MOFA, 1963 The Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963.

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1 Subject :- The Institute of Chartered Accountants of India Western India Regional Council wircevents1@gmail.com Conference on Real Estate Sector on 15 th July 2011 at Hotel Sea Princes, Juhu Tara Road, Mumbai Income tax + Mofa Regulations and Directives issued by State Government for Redevelopment Speaker : K.K. Ramani (Advocate) MOFA, 1963 The Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, REGULATIONS OF THE (a) Promotion of Construction (b) Sale (c) Management and (d) Transfer MOFA - Important Definitions Section 2(a-1) : Flat means a separate and self-contained set of premises used or intended to be used for residence, or office, or show-room or shop or godown 1[or for carrying on any industry or business] (and includes a garage), the premises forming part of a building 2[and includes an apartment]. Explanation.- Notwithstanding that provision is made for sanitary, washing, bathing or other conveniences as common to two or more sets of premises, the premises shall be deemed to be separate and self-contained; Section 2(c) Promoter means a person and includes a partnership firm or a body or association of persons, whether registered or not who constructs or causes to be constructed a block or building of flats, or apartments for the purpose of selling some or all of them to other persons, or to a company, co-operative society or other association of persons, and includes his assignees; and where the person who builds and the person who sells are different persons, the term includes both. 1

2 IMPORTANT SECTIONS OF MOFA, General liabilities of promoter 4. Promoter before accepting advance payment or deposit to enter into agreement and agreement to be registered 4A. Effect of non-registration of agreement required to be registered under section 4 5. Promoter to maintain separate account of sums taken as advance or deposit and to be trustee therefor and disburse them for the purposes for which are given 5A. Competent Authority 6. Responsibility for payment of outgoings till property is transferred 7. After plans and specifications are disclosed no alterations or additions without consent of persons who have agreed to take the flats; and defects noticed within three years to be rectified 7A. Removal of doubt 8. Refund of amount paid with interest for failure to give possession within specified time or further time allowed 9. No mortgage etc., to be created without consent of parties after execution of agreement for sale 10. Promoter to take steps for formation of co-operative society or company 11. Promoter to Convey title, etc., and execute documents according to agreement 12. General Liabilities of flat-taker 12A. Manager not to cut-off, withhold, curtail or reduce essential supply or service 13. Offences by Promoters and consequences on conviction

3 APPLICATION U/S. 10(1) FOR DIRECTION TO THE REGISTRAR OF CHS 3 [FORM VI] (SEE RULE 12) Form of application under proviso to sub-section (1) of section 10 of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (Mah. XLV of 1963) for obtaining direction to the concerned Registrar of Cooperative Societies for registration of society. Before the Competent Authority at. Application under proviso to sub-section (1) of section 10 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer ) Act, Application No... of 20 Applicant/s; Versus Promoter/s Opponent/s. The Applicant/s above-named state as follows: Court-fee stamp of Rupees 1000/ (Rupees One thousand only) 1. The Applicant is the Chief Promoter of. Co-operative Housing Society Ltd. ( Proposed ) having its address at Plot No... (address). (hereinafter referred to as the said proposed Society" for the sake of brevity). 2. The Chief Promoter has been elected in the meeting of the persons who have taken flat from the Opponent (hereinafter referred to as the flat purchasers ) held on and the copy of the resolution is annexed and marked Exhibit No. 3. The Applicant states that the building of the Society consists of wings / building known as. (give the description here) 4. The Applicant state that the Opponent No. and/or their Authorised Representatives has/have entered into Agreement for sale of flats/ shops with the individual purchasers of the flat/ shop and entered into Agreement for Sale of the said flat/shop as required under section 4 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 and all Agreements are duly stamped, as required under the Bombay Stamp Act, 1958 and also duly registered, as required under the Registration Act, The Opponent No. 1 and their Authorised Representatives have agreed to register the Society or Company or Association of flat purchasers, to maintain the building and common areas. The copy of the said Agreement for Sale executed with one of the flat/ shop purchaser Mr./ Mrs... with the Opponent No... is enclosed herewith and marked as Exhibit No. 6. And a list of flat purchasers with the details of flat number, area, stamp duty paid, registration number, registration fees paid, etc., is given in Exhibit No.

4 4 7. The Applicant further states that the flat purchasers in their meeting have elected the Applicant as a Chief Promoter and also have authorised the Applicant to register the Society. 8. The Applicant states that the Opponent No. has failed to submit an application for registration of the organisation of flat purchasers as a co-operative society as required under sub-section (1) of section 10 of the said Act within the time prescribed under rule 8 of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Rules, The Applicant is, therefore, entitled to get the direction / order from this Competent Authority for registration of the Society by the flat purchasers of the said building as per the provisions of the Maharashtra Co-operative Societies Act, 1960, under proviso to sub-section (1) of section 10 of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, (Details of the sequence of events and the correspondence may be mentioned by the Applicant here) 9. The Applicant will rely upon a list of documents, which is annexed hereto. 10. The Applicant. therefore, pray - (a) That this Hon ble Competent Authority be pleased to order the registration of the proposed co-operative society under the proviso to sub-section (1) of section 10 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, (b) For costs of the application to be provided. (c) For such other relief as this Hon'ble Competent Authority may deem fit. Sd/- Advocate/Authorised Representative Applicant. Sd/- VERIFICATION I, Shri being the Applicant/ Chief Promoter of proposed Society and Authorised Representative abovenamed, residing at. floor.. do hereby state on solemn affirmation that what is stated in the foregoing Application is true to my own knowledge and I believe the same to be true. Solemnly declared at This day.. of.. 20 Sd/- Before me Sd/- Sd/- Advocate/Authorised Representative Notary Public Note.- When an Applicant is a Body Corporate, a copy of the resolution of its Committee or Board of Directors shall accompany the Application.]

