(Secretary, Flat Owners’ Association)

    Maharashtra Ownership Flat (Regulation of the Promotion of Construction Sale Management and Transfer) Act 1963, has been enacted with a view to prevent the malpractices of promoter of building flats (AIR 1967. Bom. 54) Malpractices prevailing were on account of several clauses. Some of them are as under: -

    Object and Reasons : This act was enacted to prevent malpractices of promoters of building flats. Statement of Objects & Reasons cannot be read for interpreting the unambiguous words of the section.

    The Malpractices prevalent on an extensive scale in the areas where the construction and sale of flats on ownership basis was carried on, were as regards:

(1) misuse of deposits from prospective flat-owners,
(2) delay in conveying the title of the land and the building constructed thereon,
(3) bogus sale of flats to the nominees and dummy persons of the builders,
(4) defects in the building constructed,
(5) plans shown to owners were different from the sanctioned plans
(6) delay in delivery of possession of the flat to the prospective purchaser even though the agreed date had elapsed,
(7) sub-standard materials were used in construction of the building
(8) the size of the flat and the amenities provided were not in accordance with the assurances given by the builder and what had been agreed upon
(9) the flats partially were constructed not in accordance with the plans approved by the Municipality
(10) defects were not rectified by the builder even under threat of legal action,
(11) even imperfect title in the land were conveyed to the flat owners in some cases
(12) inordinate delay in the formation of an organization of the flat owners and conveyance of title in the said property to the said organization and
(13) a number of other known and unknown malpractices and irregularities to be found in the system of construction of flats for sale on ownership basis.

    Section 11 refers to duty of Promoter to convey title etc. and execute document according to the agreement. The word used in Section “is shall and not may” this is mandatory obligation caste of respective parties.

    Mandatory Provisions : The wording of Section 11 compelling the promoter to take steps is emphasized by the use of world ‘shall’. This is a mandatory obligation cast on the respective parties. The transfer of title contemplated by the Section 11 is not an individual transfer based on an ordinary contract-giving rise to individual rights and liabilities. The transfer is to be made in favour of Co-operative society or an association or a company. So the obligation provided by the agreement referred to in Section 4 read with section 11 are statutory and the performance of which can be claimed by the Plaintiff.

    Payment regarding conveyance charges etc.: If the promoter agrees to bear stamp duty and all the expenses of preparing (including legal fees) and registering the conveyance, he will have to pay all the charges. In the absence of such clause in the agreement each flat purchaser has to bear the charges proportionately.
Model Form V (of agreement), term No.15 and 16 states about legal charges are deposited by the flat purchaser to the promoter on or before delivery of possession of the premises.

    Declaration under M.A.O.Act 1970 : When the promoter has made declaration and registered such declaration according to provision made by sec10(2) of Ownership Flat Act, Society or company cannot be formed
In such cases the promoter executes the conveyance or deed of apartment in favour of each apartment taker within four months from the date the apartment taker has entered into possession of his apartment (Rule 9 of Ownership Flats Rules)
Consequences of not executing a conveyance are as under: -

a) Title in respect of plot of land remains to the original owner which may be an individual or joint family or partnership firm or limited company or a trust and that property taxes will continue to be issued in their name. The notice of auction sale in case of non payment of taxes will be issued in their name,
b) No conveyance will be executed in the favour of Society in case of the plans which are approved according to the law and that stamp duty also will not be accepted if the structure is not according to approved plan.
c) The flat owners or occupants will not get water supply if there is no occupation certificate to the building and that in case the water is supplied in humanitarian grounds the flat owners will be required to pay additional deposit at the end of every quarter and they will be required to pay double water charges.
d) If there is no conveyance no Bank or any financial institutions will accept as a document of title or security for advancing loan or any financial assistance.

    Following are some of the societies where conveyance is not executed: -

i) Kartik Co-operative Housing Society at Andheri (West) having more than 80 flats.
ii) Harihant Co-operative Housing Society at Vakola, having more than 74 flats.
iii) Patel Apartments consisting of 6 building, having ground plus 6 floors.
iv) Godavari Apartments at Santacruz (West)
v) Andheri Anurag Co-operative Housing Society
vi) Eden Wood Co-operative Housing Society at Thane consisting of 8 buildings.
vii) Juliaswadi Co-operative Housing Society at Goregaon
viii) Doodhwala Tower at Goregaon
ix) Pancharatna Co-operative Housing Society at Andheri
x) Siddhi Vinayak Tower at Powai
xi) Chapshi Dharshi wadi Co-operative Housing Society
xii) Mota Bhavan at Worli

    The Problem is executed conveyance under different laws:-

a) Transfer of Removable Property Act, 1872.
b) Transfer of removable property under the Maharashtra Co-operative Act, 1960.
c) Transfer of removable property under Maharashtra Ownership Act, 1963.
d) Transfer of Property under Maharashtra Ownership Apartment Act, 1970.
e) Transfer of Removable Property under Bombay Tenancy and Agricultural Land Act, 1948.

