RAMESH HIMMATLAL SHAH versus HARSUKH JADHAVJI JOSHI

GOSWAMI, J.-This appeal in. forma pauperis rainses an impor-. tau~ question of Jaw : Is a flat m a te,nant co-partnership housing society under the Maha;ashtra Cooperative Societies Act, 1960 liable to .attachment and sale m execution of a decree against a member in ll'hooe favour or for whose benefit the same has been allotted by the society ? · . We may briefly note the tacts. :

p. 271, margin G

.. The appellant is the . decree-holder. He obtained a money decree. against the respondent judgment-debtor and took a warrant of attachment of ffat No. 9 of Pare~h Cooperativ~ Housing Society Limited at .Santacruz, Bombay. ·Tius ·flat (descnbed as ownership. flat in common parlance) was attached on August 8, 1970 and. a warrant ·~:-< of attachment was served on the judgment-debtor while be was m jail in Rajkot. In due course a sale proclamation was also issued in respect of the flat while the judgment-debtor was yet in jail. At this stage of the proceedings, the judgment-debtor's brother, Hasmukh J.; Joshi (for brevity Hasmukh) took out a chamber summons challenge ing the execution on the ground that the flat did not belong to the judgment-debtor but belonged to him and to the judgment-debtor's wife and that the attachment should be raised. His chamber summons was made absolute but in appeal the order was set aside and the matter was remanded. The aforesaid chamber summons was, however, finally dismissed on September 30, 1971. Hasmukii did not take any further action against the rejection of his claim to the property. After coming out of the jail, the judgment-debtor filed a suit some time in 1972 to set aside the decree. He, however, could not secure an order for injunction to prevent the execution of the decree and the suit is pending. The fiat was offered for sale and was purchased in auction by one Bhupendra N. Shah for a sum of Rs. 24,000. The sale, however, is not yet confirmed. Subsequently a new plea was taken by the judgment-debtor. This time he filed a chamber summons on March 28, 1972, praying for the dismissal of the execution petition filed by the decree-holder and for setting aside the warrant of attachment and proclamation of sale on the ground that the flat being a flat in a cooperative housing society was not liable to attachment and sale. It was also stated that he had no saleable intere•st in the said property under section 60, Civil Procedure Code, and therefore, it was not liable to attachment. The Judge, City Civil Court, Bombay, dismissed the chamber summons. The learned single Judge, Bombay High Court, however, in appeal allowed the claim and made the summons absolute by directing that the attachment and sale of the flat being illegal be set aside. The appellant preferred a Letters Patent Appeal before the Bombay High Court without success and the decision of the learned single Judge was affirmect. Hence this appeal by special leave.

pp. 271–272, margin H

The flat in question is admittedly owned by the Paresh Co()J'el'ative Housing Society Limited (briefly the Society). Originally · this fiat stood in the name of one Ramesh Hariram Chande and his wife. It is not disputed before us and it has been so held by the court in the claim case by the judgment-debtor's brother that the respondent purchased the flat benami in the. name of his brother Hasmukh and his · wife Shashikala. Although, therefore, the respondent is not a registered holder of the fiat, it is clear that the flat is held by :his brother and his wife on behalf of the respondent. This is to be noted as section 60, Civil Procedure Code, reaches a benami holding .. It may also be noted that the respondent is now fighting the case on the basis that the right to occupy the flat in question is his property ·which is not liable to attachment and sale. We should also note here that after the High Court invalidated the attachment and sale, the flat was purchased by one Suryakant N. Sangani (briefly Surya· kant) having acquired the shares in the Society from Hasmnkh and' Shashikala. It is said that on the joint application of Shashikala .and Suryakant, the shares were transferred to the latter on or abour· May 15, 1974. ·

p. 272, margin F

v. J. (Goswami, /.}

p. 273

The appeal came up for hearing earlier and when it was found that the respondent was not represented the court issued notice to the purchaser, Suryakant and also directed for appointment of an amicus curiae. Mr. Chatterjee has now appeared before us as amicus cur~ and the purchaser has also entered appearance through Mr. Sangh1. Ultimately, however, we did not hear Mr. Sanghi, as we are concerned in this appeal only with the 'question of attachability and saleability which is a condition prior to the . purchase of the property by Bbupendra N. Shah. Mr. Sanghi,. therefor<:, had to retire from the appeal.