5 APPLICATION U/S. 11(3) FOR UNILATERAL DEEMED CONVEYANCE 5 [FORM VII (SEE RULE 12) Form of Application under sub-section (3) of section 11 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 to issue a Certificate for unilateral deemed conveyance or registration of Declaration in favour of the Applicant. Before the Competent Authority at. Application under sub-section (3) of section 11 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, Application No. of 20. Applicant/s; Versus Promoter/s Opponent/s. The Applicant/s above-named state as follows: 1) The Applicants are the members of a Co-operative Housing Society formed under section 10 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 duly registered under the Maharashtra Co-operative Societies Act/ the Company/ Association of Apartment- takers having its registered office at (address) (hereinafter referred to as the said Society / said Company / said Association of Apartment-takers ). 2) The said Society / the said Company/ the said Association of Apartment-takers is in possession of a Plot of land bearing Survey No... Hissa No. City Survey No.. Admeasuring. sq. metres, (hereinafter referred to as the Suit Premises ). Hereto annexed and marked as Exhibit No.. is the copy of Registration Certificate of the said Society / the said Company/ the said Association of Apartment-takers. 3) The Applicant states that the building of the said Society / the said Company/the said Association of Apartment-takers consists of wings /.. building known as (give the description here) 4) The Applicant states that the Opponent has entered into an Agreement for Sale of flats/ shops with the individual purchasers of the flat/ shop as required by section 4 of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 and all Agreements arc duly stamped as required under the Bombay Stamp Act, 1958 and also duly registered as required under the Registration Act, The Opponent has agreed to convey the suit premises with the entire building constructed thereon (hereinafter referred to as "the said Property") to the said Society / the said Company / the said Association of Apartment-takers within the period agreed upon in the agreement or within a period of four months from the formation of the said Society / the said Company/ the said Association of Apartment-takers, as provided in rule 9 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Rules, The copy of the said Agreement for Sale executed with one of the flat/ shop purchaser Mr. / Mrs. with the Opponent No. is enclosed herewith and marked as Exhibit No...., and a list of present members with the Court-fee stamp of Rupees 2000/ (Rupees Two thousand only)

6 6 details of flat number, area, stamp duty paid, registration number, registration fees paid, etc., is given in Exhibit No... 5) The Opponents have failed to execute a conveyance for conveying the right, title and interest of the promoter in the land and building in favour of the Applicants, which they are legally entitled to have and enjoy as provided under the said Act and the rules made thereunder. (In case of Association / Condominium to be submitted under Apartment Ownership Act, as per the desire of flat purchasers, the fact should be mentioned and the failure of the promoter in complying with the provisions of the law should be brought out here) 6) The Applicant is, therefore, entitled to have a certificate issued by this Competent Authority that the Applicant is entitled to have a unilateral deemed conveyance in respect of the suit premises under section 11 of the said Act. 7) Accordingly, this Competent Authority be pleased to issue a certificate of entitlement of unilateral conveyance of land admeasuring sq. metres as specifically set out in (the Property Registration Card) the copy of the Agreement dated.. alongwith building situated at Plot No..., bearing Survey No.. Hissa No. at. gunta,.. (Name of the place).. in favour of the Applicant as the same falls within jurisdiction of this Hon ble Competent Authority. 8) The Applicant will rely upon a list of documents, which is annexed hereto. 9) The Applicant therefore prays that: (a) This Hon ble Competent Authority be pleased to grant a Certificate that the Applicant is entitled to have an unilateral deemed conveyance of Suit Premises under section 11 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 and to have it registered. (b) For costs of the application to be provided. (c) For such other reliefs as this Hon ble Competent authority may deem fit. (Sd/-) Advocate/Authorised (Sd/-) Representative for Applicants. Applicant. VERIFICATION I, Shri. member of the Applicant and Authorised Representative abovenamed, residing at floor Co-operative Housing Society Ltd. do hereby state on solemn affirmation that what is stated in the foregoing Application is true to my own knowledge and I believe the same to be true. Solemnly declared at.. This Advocate/Authorised Representative for Applicants. ] (Sd/-) Before me (Sd/-) Notary Public. (Sd/-)

