Developer can’t unilaterally decide form of flat buyers’ body: HC

The declaration regarding formation of a condominium was not lawful, as it was signed by only seven out of 42 flat buyers, including six allegedly belonging to the promoter’s family, the court found

MUMBAI: Developers cannot unilaterally declare their intention to form a condominium of flat buyers under the Maharashtra Apartment Owners (MAO) Act based on the consent of selective flat owners, the Bombay High Court observed on Tuesday while upholding registration of the Dayal Smruti Cooperative Housing Society (CHS) in Kandivali West, which was earlier registered by the developer as a condominium.

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The single judge bench of justice Amit Borkar was hearing a petition filed by Rachana Developers, the partnership firm that had constructed the Dayal Smruti CHS building, located on Shantilal Mody Road.

According to the petition, construction of the building began in 2000 and in March 2003, Rachana Developers entered into agreements with 42 flat buyers. On 18 December 2004, Rachana Developers and the land owners executed a joint declaration as contemplated under the MAO Act, designating the form of organisation of flat buyers as a condominium. On 18 February 2005, the declaration was registered with the Sub Registrar of Assurances, and in June 2005, flat buyers were informed about formation of the condominium, the petition claimed.

However, in December 2006, one of the flat buyers submitted a proposal for registration of a CHS; and in February 2007, the deputy registrar registered the body as a CHS. Rachana Developers filed a revision application with the minister of cooperation, questioning registration of the flat owners’ body as a CHS. But the application was dismissed on August 28, 2018. Subsequently, Rachana Developers approached the high court.

Before the high court, Rachana Developers relied on clauses contained in the agreements executed with flat buyers, which said the developer retained the discretion to decide the form of organisation. The discretion was lawfully exercised when a declaration under the MAO Act was executed on December 18, 2004. Once the declaration was communicated to the registrar in June 2005, subsequent registration of the body as a CHS was legally impermissible and the registrars had acted without jurisdiction in granting the registration, Rachana Developers argued.

But justice Borkar rejected the argument after noticing that the declaration regarding formation of a condominium was not lawful, as it was signed by only seven out of 42 flat buyers, including six allegedly belonging to the promoter’s family.

“The declaration relied upon by the petitioners (developer) was not executed by all flat purchasers,” the judge said. “Such a declaration cannot represent the collective will of persons who have taken or are to take flats in the building.”

A condominium, by its very nature, rests on consent and participation of all apartment owners, the court stressed, noting, “A unilateral or selective declaration defeats the statutory scheme.”