Redevelopment Of Housing Societies – Bliss Or A Burden!

The new master plan by the Maharashtra Government will hopefully bring an end to the frequent litigation and will simultaneously bring in a new ray of hope to the aggrieved members of the Society by keeping a check on the procedure adopted by the Developers.

The Government of Maharashtra is now coming up with a new master plan for revamp of old, dilapidated cessed buildings in the Housing Societies in the Island City. The State Government will form a cluster of such buildings and prepare the master plan. Though the directives issued by the Government for redevelopment of buildings in Housing Societies are in place ("Directives"), there have been complications and controversies and consequently, the Government is preparing a master plan to be followed by the Developers. As the master plan is yet to come in force, its success is yet to be tested. The process of redevelopment is to begin only once the existing members of the Society resolve in favour of the redevelopment of the housing society.

The Bombay High Court in its decision in Raja Construction Co. v. Sahara Cooperative Housing Society Ltd. and Ors. paved the way to the redevelopment of housing societies in spite of minority members of the Society dissenting to the proposed redevelopment scheme. The judgment further added that the dissenting members can be forcibly evicted. Since the buildings of Housing Societies were being revamped on a large scale, a number of irregularities were observed in the mechanism of such redevelopment. The redevelopment suffered various irregularities such as:-

• The redevelopment scheme being prejudicial towards certain members;
• No transparency in the redevelopment scheme;
• Arbitrary appointment of contractors/developers;
• Violation of Co-operative Societies Act, Rules and Bye-Laws;
• No orderliness in the work of Architect and Project Consultant;
• The Redevelopment Project Report not being adequately planned;
• No proper procedure in finalizing the tenders;
• No similarity in agreements with the Developers

To resolve the aforesaid irregularities, the Study Group, appointed under the Chairmanship of Joint Registrar, Co-operative Societies (CIDCO) formulated Directives under section 79A of Maharashtra Co-operative societies Act, 1960 after consultation with all the constituents in the field of Co-operative Housing as set out below:

• One-fourth members of the Society should submit a requisition to the Secretary of the Society for redevelopment of the Society's building for convening a Special General Body Meeting to finalise the redevelopment scheme of the building.
• On receipt of the aforesaid requisition, the Managing Committee of the Society should take a note thereof within eight days and the Secretary of the Society should convene General Body Meeting of all the members of the society.

The agenda of the meeting should be furnished to each member 14 days prior to the day of the meeting. The Society is required to obtain a 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 for redevelopment work of the building and one expert person from among them will be selected in the Special General Body Meeting.

The following issues should be discussed/decided in the Special General Body Meeting:-

1. To take preliminary decision by taking into consideration the demand of the members for redevelopment of the Society's building and the 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 finalize 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.
4. The members of the Society will be entitled to submit in writing to the Committee eight days prior to the meeting their realistic scheme of redevelopment. The members of the Society can suggest and recommend for appointment of an experienced and expert Architect/Project Management Consultant known to them. However, the Architect/Project Management should submit a letter that he is desirous of doing work of redevelopment.
5. The quorum for the Special General Body meeting for the redevelopment of the building of the Housing Society should be three fourth of the total members of the Society. On formation of the quorum, suggestions, recommendations and objections from all 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 minute book. Therefore, a preliminary decision will be taken whether to redevelop Society's building or not.

On preliminary resolution about the redevelopment, following issues will be discussed/ decided in the meeting:-

• To select an expert and experienced Architect/Project Management Consultant for redevelopment of the building and to finalise items of work to be done by him and terms and conditions for the same;
• To submit an outline of the programme for redevelopment of building.
• The Secretary of the Society should prepare minutes of Special General Meeting within ten days and a copy should be furnished to all members and the acknowledgment should be recorded. Moreover, a copy is required to be forwarded to the office of the Registrar.
• The Secretary of the Society will within fifteen days of the meeting issue an 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 setting out therein the terms and conditions approved in Special General Body Meeting.
• The Architect/Project Management Consultant will survey the Society's building and land and obtain information about conveyance of land to the Society. The Architect/Project Management Consultant will take into consideration prevailing policy of the Government and the regulations applicable from time to time depending on ownership of the land regulations applicable from time to time and to obtain information about Floor Space Index and Transferable Development Rights, which would be available with respect to the building and land of the Society. The Architect/Project Management Consultant should prepare the project report within two months of the date of his appointment and should submit the same to the Committee of the Society.
• On receipt of Redevelopment Project Report, the Secretary of the Society shall convene a joint meeting of the committee members and the Architect/Project Management Consultant to approve the Project Report by a majority vote. Notice is to be served on the members of the Society that they should submit their suggestions eight days prior to the next Committee Meeting. Seven days prior to the joint meeting, suggestions received form the members will be forwarded by Society's Secretary to the Architect/Project Management Consultant for his information.
• After detailed discussions in the Joint Meeting on the suggestions/recommendations from the members of the Society and opinion of the Architect/Project Management Consultant, a tender form will be prepared in order to obtain competitive quotations from experienced and renowned developers. After the bids are received, a bidders' list is prepared.
• A Special General Meeting is convened within eight days from the preparation of the aforesaid list, for selecting a developer out of those selected by the Committee of Society while considering his experience, merit, financial capacity, technical capacity and competitive rate etc. Thereafter, a Special General Meeting will be convened for appointment of Developer and the agenda of the meeting will be sent to all the members fourteen days prior to the meeting.

