1 Source- http://taxguru.in/income-tax/law-case-law-flats.html LAW vs Case Law On ‘ Flats’ V. Swaminathan B.Sc., B.L., FCA PROLOGUE As is, by and large, known, the Constitution of India, the nation’ s basic charter, is the supreme law of the land. And all other laws are subordinate to the Constitution; and as such, must be read and interpreted in the light of the constitutional provisions. The authority to legislate by the Union and States is as conferred by Article 246 of the Constitution. Of the three independent lists as provided in the Seventh Schedule to the Constitution, List- II comprises the entries over which the State legislatures have the exclusive powers to legislate. Anyone concerned is expected, rather needs, to be aware, the Constitution itself has, over the recent years, been subjected to drastic amendments; and many are purported to have been made so as to remain in tune mainly with growingly changing socio-economic environments. Even so, in a manner of plain speaking, quite a few of the amendments do not, in public opinion, seem to have
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the purpose of construing any statutory provision.
That is to ascertain the intention of the law makers,
so as to make it effective and accomplish the
objective of any enactment. As there are several
of them, court has to, for its purpose of
adjudication, select the most appropriate one or
more of them not only for a proper understanding
of, but also for construing any provision, depending
on the type of issue (s), to the end of adjudicating
having regard/in accordance with the relevant
provisions of the applicable governing enactment.
That is easier said than done / doable. In that
endeavour, no need to underline, it is the duty and
responsibility of counsels for both sides to be of
every assistance to courts.
This write-up is intended, and may be, read as a
supplement to the earlier write-up published @
Nahalchand's Case (I).
The viewpoints stressed therein, in a nut shell:
The only point of dispute for court to decide and settle was whetherthe promoter was entitled to be granted the prayer for 'injunction'against the OPs. Going by an understanding of the arguments
advanced, and the reasoning and findings given, the court has to besimply taken to have said "NO". That is, on the ground that thepromoter has no such lawful right to retain, for a separate sale, thedisputed property, being the 'stilt car parking slots', forming part andparcel of the Common Areas and Facilities”(CAF). That being so,the court's further observation (Para 40 of the judgment – whichreads : “It is, thus, clear that the PROMOTER HAS NO RIGHTTO SELL `stilt parking spaces' as these are neither `flat' norappurtenant or attachment to a `flat'. (FONT supplied) mighthave to be regarded merely as an observation in the nature of "obiterdictum"; as distinct from “precedent”
Further that, with due respect to the wisdom of the
judiciary, but in no manner offending it, the only
way to reconcile the said observation might be to
take it to mean that a promoter selling units of a
building as ‘flats’, hence governed by MOFA, has
“no right to sell separately”any such portion of the
building complex, which is necessarily part and
parcel of CAF. This is a straight forward and
common sense point, readily inferable; hence
requiring no long drawn process of reasoning, more
so, any interpretation of the law in its legal sense.
Anyone proceeding on a different premise / understanding ofthe SC case, whether or not based on any legal /expert advice orotherwise, will be doing so at his own peril; by reason of theprospect of his having to face a lifelong (or even beyond)'infantile' / 'imbecile' litigation.
