In the island city, there are approximately 1,300 lease hold plots mainly in areas like Backbay, Nariman Point, Churchgate, Marine Lines, Sion, Dadar and Wadala that are owned by the Government of Maharashtra (“State Government“). These plots were leased by the State Government to different persons on certain terms and conditions. The Supreme Court in its judgment on 30^th September, 2022 in The State of Maharashtra & Ors. v. Mr. Aspi Chinoy and Anr.¹ settled the question on whether consent of the Collector was required for transfer of flats on lands given by the State Government to a developer for construction.

Facts

Certain plots at Back Bay Reclamation Estate were offered for lease by the State Government in 1971 and one Aesthetic Builders Pvt. Ltd. (“Company“) made a bid for two of these plots on the basis that the Company would construct a building thereon and sell flats on ownership basis. Accordingly, a building was constructed and the flats were sold to various parties on ownership basis. One such flat was sold by the Company to one Mr. Madhavan who further sold it onwards to one Mrs. Reshmidevi Agarwal

In the year 1977, the purchasers of the flats formed a Co-operative Society called Varuna Premises Co-operative Society Ltd., which was duly registered under the Maharashtra Cooperative Societies Act, 1960 (“Society“).

Thereafter, the Society issued five fully paid up shares bearing Distinctive Nos.626-630 in favour of Mrs. Reshmidevi Agarwal.

On 16^th December 2000, Mr. Chinoy (“Transferee“) entered into an agreement with Mrs. Reshmidevi Agarwal to purchase rights to occupy Flat No. 211 as also five shares in the Society. When the Transferee approached the Sub-Registrar Office for registration of such agreement, he was declined the registration and was directed to secure a No Objection Certificate from the Collector for transfer of the flat.

Case before the Hon’ble Bombay High Court

In the above backdrop, the Transferee approached the High Court by way of the writ petition² challenging a letter addressed by the Collector to the Sub Registrar, Bombay City, Old Custom House. Vide this letter, the Collector had directed the Sub Registrar that before registering the transaction in respect of transfer of flats in the buildings situated at B.B.R.Block No.3 & 5, Nariman Point and Cuffe Parade, Bombay, any person who approaches the Sub Registrar for registering the transaction should be asked to contact the office of the Collector first and obtain necessary certificate from the Collector.

The main issues in this matter were as follows:

Whether because of the terms and conditions on which the land was granted in favour of the Company, previous permission of the Government is necessary for a flat owner to transfer his interest in the flat?

The two main terms and conditions under consideration were Clause 15 and 16 of the memo of terms and conditions for lease of plot.

Clause 15 stated that the Licensee will not directly or indirectly transfer, assign encumber or part with his interest under or the benefit of the Agreement to lease of any part thereof in any manner without the previous consent in writing of the Government.

Clause 16 stated that the Lessee will not assign or part with possession of the demised premises or any part thereof or underlet or transfer the lessees interest therein without the previous consent in writing of the lessor.

The Hon’ble Court observed that the bye- laws of the Society stated that that title to the property vests in the Society and a member gets a right to occupy the flat subject to the bye-laws of the society. On the transfer from the Company to the Society taking place, the Society steps into the shoes of the Company and the terms and conditions relied on by the State Government apply to the Society, and not when a member transfers his flat. The Society is not even a party to that transaction, and therefore, Clause 16 will not be attracted. The Hon’ble Court also observed that so far as Clause 15 is concerned, the clause operates on the lessee. The lessee within the meaning of this clause will be the Company and thereafter the Society who has stepped into the shoes of the lessee. The members of the Society who only own the shares in the Society and right to occupy the flats, do not step into the shoes of the lessee i.e. Company, and therefore, Clause 15 will not be attracted. If at all, it will be attracted when the Company transferred its interest in favour of the Society.

Accordingly, the Hon’ble Court held that by virtue of Clause 15 and 16 aforesaid, no previous consent of the State Government or Collector is necessary when a member of the Society wants to transfer his rights in the flat to anybody else.

Whether under theGovernmentResolution dated12 ^thMay1983 (“1983GR”) and Government Resolution dated 9^thJuly 1999 ( “1999 GR”), (collectively the “said Resolutions”), the State Government can require the Transfereeto seek Collectors previous consent for transfer?

The Hon’ble Court held that that the 1999 GR is merely a modification of the 1983 GR.

The guidelines in the said Resolutions apply when the land is granted in favour of a co-housing society at a concessional rate. In the present case, admittedly, the allotment is not made at concessional rate, it was made after calling bids, and the land was not allotted to a co-operative housing society.

Therefore as the said Resolutions do not apply to the grant of lease of the land in question, there is no question of the State Government being competent to require the Transferee to seek any previous consent under the said Resolutions.

Ruling of the Hon’ble High Court:

By an order dated 29^th September 2009 (“Impugned Judgement“), the Hon’ble Court allowed the Petition and held that the State Government does not have right to ask the Transferee to seek its previous approval before entering into the transaction. It does not have any power to demand any premium before transferring the flat and no permission either of the State Government or of the Collector is necessary for transfer of the flat either under the terms and conditions or under the said Resolutions.

Proceedings before the Hon’ble Supreme Court

The State assailed the Impugned Judgement before the Hon’ble Supreme Court of India.³

The State argued that the Hon’ble High Court erred into going into the question as to whether the allotment of the land was on a concessional rate or not which was not at all relevant for determining the issue at hand and that the 1983 GR superseded the 1999 GR and was applicable.

Ruling of the Hon’ble Supreme Court

By an order dated 30^th September 2022, the Hon’ble Supreme Court held that the present case is not a case where the land is allotted to a Co-operative housing society by the State Government. The land was leased to the Company, a developer who was the successful bidder and after the ownership of the flats was transferred to private individuals, a society of the flat purchasers was formed.

Since the land was not allotted to a society but to a builder on lease, who has constructed flats for private individuals, who have subsequently formed a co-operative Society, the said Resolutions would not be applicable to the members of such a society.

The appeals were dismissed.

Footnotes

1. Civil Appeal No. 5809 of 2011 filed before the Hon’ble Supreme Court in its civil appellate jurisdiction

2. Writ Petition No. 713 of 2001 filed before the Hon’ble Bombay High Court in its ordinary original civil jurisdiction

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