Redevelopment of Housing Society: Minority Dissent Cannot Stall Majority Decision, Rules Bombay High Court

MUMBAI — Members of a co-operative housing society who voted against a redevelopment proposal cannot hold up a project approved by the statutory majority, the Bombay High Court held on 16 October, directing the dissenting members of Sagar Darshan Co-operative Housing Society in the western suburbs to vacate within eight weeks and the Municipal Corporation to process the society's building permissions without further delay.

The 54-member society had resolved to redevelop its forty-year-old building at a special general body meeting attended by 46 members, of whom 38 — more than 51 per cent of the total membership — voted for the proposal and the developer selected through a tender process conducted in the presence of the Registrar's authorised officer. Six members refused to sign consent letters or individual agreements for alternative accommodation, and the Corporation declined to issue the commencement certificate while their objections were pending.

"The will of the majority, lawfully expressed, binds the few," the Division Bench said.

How society redevelopment is approved in Maharashtra

Redevelopment of a co-operative housing society is governed by the Maharashtra Co-operative Societies Act, 1960, the directions issued under Section 79A of that Act, and, since 2019, Chapter XIII-B of the Act (Sections 154B-1 to 154B-31), which contains the provisions specific to housing societies. The current directions, issued by the state government on 4 July 2019 and superseding the 2009 directions, prescribe the process:

• a requisition by not less than one-fifth of the members, followed by a special general body meeting called with the prescribed notice;
• a quorum of two-thirds of the total membership at that meeting;
• appointment of a project management consultant, a feasibility report and the invitation of competitive bids from developers;
• selection of the developer at a meeting held in the presence of an officer authorised by the Registrar, approved by at least 51 per cent of the total membership, with written consent letters from those members;
• a development agreement, a bank guarantee from the developer equal to 20 per cent of the project cost, registration of the project with MahaRERA, and individual agreements for permanent alternative accommodation with each member.

What the court held

1. The majority decision binds all. Membership of a society carries acceptance of its bye-laws and of decisions lawfully taken by the general body. A member who disagrees with a resolution passed in compliance with the Section 79A directions is bound by it in the same way as a member who voted for it.
2. Dissent is not a veto. The remedy of a dissenting member is to challenge the process — for fraud, for non-compliance with the directions, or for discrimination in the terms offered — before the co-operative authorities under Section 91 of the Act or, in an appropriate case, before the court. It is not to refuse to vacate and thereby defeat the decision of 38 members.
3. Same terms, no more. The developer had offered the dissenters the same additional area, corpus and transit rent as the consenting members. The court held that this was all they were entitled to, and that demands for better terms as the price of consent could not be entertained.
4. The Corporation's role. The Municipal Corporation decides planning permissions on planning grounds. It has no authority to withhold a commencement certificate because of a dispute between a society and some of its members once the society has placed the requisite consents on record.

The bench relied on the line of decisions of the High Court since Girish Mulchand Mehta v. Mahesh S. Mehta (2010), in which single judges and Division Benches have repeatedly directed dissenting members to vacate once the statutory process is complete, and observed that the reduction of the consent threshold to 51 per cent in 2019 was a legislative choice intended to prevent exactly the kind of deadlock that had arisen.

The will of the majority, lawfully expressed, binds the few.

From the judgment

The dissenters' arguments, and why they failed

• The offer was inadequate. The dissenters said the additional area and corpus were below what neighbouring societies had obtained. The court held that the adequacy of commercial terms is for the general body, which had accepted them after a competitive process, not for individual members or the court.
• The developer's track record. The project management consultant's due diligence and the bank guarantee were on record; the dissenters placed nothing before the court to show the selection was vitiated.
• Individual property rights. A flat in a co-operative society is held through the society's tenure. Membership does not confer a right to prevent the society from dealing with its own building in the manner the Act permits.

What dissenting members can still do

• Challenge the process, within the time limits, for specific non-compliance with the Section 79A directions: lack of quorum, selection without the Registrar's officer, or consents obtained by misrepresentation.
• Insist on parity: the same carpet area, corpus, transit rent, deposit and completion timeline offered to consenting members, recorded in an individual permanent alternative accommodation agreement.
• Invoke the arbitration clause, if any, in the development agreement for disputes about the terms of their own accommodation.

What it means for societies and developers

The judgment rewards societies that follow the 2019 directions to the letter. Managing committees should keep the requisition, notices, attendance sheets, the video record of the selection meeting, the Registrar's officer's report, the consent letters and the bank guarantee on file, and should offer every member, consenting or not, identical terms in writing before approaching the court. Developers should expect courts to direct vacation of dissenting members only where that record is complete.

The Counsel will report any appeal against the judgment. Members of societies considering redevelopment, and members facing a notice to vacate, should consult a qualified lawyer about the specific terms of their society's resolution and development agreement.

This report is for general information only and does not constitute legal advice. Readers should consult a qualified lawyer about their own circumstances. Case citations are to The Counsel Reports (TCR) unless otherwise stated.