CASE SUMMARY

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORIDINARY ORIGINAL CIVIL JURISDICTION

ARBITRATION PERIOD N0. 441 0F 2015

Name of the Parties

M/s. Panama Builders & Developers Pvt. Ltd.

– Petitioner
A company duly registered under the provisions
Of the Companies Act,1956 having its office
at 416, Narshi Natha Street, Mahavir Darshan
Mumabai -- 400 009
Verses

M/s. Nutan Kalpana Co-op. Housing Society Ltd.

A co-operative Society registered under the
Maharashtra Co-op. Societies Act, 1960 having
its Buildings and office at Sarojini Nagar Road,
Mulund[W.], Mumbai – 400 080
-Respondent

1. Facts of the case:

The case involves a Development Agreement between a petitioner and a society,

which was executed seven years prior to the events in question. However, there
was no progress on the project during this time and it was discovered that the
members of the Managing Committee elected at that time had not submitted the
required bonds, thus lacking authority to enter into the agreement. Nonetheless, the
society had accepted a payment of 1.2 crores under the agreement. A special
general meeting was subsequently held to discuss the redevelopment issues, and
the petitioner claimed that the offer made by them was beneficial and in the
interest of the society. The petitioner further argued that they had taken steps to
commence construction and had made a partial payment of 12 lakhs out of the total
consideration. The case also involved the appointment of a new Managing
Committee and the insertion of Section 73(1AB) into the MCS Act, which required
elected members to execute mandatory bonds. A letter informing about the
redevelopment was sent to the Administrator in May 2009.

The facts of the case also includes the execution of a Development Agreement that
remained at a standstill for seven years due to the lack of authority of the managing
committee members who had not submitted the required bonds. The petitioner
claimed to have made efforts to commence construction and had made a partial
payment. A special general meeting was convened to discuss the redevelopment
issues, and the petitioner argued that their offer was beneficial to the society. The
case also involved the appointment of a new managing committee and the insertion
of a new provision in the MCS Act regarding the execution of mandatory bonds by
elected members. A letter was sent to the Administrator informing about the
redevelopment.

In addition, it is mentioned that a Memorandum of Understanding (MoU) was

executed between the petitioner and the society, outlining the broad terms and
conditions of the project. The society held a special general meeting in December
2009 to discuss issues related to the redevelopment being undertaken by the
petitioner. The petitioner alleges that the parties had entered into a Development
Agreement, which was confirmed by the Administrator. The given case also
mentions the extension of the period for submitting tenders for the proposed
development and the appointment of a new Managing Committee in the Annual
General Meeting of August 2002. It is concluded that the elected members of the
Managing Committee were required to execute mandatory bonds for the society's
benefit, and failure to do so resulted in their automatic vacation of office.

2. Issue:

During the arbitration proceedings, the Society submitted a preliminary defense.

The arbitrator identified two key preliminary issues to be addressed:

1. Is there a legally valid and enforceable arbitration agreement between the

appellants/claimants and the society?
2. Is the appellants' claim time-barred, meaning it exceeds the applicable time
limitation?
 3. Submission on behalf of the petitioner:

The petitioner in this case is arguing that after the execution of the Development
Agreement, steps were taken to commence construction and a partial payment of
Rs. 12,00,000 was made. The petitioner claims that the society issued a public
notice for tenders in November 2011, and that the managing committee appointed
in the 42nd AGM in 2002 was superseded due to the failure to execute mandatory
bonds. In May 2009, the petitioner informed the administrator about the
redevelopment. The petitioner contends that the elected members of the managing
committee were required to execute bonds in favor of the society, but failed to do
so. The petitioner also argues that the minutes of various meetings confirm the
approval and confirmation of the development agreement. In support of their case,
the petitioner highlights that the Managing Committee elected in the 11 August,
2002 AGM was required to submit bonds under Section 73(1AB) of the MCS Act,
which they failed to do. They claim to have taken steps to commence construction
and paid a partial amount of the total consideration. The petitioner emphasizes that
the society issued a public notice for tenders and that the managing committee
appointed in the 42nd AGM was superseded due to their failure to execute the
mandatory bonds. The petitioner also points out that they informed the
administrator about the redevelopment. They argue that the minutes of several
meetings confirm the approval and confirmation of the development agreement.