p. 273, margin A

The point that arises for consideration m this appeal, as stated earlier, is whether the right of the judgment-debtor, who claims the right to occupation of fiat No. 9, is liable ttl attachment and sale in execution of a decree. Before we proceed further it is necessary to go through the relevant provisions of the Maharashtra Cooperative Societies Act, 1960 (briefly the Act}. The Maharashtra Cooperative Societies Rules, 1961 (briefly descri0ed as the Rules} and the Byelaws of the Society. The Act was passed in the year 1961 to consolidate and amend the law relating to cooperative societies in the state of :Maharashtra.

p. 273, margin B

Section 2 of the Act contains the definitions. By section 2(5} " 'by-Jaws' means by-laws registered under this Act and for the time being in force, and includes registered amendments of such by-laws". By section 2 (11} "dividend" means the amount paid, out of the profits of a society, to a member in proportion to the shares held by him. By section 2(16} '"housing society' means a society the object of which is providing its members with dwelling houses". By section 2(9} "'member' means a person joining in an application for the registration of a cooperative society which is subsequently registered, or a person duly admitted to membership of a society after registration, and includes a nominal, associate or sympathiser member". By section 2(19} (b} "'associate member' means a member who holds jointly a share of a society with others, but whose name does not stand first in the share certificate". By section 2(19} (c} " 'nominal member' means a person admitted to membership as such after registration in accordance with the by-law''. By section 2(21} " 'prescribed' means prescribed by rules". By section 2(31} "'working capital' means funds at the disposal of a society inclusive of paid up share capital, funds built out of profits, and money raised by borrowing and by other means." . By secti~n ~ "a society, which has as its objects the promotion of the economic mterests or general welfare of its members or of the ~blic, i? accord8:flce with .c?O~erative principles, or a so~iety estabhshed with the. ob1ect of fac1htatmg the operations of any snch society may be registered under this Act.

p. 273, margin D

Pro~ided that, no society shall .be registered if if is likely to be econOtrucally unsound, or the registration of which may have an adverse effect on development of the cooperative movement".

p. 273, margin H

···~·- .,

p. 273, margin H

Chapter Ill of the Act deals with members and their rights and lia])ilities. Section 22 with which this chapter opens provides .how a person may become a member. For example by section 22(1A) subject to the provisions of section 24, an individual competent to contract under .the Indian Contract Act may be admitted as a member. By section 23 (l) '·No society shall, without sufficient cause, refuse admission to membership to any person duly qualified therefor under the provisions of this Act and its bye-Jaws". By sub-section (2), "Any person aggrieved by the decision of a society, refusing him admission to its membership, may appeal to the Registrar" and the decision of the Registrar under sub-section (3) shall be final. By section 25 "a person shall cease to be a member of a society on his resignation from the membership thereof being accepted, or on the transfer of the w):iole of his share or interest in the society to another member, or on his death, or removal or expulsion from the society". By section 26, "no person shall exercise the right of a member of a society, until he has made such payment to the society in respect of: membership, or acquired such interest in the society, as may be prescribed by the rules, or the by-laws of such society". Section 28 contains certain restrictions on holding shares. Two of the material sub-sections of section 29 which are jmportant and with which we are concerned may be set out :

p. 274, margin A

29(1). "Subject to the provisions of the last precedinl', section as to the maximum holding of shares and to any rules made in this behalf, a transfer of, or charge on, the share or interest of a member in the share capital of a society shall be subject to such