7 7 Directive under Section 79(A) of Maharashtra Co-operative Societies Act, 1960 to all the Co-operative Housing Societies in the State of Maharashtra. Regarding Redevelopment of Buildings of Co-operative Housing Societies. GOVERNMENT OF MAHARASHTRA No. CHS 2007/CR554/14-C Co-operation, Marketing and Textiles Department Date: 3rd January 2009 Whereas, buildings of Co-operative Housing Societies in the State of Maharashtra are being redeveloped on a large scale. A number of complaints were received from members against managements of Co-operative Societies in which redevelopment is taking place. In respect of most of the Co-operative Housing societies, nature of complaints relating to redevelopment is as under: 1. Not taking the members in confidence in the process of redevelopment. 2. There is no transparency in tender process. 3. Appointing contractors arbitrarily. 4. To work by violating provisions of Co-operative Act, Rules and Bye-Laws. 5. No orderliness in the work of Architect and Project Consultant. 6. Not planning Redevelopment Project Report. 7. Not adopting proper procedure in finalizing tenders. 8. There is no similarity in agreements with Developers. Whereas there is no concrete policy in respect of all above points of complaint and therefore Cooperation Commissioner and Registrar, Co-operative Societies, Maharashtra State, Pune had appointed a Study Group under the Chairmanship of Joint Registrar, Cooperative Societies (CIDCO) to study the complaints received at various levels and for consultations with all constituents working in the relevant fields. The said Study Group has expressed the opinion that it is essential to frame regulations for redevelopment of buildings of Co-operative Housing Societies after consultation with all the constituents in the field of Co-operative Housing. Therefore the Government is issuing following directive under Section 79(A) of Maharashtra Co-operative Societies Act, The following directive be termed as Directive for Redevelopment of Building of Co-operative Housing Society.

8 8 1. Requisition for convening Special General Body Meeting for Redevelopment of Society s Building: Not less that ¼ members of the Society the building of which is to be redeveloped should submit a requisition to Secretary on the Managing Committee elected as per provisions of Bye-Laws and lawfully formed along with their scheme and suggestions for redevelopment of the Society s building for convening Special General Body Meeting to finalise the policy on redevelopment of the building. 2. Convening Special General Body Meeting : On receipt of an application as per Directive No. 1 above, Managing Committee should take a note thereof within 8 days and Secretary of the society should convene General Body Meeting of all the members of the society, Agenda of the Meeting should be furnished to each members 14 days prior to the day of meeting and acknowledgement thereof should be kept on record of the society. Before convening the said meeting, Society should obtain list of Architects / Project Management Consultants on the panel of Government / Local Authority and obtain quotations from minimum 5 experienced and expert persons for preparing project report for redevelopment work of the building and one expert person from among them will be selected in the Special General Body Meeting. Following business will be transacted in the said Special General Body Meeting: 1. To take preliminary decision by taking into consideration demand of the members for redevelopment of society s building and suggestions received in respect of the same. 2. To select expert and experienced Architect / Project Management Consultant on the panel of the Government / Local Authority for work of redevelopment of the building and to finalise items of work to be done by them and terms and conditions of work. 3. To submit outline of the programme for redevelopment of the building. 3. To accept written suggestions from members relating to redevelopment of the building: Members of the Society will be entitled to submit in writing to the committee eight days prior to the meeting their realistic scheme, Suggestions and recommendations for redevelopment of the building in the name of experienced and expert Architect / Project Management

9 9 Consultant known to them. However, that Architect / Project Management Consultant should submit a letter that he is desirous of doing work of redevelopment. 4. Decisions to be taken in the Special General Body Meeting: Quorum for the Special General Body Meeting convened for redevelopment of building of the Co-operative Housing Society will be ¾ of the total members of the society. If quorum is not formed, meeting will be adjourned for eight days and if there is no quorum for the adjourned meeting, it will be deemed that members are not interested in redevelopment of the building and meeting will be cancelled. On formation of quorum for the meeting, Suggestions, recommendations and objections from all the members with regard to redevelopment of the society s building will be taken into consideration and opinions expressed by all the members will be recorded in the minutes book with names of concerned members. Therefore a preliminary decision will be taken whether to redevelop society s building or not. Such decision must be taken with majority vote of more than ¾ of the members. On preliminary resolution about doing the work of redevelopment getting passed, following business will be transacted in the meeting. a) To selected expert and experienced Architect / Project Management Consultant from the panel of the Government / Local Authority for work of redevelopment of the building and to finalise items of work to be done by him and terms and conditions for the same. b) To submit an outline of the programme for redevelopment of building. 5. Providing minutes of Meeting to all members: Secretary of the Society should prepare minutes of Special General Body Meeting as above within ten days and a copy thereof should be furnished to all members and acknowledgement therefore be kept on record of the society. Also one copy should be forwarded to the office of the Registrar. 6. Issuing Appointment Letter to the Architect / Project Management Consultant: Secretary of the society will within 15 days of the meeting issue Appointment Letter to the Architect / Project Management Consultant selected in Special General Body Meeting and Society will enter into an agreement with Architect / Project Management Consultant incorporating therein terms and conditions approved in Special General Body Meeting.