    Under the Transfer of Property Act, Stamp duty is payable at the time of taking possession and under the Co-operative Societies Act, no stamp duty is not payable at the time of allocate of the flat in case of ownership flat Act, the purchaser is the owner of the flat on the same day that is the date when the agreement is educated on stamp paper of Rs. 20/- and when the stamp duty is paid. Even if stamp duty is paid with nominal earnest money thaw full amount is not paid and thaw building in not constructed. In case of Agricultural Land Act conveyance is deemed to be educated if in possession for a certain period (check up the provision of law)

    The promoter the under the Maharashtra Flat Act builder is support to trustee and take the necessary stamps for construction and development of the property. The unfortunately there is heavy demand for residence premises and the builder is want to quick money and they sold the same flat for more than one person. The several building constructed without approved plan and the builder there fore could not educate the conveyance in the favour of the society.

    It must be noted that Section 7 states that after the plans and specifications are disclosed no alterations or additions without consent of persons who have agreed to take the flats; and defects noticed within (3 years) to be rectified.

    The consent obtained from the flat purchasers cannot be contrary to provisions made in the model agreement or contrary to the provisions of law. The blank consent or authority would nullify the provision {Smt.Neena Sudarshan Wadia Vs. Vinod Enterprises 1984(2) Bom.CR 505, Kalpita Co-op.Hsg.Soc. Vs.Kiran Builders Pvt. Ltd., 1086 Mah.Law Journal 110) after amendment to sub-section 2, it has create more problem than solution. Sub-section 7 is also added for removal of doubt.

    Under the New Model Bye-laws, which have, come into existence also refers to the reddressal of complaint Bye-law No.175; Sub clause (c) refers to:

a) Non compliance of the terms and conditions of the agreement by and between the builder/developer
b) Substandard constructions
c) Conveyance
d) Escalation of construction cost
e) Any other like disputes which fail within jurisdiction of the civil court.

    Difference between the conveyance under the Transfer of Property Act, 1882 and under the Maharashtra Ownership Flat Act, 1963

    The word “transfer” is defined with reference to the word “convey”. This word in English law in its narrower and more usual sense refers to the transfer of an estate in land; but it is sometimes used in a much wider since to include any form of an assurance intervivos. The definition in section 205 (1) (ii) of the law of declaration vesting instrument, disclaimer, release and every other assurance of property or of any interest therein by any instrument except a will. This is a special definition adopted for the purposes of the law of property Act, 1925.

    The promoter under the Maharashtra Ownership Flat Act is supposed to be the trustee and he required utilizing the money for the purpose, which it is received (See section 6). There are different categories of promoters-

(1) The promoter may be the owner of freehold land or
(2) The promoter maybe the lessee of the land intended to be developed, provided the indenture of lease authorizes the promoter to construct flats and sell the same on ownership basis;
(3) The promoter may have entered into an agreement to purchase the land from the lawful owner thereof. In such a case, the Vendor of the promoter must have a valid title to the said land and the agreement must not be terminable by the vendor.
(4) The promoter is an agent of the owner or of the authorized lessee duly entitled to construct and dispose of flats on ownership basis. (Ramniklal Kotak Vs. Varsha Builder AIR 1992 Bom.62 Justice D. R. Dhanuka)

    The certificate of title need not necessarily be unconditional or unqualified:
A certificate of title to be issued by an Advocate or an Attorney need not necessarily be unconditional or unqualified. A Certificate of title to be issued by an advocate or an extent. I.e. to the extent of existing encumbrances and charges which must be redeemed or removed before the due date as contemplated by S.3 (2) (b) of the Act read with S.11 thereof. If any claims are made by any third party in pursuance of public notice, which may be issued by the Advocate or Attorney, the Advocate or Attorney must examine the claim and come to an impartial conclusion as to whether the title of the person concerned is affected by reason of such claim (Ramniklal Kotak Vs. Varsha Builder AIR 1992 Bom.62 Justice D.R.Dhanuka).