2. To reinforce, though at the cost of repeating:
The instant case is one of civil law dispute between
the two parties; and only them, none else. The final
3.1. The factual matrix as per narrationin the SC Judgment is reproduced below:
< The facts:
2. Few important questions of law arise in this group of appeals.It will be convenient to formulate the questions after we set outthe material facts and the contentions of the parties. Thenarration of brief facts from S.C. Suit No. 1767 of 2004 willsuffice for consideration of these appeals. NahalchandLaloochand Private Limited is a Private Limited Company. As apromoter, it developed few properties in Anand Nagar, Dahisar(East), Mumbai and entered into agreements for sale of flatswith flat purchasers. The flat purchasers are members ofPanchali Co-operative Housing Society Ltd. (for short, `theSociety'). The promoter filed a suit before the Bombay City CivilCourt, Bombay for permanent injunction restraining theSociety (defendant) from encroaching upon, trespassing and/orin any manner disturbing, obstructing, interfering with itspossession in respect of 25 parking spaces in the stilt portion ofthe building. The promoter set up the case in the plaint thatunder the agreements for sale it has sold flats in its buildingand each flat purchaser has right in respect of the flat sold tohim and to no other portion. It was averred in the plaint thateach flat purchaser has executed a declaration/undertaking inits favour to the effect that stilt parking spaces/open parkingspaces shown in the plan exclusively belong to the promoterand that the declarant has no objection to the sale of suchspaces by it. The defendant (Society) traversed the claim andset up the plea that the promoter has no right to sell or disposeof spaces in the stilt portion and that the undertakings given bythe flat purchasers are not binding being contrary to law andbased on such undertakings, the promoter has not acquired anyright to sell stilt parking spaces. >
3.2. For ready reference and appreciation, certain
portions of the operative part of the Judgment, as
selected for the present purpose (UPPERCASE/ITALICS
supplied), are set out below; while specific
comments are inset, other detailed comments are
being separately furnished later:
A) The summary of findings of the High Court as given in theSC judgment (with BIG FONT supplied):
While dismissing the appeal, THE HIGH COURT RECORDED THE
FOLLOWING FINDINGS:
The carpet area of any of the 56 flats/tenements in Panchalibuilding is not less than 35 sq. mtrs.
The parking space enclosed or unenclosed, covered or opencannot be a `building'.
IT IS COMPULSORY REQUIREMENT TO PROVIDE FOR PARKING SPACES
UNDER DCR.
IT IS OBLIGATORY ON THE PART OF THE PROMOTER TO FOLLOW THE DCR.
THE AGREEMENT SIGNED UNDER MOFA BETWEEN THE DEVELOPER AND
THE FLAT PURCHASER MUST BE IN CONFORMITY WITH THE MODEL FORM
OF AGREEMENT (FORM V) PRESCRIBED BY THE STATE GOVERNMENT.
THE MODEL AGREEMENT DOES NOT CONTEMPLATE THE FLAT
PURCHASERS TO SEPARATELY PURCHASE THE STILT PARKING SPACES.
The rights arising from the agreement signed under the MOFAbetween the promoter and the flat purchasers cannot be dilutedby any contract or an undertaking to the contrary. Theundertakings contrary to DCR will not be binding either on theflat purchasers or the Society.
The stilt parking space is a common parking area available andTHE DEVELOPER IS OBLIGED TO PROVIDE THE SAME UNDER THE DCR
WHEN THE CARPET AREA OF THE FLAT IS 350 SQ. METERS IT IS NOT AN
ADDITIONAL PREMISES/AREA THAT HE IS AUTHORIZED TO SELL
EITHER TO FLAT PURCHASER OR ANY OUTSIDER. IT IS PART AND
PARCEL OF THE SOCIETY BUILDING AND IT CANNOT BE SEPARATE
PREMISES AVAILABLE FOR SALE. As soon as the Corporationissues the occupation certificate and the Society is registered,the building as well as the stilt parking spaces, openspaces and all common amenities become theproperty of the Society.
The stilt parking spaces cannot be put on sale by the developeras he ceases to have any title on the same as soon as theoccupation certificate is issued by the Corporation and itbecomes the property of the society on its registration.
THE STILT PARKING SPACES CANNOT BE TERMED AS `OPEN/COVERED
GARAGES' AND CLAUSE 2 OF THE MODEL AGREEMENT-FORM V PROVIDES
FOR SALE OF COVERED/OPEN GARAGE IN ADDITION TO THE FLAT/SHOP.
IT IS IMMATERIAL IF THE PURCHASE AGREEMENT DOES NOT INCLUDE
STILT CAR PARKING SPACES IN THE COMMON AREA OF AMENITIES. Thestilt car parking spaces is part of the common amenities and IT
CANNOT BE TREATED TO BE A SEPARATE PREMISES/ GARAGE WHICH
COULD BE SOLD BY THE DEVELOPER TO ANY OF THE MEMBERS OF THE
SOCIETY OR AN OUTSIDER.
