Membership Cannot Be Compelled for Non-Existent “Flats”: Section 154B-5 MCS Act Bars Admission Where Agreements Cover Refuge Areas

1. Introduction

The Bombay High Court (Firdosh P. Pooniwalla, J.) decided a writ petition filed by four co-operative housing societies (Dheeraj Dreams Building No.1 CHS Ltd., No.3 CHS Ltd., No.4A CHS Ltd., and No.4B CHS Ltd.) challenging orders passed by co-operative authorities that compelled them to admit two individuals (Respondent Nos. 3 and 4) as members on the basis of five registered agreements for sale dated 30 April 2019 allegedly executed by the developer (Respondent No.7).

The controversy arose because the “flats” described in those agreements were said by the societies to be non-existent and in fact comprised refuge areas/open spaces shown erroneously as flats in the plan annexed to the building’s Full Occupancy Certificate dated 5 September 2009.

Key issues before the Court were:

  • Whether the Divisional Joint Registrar was justified in directing the societies to grant membership under the MCS Act based on agreements allegedly relating to refuge areas rather than actual flats.
  • Whether such compelled membership would violate Section 154B-5 of the Maharashtra Co-operative Societies Act, 1960 (MCS Act) (statutory limit on membership vis-à-vis number of flats/plots).
  • Whether the principle in Videocon Appliances Ltd. v/s. Maker Chambers V Premises Co-operative Society Ltd. & Others (Writ Petition No.7471 of 2004) prevented the society/authorities from refusing membership on grounds touching the legality of the construction.
  • The effect of the societies’ Deemed Conveyance process and the Certificate of Entitlement issued on 31 May 2017 on the developer’s later “sale” in 2019.

2. Summary of the Judgment

The High Court quashed:

  • the Divisional Joint Registrar’s order dated 22 July 2022 directing the societies to admit Respondent Nos.3 and 4 as members; and
  • the consequential execution order dated 19 October 2022 appointing an Authorized Officer to implement the membership direction.

The Court restored the Assistant Registrar’s order dated 19 October 2020 which had rejected Respondent Nos.3 and 4’s membership application.

In substance, the Court held that the case was not about refusing membership due to allegedly “unauthorised” construction; rather, it concerned “flats” that do not exist and were actually refuge areas. Compelling membership in such circumstances would result in an illegal outcome, including a breach of Section 154B-5 MCS Act.

3. Analysis

3.1 Precedents Cited

Videocon Appliances Ltd. v/s. Maker Chambers V Premises Co-operative Society Ltd. & Others (Writ Petition No.7471 of 2004)

Respondent Nos.3 and 4 relied heavily on Videocon Appliances Ltd., particularly the proposition (as extracted in paragraph 29 of the present judgment) that:

  • a society cannot refuse membership merely on the ground that the builder’s construction is unauthorised or in contravention of MOFA; and
  • the legality/validity of construction is a civil dispute for the civil court, not for the society or the Registrar in membership proceedings under Sections 22(2) and 23.

How it influenced (and was limited by) the Court: The High Court accepted that Videocon Appliances Ltd. states a correct general principle, but held it inapplicable where the problem is not “unauthorised construction” but the more fundamental fact that the subject matter is not a flat at all. The Court drew a sharp doctrinal line:

  • Unauthorised/illegal construction cases: membership generally cannot be denied on that external factor alone (civil court domain), per Videocon.
  • Non-existent unit / refuge area sold as a flat: membership may be refused because admitting such a person would force the society to commit a statutory illegality, including breach of Section 154B-5 MCS Act.

Thus, Videocon Appliances Ltd. was treated as a rule with a boundary: it does not compel societies/authorities to recognise “ownership” claims over spaces that are not legally/allotment-wise flats and whose admission would violate the statutory membership cap.

3.2 Legal Reasoning

(a) The “flats” were shown to be refuge areas on the record

The Court placed substantial weight on the floor plans annexed to registered agreements of other constructed and sold flats, which disclosed the impugned portions on the 8th and 15th floors as refuge areas. This documentary comparison supported the societies’ core case: Respondent Nos.3 and 4’s “flats” were not merely disputed constructions—they were open/unconstructed spaces earmarked as refuge areas.

(b) The developer’s conduct under Section 10(1) MOFA indicated there were no “unsold flats”

The Court drew an evidentiary inference from Section 10(1) of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA). Under that provision, when a society is formed, the promoter must join the membership application “in respect of flats which have not been taken”.

Since the developer (Respondent No.7) did not join as a member at society formation, the Court treated that as supporting the societies’ contention that there were no unsold flats at that time—reinforcing that the later “sale” was not of a genuine remaining inventory flat but of something else (here, refuge/open space).

