This article has been written by Oishika Banerji of Amity Law School, Kolkata. This article provides a detailed analysis of a list of Supreme Court judgments on society maintenance charges.

This article has been published by Sneha Mahawar.

Introduction 

Apart from stamp duty and registration fees, maintenance costs are the cost of living in an apartment, and they are estimated primarily depending on the size of the property and the quality of the upkeep. Repair fees are generally used to fund the upkeep and maintenance of common spaces and utilities, as well as security services such as CCTV. Elevators, a clubhouse, and generators are among the common amenities. Put simply, in exchange for the maintenance fee, you receive services such as security, housekeeping, gardening, a lift, power backup, painting, and civil repairs in the society’s common spaces, among other things from the society you live in. This is known as the society maintenance charge. These fees may be set by the general body, but they must be at least 0.75 percent of the cost of the flat/shop every year. For a 1000 sq ft apartment, the annual charge will be Rs. 9,000/-. Whether the unit is inhabited or unoccupied, the monthly maintenance expenses must be paid by the owner or the renter. The bylaws will empower the organisation to take appropriate legal action in accordance with the requirements of the bylaws. This article explains the concept of society maintenance charge by means of landmark decisions of the Supreme Court on the same. 

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Supreme Court judgments on society maintenance charges

A list of Supreme Court judgments on society maintenance charges has been discussed hereunder which will provide a better understanding to the readers on this subject matter. 

Malpe Vishwanath Acharya & Ors v. State Of Maharashtra & Anr (1997)

In the case of Malpe Vishwanath Acharya & Ors vs State Of Maharashtra & Anr (1997), the Supreme Court of India was hearing a batch of appeals and the connected writ petitions, filed by the landlords, questioning the validity of certain provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 which provides that landlords cannot charge rent in excess of the standard rent.

Facts of the case 

The appellants are the owners or representatives of numerous properties in Bombay that have been rented out to various tenants. They had filed writ petitions in the Bombay High Court challenging the constitutional validity of Sections 5(10) (B), 11 (1), and 12(3) of the Bombay Rent Act, 1947, claiming, among other things, that the provisions relating to standard rent were in violation of Articles 14, 19, and 21 of the Indian Constitution and thus void. The main argument against the provisions was that the restriction on landlords’ right to increase rents, which had been frozen since September 1, 1940, or at the time of the first letting, was no longer a reasonable restriction and that the provisions had become arbitrary, discriminatory, and unreasonable over time, and thus were in violation of Article 14 of the Constitution. The writ petitions were dismissed by the High Court, which held that the Act’s purpose was not to provide the landlord with an adequate return on his investment and that it was not open to him to claim an increase in the rent by taking into account the increase in the land privies, etc.

Supreme Court’s decision 

  1. It is true that whenever a special provision, such as the Rent Control Act, is made for one section of the society at the expense of another, such a provision or enactment may be necessary for the larger interest of the society as a whole, but the benefit that is given initially results in increasing injustice to the other section of the society and unwarranted largess or windfall to another, without appropriate corresponding relief. Its continuance, therefore, becomes arbitrary. 
  2. While the tenant will have the security of tenure in controlled premises, they should agree to pay a rent that offers an appropriate return on investment, as well as adequate maintenance and taxes, so that they do not have an unfair advantage over the landlord. The fact that the puggrie system has grown common in Mumbai as a result of the rent restriction legislation has been noted by the legislature. The Apex Court took judicial notice of the fact that the landlords are resorting to various measures to seek restitution in light of the excessively low rents they are receiving. These practises are outside the bounds of the law, and they are gradually leading to a state of lawlessness in which it is believed that the courts would become irrelevant in resolving conflicts between landlords and renters.
  3. The Apex Court observed that they have no doubt that the present provisions of the Bombay Rent Act related to the determination and setting of the standard rent are no longer acceptable in light of all the facts and circumstances. The stated clauses would have been knocked down as being irrational and arbitrary, but the Court did not believe it was essential to do so, given that the Bombay Rent Act’s revised extended time ends on March 31, 1998. The appeals were disposed of thereby viewing that the decision of the High Court upholding the validity of the impugned provisions relating to standard rent, was not correct. 

The Apex Court had further opined that with effect from April 1, 1998, a new Rent Control Act was to be established, taking into account the remarks expressed in this ruling regarding the determination of standard rent. It was made clear, however, that any further expansion of existing rules without bringing them into compliance with the views indicated in this judgment would be unlawful as arbitrary and in violation of Article 14 of the Constitution, and therefore would have no effect.

