Court Upholds Removal of Committee Members Without Ownership of Flats in Society’s Building – Developer’s Dual Role Under Scrutiny

The Court upheld the removal of the Petitioners from the managing committee, holding that they did not own any flats in the society’s building and were managing its affairs without any legal right. The Court found that the Deputy Registrar had jurisdiction under Section 78A to remove the Petitioners, as their actions were prejudicial to the society’s interests. The Court rejected the Petitioners’ argument regarding the violation of natural justice, noting that the impugned orders were justified in ensuring that only flat owners manage the society’s affairs. The Court emphasized that the dual role of Parvath Shetty as both a managing committee member and a developer was a clear conflict of interest and prejudicial to the society.

The Court dismissed the writ petitions, holding that the removal of the Petitioners from the managing committee was justified, and no interference was warranted under Article 227 of the Constitution of India. The issue of membership validity was left to be decided in separate proceedings.

Jurisdiction and Scope of Section 78A: (Paras 16-20) Ownership of Flats and Membership Validity: (Paras 21-25) Developer’s Dual Role and Conflict of Interest: (Paras 34-36) Supervisory Jurisdiction and Natural Justice: (Paras 40-42)

Major Acts:

• Maharashtra Co-operative Societies Act, 1960 (MCS Act) – Section 78A (Power of Supersession of Committee or Removal of Member), Section 154B-9 (Removal of a Member)

• Constitution of India (COI) – Article 227 (Supervisory Jurisdiction of High Court)

Subjects:

• Section 78A MCS Act – Removal of Managing Committee Members – Jurisdiction of Registrar – Validity of Membership – Developer’s Dual Role – Cooperative Housing Society – Natural Justice – Article 227 COI – Supervisory Jurisdiction – Ownership of Flats – Prejudicial Acts

Facts:

1. Nature of the Litigation: The Petitioners, who were members of the managing committee of JVPD Sterling Co-operative Housing Society Ltd., challenged their removal from the committee under Section 78A of the MCS Act. The Deputy Registrar, Divisional Joint Registrar, and the Hon’ble Minister had concurrently ruled against them, removing them from the committee and disqualifying them for one term.

2. Reason for Filing the Case: The Petitioners contended that their removal was based on erroneous grounds, including the lack of prior approval from MHADA (Maharashtra Housing and Area Development Authority) for their membership, which they argued was not a valid reason under Section 78A. They also claimed violation of natural justice as they were not served proper notice.

3. What Has Already Been Decided: The Deputy Registrar had removed the Petitioners from the managing committee, citing their lack of ownership of flats in the society’s building and their alleged prejudicial acts in aiding the developer. The Divisional Joint Registrar and the Hon’ble Minister upheld this decision.

Issues:

1. Whether the Deputy Registrar had jurisdiction under Section 78A of the MCS Act to remove the Petitioners from the managing committee based on the lack of MHADA’s approval for their membership?

2. Whether the Petitioners, who did not own any flats in the society’s building, could continue to manage the affairs of the society?

3. Whether the dual role of one Petitioner (Parvath Shetty) as both a managing committee member and a developer (95% partner in Kamla Landmarc) was prejudicial to the society’s interests?

4. Whether the principles of natural justice were violated in the removal process?

Submissions/Arguments:

• Petitioners:
  a. The Deputy Registrar exceeded jurisdiction by commenting on the validity of their membership, which is not within the scope of Section 78A.
  b. The Petitioners were not served proper notice, violating natural justice.
  c. The membership of the Petitioners was approved by the Deputy Registrar in 2018, and the same authority could not later question its validity.
  d. The Petitioners relied on the Development Agreement, which entitled them to purchase flats at a discounted rate, but the developer sold flats to outsiders instead.

• Respondents:
  a. The Petitioners did not own any flats in the society’s building and were managing its affairs illegally.
  b. The developer sold flats to outsiders, and the Petitioners’ real grievance was the non-allotment of flats, not their right to manage the society.
  c. The dual role of Parvath Shetty as both a managing committee member and a developer was prejudicial to the society’s interests.
  d. The Petitioners’ membership was not approved by MHADA, and their continued management of the society was against the MCS Act and the society’s bye-laws.

Ratio:

1. Jurisdiction Under Section 78A MCS Act: The Registrar has the power to remove managing committee members if their actions are prejudicial to the society’s interests, even if the issue of membership validity is not directly within the scope of Section 78A.

2. Ownership of Flats: Only those who own or have a right to flats in the society’s building can manage its affairs. Persons without such ownership cannot continue as managing committee members.

3. Developer’s Dual Role: A managing committee member who is also a developer cannot act in the best interests of the society, as it creates a conflict of interest.

4. Supervisory Jurisdiction Under Article 227 COI: The High Court will not interfere with the orders of lower authorities unless there is a gross error of law or a flagrant abuse of power.

Excerpts:

• “The very purpose of constitution of managing committee of a housing society is to ensure that the affairs of the building of the society are collectively managed by the elected members of such Housing Society.” (Para 20)

• “The managing committee members of the society, who do not have any flat in its building, instead of taking care of interests of the society, are apparently assisting the developer, who again is one of the committee members.” (Para 37)