10 10 7. Work to be done in the initial stage by Architect / Project management consultant: a) To survey Society s building and land. b) To obtain information about conveyance of land to the society. c) To take into consideration prevailing policy of the Government and the regulations applicable from time to time depending on ownership of the land (MHADA/SRA/ Municipal Corporation) and to obtain information about FSI and TDR, which would be available in relation to building and land of the society. d) To take into consideration suggestions and recommendations from the members for redevelopment of the building as also the residential area to be made available to the members, commercial area, vacant area, garden, parking, building specifications etc. and to prepare a realistic project report. e) Architect / Project Management Consultant should prepare the project report within two months of date of his appointment and to submit the same to committee of the society. 8. Action to be taken on receipt of redevelopment Project Report: a) On receipt of Redevelopment Project Report as above, Secretary of the society will convene a joint meeting to approve the Project Report with majority vote by taking into consideration suggestions received from Committee Members and Architect / Project Management Consultant. Notice in that behalf will be published on the Notice Board of the Society mentioning time venue etc. of the meeting. It should be mentioned in the notice that a copy of the Project Report is available in the society s office for members to see and the notice should be served on all the members that they should submit their suggestions eight days prior to the next Committee Meeting and acknowledgement of such notice should be kept on record of the Society. b) Seven days prior to joint meeting, suggestions received from the members will be forwarded by Society s Secretary to the Architect / Project Management Consultant for his Information. c) There will be a detailed discussion in the Joint meeting on the suggestions / recommendations from members and opinion thereon of the Architect / Project Management Consultant and project report will be approved with necessary changes. Thereafter draft of tender from will be prepared and date of next joint meeting will be

11 11 fixed for discussion on draft tender form and finalising the same. While preparing draft tender form, in order to get competitive quotations from renowned experts and experienced developers, either carpet area or corpus fund fixed (not to be changed) and by finalising other technical matters, the Architect / Project Management Consultant will invite tenders. Society s members will be entitled to furnish information about it to the reputed and experienced developers known to them. 9. Preparing List of Bids Received: a) On the Last day for receiving quotations, Secretary of the Society will prepare a list of offers received and display the same on the notice board of the society. b) After 15 days of the last day for receiving quotations, Secretary of the society will convene special meeting of Managing Committee of the society. Athorised representatives of bidders and members of the society desirous of remaining present can remain present for the meeting as observers. Tenders so received will be opened in the presence of all and the Architect / Project management consultant will scrutinize all tenders and prepare a comparative chart and after checking merit, reputation, experience and comparative rate etc. and select minimum 5 bids and if the bids received are less than 5, all the bids for putting up before Special General Meeting and concerned bidders will be informed about it immediately. 10. Selection of Developers: a) Office of the Registrar to appoint Athorised officer for attending General Body Meeting: An application with list of the members should be sent within eight days to the registrar for appointment of Athorised officer to attend the Special General Meeting of the Society for selecting a Developer out of those selected by committee of the Society with the help of the consultant, by taking into consideration his experience, merit, financial capacity, technical capacity and competitive rate etc. b) Convening Special General Body Meeting for finalising tender: After appointment of authorized officer, with his prior permission Secretary of the Society will fix the time and venue convene Special General Body Meeting for appointment of Developer and Agenda of this meeting will be sent to all the members 14

12 12 days prior to the meeting by hand delivery and by registered post and keep acknowledgement thereof on record of the Society. Also, office of the Registrar will make arrangement to keep his authorized representative present for the meeting. Also arrangement will be made for video shooting of the meeting at the cost of the Society. Any person other than formal members will not be entitled to attend this meeting. Therefore members will be required to present at the venue of the meeting with their Identity Cards. At the time of submitting redevelopment proposal to the concerned authority for sanctioning, selection of Developer and other work should have been done in the presence of authorized officer from Registrar s office. c) If there is no quorum for Special General Body Meeting: If the quorum of ¾ members out of total members is not formed for Special General Body Meeting, the meeting will be adjourned for eight days. If quorum does not get formed for adjourned meeting, it will be deemed that the members have no interest in redevelopment of the building and the meeting will be cancelled and thereafter the said subject will not be taken up before the Special General Body Meeting for approval. d) In the Special General Body Meeting to be convened for selection of Developer, authorized representative from the office of the Registrar will be present and observe proceedings of the meeting. Also, on concerned representatives and authorized officer remaining present at the venue and at the time of meeting and on quorum of ¾ members getting formed, following business will be transacted in the meeting. i) Providing comparative information in respect of tenders selected for presentation (for redevelopment work). ii) Presentation by bidders one by one. iii) To select Developer for redevelopment of the building, to finalise terms and conditions and finalise the tender. iv) To obtain consent from the selected Developer. v) Give information about further work. It will be essential to take written approval by ¾ majority vote of the members present for the meeting for selection of Developer. If the selected Developer of his representative does not remain present for the meeting, further action will be taken by presuming that they have given their consent for the project.

13 Agreement to be entered into with Developer: Subject to the terms and conditions approved by General Body Meeting of the Society, an agreement should be entered into with the Developer within one month under guidance from the Architect / Project Management Consultant. Along with the points suggested by the Architect / Project Management Consultant appointed by the Society, following points will also be included in the agreement. (1) The period for completing redevelopment project of the Society will not exceed more than two years and in exceptional cases, it will not exceed three years. (2) Developer will give a Bank Guarantee for amount equal to 20% of the project cost. (3) During the period of redevelopment, the Developer will make available to the members alternative accommodation in the same area as far as possible or arrange to pay monthly rent and deposit as acceptable to members or make available transit camp accommodation. (4) The said agreement will be registered under Registration Act, (5) On completion of redevelopment project, new members will be admitted in the Society only with approval of General Body Meeting of the Society. (6) Carpet area to be allotted should be clearly mentioned in the agreement. (7) Development right vested in the Developer will be non-transferable. (8) Members will vacate their respective premises only after all legal approvals are received for redevelopment of the building. (9) Rights of those who are in possession of the flats will remain unaffected. (10) If any dispute arises in the work of redevelopment, provision should be made in the agreement to resolve the same as per provisions of Section 91 of the Act.