Narendra K. Kochar v. Sind Maharashtra Coop. Housing (2002)

In the present case of Narendra K. Kochar vs Sind Maharashtra Coop. Housing (2002), the Supreme Court of India was considering an appeal by special leave against a judgment of the Bombay High Court which dismissed the appellant’s writ application and upheld an order of the Maharashtra State Co-operative Appellate Court that had directed the appellant to act under Section 91 of the Maharashtra Co-operative Societies Act, 1960, in relation to a premise in question. 

Facts of the case 

The Sind Maharashtra Co-operative Housing Society Limited (respondent) was a tenant co-partnership housing society, and B.D. Punjabi (respondent 2) was a tenant co-partner in regard to apartment No. 5 in the Society’s Ashiana Building. The respondent 2, who was given possession of the aforementioned apartment, placed the appellant in it in December 1970, without the Society’s permission, as a licensee at a monthly charge of Rs. 325/-, which was later increased to Rs. 450/-. The respondent 2 had been delinquent in paying the Society’s dues since March 1977, and the appellant, who was the occupant, was causing a nuisance to the Society’s members. The Society filed the current action under Arbitration Case No. ABN 634/754 of 1977, seeking to reclaim vacant possession of the aforementioned flat from both the respondent and the appellant. A second petition was filed for the respondent to be directed to pay the Society’s dues. The Registrar of Co-operative Societies submitted the Society’s dispute to an Officer on Special Duty under Section 91 of the Societies Act, 1960, which was then moved to the Co-operative Court under Section 91A of the Societies Act,  1960, following amendments.

Supreme Court’s observations 

  1. As the appellant’s licence was valid on 1.2.1973, the Apex Court held that, as a protected tenant under the Maharashtra Rent Control Act, 1999, he could not be evicted by bringing a proceeding under Section 91 of the Societies Act, 1960 and passing orders therein. This, therefore, circumvented the provisions of the Rent Control Act, where no proceeding was taken, and thus the impugned orders were unjustified. 
  2. The Supreme Court concluded that during the hearing, it became clear from reading the evidence presented by the parties that the real reason for the society’s initiating proceedings against the appellant in order to get rid of him appears to be that he was not behaving himself and conducting himself in such a way as to annoy other members of the society who occupy the flats. The Court further noted that the learned counsel for the appellant told the Court that the appellant would be counselled not to cause any issue or annoyance to other residents in the society, to adhere to the society’s laws, and to ensure that he had no outstanding debts. The total sum that the appellant was supposed to pay was Rs. 2,47,962/- which included repayment of loan and interest thereon, building maintenance, municipal taxes, parking charges, water charges, service and maintenance charges, sinking fund, interest on arrears, and building repairs charges.
  3. The appeal was granted thereby invalidating the contested orders and dismissing the Society’s petition under Section 91 of the Societies Act, 1960. The Court observed that the parties are responsible for their own costs based on the facts and circumstances of the case.

Action v. Director of Education & Ors (2009)

The case of Action vs Director Of Education & Ors (2009) that appeared before a Single bench of Justice S.B. Sinha of the Supreme Court of India was concerned about the Delhi School Education Act, 1973, which was enacted by the Parliament to provide for better organisation and development of school education in the National Capital Territory of Delhi (NCT) and for matters connected therewith or incidental thereto.

Facts of the case 

The Delhi Abibhavak Mahasangh filed a Writ Petition in which it asked the Union of India, the Government of the National Capital Territory of Delhi, and a few other government departments to take necessary steps to regulate admissions in recognized unaided private schools in Delhi in order to avoid and check the demand of illegal money in the name of donations by the schools at the time of admissions, by framing effective policy. It was claimed that private schools were engaging in large-scale commercialization of education, which had reached an alarming level due to the government’s failure to carry out its statutory functions under the Act and Rules, as well as failing to insist on schools adhering to affiliation bye-laws and bye-laws framed by the Central Board of Secondary Education.

One of the charges levelled against Unaided Recognized Schools in the writ petition was that the schools were transferring funds to societies/trusts and/or other schools run by the same society/trust, which the Mahasangh claimed was in violation of the Delhi School Education Act, 1973 and Rules framed thereunder. Simultaneously, the Action Committee of Unaided Private Schools filed a civil writ case in the same High Court, requesting, among other things, that the Director of Education’s Order dated 10.9.1997, which provided that fees and money acquired from parents must be used precisely in line with the Rule 177 of the Rules. No money shall be moved from a school’s Recognized Unaided School Fund to the Society or Trust, as the case may be, that runs that school, nor shall any expenditure be made that is not beneficial to the school’s pupils or personnel, be set aside. 

