No Question Of Suffering From Irreparable Loss By Refusal Of Temporary Injunction: Bombay High Court Rejects Housing Society’s Plea Against Purchasers
The Bombay High Court said that inadequacy of consideration is not a ground for setting aside valid sale of TDR.
Justice Sandeep V. Marne, Bombay High Court
The Bombay High Court has rejected an Interim Application filed by Green Garden Apartments Co-operative Housing Society Limited seeking temporary injunction against the flat purchasers.
The said housing society sought to restrain some persons to act in furtherance with the Agreements executed in their favour for transfer of Transferable Development Rights (TDR) and from selling, transferring, assigning, parting with or alienating the TDR received by them from and out of Development Rights Certificate (DRC).
A Single Bench of Justice Sandeep V. Marne remarked, “The Society has already pocketed the sale consideration of Rs.46 crores. If it is proved that the TDR ought to have been sold at higher price or that Society has suffered any losses, recovery of such losses can be undertaken in an enquiry under Section 88 of the MCS Act. Therefore, there is no question of Society suffering any irreparable loss by reason of refusal of temporary injunction. The balance of convenience is tilted clearly against the Plaintiffs and in favour of Defendant Nos.5 to 18. Grant of any temporary injunction would affect not just Defendant Nos.5 to 18 who are bonafide purchasers for value, but the innocent flat purchasers. Any delay caused in completion of projects by Defendant Nos.5 to 18 would also affect the third parties.”
The Bench said that inadequacy of consideration is not a ground for setting aside valid sale of TDR.
Senior Advocate Prateek Seksaria appeared for the Plaintiff, while Senior Advocates Sharan Jagtiani, Pravin Samdani, G.S. Godbole, Simil Purohit, Advocates S.R. Ganbavle, Karl Tamboli, Mayur Khandeparkar, Yogesh C. Naidu, Rubin Vakil, Sahil Gandhi, and Janhavee Joshi appeared for the Defendants.
Facts of the Case
The Plaintiff-society was an owner of a land and in 1986, a portion of it was acquired by the Defendant-MCGM (Municipal Corporation of Greater Mumbai) for the purpose of construction of road. Allegedly, the society did not contemporaneously receive compensation from MCGM in respect of the acquired land. It was entitled to apply for compensation in the form of TDR as per applicable Development Control Regulations in lieu of monetary compensation. According to the Plaintiff, Defendant No.2, who was its member, was liasoning with MCGM and had sufficient experience in aiding the society in the process of securing the TDR and began the process of making applications to MCGM for grant of TDR. Defendant Nos.1 and 2 were entrusted with the task of taking necessary steps for entering into Agreements for appointment of Defendant Nos.3 and 4 as consultants.
Thereafter, unregistered Agreements for Sale of TDR and Agreements for utilization of FSI were executed between the Plaintiff Society and Defendant Nos.5 to 18. Plaintiff-Society alleged that Defendant No.2, under the guise of raising complaint against Defendant No.1, raised the issue of making payments to Defendant No.4 despite non-performance of any work by Defendant No.4. On account of raising of the said dispute, the members of the Society approached the Secretary (Defendant No.20) and sought clarifications. Defendant No.2 filed a complaint with the Deputy Registrar alleging misappropriation of Society’s funds through unauthorized payments of Rs.15 crores to Defendant No.4 alleging business relationship with Defendant No.1. In this background, a Suit was filed before the High Court, seeking various declarations along with an Interim Application.
Court’s Observations
The High Court in view of the facts and circumstances of the case, observed, “In my view, the doctrine of indoor management would clearly apply to the facts of the present case when it comes to the issue of validity of title acquired by Defendant Nos. 5 to 18 in respect of the purchased TDR. Even if the authorities under the MCS Act come to a conclusion that the members/ managing committee members of the Society have acted against the provisions of the MCS Act or the Rules made thereunder while effecting sale of TDR, the same would not divest Defendant Nos. 5 to 18 of the title acquired by them. In my view therefore the first ground of lack of authority for purchase of TDR sought to be canvassed on behalf of the Plaintiff cannot be prima facie accepted for grant of any injunctive relief in its favour.”
The Court noted that the case does not involve a fraudulent sale transaction where sale is caused by entity not having title in the TDR, and therefore, the allegation of fraud again cannot be prima facie accepted for invalidating title of Defendant Nos. 5 to 18 in respect of the TDR purchased by them.
“In my prima facie view therefore the Agreements executed in favour of Defendant Nos.5 to 18 for sale and utilisation of TDR do not require registration under Section 17 of the Registration Act”, it added.
The Court was of the view that the Plaintiff is not entitled to any temporary injunction on account of non-willingness displayed by it for return of received consideration while seeking avoidance of sale.
“The delay on the part of the Plaintiff in the present case has resulted in utilization of TDR by Defendant Nos. 5 to 18 in their respective projects. Prima-facie Defendant Nos. 5 to 18 are not guilty of fraud or dishonesty. They are bonafide purchases for value. It is otherwise difficult to believe that the TDR which is freely available for projects in market is purchased by Defendant Nos. 5 to 18 in connivance with Defendant Nos.1 to 4. On the other hand, the Society has sold the TDR with its eyes wide open and is now attempting to take a volte-face and question the agreements after enjoying the sale consideration and without offering to return the same. In my view, therefore delay in filing the suit is yet another reason why this Court would be loathe in granting temporary injunction in Plaintiff’s favour”, it further said.
Conclusion
The Court also remarked that the Society does not appear to be consistent in its approach as it had justified the actions relating to sale of TDR, notably through the same person who has affirmed the Plaint and this would be yet another reason for not granting any injunctive relief in society’s favour.
“Plaintiff has thus failed to make out prima-facie case for grant of temporary injunction in its favour. This Court is unable to trace any element of illegality in purchase of TDR by Defendant Nos.5 to 18. The present Suit is an outcome of disputes between the members of the Society. Such disputes cannot be a reason for restraining Defendant Nos.5 to 18 from carrying out construction by utilizing the purchased TDR. The Suit merely seeks to highlight the procedural illegalities in the matter of sale of TDR. … Even if inadequacy of consideration is ultimately found to be proved, the same would be a ground for recovery of losses from the responsible persons through the machinery provided for under the provisions of the MCS Act. Plaintiff has fulfilled the object behind the sale of TDR”, it concluded.
Accordingly, the High Court rejected the Interim Application and denied temporary injunction to the Plaintiff-Society.
Cause Title- Green Garden Apartments Co-operative Housing Society Limited v. Nitin Chaudhari and Others (Neutral Citation: 2025:BHC-OS:17428)
