Bombay HC Allows Developer to Complete Disclosed Building Despite Deemed Conveyance

ACME Enterprises & Anr. Vs Deputy Registrar Co-operative Societies (2) & Ors. (Bombay High Court)

The Bombay High Court, in ACME Enterprises & Anr. Vs Deputy Registrar, Co-operative Societies (2) & Ors., considered a dispute between a developer and the Neelam Nagar Building Nos. 11A to 11J Co-operative Housing Societies’ Association Limited concerning the unilateral deemed conveyance of land measuring 18,602.20 sq. mtrs. at Mulund (East), Mumbai, and the developer’s right to complete an additional building in the layout. ACME Enterprises challenged the Competent Authority’s order dated 26 November 2019 and the registered conveyance deed dated 26 June 2023, which transferred the entire plot to the federation. The developer contended that Building No. 1 had been disclosed in the original sanctioned plans and agreements with flat purchasers and that conveyance of the entire land would prevent completion of the proposed construction. The federation, representing ten housing societies, maintained that it was entitled to the whole plot under the Maharashtra Ownership Flats Act, 1963 (MOFA), and opposed further construction by the developer.

The dispute arose from development plans originally sanctioned in 1991 for two buildings on Plot D. Building No. 2, comprising Wings A to J, was completed and received its Occupancy Certificate in April 2004, while Building No. 1 remained incomplete. The developer relied on the original disclosure of Building No. 1 with a proposed built-up area of 7,166.70 sq. mtrs. and sought permission to complete it. Alternatively, the developer proposed that 3,200 sq. mtrs. be excluded from the conveyance for Building No. 1, leaving 15,402.20 sq. mtrs. with the federation. The federation disputed this arrangement, arguing that the developer had substantially abandoned construction, that subsequent plans had reduced the permissible built-up area, and that the entire land and its development potential belonged to the federation. Both parties filed separate suits and sought interim injunctions against each other.

The High Court examined Sections 3, 4, 7, 7A, 10 and 11 of MOFA, particularly the promoter’s disclosure obligations, the rights of flat purchasers, restrictions on alterations to sanctioned plans and the statutory duty to convey land and buildings to housing societies. The Court observed that proceedings for unilateral deemed conveyance under Section 11 are summary in nature. Although a registered deemed conveyance transfers the promoter’s title to the society, the Competent Authority cannot conclusively determine complicated disputes relating to ownership or development rights. Such disputes can be examined by a competent civil court. Consequently, the federation’s registered conveyance did not, by itself, prevent judicial examination of the developer’s claim to complete construction disclosed in the original development scheme.

The Court also considered the Supreme Court’s decision in Jayantilal Investments v. Madhuvihar Co-operative Housing Society, (2007) 9 SCC 220, and other authorities concerning additional construction, disclosure of development plans and the entitlement to floor space index (FSI). It distinguished the proposition that conveyance must invariably be postponed until every disclosed building is completed. At the same time, it examined whether the developer could be prevented from completing construction merely because the entire plot had been conveyed to the federation. The Court assessed the original sanctioned plans, subsequent modifications and the competing claims regarding the remaining development potential. It recognised the need to protect the federation’s rights while considering the developer’s prima facie entitlement to undertake the previously disclosed construction.

On the question of interim relief, the Court found that the developer had established a prima facie case for completing Building No. 1 within the limits of the original disclosure. It considered that preventing construction altogether could cause substantial prejudice to the developer, while the federation’s interests could be protected through appropriate restrictions. The Court therefore adopted an interim arrangement permitting construction on 3,200 sq. mtrs. of Plot D, while restricting the federation’s interim land entitlement to the remaining 15,402.20 sq. mtrs. The developer’s construction rights were limited to a built-up area of 7,166.70 sq. mtrs. and stilt plus 17 floors, subject to admissible FSI and applicable permissions. The Court did not finally determine the parties’ competing ownership claims.

Accordingly, the Bombay High Court stayed the operation of the registered deemed conveyance deed dated 26 June 2023 pending final disposal of the developer’s suit and restrained the federation from relying upon that deed before the Municipal Corporation of Greater Mumbai or other authorities. The Court also stayed MCGM’s stop-work notices dated 6 June and 30 June 2023, enabling the developer to pursue the permitted construction subject to the prescribed restrictions. The developer was required to disclose the pendency of both suits to prospective purchasers of flats in Building No. 1. The developer’s interim application was partly allowed, while the federation’s application seeking to restrain further construction was rejected. The directions were expressly interim in nature and remained subject to final adjudication of the suits.