14 14 (11) After receipt of Occupation Certificate, flats in the redeveloped building should as far as possible be allotted as per present conditions floor-wise and if it becomes necessary to allot flats by drawing lots, on completion of construction, Developer should make arrangement drawing lots, and at that time flats should be allotted in the presence of Registrar s representative and this process be recorded by video shooting. (12) Any Committee member or Office Bearer of the Society should not be the Developer or relative of the Developer. (13) Building plans sanctioned by the Municipal Corporation / Competent Authority should be put up before the General Body Meeting for information and if any member wants copies of approved documents, he should submit application for the same to the Society and it will be binding on the Committee to furnish the information by charging necessary fee. By order and in the name of the Governor of Maharashtra (Dr. Sudhirkumar Goyal) Principal Secretary (Co-operation and Marketing)

15 IMPORTANT DECISION 1 15 REGARDING CAR PARKING Nahalchand Laloochand Pvt. Ltd vs. Panchali CHS Ltd The issue as to saleability of stilt parking was considered by the Bombay High Court in Nahalchand Laloochand Pvt. Ltd vs. Panchali CHS Ltd., wherein it was held that stilt parking is an amenity offered by the Society and is not saleable. Only such spaces can be sold which are counted in the working of FSI. Stilt parking is not included in FSI nor the same is subject to tax. Hence such parkings cannot be sold. The Supreme Court framed the following issues for decision:- (i) Whether stand alone garage or in other words garage as an independent unit by itself, is a flat, (ii) Whether stilt parking space / open parking space of a building regulated by MOFA, is a garage; (iii) If the answer to the aforesaid questions is in the negative, whether stilt parking space in such building is part of common areas and facilities. (iv) What are the rights of the promoters vis-à-vis society in respect of such parking spaces. After a detailed discussion and consideration of arguments from both sides the Apex Court answered the questions as under:- (i) The first question was answered in the negative. The court held the view that the statutory definition of flat must be construed keeping in view the intent of the legislature and the context of the statute and, seen thus, the phrase and includes a garage in the bracketed portion in the definition does not bring in garage by itself within the meaning of the word flat. The bracketed phrase is indicative of the legislative intention to include garage as appurtenant or attachment to a flat which satisfies the ingredients of Section 2(a-i). If stand alone garage (or a garage by itself) was intended by the legislature to be a flat within the meaning of Section 2(a-1) that could have been conveniently conveyed by use of the expression or garage after the word business, in the same breath as preceding uses. To this extent the court disapproved the decision of Bombay High Court in Dr. K. R. Agarwal vs. Balkrishna AIR 1972 Bom 343. (ii) The second question too was answered in the negative. It was held that for the purpose of MOFA and particularly Section 2(a-1), the term garage must be considered as would be understood by a flat purchaser and such person would contemplate garage which has a roof and wall on three sides. A roofless erection could not be described a garage. The Court considered clause/condition No. 2 in Form V which used the words covered/open garage and held that the word open cannot override the true meaning of term garage in Section 2(a-1). The court observed 35. We do not perceive any force in the argument that open parking space tantamounts to a `garage' within the meaning of Section 2(a-1) read with condition No. 2 Form V of

16 Rules. Can a person buying a flat for residence or one of the uses mentioned in Section 2(a-1) really think that open to the sky or open space for parking motor vehicles is a garage? We do not think so. The word `garage' may not have uniform connotation but definitely every space for parking motor vehicles is not a garage. A roofless erection could not be described a garage. What is contemplated by a `garage' in Section 2(a-1) is a place having a roof and walls on three sides. It does not include an unenclosed or uncovered parking space. It is true that in condition No. 2, Form V the words `covered/open garage' have been used but, in our view, the word `open' used in the Model Form V cannot override the true meaning of term `garage' in Section 2(a-1). As a matter of fact, none of the provisions of MOFA regards `open garage' connoting `flat' or an appurtenant/attachment to a flat. We do not think undue importance should be given to word `open' which has loosely been used in condition No. 2, Form V. The true meaning of the term `garage' in Section 2(a-1), we think, is not affected by a Model Form V appended to the 1964 Rules. (iii) As to whether stilt parking space / open parking space is part of the common area and facilities, the court disapproved the argument that unless the promoter prescribes and defines at the outset the common area and includes parking therein, the parking area cannot be taken as common area. If a promoter does not fully disclose the common areas and facilities, he does so at his own peril. Stilt parking spaces would not cease to be part of common areas and facilities merely because the promoter has not described the same as such in the advertisement and agreement with the flat purchaser. (iv) The Apex Court was not impressed with the argument on behalf of the promoter that the promoter continues to have contractual, legal and fundamental right to dispose of the stilt / open parking space in the manner in which he proposes and his consumers accept. It also held that if the argument is accepted, the mischief which MOFA is obviously intended to deal with and curb remains unabated and flat Purchasers would continue to be exploited indirectly by the promoters. The Court held:- In our opinion MOFA does restrict the rights of the promoters in the block or building constructed for flats or to be constructed for flats to which the Act applies. The promoter has no right to sell any portion of such building which is not a flat within the meaning of Section 2(a-1) and the entire land and building has to be conveyed to the organisation; the only right which remains with the promoter is to sell the unsold flats. It is, thus, clear that the promoter has no right to sell stilt parking spaces as they are neither flat nor appurtenant nor attachment to a flat.

