance. The Development Agreement in this case was entered into on 27 August
2008 much prior to the enforcement of the guidelines. The contention that the
Director of the plaintiff had no authority is belied by the copy of the Board
Resolution dated 15 May 2010 which has been placed on record. The Resolution
authorised the Director in question to represent and sign documents, returns,
statements and other writings on behalf of the company to be submitted inter alia
before any Court of law. Similarly there is no merit in the contention of the
objectors that the Power of Attorney in favour of the nominee of the plaintiff has not
been registered. The Development Agreement admittedly has been registered. The
Power of Attorney executed by the society was similarly registered and stamp duty
in excess of Rs. 19 lacs was paid. The contention based on the consent affidavits is
similarly devoid of substance. It has been stated on behalf of the plaintiff that the
Developer had forwarded the stamp paper to the Cooperative Society. The consent
affidavits were executed, notarized and remitted back to the Developer.
Significantly there is no dispute about the fact that the consent affidavits have been
duly executed. There being no dispute about the fact that the consent affidavits
have Been signed and executed by the objecting defendants, the objection is
lacking in substance. The contention that there is an arbitration clause in the
Development Agreement between the society and the Developer, over looks the
basic factual position that there is no dispute between the society and the
Developer. It is the objectors who are objecting to the enforcement of the
development Agreement. A suit for obtaining necessary reliefs is therefore
maintainable. For these reasons I am of the view that the objections which are
raised on behalf of defendant Nos. 5 to 6, however technical, are devoid of any
material substance.”
15. Mr. Kamdar, learned Senior Counsel also distinguished the judgment cited by
Mr. Mehta on the ground that in each of such case relied upon by Mr. Mehta, the
dispute was arising out of initial construction of buildings and flats of the society which
was as per objects for formation of such society and not arising out of any re-
development project. In all these matters the suit was dismissed on the ground that
notice under section 164 of the Maharashtra Co-operative Societies Act was not issued
when there was dispute regarding the initial construction of the building and flats by
the society having arisen which was object of the said society and was not the case of
re-development.
16. Mr. Madon, learned Senior Counsel appearing on behalf of the first defendant
society submits that the society is supporting the plaintiff and is formal party to the
suit. The society is not opposing prayer Clause (a) of the plaint. Learned Senior
Counsel submits that the resolution passed by the society is not challenged by the
applicants. Mr. Madon, placed reliance on the judgment of the Division Bench of this
Court in the case of (Girish Mulchand Mehta v. Mahesh S. Mehta)15 , 2010 (1) Bom.C.R.
31 (O.S.) : 2010 (2) Mh.L.J. 657. It is submitted by learned Senior Counsel that once
the resolution is passed by defendant No. 1 society by which the society has approved
the terms and conditions of the development agreement between plaintiffs and
defendant No. 1, merely because development agreement is not acceptable to the
applicants, who are in minority, the same cannot be the basis for not abiding by the
decision of the overwhelming majority of the general body
Page: 430
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of the society. It is submitted that the person once become member of the Co-
operative Society, he loses his individuality with the society and he has no
independent rights except those given to him by the statute and Bye-laws. Learned
Senior Counsel submits that the society has not opposed the suit on the ground of
want of notice under section 164 and would abide by the resolution passed by the
society. The applicants thus have no locus independently to take out this notice of
motion and seeks dismissal of the suit on the ground that the suit against the society
is not maintainable for want of notice under section 164 of the said Act. Paragraph 16
of the said judgment in the case of Girish Mehta (supra) reads thus:
“16. In the present case, it is not in dispute that the General Body of the society
which is supreme, has taken a conscious decision to redevelop the suit building.
The General Body of the society has also resolved to appoint the respondent No. 1
as the developer. Those decisions have not been challenged at. all. The appellants
who were members of the society at the relevant time, are bound by the said
decisions. The appellants in the dispute filed before the Co-operative Court have
only challenged the Resolution dated 27/4/2008, which challenge would merely
revolve around the terms and conditions of the Development Agreement. As a
matter of fact, the General Body of the society has approved the terms and
conditions of the Development Agreement by overwhelming majority. Merely
because the terms and conditions of the Development Agreement are not
acceptable to the appellants, who are in minuscule minority (only two out of twelve
members), cannot be the basis not to abide by the decision of the overwhelming
majority of the General Body of the society. By now it is well established position
that once a person becomes a member of the Co-operative Society, he looses his
individuality with the society and he has no independent rights except those given
to him by the statute and Bye-laws. The member has to speak through the society
or rather the society alone can act and speaks for him qua the rights and duties of
the society as a body see (Daman Singh v. State of Punjab)16 reported in (1985) 2
SCC 670 : A.I.R. 1985 S.C. 973. This view has been followed in the subsequent