Under MOFA, the developer's right is restricted to the extent ofdisposal of flats, shops and/or garages, which means that anypremises which is included in the Flat Space Index (FSI) can besold by the developer/promoter. The stilt parking space is notincluded in the FSI nor is it assessable for the Corporationtaxes.
B) OBSERVATIONS, FINDINGS, AND OPINION OF SC:
Q
> 12. In view of the contentions outlined above, the
questions that arise for consideration are:
(i) WHETHER STAND ALONE `GARAGE' OR IN OTHER WORDS `GARAGE' AS
AN INDEPENDENT UNIT BY ITSELF IS A `FLAT' WITHIN THE MEANING OF
SECTION 2(A-1) OF MOFA; (ii) WHETHER STILT PARKING SPACE/OPEN
PARKING SPACE OF A BUILDING REGULATED BY MOFA IS A `GARAGE'; (III)
IF THE ANSWER TO AFORESAID QUESTIONS IS IN THE NEGATIVE, WHETHER
STILT PARKING SPACE/OPEN PARKING SPACE IN SUCH BUILDING IS PART
OF `COMMON AREAS AND FACILITIES' AND (IV) WHAT ARE THE RIGHTS OF
THE PROMOTER VIS-`-VIS SOCIETY (OF FLAT PURCHASERS) IN RESPECT OF
OPEN PARKING SPACE/S / STILT PARKING SPACE/S.
> 13. All these questions have to be considered in
the light of statutory provisions. At this stage we
notice some of the provisions of MOFA. As regards
other statutory provisions, we shall refer to them
wherever necessary.
<> Thus seen, the main focus has been on the provisionsof MOFA. However, the proposition thrown up, as may benoted from the analytical study attempted herein, for anincisive consideration, is this: - The two enactments, forthe reasons brought out, are prima facie not self -contained / -sufficient codes; and therefore, must be readtogether, as mutually interlinked /complementary; not ona standalone basis.
> 14. THE DEFINITION OF `FLAT' IN SECTION 2(a-1) IS MOST VITAL AND
DURING COURSE OF ARGUMENTS IT HAS BEEN RIGHTLY SAID THAT
MEANING OF THE WORD `FLAT' IS THE ACTUAL FULCRUM OF MOFA.
SECTION 2(A-1) READS THUS:
.......
In the same vein the other arguments of either
parties, it might be noted, have been set out, and
considered mainly having regard to the statutory
definitions of the other words/expressions used in
<> As may be readily inferred, simply following upon thelines of arguments of both sides, the court appears to haveconfined itself, in considering the point of and settling theprivate dispute, with the main focus, as urged, merely oninterpretation of the statutory definitions of the words /expressions under reference.
>18. Section 10 casts duty upon the promoter to take steps forformation of co-operative society or company, as the case maybe. The said provision reads as follows:
S.10. (1) As soon as a minimum number of persons required toform a Co-operative society or a company have taken flats, thepromoter shall within the prescribed period submit anapplication to the Registrar for registration of the organizationof persons who take the flats as a co-operative society or, as thecase may be, as a company; and the promoter shall join, inrespect of the flats which have not been taken, in suchapplication for membership of a co-operative society or as thecase may be, of a company. Nothing in this section shall affectthe right of the promoter to dispose of the remaining flats inaccordance with the provisions of this Act.
Provided that,….