p. 274, margin D

conditions as may be prescribed. ( 2) A member shall not transfer any share held by him or his interest in the capital or property of any

p. 274, margin E

society, or any part thereof, unless :- (a) he has held such share or interest for not less

p. 274, margin E

than one year ; (b) the transfer is made, to a member. of the society or to a person whose application for membership

p. 274, margin F

has been accepted". Section 31 may also be set out :-

p. 274, margin F

"The share or interest of a member in the capital of a society, or in the Joan-stock issued by a housing society, or in the funds raised by a society from its members by way of savings deposit, shall not be liable to attachment or sale under any decree · or order of a Court for or in respect of any debt or liability incurred by the member ; · and accordingly, neither the Ofiicial Assignee under· . the Presidency-towns Insolvency Act, 1909, ·nor ·a Receiver under the Provincial Insolvency Act, 1920, nor any such person ,or authority under al)y corresponding l~w for the time being in force, shall be- entitled to, or have any claim. such share .or interests."

p. 274, margin G

H. sllAH ~- J. JOSHI iGoswami, !.) ''' Section 4 7 so far as material for our purpose may be quoted· 47(1). "Notwithstanding .anything i,n any other law for the time being· in force, brit subject to any prior claim of Government in respect of land revenue or any money recoverable as land revenue and to the provisions of section 60 and 61 of the Code of Civil

p. 275

Procedure, 1908. (b) any oustanding demands or dues payable to a society by any member or past member or· deceased member, in respect of rent, shares, loans or purchase money or any other rights or amou11ts payable to such society, shall be a first charge upon his interest in the immovable property of the

p. 275, margin B

society". (2) No property or interest in property, which is subject to a charge nuder the foregoing sub-section, shall be transferred in any manner without the previous permission of the society; and such transfer shall be subject to such conditions, iLany, as the society may

p. 275, margin C

impose. (3) Any transfer made in contravention of sub-section

p. 275, margin D

(2) shall be void".

p. 275, margin E

Section 165 contains the rule making powers. The last section 167 provides that "for the removal of doubt, it is hereby declared that the provisions of the Companies Act, 1956, shall not apply to societies registered or deemed to be registered, under this Act".

p. 275, margin E

We may now turn to the relevant Rules. By rule-9 "wheu a society has been registered the by-laws of. the society as .approved and registered by the Registrar shall be the bye-laws of the society". Rule 10 contains classification and sub-classification of societies and we are concerned with the fifth class mentioned therein, namely, the 'Housing Society' which again is sub-divided into three categories and we are concerned in this appeal with the second category, namely, 'Tenant Co-partnership Housing Society', which is described therein as an example of "Housing Societies which hold both lands al)d buildings either on lease hold or free hold basis and allot them to their members".

p. 275, margin F

Chapter III of the Rules deals with members and their rights and liabilities. Rule 19 contains conditions to be complied with for · admission for membership. Rule 24 provides for the procedure for transfer of shares. Rule 28 provides for expulsion of members and expulsion from membership may involve forfeiture of· shares held by the member.

p. 275, margin G

We may now notice some of the material Bye-laws of the Society.

p. 275, margin H

Bye-Jaw 6. "All persons permanently residing in Bombay city and suburban area and who have signed the application for registration, are original members. Other members Jll\lY be admitted by the General .Bouy. Every person on applying for membership shall d.cposit Re. 1 as entrance fee and. the value of at least five shares for which he shall receive a copy of the Bye-laws. In case where an application is

p. 276, margin A

refused, the deposit shall ordinarily be returned". · 6(1). "The General Body may admit any new members other than the promoters subject to the applicants satisfying the qualifications for membership as pres-

p. 276, margin B

cribed under the bye-laws". (2) "TI1e General Body shall not admit members exceeding the· number of tenements or plots available for

p. 276, margin C

allotment". (3) The General Body alone shall be comi;i:etent to allot tenements to the members on the basis of policy

