MUMBAI: The Bombay high court on Tuesday ruled that a landowner cannot be treated as a “co-promoter” under the Maharashtra Ownership Flats Act (MOFA) if the developer acted independently, and struck down an interim order passed by the Dindoshi Civil Court that had stalled the development of a 120,000-square-metre (sqm) plot in Borivali East.
“This is an abuse of the process of the court and a misuse of beneficial legislation,” Justice Kamal Khata said, as he dismissed a plea filed by Western Edge II Premises Co-operative Housing Society. “MOFA, enacted to protect flat purchasers from unscrupulous promoters, cannot be turned into a weapon to appropriate the landowner’s reserved rights,” he added.
The case concerned a plot measuring 31,323 sqm that Western Edge II shares with two other housing societies, Western Edge I and Samarpan Exotica. In February 2005, the landowner, Cable Corporation of India Ltd (CCIL), had granted Kanakia Spaces Realty Pvt Ltd rights to develop 31,323 sqm of its 151,328 sqm property in Borivali East.
Accordingly, the company constructed three buildings on the plot, utilising a floor space index (FSI) of 59,157 sqm, and handed over possession of the ready flats to their respective buyers in 2010 and 2012 after obtaining occupancy certificates from the Brihanmumbai Municipal Corporation (BMC).
However, disputes began in 2019, when BMC issued notices alleging illegal additions and alterations to the Western Edge II building, resulting in an excess FSI use of about 4,226 sqm. After talks with the landowners failed to secure additional FSI to regularise the unauthorised additions, Western Edge II filed a suit in the civic court in September 2022.
On October 30, 2023, the civil court issued an interim order restraining CCIL from commencing any construction, utilising any FSI or transferable development rights (TDR) on the land, or creating any third-party rights in it. The interim order came about seven months after CCIL obtained the BMC’s permission to construct high-rises on the remaining plot, prompting the company to approach the high court.
What the high court said
The high court held that the trial court could not have passed such a drastic order, especially when the flat purchasers were well aware that CCIL had granted Kanakia Spaces Realty the right to independently develop the 31,323-sqm plot, with an FSI of 59,157 sqm, and specifically reserved rights over the remaining property’s development potential.
Justice Khata rejected the society’s argument that CCIL, as the landowner, was also a co-promoter under MOFA, and that it could not exploit the development potential of the remaining property without informing the flat purchasers.
The court rejected the society’s reliance on the words “causes to be constructed” in the definition of “promoter” under MOFA, saying the expression cannot be read so broadly as to include every landowner who grants development rights to an independent developer.
“Every act that facilitates construction cannot amount to causing construction,” the court said. “Otherwise, financiers, suppliers, landowners, and statutory authorities granting approvals would all become promoters. That would lead to absurd consequences. The expression must, therefore, mean something more, namely, active participation, control, or entrepreneurial involvement in the construction activity,” it clarified.
The court said the landowner in this case could not be characterised as a promoter, and that the statutory obligations under MOFA, including the obligation to execute a conveyance under Section 11, attach to the developer, not to the owner. The court also held that the sale deeds executed with flat purchasers specifically mentioned the terms agreed between the landowner and the developer and, therefore, could not seek anything beyond 31,323 sqm of land.
“In the present case, the society is not being denied what it bargained for,” the judge said. “What the society seeks is something more, namely rights in FSI/TDR that never formed part of the developer’s entitlement and which its members knew were reserved to the owner,” the court added.
The court noted that the disputes arose only after BMC issued a notice to Western Edge II, and that the suit was filed only after their attempts to regularise the unauthorised construction failed. It said the sequence of events “strongly indicated” that the suit was not filed out of any genuine concern to protect statutory rights under MOFA, but as a pressure tactic to compel the landowner to part with its reserved FSI/TDR for regularisation of the unauthorised construction.
Noting that this attempt was “an abuse of the process of the court and a misuse of beneficial legislation” like MOFA, the court also ordered Western Edge II CHS to pay the litigation cost of ₹10 lakh to CCIL.