Provided further that,
>19. There is also obligation cast upon promoter to executethe documents of title and CONVEY TO THE CO-OPERATIVE SOCIETY OR
THE COMPANY OR AN ASSOCIATION OF FLAT PURCHASERS/APARTMENT
OWNERS, RIGHT, TITLE AND INTEREST IN THE LAND AND BUILDING BY
VIRTUE OF SECTION 11 which reads thus:
S.11. (1) A promoter shall take all necessary steps to completehis title and convey to the organization of persons, WHO TAKE
FLATS, WHICH IS REGISTERED EITHER AS A CO-OPERATIVE SOCIETY OR AS
A COMPANY AS AFORESAID, OR TO AN ASSOCIATION OF FLAT TAKERS OR
APARTMENT OWNERS HIS RIGHT, TITLE AND INTEREST IN THE LAND AND
BUILDING, AND EXECUTE ALL RELEVANT DOCUMENTS THEREFOR IN
ACCORDANCE WITH THE AGREEMENT EXECUTED UNDER SECTION 4
and if no period for the execution of the conveyance is agreedupon, he shall execute the conveyance within the prescribedperiod and also deliver all documents of title relating to theproperty which may be in his possession or power.
The specially marked words “IN ACCORDANCE WITH THE
AGREEMENT EXECUTED UNDER SECTION 4”are so crucial, asrequiring to be given the due importance; ought not to beglossed over. That is, one would urge, necessary, for aproper understanding and appreciation of the purport andimport of Section 11. And, if so done, it is bound to berealised that, the final conveyance to the registered society(or company or association) as envisaged, would be of theentire property (land and building) in the complex; butthat should/could only be, subject to, not only theexclusive rights to the ‘flat’, so also the proportionate right/ interest in the common areas and facilities (thoughundivided, but not excluding but including the right tosuch part of them as demarked “limited”, and passed on,“as appurtenant thereto”, to individual flat taker(s), as perthe terms spelt out in the “agreement to sell”respectivelyentered into.
Also needs to be specially noted that, Section 11, in terms,covers / applies to ‘apartments’as well, albeit ‘apartments’are, generally speaking, governed by the separateenactment i.e. MAOA. Further that, in the MAOA itselfthere is no provision to cover the mandate of “finalconveyance”; for which, therefore, one has to necessarilyturn to and take into consideration what is provided in,besides MOFA, the rules framed there under (Rules 8 and9). Similar such clinching clues are to be found in both theenactments, elsewhere as well. Most significant of all is, -clause 25 of FORM V, prescribed for MOFA, which reads:“This Agreement shall always be subject to the provisions
of the Maharashtra Apartment Ownership Act, and therules…”
>20. Section 16 of MOFA provides that the provisionscontained therein are IN ADDITION TO THE PROVISIONS OFTHE T. P. ACT and shall take effect notwithstanding anythingto the contrary contained in the contract.
By necessary implication, (a) for a proper understanding/ construing the implication of the provisions of MOFA,the elated provisions of the TP Act ought to be kept inview, and given due weight age; and (b) though not sospelt out,- so also, besides any other, of the related /connected provisions of the Contract Act, RegistrationAct.
Re: question nos. (i) and (ii):
(A) WHAT IS `FLAT'?
> 21. FOR PROPER CONSIDERATION OF QUESTIONS (I) AND (II) AS AFORE-
REFERRED, IT IS OF CONSIDERABLE IMPORTANCE TO ASCERTAIN THE
IMPORT AND MEANING OF THE TERM `FLAT' DEFINED IN SECTION 2(A-1) ....
(B) WHETHER STILT PARKING SPACE IS A GARAGE?
………
> 30. THE NEXT QUESTION IS, WHETHER STILT PARKING SPACE IN A
BUILDING REGULATED BY MOFA IS A `GARAGE'. THE TERM `GARAGE' HAS
NOT BEEN DEFINED IN MOFA AND, THEREFORE, WE NEED TO FIRST FIND
OUT WHAT IS THE EXTENT AND SCOPE OF THAT TERM IN SECTION 2(A-1).