Following issues shall be discussed/decided in the Special General Meeting with a quorum of three fourth members of the Society:-

1. Providing comparative information in respect of tenders selected for redevelopment;
2. Presentation by bidders;
3. To select Developer for redevelopment of the building and to finalise the terms and conditions and finalise the tender;
4. To obtain consent from the selected Developer;
5. Written approval by three fourth members present in the meting for selection of Developer.
6. An agreement will be entered into with the developer within one month under the guidance of the Architect/Project Management Consultant.

The following clauses will be reflected in the development agreement:-

1. The time period for completing the redevelopment project of the Society will not exceed two year and in exceptional cases, it will not exceed three years;
2. Developer will provide a Bank Guarantee for the amount equivalent to 20% of the project cost;
3. During the course of redevelopment, the Developer will provide the members of the Society alternative accommodation in the same area as far as possible or to pay monthly rent and deposit as acceptable to the members of the Society or make available transit camp accommodation;
4. The development agreement will be registered under the Registration Act, 1908;
5. After the completion of the redevelopment project, the members of the Society will be admitted in the Society only with the approval of General Body Meeting of the Society;
6. The carpet area to be allotted should be clearly set out in the development agreement;
7. The development right vested in the developer will not be transferable;
8. The members of the Society will leave their premise only when all legal approvals for redevelopment of the building are obtained;
9. The rights of the members of the Society who are in possession of their flats will not be affected;
10. In case of any dispute in the course of redevelopment, provision should be made in the development agreement to resolve the same as is provided under section 91 of the Maharashtra Co-operative Societies Act, 1960;
11. On receipt of the Occupation Certificate, the flats in the redeveloped building will be allotted as per present conditions floor wise and if it becomes necessary to allot flats by drawing lots, and at that time flats should be allotted in the presence of the Registrar's representative;
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 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 the necessary fee;
14. The Developer also enters into a development agreement with individual members of the Society.

Inspite of formulating the above Directives, there were a number of controversies, disputes and litigation that arose with respect to redevelopment of buildings in Housing Societies. Justice Dharmadikari of Bombay High Court while passing a landmark judgment in M/s. Acknur Constructions Pvt. Ltd.v/s Sweety Rajendra Agarwal & others on 5th December 2009 observed that any activity of redevelopment of housing society should not hamper the rights of members and must safeguard the existence of the Society.

Justice Dharmadikari held that that even a single dissenting member of a co-operative housing society cannot be thrown out by a builder based on a mere development agreement with the society and a majority of its flat owners for redevelopment of the building. The Directives have provided some more protections like time bound completion of redevelopment project, bank guarantee of 20% price of the project and non transferability of the development rights.

Looking to the enormous need of redevelopment in the island city, a regulatory body should be created to oversee effective execution of redevelopment projects and for quick remedy of society's and member's grievances. Further, the safety of Society in redevelopment process needs to be reconsidered in the Directives else the perception of safety can itself be a key point of litigation by dissenting members. To sum up, the recent Directives for redevelopment of housing societies has tried to provide transparency in the process of redevelopment.

Justice Kathawalla of the Bombay High Court on 4th February 2010 has ruled that members of a co-operative housing society who are in minority cannot obstruct a redevelopment project and must abide by the majority decision of the society, unless they show that there is some prejudice caused to them or a fraud has been committed.

In the judgment of Bombay High Court in Girish Mulchand Mehta and Durga Jaishankar Mehta vs. Mahesh S. Mehta and Harini Co-operative Housing Society Ltd. passed on 10th December 2009, the Division Bench comprising of Chief Justice Swatanter Kumar and Justice Khanwilkar held that merely because some members of the Society disapprove of the decision of the majority to redevelop the building of the Society, that cannot be a basis to negate the decision of the majority members of the Society, unless it is shown that the aforesaid disapproval was a result of fraud or misrepresentation or opposed to some statutory prohibition.

Though redevelopment of housing societies is the need of the hour, it has become a cumbersome task. The redevelopment comes with a cost incurred by the members of the Society as well as the Developer. There are complexities involved in fulfilling the redevelopment projects which has resulted into a never ending phenomenon. The Government of Maharashtra in order to ensure transparency and efficiency in the process of redevelopment formulated Directives for the same.

However, it was a futile effort as inspite of such Directives being in place, the redevelopment schemes were and are being taken to Courts for a resolution. The Courts are sitting over the decisions of the Housing Societies. However, the law laid down by the Courts over a period, have been in a way supportive to the redevelopment schemes thereby going against the dissenting members of the Society so as to give effect to the redevelopment projects.

The inception of the redevelopment schemes originated with a ray of hope amongst the occupants of the Housing Societies, little did they know that such schemes would be burdensome and would be subjected to frequent litigation. Hope the new master plan will bring an end to the frequent litigation and will simultaneously bring in a new ray of hope to the aggrieved members of the Society by keeping a check on the procedure adopted by the Developers.

The author is a Aditi Awasthy, Associate, Juris Corp. Views are personal.