p. 276, margin C

framed by it for such allotment". 7 (a). "A person may be admitted as a nominal member on payment of Re. 1 only as entrance fee for the purposes of occupying a shop/ godown/ garage m the society. A nominal member shall not exercise any right of membership or receive any advantage,

p. 276, margin D

or benefit or dividend, etc." 7(b). "A subletec, a licencee or a caretaker may also be admitted as a nominal member of the Society on payment of Re. 1 as entrance fee. Such member shall not exercise any right of membership or receive any

p. 276, margin E

advantage or benefit or dividend, etc.". 8 (a) . "Ko person shall be admitted as a member of the Society who already owns a house, a plot or a ilat in Bombay city and suburban area, in his own name or in the name of any of his dependents or of his family members, such as wife/husband, children, etc. and whose need of a house, a plot or a fiat in the' opinion of the General Body are not considered

p. 276, margin F

pressing or deserving ...... "

p. 276, margin G

10. "No person shall exercise the rights of a member of the Society until he is admitted as such as laid down in Bye-law No. 6 and holds not less than five fully paid shares in the Society and his name has been

p. 276, margin G

entered in the Register of Members". ·

p. 276, margin H

Chapter Vil of the Bye-laws provides for transmission of interests. Bye-law 14 01>11tains how a nomination has to be made, how member may nominate a person to whom his share or intcrcst in the society or so much thereof as is specified in such nomination

p. 276, margin H

v. :r. (Goswami, J.) shall ·be transferrcc;I at h.i~ decease, .etc. Byc-la.w 15(1) provides .that "on r~iving satisfactory pr()Of of the. death of a member, the' Generai' Body may tr1msfer the share or the. interest of the member to the person or persons nominated or if there is no. person so nominatecl to such person as may appear to the Ge11eral Body to be the heir or the legal representative of the member or to pay such a sum representing the value of such nominator's share or interest as oete.rmined in accordance with the Rule 23 of the M.C.S. Rules 1961 deducti11g all sums due to the Society from the nominator ..... .'' Under Bye-law 15 ( 4) where a share or shares were issued to member by virtue of his being a tenant or a lessee what would happen on the death of such a member is provided for.

p. 277

Chapter XX deals with tenants. Bye-law 71 with which it opens says "no member shall be a tenant of the Society unless he subscribes to such nnmber of shares as the Managing Committee prescribesi'.

p. 277, margin C

71A, "Whenever a member to whom a dwelling house/ tenement or flat has been allotted by the society does not require it for his own use for any particular period, he may hand it over to the society for using

p. 277, margin C

the same in such manner as it may consider best". 71B. "The society may offer the dwelling house/tenements or flats falling vacant in its possession in terms of the provisions of bye-law No. 7HA) above, to any person in its discretion _for temporary occupation for the period indicated by the original allottee on such

p. 277, margin D

clear understanding provided that: (i) It shall give preference to such person as has already been enrolled as member of the society in terms of the provisions in bye-law but who could not be allotted a dwelling house/tenement or fiat .

p. 277, margin E

by it; (ii) It shall enroll the person to whom the dwelling house/tenement or flat is proposed to be allotted as a nominal member if he is not already a mem·

p. 277, margin E

ber of the society. (iii) The payments received for such temporary occupation shall be credited to the account of the .original allottee and be apportioned towards satisfaction of the dues and the demands of the society out- •tanding against him under these Bye-laws and

p. 277, margin G

the tenancy regulations. 71D. "A member to whom a tenement is allotted ·shall occupy it himself and shall not assign, under!et, vac'ate. or pan with the possession of the. tenement . any part thereof without .the previous. consent in writ· ·

p. 277, margin H

ing of the Managing Committee." · ·<~--·

p. 277, margin H

[1975)

p. 278

72. "No dwelling house offered on lease shall be taken · by persons who are not members of the Society un" ·

p. 278

less no member is willing to take it".

p. 278

Form A to the Bye-laws contains "regulations relating to. tenancies to be granted by the Society to members in respect of houses held by tbe Society".