decision of the Apex Court in the case of (State of U.P. v. Chheoki Employees
Cooperative Society Ltd.)17, reported in, (1997) 3 SCC 681 : A.I.R. 1997 S.C. 1413.
In this decision the Apex Court further observed that the member of society has no
independent right qua the society and it is the society that is entitled to represent
as the corporate aggregate. The Court also observed that the stream cannot rise
higher than the source. Suffice it to observe that so long as the resolutions passed
by the General Body of the respondent No. 2 society are in force and not overturned
by a forum of competent jurisdiction, the said decisions would bind the appellants.
They cannot take a. stand alone position but are bound by the majority decision of
the General Body. Notably, the appellants have not challenged the resolutions
passed by the General Body of the society to re-develop the property and more so,
to appoint, the respondent No. 1 as the Developer to give him all the
redevelopment rights. The propriety rights of the appellants herein in the portion
(in respective flats) of the property of the society cannot defeat the rights accrued
to the Developer and/or absolve the society of its obligations in relation to the
subject-matter of the Arbitration Agreement. The fact that the relief prayed by the
respondent No. 1 in section 9 petition and as granted by the learned. Single Judge
would affect the propriety rights of the appellants does not take the matter any
further. For, the propriety rights of the appellants in the flats in their possession
would be subservient to the authority of the General Body of the society. Moreso,
such rights cannot he invoked against the Developer (respondent No. 1) and in any
case, cannot extricate the society of its obligations under the Development
Agreement. Since the relief prayed by the respondent No. 1 would affect the
-----------------------------------------------------------------------------------------------------------------------------------------------------------
appellants, they were impleaded as party to the proceedings under section 9 of the
Act, which was also necessitated by virtue of Rule 803-E of the Bombay High Court
(Original Side) Rules. The said Rule reads thus:
Rule 803-E. Notice of filling application to persons likely to be affected.-Upon
any application by petition under the Act, the Judge in chambers shall, if he
accepts the petition, direct notice
Page: 431
thereof to be given to all persons mentioned in the petition and to such other persons
as may seem to him to be likely to be affected by the proceedings, requiring all or any
of such persons to show cause, within the time specified in the notice, why the relief
sought in the petition should not be granted.”
17. Mr. Madon, learned Senior Counsel submits that in any event prayer Clause (a)
in the plaint is irrelevant. The issue of jurisdiction has to be decided based on the
averments in the plaint. It is submitted that the society in this case is a formal party.
18. In rejoinder, Mr. Mehta, the learned Counsel for the applicant submits that
whether the party is formal or not, section 164 of the said Act applies and since there
is no compliance of the said provisions, the suit deserves to be dismissed.
19. It is not in dispute that the resolution passed by the society to enter into re-
development agreement with the plaintiff, is not challenged by the applicants. The
consent terms filed by and between the plaintiff and defendant No. 1 in arbitration
petition by which resolution of the society by which development agreement was
terminated, has been withdrawn and those consent terms or resolution of the society
has not been challenged by the applicants in any Court of law. Defendant No. 1 is not
opposing the claim on the ground that the notice under section 164 is not issued by
the plaintiff before filing the said suit.
20. On perusal of the judgment of the Di-vision Bench of this Court in the case of
Girish Mehta (supra), it is clear that once the person becomes member of the Co-
operative Society, he loses his individuality in the society and has no independent
rights except those given to him by the statute and byelaws. The member has to
speak through the society or rather the society alone can act and speaks for him qua
the rights and duties of the society as a body. In my view, since society has no
objection about the maintainability of the suit for want of notice under section 164 of
the said Act, and in view of the fact that no such notice is required under section 164
for filing suit against the members of the society, the applicants have no independent
locus to seek dismissal of the suit on the ground of want of notice under section 164 of
the said Act.
21. The question arises for consideration of this Court is whether the resolution
passed by defendant No. 1 society to confer development rights in favour of the
plaintiff for redevelopment of the property of the first defendant, would amount to
business of defendant No. 1 society and any dispute arising out of such resolution
would require compliance of notice under section 164 of the Maharashtra Co-operative
Housing Societies Act, 1960.
22. It is not in dispute that in the object clause of the society for which society was
formed, redevelopment of the property of the society was not the object or business of
the society. In my view, the members of the society having agreed in the general body
meeting to get the property re-developed for the benefit of its members, through
plaintiff, would not amount to business of the society and notice under section 164 of
the Maharashtra Co-operative Societies Act, 1960 would not be mandatory before filing
-----------------------------------------------------------------------------------------------------------------------------------------------------------
any such suit by the plaintiffs.

