Co-Operative Society Can Refuse Membership To Buyer If Builder Sells 'Refuge Area' As Residential Flat: Bombay High Court

The Bombay High Court has held that a co-operative housing society can refuse membership to a purchaser where the builder has purported to sell a “refuge area” as a residential flat, as admitting such a person would violate Section 154B-5 of the Maharashtra Co-operative Societies Act. The Court observed that where the flats in question do not exist, and membership would exceed the number of permissible units, the society is justified in refusing admission.Justice Firdosh P. Pooniwalla was hearing a writ petition filed by multiple co-operative housing societies challenging orders of the Divisional Joint Registrar directing them to admit certain purchasers as members based on agreements for sale executed by the developer. The purchasers claimed to have bought five flats in 2019, whereas the societies contended that the areas sold were in fact refuge areas and no constructed flats existed at those locations.The Court examined the material on record, including floor plans annexed to agreements of existing flats, and found that the areas in question were consistently shown as refuge areas and not as residential units. It also noted that the municipal authorities had treated these areas as refuge spaces and had not levied property tax on them, reinforcing the conclusion that no flats existed.The Court further observed that when the societies were formed, there were no unsold flats, as evidenced by the fact that the developer had not joined the societies as a member in respect of any remaining units. It held that subsequent agreements executed by the developer, after deemed conveyance, were without authority and could not bind the societies.A central consideration for the Court was Section 154B-5 of the MCS Act, which prohibits a housing society from admitting members beyond the number of flats available for allotment. The Court held that since the alleged flats did not exist, admitting the purchasers would result in membership exceeding the permissible limit, thereby directly violating the statutory provision.The Court distinguished earlier precedent, which held that societies cannot refuse membership on the ground of illegality of construction, observing that such a principle would not apply where the subject matter itself does not exist, and membership would result in a statutory violation. It held that refuge areas cannot be treated as flats or even unfinished units for the purpose of membership. It observed:“The situation would be very much different in a case like the present one where the flats simply do not exist and what has been sold to Respondent Nos. 3 and 4 by Respondent No.7 is the refuge area. As rightly submitted by the Petitioners, the refuge area cannot be considered as a flat or even a raw flat.”Accordingly, the High Court allowed the writ petition, quashed the orders directing admission of the purchasers as members as well as the consequential execution proceedings, and restored the earlier order rejecting their application for membership.Case Title: Dheeraj Dreams Building No.1 CHS Ltd. & Ors. v. Divisional Joint Registrar, Co-operative Societies & Ors. [Writ Petition No. 973 of 2023]Citation: 2026 LiveLaw (Bom)148Click Here To Read/Download Order

Co-Operative Society Can Refuse Membership To Buyer If Builder Sells 'Refuge Area' As Residential Flat: Bombay High Court

Saksham Vaishya

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