p. 278

From a review of the foregoing provisions the position ,~ith reference to the particular Society is as follows :

p. 278, margin B

There is no absolute prohibition in the Act or in the Rules or

p. 278, margin B

in the Bye-laws prohibiting transfer of interest of a member in the property belonging to the Society. Tne only transfer which is void under the Act is one made in contravention of sub-section ( 2) of secti'On 47 [see section 47(3)]. We have not been able to find any ether provision anywhere to the same effect. In :he scheme. of the provisions a dichotomy is seen between share or interest . in the capital and interest in property of tbe Society. While section 29(2)

p. 278, margin B

refers to transfor of a member's share or his interest in tbe capital or property of any society, section 31 in contrast speak~ of "the share or interest of a member in the capital of a society''. The Act, therefore, makes a clear distinction between the share or interest in the capital and share or interest in property of tbe Society. We have also noticed that the Act does recognise interest in the immovable property of the Society as well [see section 4 7 (I) (b)]. We have seen the qnalifications for membership. There is no reason to snppose that if the qualifications under the Bye-laws are fulfilled an application for membership may be rejected. It is admitted that the fiat is owned by the Society and the judgment-debtor has a right or interest to occupy the same.

p. 278, margin C

This right or interest to occupy is a species of property. We have to consider wh1:ther this right to the particular property is attachable and saleable in execution of the decree against the judgment-debtor. It is contended by Mr. Chatterjee, amicus curiae, that section 31 of the Act completely bars attachment and ·sale of the said property in execution of the decree. We have already pointed out the difference in language between section 29 and section 31 and also made refe-

p. 278, margin D

rence to section 47(1) (b) in that connection. There is nothing in the language of section 31 to indicate that the right to occupation which is the right to be sold in auction is not attachable in execution of the decree. There is nothing in section 31 to even remorely include a prohibition against attachment or sale of the aforesaid right to occupation of the fiat. Once section 31 is out of the way, we are left with section 29 wherein we do not find even a provision of

p. 278, margin F

prior consent for transfer of share or inrerest in such property. The only restrictions un~er section 29(2) are that the member may not transfer his interest in the property prior to one year and the transfer is made to an existing member of the Society or to a person whose application for membership has been accepted by the Society. It is true that bye~law 71D says that a member to whom a tenement is allotted shall not assign or underlet, vacate or part with the possession of the tenement or any part thereof without the previous consent in writing of the Managing Committee, but there is nothing ·to show that contravention of this bye-law makes the assignment void under the Act unlike in the case of a transfer being void under section 4 7 ( 3) . There is no impediment to ratification of the assignment by the Committee particularly in view of the legal position arising . out of the conjoint effect of section 29, rule 24 and bye-Jaw 9. Sect10n 29 read with rule 24 shows that' there is no prohibition as such against transfer of a share to a member or even to a non-member if he consents to be a member .and makes an application for membership by purchasing five shares as provided under bye-law 9. Reading the aforesaid provisions there is no reason to ~hink that 'there is any guestio? of refusal of membership of the Society to a non-member 1f he 1s qualified otherwise and makes an appropriate .application in which case the transfer of shares will be operative and thus the assignment of the right to occupation will hold good. Further it is significant that under section 146(a) of the Act, contravention of sub-section (2) of section 47 is punishable under section 147 of the Act. Contravention of any bye-law is, however, no offence. We, therefore, unhesitatingly come to the conclusion that this species of property. namely the right to occupy a fiat of this type, assumes significant importance and acquires under the law a stamp of transferability in furtherance of the interest of commerce. We have seen no fetter under any of the legal provisions against such a conclusion. The attachment and the sale of the property in this case in execution of the decree are valid under the Jaw.