23. All the judgments referred to and relied upon by the applicants are clearly
distinguishable in the facts of this case. All such judgments are referred in the
subsequent judgments which are relied upon by Mr. Kamdar, learned Senior Counsel
appearing for the plaintiff and Mr. Madon, learned Senior Counsel appearing for
defendant No. 1. On perusal of the judgments relied upon by Mr. Mehta, it is clear that
in each of such judgment, the dispute had arisen out of resolution passed by the
societies for initial construction of the buildings and flats and not arising out of re-
development of such properties. The Division Bench of this Court in the case of
Mohinder Kaur (supra) has followed the judgment of the Supreme Court in
Page: 432
the case of Margaret Almeida (supra) by which it was held that since the dispute was
not touching the business of the society, in view of the project of redevelopment, the
dispute was not maintainable under section 91 of the Maharashtra Co-operative
Societies Act. The Division Bench of this Court has also referred to the judgment of the
learned Single Judge in the case of Vardhaman (supra) which has been upheld by the
Division Bench in Appeal No. 277 of 2011. After considering the judgment of the
Supreme Court and earlier judgments of this Court including the judgment referred to
and relied upon by Mr. Mehta, the learned Counsel for the applicants, the Division
Bench of this Court has held that the society had undertaken the project of re-
development of its property and it cannot be said that the respondent society was
engaged in the business of redevelopment. The Division Bench had considered the
model Bye-laws of Co-operative Housing Societies. It is held by the Division Bench
that when the Co-operative Housing Society initially constructs a building for its
members, it is not re-development but is initial development of the property. Initial
construction of the property in the Co-operative Housing Society is one of its prime
objects. It is held that the initial construction of building and its re-development are
different activities. The dispute arisen from such re-development which becomes
necessary by passage of time, is not “business” of the society and cannot be
considered as touching the business of the society. The said activity cannot be
considered as “touching the business” of the society. The dispute involving members,
developers, managing committee in respect of the redevelopment of the property
which becomes necessary in view of the passage of time is not relatable to the
business of the society. I am respectfully bound by the judgment of the Division
Bench of this Court which is directly applicable to the facts of this case. Mr. Mehta,
learned Counsel for the applicant did not dispute that the agreement entered into
between the plaintiff and defendant No. 1 society was for re-development of the
property. It is not in dispute that the resolutions passed by the society are not
challenged by the applicants in any Court of law.
24. In my view, since the agreement entered into between the plaintiff and
defendant No. 1 is for re-development which is not the object for which the society
was formed, and thus would not be business of the society. Any such dispute arising
between plaintiff and defendant No. 1 arising out of re-development would not be
arising out of the business of the society and thus section 164 of the Maharashtra Co-
operative Housing Societies Act, 1960 would not be applicable to the suit filed by the
plaintiff. Merely because it is stated in the plaint that in view of the urgency, the
plaintiff did not issue notice under section 164 or seeks dispensation thereof, would be
irrelevant in view of the fact that no such notice is required. I am not inclined to
accept the submission made by Mr. Mehta that once it is the case of the plaintiffs
-----------------------------------------------------------------------------------------------------------------------------------------------------------
themselves that notice was required under section 164, plaintiffs cannot be allowed to
plead that no such notice is required. The requirement of notice is under section 164
of the Act. The Court has to consider whether the said section is applicable at all in the
facts of this case. Even if, such reference is made in the plaint, it would not make it
mandatory for the plaintiffs to issue notice since it is not required at all. For the
aforesaid reasons, in my view there is no substance in any of the submissions made by
Mr. Mehta, learned Counsel for the applicants and the Notice of Motion thus deserves
to be dismissed.
25. I, therefore, pass the following order:
Notice of motion is dismissed.
There shall be no order as to cots.
26. Motion dismissed.
———
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Page 1 Saturday, December 11, 2021

In the High Court of Bombay

Vardhman Developers Ltd. … Plaintiff;

The Judgment of the Court was delivered by

Parties to act on a copy of this order duly authenticated by the Sheristedar/P.S.

of the society, specified in these Bye-laws. *Struck whichever is not

“6. There is no merit in the contention based on section 91 of the Maharashtra Co

any such suit by the plaintiffs.

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