GREEN GARDEN APARTMENTS CO-OPERATIVE HOUSING SOCIETY LIMITED V. NITIN CHAUDHARI AND OTHERS 2025:BHC-OS:17428:

DATE: 03/10/2025

COURT: High Court of Bombay

BENCH: Justice Sandeep V. Marne

FACTS:

The Plaintiff-Society owned a parcel of land, a portion of which was acquired in 1986 by the Defendant, the Municipal Corporation of Greater Mumbai (MCGM) for the purpose of constructing a road. According to the Society, no compensation was received from the MCGM at the time of acquisition. Under the applicable Development Control Regulations, the Society was entitled to claim compensation in the form of Transferable Development Rights (TDR) instead of monetary payment. The Plaintiff stated that Defendant No.2, who was a member of the Society, had prior experience in dealing with MCGM and took on the responsibility of assisting the Society in obtaining the TDR. Acting in this capacity, Defendant No.2 began preparing and submitting applications to the MCGM for the grant of TDR. Defendant Nos.1 and 2 were further entrusted with the task of initiating and finalizing agreements for the appointment of Defendant Nos.3 and 4 as consultants for the project. Subsequently, a series of unregistered Agreements for Sale of TDR and Agreements for the utilization of Floor Space Index (FSI) were executed between the Plaintiff-Society and Defendant Nos.5 to 18.

The Society later alleged that Defendant No.2, while ostensibly raising concerns about Defendant No.1’s actions, brought up the issue of payments being made to Defendant No.4 despite the latter’s failure to carry out any work. This led to disputes among the Society members, who then approached the Secretary (Defendant No.20) seeking explanations regarding the alleged irregularities. Thereafter, Defendant No.2 lodged a complaint before the Deputy Registrar, accusing certain office bearers of misappropriating Society funds by making unauthorized payments of Rs.15 crores to Defendant No.4, who was purportedly in a business relationship with Defendant No.1. In light of these developments, the Plaintiff-Society filed a Suit before the High Court, seeking several declaratory and injunctive reliefs, along with an Interim Application, to address the alleged financial and procedural misconduct.

ISSUES:

The primary issues before the Court were whether the Plaintiff-Society was entitled to a temporary injunction to restrain Defendant Nos. 5 to 18 from utilizing the Transferable Development Rights (TDR) allegedly sold through unauthorized and fraudulent transactions, and whether the sale of TDR was void on account of lack of authority, fraud, or procedural irregularities. The Court also examined whether the Plaintiff-Society, having received Rs. 46 crores from the sale, could seek cancellation of the TDR sale agreements without offering to return the consideration received, and whether the delay of nearly two years in filing the suit affected its claim for equitable relief.

JUDGEMENT WITH REASONING:

The Bombay High Court rejected the Plaintiff-Society’s application for a temporary injunction, holding that the Society failed to establish a prima facie case for restraining Defendant Nos. 5 to 18 from utilizing the purchased TDR. The Court ruled that the sale transactions were not fraudulent or illegal and that the Defendants were bona fide purchasers for value. It further held that the Society could not seek avoidance of the sale while retaining the sale proceeds, and that the delay in filing the suit was fatal to its claim.

The Court reasoned that if the Plaintiff-Society sought to have the TDR sale agreements declared void and requested restoration or reissuance of the Development Rights Certificate (DRC), it was legally bound to return the Rs. 46 crores it had received from the sale. Relying on the principles in Kuju Collieries Ltd. and the doctrine of approbate and reprobate, the Court emphasized that a party cannot simultaneously challenge a transaction while retaining its benefits. The Court observed that the Society’s refusal to refund the consideration indicated that it had willingly entered into the sale to raise funds for settling disputes with adjoining landowners. Having achieved that objective, it could not now turn around and invalidate the transaction merely to gain a further advantage.

Furthermore, the Court noted that the Defendants had already utilized the TDR in their respective real estate projects, obtaining Commencement Certificates and Occupancy Certificates, and in some cases, completing construction. Granting an injunction at this stage would not only render the constructions and permissions illegal but also harm innocent third-party flat purchasers. The Court found no evidence of fraud or illegality in the TDR transactions and observed that the Plaintiff-Society’s delay in initiating proceedings—nearly two years after receiving the sale consideration, undermined its claim for equitable relief. It held that the case was primarily a result of internal disputes among society members and that procedural irregularities, if any, could be addressed under the Maharashtra Co-operative Societies Act, 1960. Thus, the balance of convenience and equity lay in favour of the Defendants, leading the Court to deny the interim relief sought by the Plaintiff.

ANALYSIS:

The Bombay High Court’s decision in this case underscores the principle that a party seeking equitable relief must approach the court with clean hands and cannot selectively accept the benefits of a transaction while disputing its validity. The Plaintiff-Society’s claim for an injunction was fundamentally weakened by its retention of Rs. 46 crores from the TDR sale, which it sought to invalidate without offering restitution. The Court rightly invoked the doctrine of approbate and reprobate, affirming that a litigant cannot both affirm and disown the same transaction. This reasoning reflects judicial consistency in ensuring that contractual fairness and equity go hand in hand, particularly in commercial and property-related transactions. The Court’s reliance on precedents such as Kuju Collieries Ltd. further reinforced the notion that relief cannot be granted to a party that benefits from its own inconsistent conduct.

Additionally, the judgment highlights the judiciary’s reluctance to interfere with transactions that have already been acted upon, especially when third-party rights have arisen. The Court’s observation that the Defendants had utilized the TDR in completed or ongoing construction projects weighed heavily in favor of denying injunctive relief, as any restraint at that stage would have adversely affected bona fide purchasers and the public interest. The ruling also reflects the Court’s awareness of internal governance issues within housing societies and its deference to specialized forums under the Maharashtra Co-operative Societies Act, 1960, for resolving such disputes. Overall, the judgment reinforces the principles of finality, fairness, and commercial certainty, emphasizing that equitable relief must not be used as a tool to undo deliberate and financially beneficial transactions.