THE GENERAL TERM `GARAGE' IS APPROPRIATED IN ENGLISH FROM THE
FRENCH LANGUAGE AND MEANS
> 34. The relevant portion of condition No. 2, Form vappended to 1964 rules reads as under:
THE FLAT PURCHASER HEREBY AGREES TO PURCHASE FROM THE
PROMOTER AND THE PROMOTER HEREBY AGREES TO SELL to the FlatPurchaser one flat No. .......... of the Type .......... of carpet areaadmeasuring .......... sq. meters (which is inclusive of the area ofbalconies) on .......... floor as shown in the Floor plan thereofhereto annexed and marked Annexure D/Shop No. ........../covered/open Garage No. .......... in the .......... Building(hereinafter referred to as the Flat;) FOR THE PRICE OF RS. ..........
INCLUDING RS. .......... BEING THE PROPORTIONATE PRICE OF THE
COMMON AREAS AND FACILITIES APPURTENANT TO THE PREMISES,
THE NATURE EXTENT AND DESCRIPTION OF THE COMMON/LIMITED
COMMON AREAS AND FACILITIES/LIMITED COMMON AREAS AND
FACILITIES WHICH ARE MORE PARTICULARLY DESCRIBED IN THE
SECOND SCHEDULE hereunder written. The Flat Purchasershereby agrees to pay to that Promoter balance amount ofpurchase price of Rs. .......... (Rupees .......... ...............) havingbeen paid to the Promoter on or before the execution of hisagreement in the following manner;
> 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 1964 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....
In perceiving as aforesaid, Paragraph 11 of FORM V, thesecond of two sentences therein, which reads, -“HeSHALL USE THE GARAGE OR PARKING SPACEonly for propose of for keeping or parking the Flatpurchaser’s own vehicle”-has apparently been lost sight of;that mentions “parking space”, in addition to “garage”.
> 37. THE HIGH COURT HAS HELD THAT THE STILT CAR PARKING SPACES
ARE PART OF THE COMMON AMENITIES. IS THE HIGH COURT RIGHT IN ITS
VIEW? MOFA DOES NOT DEFINE NOR does IT EXPLAIN `COMMON AREAS
AND FACILITIES' THOUGH THE SAID PHRASE IS USED AT VARIOUS PLACES
flats or to be constructed for flats to which that Act
applies. The promoter has no right to sell any
portion of such building which is not `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 remains with the promoter is to sell
unsold flats. It is, thus, clear that the promoter has
no right to sell `stilt parking spaces' as these are
neither `flat' nor appurtenant or attachment to a
`flat'.
The case law cited, on a quick reading, does not appear tobe of any direct relevance or of real help to support thearguments. Be that as it may, as is seen, the court itself hasnot considered necessary, hence not considered the caselaw cited.
Concerning the view the court has taken, as borne out in
the last sentence of paragraph 40. , that reads, - “It is,
> 41. In view of the above, it is not at all necessary to deal withthe factual submissions advanced by Mr. Tanmaya Mehta.Having regard to the answer to question No. (iv), the finding ofthe High Court that undertakings are neither binding on the flatpurchasers nor the society also warrants no interference.
UQ
NOTE: To make it clear, while reproduced above are onlysome portions on a selective basis, it is recommended,being necessary, to mindfully read the whole of theJudgment for an independent study and understanding.
persons purchasing.... did not have a marketable title
thereto and could not obtain any loan by mortgaging
such flats, felt necessary to legislate.... The above
Act was therefore passed to provide for the
ownership of an individual apartment in a building
and to make such apartment heritable and
transferable property, and to provide for matters
connected with the said purposes.>
To be noted: The above narrated legislative historygoes to explain that, the basic objective was to vestpurchasers of both flats and apartments with‘ownership rights’, alike.
ON THE CONCEPT OF, - “COMMON AREAS AND FACILITIES”
As specially defined in MOFA, the term “common
areas and facilities”, of course, means and includes,
- the land on which the building stands, and all
other wedded but common areas or facilities; which
again is an expression specially defined, as to mean
and include certain items specified. However,
should one have to go by a strict and narrow view,
as has been done in the instant case, then that
would inevitably lead to a strikingly piquant /bizarre
situation. In that, all those other facilities known to
be provided by promoter’s as agreed with flat
takers but not found a mention, e.g. swimming pool,