pp. 278–279, margin G

Multi-storeyed ownership fiats on cooperative basis in cities and big towns have come to stay because of dire necessity and are in !he process of rapid expansion for manifold reasons. Some of these are: ever growing needs of an urban community necessitating its accommodation in proximity to cities and towns, lack of availability of land in urban areas, rise in price elf building material, restrictions under various rent legislations, disincentive generated by tax laws and other laws for embarking upon housing construction on individual basis, security of possession depending upon fulfilment of tlie conditions of membership of a society which are none too irksome. In absence of clear- and unambiguous legal provisions to the contrary, it will not be in public interest nor in the interest of commerce to impose a on saleability of these fiats by a tortuous process of reasoning. The prohibition, if intended by the legislature, must be in express terms. We have failed to find one.

p. 279, margin D

The phenomenon of ownership of fiats as contra-distinguished from personal houses has been in vogue in England as well as in the, European Continent. Ownership rights over separate parts of a building are mentioned in Coke on Littleton and such "super-imposed free holds" have existed in England in various places for a long time (see International and Comparative Law Quarterly ·Volume VII, January 1958, pages 36-37).

p. 279, margin G

With regard to a fiat-owners's right to dispose of his rights, it is pointed out that "the fiat owner may, in the words of a leadincr French Commentator" "sell, donate, leave by will, Jet or hypothecateil his right. The rights are regulated by statutes in the Continent. The SC/75-19 ~~...; ~";""""-'"<:.~ German Statute, for example, allows the flat owner's right to dispose of his property to be made subject to the consent of other flat owners, but such consent may be refused only "for a very important reason.;" [Article 12( I), (2)] and the statute gives the aggrieved flat-owner easy access to the court if a violation of this provision is alleged (see ibid page 39). Thus the trend is towards recognition of these rights.

pp. 279–280, margin H

Now that attachment and sale have been held to be valid, it will be for the auction-purchaser first to obtain membership of the society and the court before confirmation of the sale will insist upon his membership of the society which, it would not be unreasonable to

p. 280, margin B

assume, will be granted by the Society in the ordinary course unless there are cogent and relevant reasons for not doing so. The fact that at the time of auction-sale the purchaser was not a member of the Society would not in law affect the saleability or prior attachment of the property in execution of the valid decree.

p. 280, margin B

The judgment-debtor has a valid decree against him. Ordinarily he has to discharge his liability under the decree. He can pay the decretal amount straigbtaway or suffer his property to be attached and sold in execution of the decree. As an honest debtor the liability under the decree has to be discharged. Here the Society is not objecting to the attachment and sale of the property, but the judgmentdebtor is. We have seen there is no absolute prohibition against transfer of a right to occupation of the flat or even to transfer a share. The auction-purchaser is presumed to know the limitations under wltich he has purchased the right to occupy the flat in court auction. If ultimately the Society turns down his application for membership (which of course cannot be done except for valid reasons) it is upto him to take such course of action as available under the law. Such a remote contingency, per se, will not make the particular right of the judgment-debtor in the flat non-attachable or non-saleable.

p. 280, margin C

It is contended by Mr. Chatterjee that section 60, Civil Procedure Code, does not specify that this species of property is liable to attachment. The argument, however, fails to take note of section 60 being not exhaustive as such. It refers also to any other saleable

p. 280, margin F

property, movable or immovable, whether the same be held in the name of the judgment-debtor or by another person on his behalf.

p. 280, margin F

We have held that the right to occupation of a flat is property both attachable and saleable. Specific non-inclusion of a particular species of property under section 60 is, therefore, not of any consequence if it is saleable otherwise. In the result the judgment of the High Court is set aside and the judgment-debtor's chamber summons dated March 28, 1972, stands dismissed. The appeal is allowed, but there

p. 280, margin G

will be no order as to costs except that the court-fees will be payable by the appellant.

p. 280, margin G

We record our appreciation of the assistance rendered by Mr Chatterjee as amicus curiae and also by Mr. Zaiwala, couru;el for the appeilant. V.M.K. Appeal allowed.

p. 280, margin H