Bombay HC Rebukes Arbitrary Flat Allotment to Contractors Over Society Members

In a check against corporate-family nexus in housing societies, the Bombay High Court has partially reversed concurrent findings to restore the rights of members over additional flats illegally diverted to a contractor's directors. The ruling exposes the 'bizarre situation' where a society’s chairman was left without a flat, while the construction contractor secured a gain of four premium apartments through family ties within the managing committee.

A Single Judge Bench of Justice Sandeep V. Marne presided over the matter, navigating a complex dispute involving the M.C.S. Act and the equitable rights of society members. The Bench scrutinized the actions of the Le Chateau Co-operative Housing Society Limited, which had bypassed its own members to allot additional floors to the directors of a private developer.

Key Takeaways

Priority of Members Over Outsiders

Allotting additional flats to contractors or their relatives instead of society members, especially when resolutions mandate member priority, is ex-facie illegal and arbitrary.

Restricting Contractor Gains

A contractor’s role is strictly professional; they are entitled to construction costs and TDR expenses, not a 'windfall gain' of ownership rights in the society’s building.

Equity in Delayed Payments

While members may be penalized for failing to make timely contributions, such defaults do not grant the society a license to distribute flats to outsiders at their whims.

Precedent on Arbitrary Allotment

Societies must auction unallotted or cancelled flats to ensure transparency rather than allotting them to relatives of influential family blocks within the society.

Court Rebukes 'Unjust Enrichment' by Contractor Directors

The Bombay High Court observed that the Mankani family, which controlled 50% of the flats, had 'ganged up' to divert society assets to their relatives who directed the contracting firm. The Bench found that the society’s decision to allot four flats (701, 702, 801, and 802) to the contractor under the guise of outstanding dues was a clear case of stealing benefits meant for society members.

The Bombay High Court explained that “The case involves a bizarre situation where the chairman of the housing society, which has constructed additional flats in the building for allotment to members, is left with no flat, whereas the contractor engaged to carry out the construction work has received a windfall gain in the form of allotment of four flats. Status as a close relative of a family holding 50% flats in the building has helped the contractor to receive from the society not just the cost incurred for construction and TDR, but also four large sized flats in the building.”

Ratio

In a co-operative housing society, the right to additional FSI or TDR benefits belongs primarily to the members. A society cannot arbitrarily allot flats to a contractor or their directors in lieu of construction dues, especially when such directors are related to a dominant family block, if such action bypasses the legitimate claims of members or avoids a transparent auction process. Even where a member defaults on payments, the remedy is a transparent recovery process, not a private, arbitrary allotment to outsiders.

Background

The petitioners, husband and wife who were original members of the Le Chateau Co-operative Housing Society, were initially allotted Flat Nos. 701 and 702 in an additional construction project. However, following a dispute over the payment schedule and TDR costs, the Society, led by a new Managing Committee, cancelled their allotment in 1998. The flats were subsequently allotted to Respondent Nos. 4 and 5, who were directors of the contractor, Jet Speed Developers Pvt. Ltd., and relatives of the Mankani family who held 50% voting power.

The Petitioners challenged this before the Cooperative Court and the Cooperative Appellate Court, both of which dismissed their claims, citing the Petitioners' failure to contribute construction costs. However, the High Court noted that while Flat Nos. 701 and 702 were already occupied, two other flats (801 and 802) remained unfinished and unoccupied. The Bombay High Court modified the lower orders, balancing equity by directing the petitioners to pay Rs. 2.5 Crores to the contractor's directors for the unfinished units, thereby preventing the contractor's unjust enrichment while penalizing the petitioners for their past payment delays.

Case Details:
Case No.: WRIT PETITION NO.751 OF 2019
Neutral Citation: 2026:BHC-AS:39093
Case Title: Dr. Omprakash B. Soniminde & Anr. V/S Le Chateau Co-operative Housing Society Limited & Ors.
Appearances:
For the Petitioner(s): Dr. Veerendra Tulzapurkar, Senior Advocate with Mr. Mandar Soman, Ms. Aditi Bhat, Mr. Munaf Virjee and Mr. Rushabh Parekh i/b AMR Law
For the Respondent(s): Mr. Vishal Kanade with Mr. Bharat Manghani, Ms. Drushti Gala and Ms. Durren Kaskar for Respondent Nos.2(b) and 4 to 6.

Source: 2026 CaseBase(BOM) 6493