The Bombay High Court has reiterated that the Court is free to pass an order under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act) to grant interim measures of protection against a third party who is impleaded in the petition filed under Section 9.
The Single Bench of Justice G.S. Kulkarni held that the minority members of a Society cannot act against the will of the majority members of the Society and obstruct the redevelopment work in the Society.
The majority members of the respondent no. 1, Pantnagar Pearl Cooperative Housing Society, passed a resolution appointing the petitioner Choice Developers as a developer to undertake the redevelopment of the Society's building. Thereafter, a Development Agreement was executed between the petitioner and the Society, which contained an arbitration agreement.
The petitioner issued a notice requesting the members of the Society to handover their respective premises/units in terms of the Development Agreement, for demolition and construction of a new building. After the said notice was issued, several members vacated their premises, except the respondent no. 2, 3 and 4.
The petitioner thereafter filed a petition under Section 9 of the A&C Act before the Bombay High Court seeking interim orders directing the respondent no. 2, 3 and 4 to vacate and handover their respective units.
The petitioner Choice Developers submitted before the Bombay High Court that the respondent no. 2, 3 and 4 were causing obstruction in the redevelopment work. The petitioner contended that the minority members of a society cannot oppose the majority will of the members to undertake redevelopment work.
The petitioner averred that respondent no. 2, 3 and 4 had initiated civil proceedings before the courts challenging the decision of the Society to undertake the redevelopment work. The respondents had contended in their respective proceedings that their units need to be redeveloped as commercial units and not as residential units. However, the petitioner submitted that no orders had been passed in the favour of respondent no. 2, 3 and 4 in the said proceedings.
The petitioner submitted that under the Development Agreement, an obligation existed on all the members of the Society to vacate their units to enable the redevelopment work. Thus, the petitioner contended that the minority members, i.e., the respondent no. 2, 3 and 4, could not obstruct the petitioner from undertaking the redevelopment work under the Development Agreement.
The petitioner averred that the respondent no. 2, 3 and 4 had made a representation before the Society to consider their respective units as commercial premises, which was not accepted by Society. Thus, the petitioner submitted that the said respondents could not obstruct the redevelopment work on the ground that their units were not yet recognized as commercial units. The petitioner added that there was no material to show that the flats or units held by the respondents 2, 3 and 4 were permitted to be converted as commercial premises.
The respondent no. 4 submitted before the High Court that it was not yet admitted as a member of the Society and, therefore, the petition under Section 9 of the A&C Act was not maintainable against it.
The High Court observed that there were no orders passed by the courts in the civil proceedings initiated by the respondents 2, 3 and 4 which could prevent the Society from calling upon the said respondents to vacate their respective units.
The Court held that it is a settled position in law that the minority members of the Society cannot act against the will of the majority members of the Society and obstruct the redevelopment work in the Society.
The Court observed that a Division Bench of the Bombay High Court in the case of Girish Mulchand Mehta versus Mahesh S. Mehta (2009) had held that though jurisdiction under Section 9 of the A&C Act can be invoked only by a party to the arbitration agreement, however, the Court is free to pass an order of interim measure against a third party who is impleaded in the petition filed under Section 9 of the A&C Act. The Court noted that the Division Bench had held that the fact that an order would affect the person who is not a party to the arbitration agreement or the arbitral proceedings, would not affect the jurisdiction of the Court under Section 9 of the A&C Act to pass interim orders.
The Court noted that the Division Bench had ruled that once a person becomes a member of a co-operative society, he loses his individuality and he has no independent rights except those given to him by the statute and the bye – laws.
The Court further observed that the Bombay High Court in the case of M/s. Calvin Properties and Housing versus Green Fields Cooperative Housing Society Ltd. (2013) had ruled that the minority members cannot act contrary to the resolution passed by the general body of the society and that they are bound to follow the resolution passed by the majority members of the society for redevelopment work.
The Court held that even if the members of a society allegedly have different rights than the other common rights, it would have to be redressed before the appropriate forum. The Court added that till such rights were adjudicated, the redevelopment work could not suffer at the prejudice of the majority members of the Society.
The Court refuted the contention of respondent no. 4 that since it was not issued a formal share certificate by the Society, the petition under Section 9 of the A&C Act was not maintainable against it.
The Court observed that the Deputy Registrar of the Society had passed an order directing the Society to accept respondent no. 4 as its member. The Court held that even otherwise the Court has the powers to pass orders against a third party in a petition under Section 9 of the A&C Act.
The Court ruled that even if the respondent no. 4 was not accepted as a member of the Society, the Court would have the jurisdiction to direct respondent no. 4 to vacate its units since it was occupying the premises of the Society on which redevelopment work had to be undertaken.
The Court thus held that the respondents 2, 3 and 4 had no right to delay or prejudice the redevelopment work by not vacating their respective units. The Court added that if the interim orders were not passed by it, then the larger interests of the Society would be seriously prejudiced.
Thus, the Court allowed the petition and directed the respondent no. 2, 3 and 4 to vacate and handover their respective premises.
Case Title: Choice Developers versus Pantnagar Pearl CHS Ltd. & Ors
Dated: 13.04.2022 (Bombay High Court)
Citation: 2022 LiveLaw (Bom) 213
Counsel for the Petitioner: Mr. Rajiv Singh a/w. Omprakash Jha, Basu, Gaurav i/b. The Law Point
Counsel for the Respondents: Mr. Siddharth a/w. Garima Mehrotra for respondent no. 1-Society; Mr. A.M. Saraogi for respondent no. 2 and 4; Mr. S.L. Mhatre for respondent no. 3.