17 IMPORTANT DECISION 2 17 REGARDING CONSTRUCTION OF ADDITIONAL BUILDING AND CONVEYANCE TO THE SOCIETY MADHU VIHAR CHS LTD., Vs. JAYANTILAL INVESTMENTS The Supreme Court considered the provisions of Section 7A and the effect of amendment in Section 7(i)(ii) and held that the question of taking prior consent of flat takers does not arise after the amendment so long as the additional building/structure has the approval of authority competent to approve the plan. The court observed " Consequently, reading S.7 and S. 7-A, it is clear that the question of taking prior consent of the flat takers does not arise after the amendment in respect of any construction of additional structures. However, the right to make any construction of additional structures/buildings would come into existence only on the approval of the plan by the competent authority. That, unless and until, such a plan stood approved, the promoter does not get any right to make additional construction. This position is clear when one reads the amended S. 7(1)(ii) with S. 7-A of the MOFA as amended. Therefore, having regard to the Statement of Objects and Reasons for substitution of S. 7(1) (ii) by the Amendment Act 36/86, it is clear that the object was to make legal position clear that even prior to the amendment of 1986, it was never intended that the original provision of S. 7(1)(ii) of MOFA would operate even in respect of construction of additional buildings. In other words, the object of enacting Act No. 36/86 was to change the basis of the judgment of the Bombay High Court in Kalpita Enclave case(supra). By insertion of S. 7-A vide Maharashtra Amendment Act 36/86 the legislature had made it clear that the consent of flat takers was never the criteria applicable to construction of additional buildings by the promoters. The object behind the said amendment was to give maximum weightage to the exploitation of development rights which existed in the land. Thus, the intention behind the amendment was to remove the impediment in construction of the additional buildings, if the total layout allows construction of more buildings, subject to compliance of the building rules or building bylaws or Development Control Regulations. However, according to the court the freedom to construct additional building/structure without the prior consent of flat takers is not absolute and unrestricted. The freedom to construct additional building, without prior consent, is subject to the disclosure made to the flat takers under Section 3 and the terms of the agreement for sale to be entered into under Section 4(1A) of MOFA. The court further observed:- At the same time, the legislature had retained S. 3 which imposes statutory obligations on the promoter to make full and true disclosure of particulars mentioned in S. 3(2) including the nature, extent and description of common areas and facilities. As stated above, sub-section (1A) to S. 4 was also introduced by the Legislature by Maharashtra Act 36/86 under which the promoter is bound to enter into agreements with the flat takers in the prescribed form. Under the prescribed form, every promoter is required to declare the FSI available in respect of the said land. The promoter is also required to declare that no part of that FSI has been utilized elsewhere, and if it is utilised, the promoter has to give particulars of such utilization to the flat takers. Further, under the pro forma agreement, the promoter

18 18 has to further declare utilization of FSI of any other land for the purposes of developing the land in question which is covered by the agreement. 16. Therefore, the legislature has sought to regulate the activities of the promoter by retaining Ss. 3 and 4 in the Act. The Hon ble Court after discussing the provisions of Section 7, 7A, 10 and 11 and relating them to the provision of Section 3 and 4 reconciled the position and interpreted the scheme of the Act in the following words:- 17. Reading the above provisions of MOFA, we are required to balance the rights of the promoter to make alterations or additions in the structure of the building in accordance with the layout plan on the one hand vis-a-vis his obligations to form the society and convey the right, title and interest in the property to that society. The obligation of the promoter under MOFA to make true and full disclosure of the flat takers remains unfettered even after the inclusion of S. 7-A in MOFA. That obligation remains unfettered even after the amendment made in in S. 7(1)(ii) of MOFA. That obligation is strengthened by insertion of sub-section (1A) in S. 4 of MOFA By Maharashtra Amendment Act 36/86. Therefore, every agreement between the promoter and the flat taker shall comply with the prescribed Form V. It may be noted that, in that prescribed form, there is an explanatory note which inter alia states that Cls. 3 and 4 shall be statutory and shall be retained. It shows the intention of the legislature. Note 1 clarifies that a model form of agreement has been prescribed which could be modified and adapted in each case depending upon the facts and circumstances of each case but, in any event, certain clauses including Cls. 3 and 4 shall be treated as statutory and mandatory and shall be retained in each and every individual agreements between the promoter and the flat takers. After laying down the legal position as enunciated above, the Apex Court set aside the order to the High Court with direction to consider the facts of the case with a view to find out whether the addition under dispute was meant to be a wing of the building or an additional building. The answer to this was to decide the applicability or non-applicability of Section 7(1)(ii) of MOFA. It will also decide whether the time to execute the conveyance has arrived or not. The directions of the court were:- "20. In the light of what is stated above, the question which needs to be examined in the present case is whether this case falls within the ambit of amended S. 7(1)(ii) or whether it falls within the ambit of S. 7-A of MOFA. As stated above, under S. 7(1) after the layout plans and specifications of the building, as approved by the competent authority, are disclosed to the flat takers, the promoter shall not make any other alterations or additions in the structure of the building without the prior consent of the flat takers. This is where the problem lies. In the impugned judgment, the High Court failed to examine the question as to whether the project undertaken in 1985 by the appellant herein was in respect of construction of additional buildings or whether the project in the layout plan of 1985 consisted of one building with 7 wings. The promoter has kept the requisite percentage of land open as recreation ground/open space. Relocation of the tennis court cannot be faulted. The question which the High Court should have examined is; whether the project in question consists of 7 independent buildings or whether it is one building with 7 wings? The answer to the above question will decide the applicability or non-applicability of S.