    Whether Advocate is liable if you certificate indiscriminately and without due regard to their statuary duty: -
If there is reasonable doubt about title of adverse possession and reasonable prospect of litigation in respect of title to the land in question, no certificate of title can be issued at all. If the Advocates issues certificate of title on basis of doubtful claim of adverse possession, they would be committing breach of their professional duty. Advocates are expected to apply skill and professional expertise while issuing certificate of title. If the Advocates issue certificates of title indiscriminately and without due regard to their statutory duty, they must be held liable in damages to the damnified flat purchasers.

    Caution to exercised before issuing certificates: -
1. In Advocates and Solicitors, by their very training and background should be circumspect in their action and conduct and should follow the usual norms viz: -

a) Peruse the title-deeds;
b) Have searches taken into office of the Sub-Registrar (and also of the Registrar of Companies in case the Vendor is a Limited Company).
c) Issue Public Notices in at least tow newspapers (one is vernacular and the other in English circulating in the area where the property is situated) inviting claims of any member of the public against or in respect of the property in question;
d) Ask the purchaser to require his Architect to ascertain where the land is under set-back or reservation;
e) Administer Requisitions on title and be satisfied about the answer;
f) Obtain Declaration on Oath from the relevant persons regarding the factual position before issuing a Certificate of Title.

    Conveyance under Bombay Stamp Act, 1958: -

(i) A Conveyance on sale
(ii) Every instrument
(iii) Every decree or final order of any Civil Court
(iv) Every order made by the High Court under section 394 of the Companies Act, 1956 (I to 1956) in respect of amalgamation of companies
    By which property, whether moveable or immovable or any estate or interest in any property is transferred to, or vested in any other person intervolves and which is not otherwise specifically provided for by Schedule I.
Effect of 1985 and 1993 Amendment: The effect of the amendments is that the scope of the definition is very much widened now conveyance includes as mentioned above.

    Agreement for sale is now covered by the definition of conveyance. Consent decree whereby property is conveyed is also held to be a conveyance (State of Maharashtra Vs. M.S.Builders (Pvt.) Ltd. 1992 (1) Bom.C.R.568.

    Court Fees for Specific Performance:-
Bombay Court-Fees Act (36 of 1959), S. 6 (iv) (j) and (xi), Maharashtra, ownership Flats (Regulation of the Promotion of Construction, Sale Management and Transfer) Act (45 of 1963), SS. 4, 10,11 and 12 – Suit by Co-operative Housing Society against builder and flat-takers to enforce obligations under sections 4, 10, 11 and 12 – Suit can not be said to be an ordinary suit.

    If the Legislature thought that it would be appropriate to collect duty at the stage of agreement itself If it fulfils certain conditions instead of postponing the collection of such duty till the completion of the transaction by execution of a conveyance deed inasmuch as all substantial conditions of a conveyance have already been fulfilled such as by passing of a consideration and delivery of possession of the property and what remained to be done is a mere formality of execution of a sale deed, it would be necessary to collect duty at a later stage itself though right, title and interest may not have passed as such. Still by reason of the fact that under the terms of the agreement there is an intention of sale and possession of the property has also been delivered, it is certainly open to the State to charge such instruments at a particular rate which is akin to a conveyance and that is exactly what has been done in the present case. Therefore, it cannot be said that levy of duty is not upon the instrument but on the transaction.

    If the agreement provides that possession will be handed over on the execution of a conveyance as contemplated under S. 11 of the MOF Act, then the Explanation shall not be attracted at all. In the instant case, it is clear that in the terms of the agreement there is no provision made at all for execution of the conveyance. On the other hand, what is submitted is that the provisions of the MOF Act could be applied to the agreement and therefore, a conveyance could be executed subsequently when it is not clear as to when the conveyance is to be executed and the stipulated time within which the possession has to be handed over. If that is so, it is clear that the document would attract duty as if it is a conveyance as provided in the Explanation.

    Whether Transfer of Shares are liable for payment of Stamp Duty: -
Bombay Stamp Act (60 of 1958), Sch. 1 Art. 25(1)(b), Expln. 1 – Transfer of shares in Co-operative Society - Whether chargeable to stamp duty – Purchasers entering into contract to purchase shares of Co-operative Society held by vendors and properties held by them on basis of such shares – Such transfer of shares is coupled with right, title and interest in immovable property – Amounts to instrument of conveyance, hence chargeable to stamp duty.