The petitioner further argues that the elected members of the managing committee
were obligated to execute bonds in favor of the society, but failed to do so. They
highlight that the managing committee elected in the 2002 AGM was required to
submit such bonds. The petitioner asserts that they took steps to begin construction
and made a partial payment. They contend that the society issued a public notice
for tenders and that the managing committee appointed in the 42nd AGM was
superseded due to their failure to execute the mandatory bonds. The petitioner
asserts that they informed the administrator about the redevelopment and that the
minutes of various meetings confirm the approval and confirmation of the
development agreement. The petitioner argues that the elected members of the
managing committee were required to submit bonds in favor of the society but
failed to do so, resulting in their automatic removal from office. They claim to
have initiated construction and made a partial payment towards the total
consideration. The petitioner highlights that the society issued a public notice for
tenders and that the managing committee appointed in the 42nd AGM was
superseded due to their failure to execute the mandatory bonds. They further assert
that they informed the administrator about the redevelopment and that the minutes
of various meetings confirm the approval and confirmation of the development
agreement.

4. Submission on behalf of the Respondent:

The submission on behalf of the respondent states that after the execution of the
Development Agreement, the project remained at a standstill for 7 years. It is
argued that the members of the Managing Committee elected in 2002 had not
submitted the required bonds under the provisions of the MCS Act, which meant
they had no authority to enter into the Development Agreement. The respondent
claims that an amount of 1.2 crores was paid to the society under the Development
Agreement, which was accepted by the society without any challenge. It is also
mentioned that a show cause notice was issued by the Deputy Registrar and a
resolution was passed during a meeting authorizing the Managing Committee to
finalize the terms and conditions and appoint a developer for the project. The
submission further highlights that during the 40th Annual General Meeting, a
unanimous resolution was passed to take steps for redevelopment. However, due to
issues between the petitioner and the society in regard to redevelopment, a special
general meeting was held to discuss the matter. The respondent argues that the
Development Agreement was confirmed by the Administrator, and the minutes of
the meeting record that the offer made by the petitioner was beneficial and in the
interest of the society. It is stated that the draft of the Development Agreement and
the Power of Attorney were read out and unanimously approved during the
meeting. The Managing Committee was authorized to execute all necessary
documents to give effect to the resolutions of the General Body.

In conclusion, the respondent emphasizes that the elected members of the

Managing Committee were required to execute mandatory bonds in favor of the
society, but failed to do so. The new members elected in the Annual General
Meeting were in compliance with the provisions of the MCS Act. The respondent
argues that the petitioner took steps to commence construction after the execution
of the Development Agreement and paid a portion of the consideration amount.
The society issued a notice inviting tenders for the proposed development, and the
Managing Committee appointed in the 42nd AGM was superseded due to non-
execution of the mandatory bonds. The respondent informs the Administrator
about the redevelopment in a letter

5. Analysis and conclusion:

The analysis and conclusion of the case can be summarized in following

paragraphs:

1. The petitioner, in this case, argues that after the execution of the
Development Agreement, they took steps to commence construction and
paid a significant amount for the project. They claim that the Managing
Committee elected in 2002 did not submit the required bonds under the
provisions of Section 73(1AB) of the MSC Act, which implied that they had
no authority to enter into the agreement. The petitioner contends that the
resolutions passed in the General Body Meeting approving the Development
Agreement and the offer made by the petitioner were not challenged by the
society. They argue that the Deputy Registrar was already looking into the
matter and had issued a show cause notice.
2. The society held a special general meeting in December 2009 to discuss the
issues related to the redevelopment project. The petitioner asserts that the
Administrator confirmed the parties' entry into the Development Agreement.
They further state that the minutes of the meeting recorded that the draft
Development Agreement and an irrevocable Power of Attorney were read
out and unanimously approved. The office bearers of the Managing
Committee were also authorized to execute all necessary documents. The
petitioner argues that the minutes indicate that their offer was beneficial and
in the interest of the society.
3. The court examines the relevant provisions of the Maharashtra Cooperative
Societies Act, specifically Section 73(1AB), which requires elected
members of the Managing Committee to execute mandatory bonds in favor
of the society. The court finds that the new members of the Managing
Committee elected in the 2002 Annual General Meeting were obligated to
submit these bonds. It is noted that the Deputy Registrar superseded the
committee in 2009 for failing to execute the required bonds. The court
 concludes that the failure to comply with this provision resulted in the
automatic vacation of the members' offices.
4. Based on the analysis of the case, the court determines that the petitioner
took steps to commence construction and made payments towards the
project. The court also considers the resolutions passed in the General Body
Meeting and the confirmation by the Administrator regarding the
Development Agreement. The court takes into account the non-compliance
with the mandatory bond requirement by the elected Managing Committee
members. Ultimately, the court concludes that the petitioner acted in
accordance with the agreements and resolutions, and the non-compliance
with the bond requirement invalidates the authority of the previous
Managing Committee.
5. Based on these findings, the court ruled in favor of the petitioner,
dismissing the society's notice for termination of the Development
Agreement. The court upheld the validity of the agreement and directed the
society to cooperate and facilitate the completion of the project.