19 19 7(1)(ii) of MOFA, as amended. The answer to the above question will decide whether the time to execute the conveyance has arrived or not. This will also require explanation from the competent authority, namely, Executive Engineer, "R" South Ward, Kandivali, Mumbai (respondent No.8 herein). In the dates and events submitted by the appellant - promoter, there is a reference to the permission granted by ULC authorities dated which states that the owner / developer shall construct a building with 7 wings. One needs to examine the application made by the promoter when he submitted the layout plan in As directed by the Supreme Court, the High Court after verifying the plan submitted by the promoter from time to time from 1985, in their order dated 7 th October, 2010, came to the conclusion that in every revision whether the wings were 7, 5 or 6 the plan showed that these wings were interlinked to each other. It was the sanctioned plan dated 29 th March 2001 which, for the first time, showed 5 wings interlinked to each other with the construction of one additional proposed building. The court held that though initially in the year 1985, the sanctioned plan was shown as consisting of 7 wings interlinked to each other, and thereafter, vide amended plans sanctioned from time to time, the number of wings were changed from 7 to 5 and thereafter from 5 to 6, it is only the sanction plan of 2001 which shows the layout of 5 wings interlinked to each other along with one proposed additional building. The court, therefore, held that in the plan which was presented to the flat takers, the said project was one building with various wings interlinked to each other. The plan of 2001 which makes substantial change was not the one presented to the flat takers. With the finding as aforesaid, the question arose as to whether in a building with wings, prior consent of flat takers was required before constructing an additional building. The following direction of the Supreme Court in such a case are relevant which guided the High Court in answering the question. If it is the building with 7 wings intended to be constructed in terms of the layout plan then the High Court is also required to consider the effect of the judgment in the case of Ravindra Mutneja and others Vs. Bhavan Corporation and others (2003 (5) Bom. CR 695), in which the learned single Judge has held that if a building is put up as a wing of an existing building, it cannot be constructed without the prior permission of the flat takers. In that connection, the High Court shall also consider permission dated under S. 21(1) of ULC Act, application made to the competent authority when initial layout plan was sanctioned, applications for amendments to layout plans made from time to time and also agreements between promoter and flat takers. In the case of Ravindra Mutneja (Supra) the learned Judge of Bombay High Court observed :- "The real issue as has been noted earlier is what is the stage up to which the developer/owner can put up additional construction after the building in terms of the registered plan has been constructed and occupied. In my opinion, once the buildings shown in the approved plan submitted in terms of the regulations under an existing scheme filed before the authorities under MOFA Act, have been completed and possession handed over, the builder/owner cannot contend, that because he has not formed the society and/or not conveyed the property by sale deed under the Act he is entitled to take advantage of any additional F.S.I. that may become available because of subsequent events. That would be so at the stage the building is under construction or the building is not completed and/or

20 20 purchasers are not put in occupation provided such building forms part of the development plan and/or layout plan already approved. Subsequent amendment of the layout plan after the building plan is registered under MOFA, without the consent, prima facie, of the flat purchasers would not be permissible. Following the decision aforementioned, the court held that the promoter was under the statutory obligation in view of Section 11 of the MOFA read with Rule 9 of the Rules to execute conveyance in favour of the society within a period of 4 months. Once the building shown in the approved plan was completed and possession handed over and the time frame prescribed for registration of the society and conveying land to the society is over, the promoter was legally precluded from further construction without consent. It may be of relevance here to point out that the S.L.P against the Order of the Bombay High Court in the case of Jayantilal Investments dated has been dismissed by the Supreme Court vide their Order dated