    Transfer of share in Co-operative Society: -
Bombay Stamp Act (60 of 1958), Sch. I, Act, 25 – Transfer of share in Co-operative Society – Member – transfer having right to occupy certain premises as incident of membership – Transfer of share is, therefore, in fact a conveyance of property – Liable to stamp duty as conveyance under Article 25 and not as instrument of transfer of share – State, therefore, has competence to levy duty.

Kotak Mahindra Finance Ltd., Petitioner v. State of Maharashtra, Respondent. AIR 2002 BOM 251.

    Object of the Maharashtra Ownership Flat Act, 1963 was to protect the rights of the Flat Owners and to prevent malpractices and illegalities of promoters. It is found that more than10,000/- i.e. 60% of the Co-operative Housing Societies in City of Mumbai and adjoining areas are not registered by the Builders and Developers, many of the flat owners are required to register the society of their own for want of co-operation from the builder and developer and more than 80% of the Co-operative Housing Societies, there is no conveyance. The members of the Co-operative Housing Societies are deprived the benefits as the properties is not conveyed in the favour of society. The builder and developer who is supposed to be the Trustee collect amount of transfer fee when the flat is transferred from one flat owner to another flat owner. The builder is also tried to claim his rights on the additional FSI available and deny the same benefit to the Society.

    Some of the questions and losses suffered by the flat owners and the society are as under :-

In order to prevent the malpractices and give protection to the flat owners and the members of the Co-operative Societies Mr.Kirit Somaiyya, M.P has submitted a Bill (Draft Bill) for amending the Maharashtra Ownership Flat Act, (Regulation of the promotion of construction, sale, management and transfer) by proposed amendment bill of 1997.

    After the said Bill was presented certain changes have taken place as under :-
1) The provision of Section 230 of Income Tax Act, 1961 for production of Income Tax clearance prior to the execution or the registration of any conveyance has been deleted or relaxed.
2) The conditions relating to the payment of Stamp Duty and regarding the transfer of property and Indian Registration Act and Indian Stamp Act are further amended
3) and the parties to the Agreements are required to annex the passport photograph even an agreement under the Transfer of Property Act and every agreement is required to be registered.
In order to have the further protection to the flat owner in future. The Promoter who is supposed to be a trustee should be made to give indemnity of completing the project within a specify period of 18 months or such other period. The Promoter also should be made to have the insurance policy against the completion of project and structural defects in the building or part of the building.

    The Promoter should be made to deposit certain amount as a security with State Bank of India. The Promoter should not be allowed to take advantage of his own wrong and delay caused him registration of the Society & execution of conveyance of the property in favour of Society

The minister for housing and the minister of co-operation alongwith MLAs & MLCs from City of Greater Mumbai and adjoining District like Thane, Raigad and special responsibility to see that their voters get conveyance and necessary amendments are carried out to the Act. Mr.Diwakar Raote, the former Mayor and former Minister for co-operation, Mr.Gajanan Kirtikar, former Minister for ………, Mr.Raj Purohit, former Minister of state Housing, Mr.Anant Tare, MLA, Mr.Bala Nandgaonkar, MLA are expected to study the bill and see that the necessary amendments be carried out in the interest of their voters.

Suggestions & Recommandations
a) Where the building of Co-op. Society is constructed ? and the Society is registered ? Whether the conveyance is executed ? The society be declared as owner of the property  permitted to make the payment of taxes in the name of the Housing Soceity or in the name of flat owners individually or collectively.

b) Whereabout of owners of the land or their heirs is not known even after issuing the public notice in news papers the society is  permitted to execute a conveyance unilaterally on the ground of non co-operation from builder and developer and the owner of the land.

c) The Society or the members of the Society be permitted to use extra FSI or by additional TDR of the Development of Property or for constructing additional areas.

d) The flat owners and occupants of the flats and building provided usual water supply without charging any extra penalty or deposit.

    In conclusion the owner of land, builder and developers  and flat owners should keep in mind that the changing society it will be never possible to have perfect solution to all the problems and therefore instead of finding of loop holes and short coming all the concerned parties should try to find out all the parties should findout how they can make the best used money for development of the property for securing maximum benefit and construct maximum number of flat at minimum costs.

    In case, one need further guidance please contact the Secretary, Flat Owners Association, at the address given below:

Gen. Secretary.

23, Hamam Street, 3rd Floor , Above Quality Machine Tools , Fort , Mumbai - 400 023
Tel : +91-22-22650284/22657291 , Fax: +91-22-22657291
© Copyright 2003, The Flat Owner's Association, Mumbai.
Updated On 27th June 2003.