Developer restrained from obstructing redevelopment as Society's arbitration agreement deemed un-abandoned.
In a significant judgment, the Bombay High Court has ruled in favor of Phalke Niketan Co-operative Housing Society Ltd., affirming their decision to terminate a redevelopment agreement with Adit Enterprises. The court, presided over by Justice Somasekhar Sundaresan, dismissed claims by the developer that the society had abandoned its arbitration agreement by supporting a derivative suit filed by some of its members.
The dispute arose from a development agreement dated back to 2009, under which Adit Enterprises was tasked with redeveloping the society's property. However, significant delays and financial defaults led the society to terminate the agreement in 2016. Despite the initiation of a derivative suit (Suit 1250) by four society members during a period of administrative oversight, the court found that this did not amount to an abandonment of the arbitration agreement by the society as a whole.
Justice Sundaresan clarified that the arbitration agreement was between the society and the developer, not individual members. The society's decision, made collectively and ratified through a special general body meeting, to terminate the agreement and appoint a new developer was deemed valid. The court emphasized the autonomy of the society's managing committee in making such decisions, distinct from the actions of individual members.
The judgment restrains Adit Enterprises from creating any third-party rights over the property and mandates the handover of possession to a court receiver. It also permits the society to proceed with redevelopment efforts through a newly appointed developer, Umang Developers LLP, ensuring the long-displaced members can finally see progress after over a decade of stagnation.
The court also addressed the developer's contention of delay in filing the Section 9 petition, ruling it unfounded. The court noted that the developer had not pursued any legal action against the society's termination decision, further supporting the society's stance.
Justice Sundaresan's ruling underscores the legal principle that the collective will of a cooperative society, as expressed through its governing body, takes precedence over individual member actions unless otherwise specified by law. This decision is expected to have broader implications for cooperative societies dealing with similar disputes in redevelopment projects.
Bottom Line:
Arbitration - Society's termination of development agreement upheld - Members' filing of derivative suit does not constitute abandonment of arbitration agreement by the Society - Developer restrained from obstructing redevelopment process.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 9, Maharashtra Co-operative Societies Act, 1960 Sections 72 and 73