21 21 IMPORTANT DECISION 3 REGARDING COST OF DEVELOPMENT RIGHTS AND APPLICABILITY OF SEC.50-C OF I. T. ACT IN THE INCOME TAX APPELLATE TRIBUNAIN TRIBUNAL MUMBAI C BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT & SHRI R K PANDA, AM ITA No. 6170/Mum/2008 (Asst Year ) Chiranjeev Lal Khanna Plot No.8, X Road, No.4 Greater Mumbai Housing Soc. Juhu, Mumbai 49 (Appellant) Vs. The Income Tax Officer Ward 11(2)(2), Mumbai PAN NO.AABPK3888K (Respondent) Assessee by Shri S C Tiwari Revenue by Shri P N Devdasan-DR PER R K PANDA, AM This appeal filed by the assessee is directed against the order dated of the CIT(A) XI, Mumbai relating to AY SUMMARY OF DECISION Granting development rights for demolition & reconstruction of building results in transfer of land & building The assessee, being owner of land and building, entered into an agreement with the developer pursuant to which the developer demolished the building and constructed a new building. The FSI on the land was retained by the assessee. The additional FSI required for construction was brought in by the developer. The assessee received Rs crores from the developer for permitting the development which was offered to tax as capital gains. The AO & CIT (A) held that as the stamp duty value of the property was Rs crores that had to be taken as the consideration u/s 50C. On appeal to the Tribunal, the assessee claimed that the transaction was not subject to capital gains at all on the ground that (i) the grant of development rights was not a transfer (ii) there was no cost of acquisition of the development rights. It was also argued that s. 50C did not apply to development rights: HELD dismissing the appeal:

22 22 (i) The assessee s argument that in the grant of development rights, there is no transfer of land or FSI (since the developer brought additional FSI) is not acceptable because (i) the assessee itself argued before the AO (to contest the AO s proposal to tax the gains as business income) that there was a transfer of a capital asset and (ii) there was demolition of an existing building and it was not merely a case of construction of additional floor/modifications on the existing structure. Consequently, there was a transfer of land & building in favour of the developer; (ii) The assessee s argument (relying on New Shailaja Co-op Hsg Soc) that there is no cost of acquisition is also not acceptable because while in that case the assessee had become entitled to additional FSI owing to the DC Regulations for which there was no cost, the present was one of transfer of existing land and building which was demolished by the builder for fresh construction and the documents were registered (Jethalal D Mehta 2 SOT 422 (Mum), Lotia Court Coop Hsg Soc 118 TTJ 199 (Mum), New Shailaja Coop Hsg Soc, Om Shanti Coop Soc etc not followed); (iii) The argument on s. 50C is also not applicable because it is a case of transfer of land and building to the developer. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on the 23th, day of April Sd/- (R V EASWAR) President Sd/- (R K PANDA ) Accountant Member Place: Mumbai : Dated:13th, April 2011

23 23 IMPORTANT DECISION 4 RAMESH HIMMATLAL SHAH V. HARSUKH JADHAVJI JOSHI AIR 1975 SUPREME COURT 1470 Flat in a tenant Co- partnership Housing Society registered under the Act Flat can be attached and sold in execution of a decree against the allottee. JUDGEMENT This appeal in forma pauperis raises an important question of law: Is a flat in a tenant copartnership housing society under the Maharashtra Co-operative Societies Act, 1960 liable to attachment and sale in execution of a decree against a member in whose favour or for whose benefit the same has been allotted by the society? The appellant is the decree-holder. He obtained a money decree against the respondent judgment-debtor and took a warrant of attachment of flat No. 9 of Paresh Co-operative Housing Society Limited at Santacruz, Bombay. This flat was attached on August 8, 1970 and a warrant of attachment was served on the judgment-debtor while he was in jail in Rajkot. In due course a sale proclamation was also issued in respect of the flat while the judgment-debtor was yet in jail. After coming out of the jail, the judgment-debtor filed a suit some time in 1972 to set aside the decree. The flat was offered for sale and was purchased in auction by one Bhupendra N. Shah for a sum of Rs.24,000/-. The sale, however, is not yet confirmed. The judgment-debtor filed a chamber summons on March 28, 1972, praying for the dismissal of the execution petition filed by the decree-holder and for setting aside the warrant of attachment and proclamation of sale on the ground that the flat being a flat in a cooperative housing society was not liable to attachment and sale. It was also stated that he had no saleable interest in the said property under Section 60.Civil Procedure Code, and therefore, it was not liable to attachment. The learned single Judge, Bombay High Court, allowed the claim and made the summons absolute by directing that the attachment and sale of the flat being illegal be set aside. The appellant preferred a Letters Patent Appeal before the Bombay High Court without success and the decision of the learned Single Judge was affirmed. Hence this appeal by special leave. The flat in question is admittedly owned by the Paresh Co-operative Housing Society Limited (briefly the Society). The respondent purchased the flat benami in the name of his brother Hasmukh and his wife Shashikala, Although, therefore, the respondent is not a registered holder of the flat, it is clear that the flat is held by his brother and his wife on behalf of the respondent. This is to be noted as Section 60, Civil Procedure Code, reaches a benami holding. It may also be noted that the respondent is now fighting the case on the basis that the right to occupy the flat in question is his property which is not liable to attachment and sale. We should also note here that after the High Court invalidated the attachment and sale, the flat was purchas by one Suryakant N. Sangani (briefly Suryakant) having acquired the shares in the society from Hasmukh and Shashikala. It is said that on the joint application of Shashikala and Suryakant, the shares were transferred to the latter on or about May 15, 1974.