(c) Deemed Conveyance: post-entitlement “sales” treated as illegal

The societies had obtained a Certificate of Entitlement for Deemed Conveyance on 31 May 2017. The Court held that upon issuance of this Certificate, the developer “stood divested of its rights in the property” and therefore subsequent agreements for sale entered into in 2019 were “illegal”.

While the judgment’s primary holding rests on the “non-existent flats/refuge area” point and Section 154B-5, this reasoning also signals judicial scepticism toward post-deemed-conveyance attempts by developers to create/transfer purported rights in common or non-saleable areas by relying on errors in sanctioned/occupation documents.

(d) Municipal assessment treatment supported the refuge-area character

The Court noted that the Municipal Authority (MCGM) had been assessing the impugned open spaces as refuge areas and had not levied property tax in respect thereof. This administrative treatment was considered consistent with the societies’ case that no flats existed as claimed.

(e) Statutory “hard stop”: Section 154B-5 MCS Act

The central normative lever in the judgment is Section 154B-5 MCS Act, which prohibits a housing society from admitting members “exceeding the number of flats or plots… available for allotment”.

The Court reasoned that because the “flats” did not exist (being refuge areas), admitting Respondent Nos.3 and 4 would necessarily push membership beyond the available flats, causing a direct statutory violation. The Court explicitly refused to “put its imprimatur” on such an illegality.

(f) Private Architect’s Certificate was rejected as contrary to the record

Respondent No.1 had relied on a Private Architect’s Certificate stating that the flats did not come within the refuge area. The Court found this certificate:

  • contrary to the documentary record (floor plans of other agreements);
  • derivative of an erroneous Occupancy Certificate plan that had wrongly depicted flats in refuge area space; and
  • insufficient to override the factual and statutory concerns.

3.3 Impact

  • Clarifies the limits of “membership must be granted” logic: The judgment draws a workable distinction between (i) disputes about legality/authorisation of construction (often for civil court, per Videocon Appliances Ltd.) and (ii) cases where the very subject of the membership claim is a non-existent unit or a non-saleable/common/refuge area.
  • Elevates Section 154B-5 MCS Act as a decisive constraint: Co-operative authorities and societies must treat the statutory membership cap as a substantive legality check—membership cannot be ordered in a manner that makes the society breach the Act.
  • Administrative caution for Registrars: The decision signals that revisionary authorities should not rely on private certifications to validate contested “flats”, especially where contemporaneous building documentation and municipal assessment indicate a refuge/common area.
  • Developer “inventory” claims scrutinised post-deemed conveyance: Where societies have moved for deemed conveyance and entitlement has been issued, later transactions by the promoter purporting to create saleable flats out of common/refuge spaces may face strong judicial resistance.

4. Complex Concepts Simplified

  • Refuge area: A designated open/safety space in a building (typically for fire safety/evacuation). It is generally not a residential “flat” and is not meant to be sold as a dwelling unit.
  • Occupancy Certificate (OC): A municipal certificate indicating that a building (or part) is fit for occupation. Here, the Court noted an error in the plan annexed to the OC which wrongly depicted flats within what were actually refuge/open spaces.
  • Deemed Conveyance (Certificate of Entitlement): A statutory mechanism allowing societies to obtain conveyance/title when the promoter fails to convey. The Court treated the entitlement certificate as significantly curtailing the promoter’s ability to deal with the property thereafter.
  • Sections 22(2) and 23, MCS Act (membership disputes): Provisions under which an applicant can approach the Registrar if membership is refused. Typically, this inquiry focuses on statutory/bye-law eligibility, but this judgment holds that the inquiry cannot culminate in an order that forces a society to violate an express statutory prohibition like Section 154B-5.
  • Section 154B-5, MCS Act (limit on membership): A statutory ceiling: membership cannot exceed the number of flats/plots available for allotment. If what is claimed as a “flat” is not a flat in reality, membership cannot be ordered without breaching the Act.
  • Writ of Certiorari under Article 226: A constitutional remedy by which the High Court can quash orders of subordinate tribunals/authorities for errors of law, jurisdictional mistakes, or perversity.

5. Conclusion

The Bombay High Court’s decision establishes a clear and practical rule: co-operative housing societies and co-operative authorities cannot be compelled to grant membership based on agreements purporting to sell “flats” that do not exist and are in reality refuge areas, particularly where such admission would breach the statutory membership cap under Section 154B-5 MCS Act.

By distinguishing Videocon Appliances Ltd. v/s. Maker Chambers V Premises Co-operative Society Ltd. & Others, the Court confirms that while membership refusals cannot ordinarily be justified by disputes over construction legality alone, the law does not require (and does not permit) membership orders that would ratify a statutory violation or treat non-saleable/non-existent spaces as flats.