Can a Housing Society Refuse a Buyer's Membership?

Ramesh Himmatlal Shah had won a money decree against Harsukh Jadhavji Joshi. On August 8, 1970, he attached Flat No. 9 of Paresh Cooperative Housing Society Limited at Santacruz, Bombay. The warrant reached Joshi while he was in jail in Rajkot. A sale proclamation followed while he was still inside.

Joshi's brother, Hasmukh J. Joshi, then claimed the flat for himself and Joshi's wife. Hasmukh first obtained an order in his favour, but that order was set aside on appeal and the matter was remanded. The chamber summons was finally dismissed on September 30, 1971, and Hasmukh did not take any further step against that rejection.

After his release, Joshi sued in 1972 to set aside the decree. He could not get an injunction, so execution continued. Bhupendra N. Shah bought the flat at auction for Rs. 24,000, although the sale had not yet been confirmed.

Joshi then filed another chamber summons on March 28, 1972. His two defences were that a flat in a cooperative housing society was not liable to attachment or sale and that he had no saleable interest under Section 60 of the Code of Civil Procedure. The City Civil Court dismissed the summons. A single judge of the Bombay High Court allowed it and declared the attachment and sale illegal. The High Court's Division Bench affirmed that decision.

Ownership facts mattered. The society itself owned the flat. It had originally stood in the name of Ramesh Hariram Chande and his wife, but the court in Hasmukh's claim case held that Joshi had bought it benami through Hasmukh and Shashikala. After the High Court quashed the attachment, Suryakant N. Sangani bought the flat after acquiring the shares in the Society from Hasmukh and Shashikala; on the joint application of Shashikala and Sangani, the shares were transferred to Sangani on or about May 15, 1974. The Supreme Court limited itself to the earlier question: whether Joshi's right to occupy the flat could be attached and sold.

The legal fight turned on the difference between two provisions. Section 29(2) restricts a member's transfer of shares, capital or property: the member must usually have held the share or interest for at least one year, and the transfer must be to an existing member or to a person whose membership application has been accepted. Bye-law 6 required an applicant to deposit Re. 1 and the value of at least five shares, while Bye-law 10 barred a person from exercising membership rights until admission under Bye-law 6, possession of at least five fully paid shares, and entry in the register of members.

Section 31, however, protects only "the share or interest of a member in the capital of a society," together with loan-stock issued by a housing society and certain savings deposits. Joshi argued that this immunity extended to the flat. The Act's own Section 47(1)(b) pointed the other way: it recognised a member's interest in the society's immovable property and gave the society a first charge for outstanding dues. Section 47(2) prohibited transfer of property subject to that charge without the society's previous permission, and Section 47(3) made such a transfer void. The Act also made contravention of Section 47(2) punishable under Sections 146(a) and 147, while breach of a bye-law was not an offence.

Bye-law 71D required the managing committee's prior written consent before a member assigned, underlet, vacated or parted with possession, but the Act did not make a breach of that bye-law automatically void. Section 60 of the Civil Procedure Code supplied the third issue. It was not exhaustive, and it reached saleable property held by another person on the judgment-debtor's behalf. That mattered because the flat stood in the names of Hasmukh and Shashikala although it was held for Joshi. The City Civil Court read the provisions one way; the High Court read them the other.

The Supreme Court drew a clear line between a member's stake in the society's capital and the member's right in a particular flat. Section 31 protected the former, not the latter. Section 60 also did not defeat attachment merely because it did not list this species of property by name.

• Section 31's immunity ends at the member's share or interest in capital, loan-stock and specified savings deposits. The right to occupy Flat No. 9 is outside that protection and is both attachable and saleable.
• Section 29(2) and Rule 24 impose transfer conditions, not an absolute ban. A qualified buyer who applies for membership and takes five shares should not be refused; breaching Bye-law 71D does not automatically void the assignment, unlike a transfer violating Section 47(2).

The Court added that multi-storeyed ownership flats in cooperative societies had become an urban necessity. It refused to impose a ban on saleability by tortuous reasoning where the legislature had not used express words. For an auction purchaser, the sale would remain valid even if that purchaser was not a member on the auction day; the court would insist on membership before confirming the sale, and the society could not refuse a qualified applicant except for cogent and relevant reasons.

• First collect the society's share or allotment record, the member-register entry, the flat-allotment or right-to-occupancy letter, any managing-committee consent under Bye-law 71D, and records showing whether society dues or Section 47(2) permission conditions have been satisfied.
• For an ordinary transfer, complete the share transfer under Rule 24. The buyer must apply for membership, pay the Bye-law 6 entrance fee, take at least five fully paid shares and be entered in the register under Bye-law 10. Transfer the interest only after the Section 29(2) one-year holding requirement and only to an existing member or a person whose membership application has been accepted.
• If the society rejects a qualified applicant, appeal to the Registrar under Section 23(2). The Registrar's decision under Section 23(3) is final.
• In an execution case, keep the decree, warrant of attachment, sale proclamation and auction record together; before confirming the sale, the court will require the purchaser to obtain membership. The costliest mistake is to treat Section 31 as if it shielded the flat itself, when it shields only capital shares, loan-stock and specified savings deposits.