Apex Court’s observations 

  1. The Apex Court had observed that if the Director of Education discovers that the school is run for profit, the school will be in violation of a condition of recognition and will be asked to correct it, failing which it will face the consequences, which may include withdrawal of recognition if the condition of recognition is not met. The Director of Education would be right in requesting that the school explain facts that, in his opinion, suggest that the institution is conducted for profit. The school must explain facts to the Director of Education’s satisfaction. If it is unable to do so, the Director of Education may request the school to reduce the fee and other charges that, in the Director’s opinion, demonstrate that the institution is pursuing commercial motives. The Court held that the school cannot claim that the Director of Education has no authority to order the school to reduce the fee and other costs since no such authority exists in unaided schools because Section 17(1) and (2) of the 1973 Act only apply to aided schools. The goal of lowering the fees and charges is to avoid taking the drastic step of terminating recognition or taking over the institution immediately.
  2. The Court held that before or after setting the tuition cost, no consent from the Director of Education is required. If the fixing is determined to be unreasonable and arbitrary, the Act and Rules provide adequate authority to offer directives to the school to correct the problem before resorting to punitive sanctions. Individual schools’ commercialization of education and exploitation of parents can be determined authoritatively by a careful review of their finances and other documents. The Court, therefore, appointed a committee chaired by Ms. Justice Santosh Duggal, a retired judge of the Apex Court, with the authority to nominate two persons, one with accounting knowledge and the other from the field of education, in consultation with the Chief Secretary of the NCT of Delhi, to decide on the fee and other charges levied by individual schools in accordance with the Court’s decision. The Court asked the Committee to rule on the claims of individual schools as soon as practicable after providing them with an opportunity to be heard.
  3. The Action Committee argued that, under the 1973 Act, the school was not a separate legal entity from the society, and under Rule 50, one of the conditions of recognition is that the school should be run by a society registered under the Societies Registration Act, 1860. The school’s Managing Committee is subject to the trust or society’s control and supervision. As a result, the Action Committee believes that transferring funds from the school to the society or vice versa is a school-internal procedure that has nothing to do with whether the funds were misappropriated. The Court concluded that there can be no objection from the Department of Education as long as there is an acceptable fee structure in place and money is transferred from one school to another under the same administration.

Rasila S Mehta v. Custodian, Nariman Bhavan (2011)

In the case of Rasila S Mehta vs Custodian, Nariman Bhavan (2011), the Supreme Court of India was considering a civil appeal filed by Smt. Rasila S. Mehta, late Harshad S. Mehta’s mother, and Smt. Rina S. Mehta, late Harshad S. Mehta’s sister-in-law, against the final judgement and order dated 26.02.2008 passed by the Special Court in Bombay in Misc that dealt with certain amounts payable to the society the appellants were living in, towards repairs and maintenance charges, interest and penalty for belated payment.  Late Harshad S. Mehta was an Indian stockbroker, who was involved in the 1992 Indian securities scam because of which he was subjected to stringent deterrent as well.  

Facts of the case 

Smt. Rasila S. Mehta and Smt. Rina S. Mehta were avid investors who had amassed an investment portfolio that had grown in value over time. They each own one of Madhuli Cooperative Housing Society Limited’s nine flats, which have been merged with other flats occupied by the combined family. The appellants’ bank accounts and stock assets are held jointly, with the appellants as first holders and their family members as joint/second holders. The Special Court’s challenged judgement and order, dated 13.03.2009, was the result of a petition filed by the Custodian in respect of outstanding dues towards Flat Nos. 32A, 32B, 33, 34A, and 34B on the Third Floor and 44A, 44B, and 45 on the Fourth Floor, as well as terrace area on the Third Floor and eight-car parking space in Madhuli Cooperative Housing Society Limited, Worli, belonging to late Harshad S. Mehta as well as other related notified entities of the Harshad Mehta Group.

Supreme Court’s observations

  1. The Supreme Court observed that according to the rules and bye-laws of Mumbai’s Cooperative Housing Societies, which are incorporated under the Maharashtra Cooperative Societies Act, all owners of residential properties/flats, as members of the Housing Society, are liable to pay such amount as may be determined by the society towards the upkeep, maintenance, and repairs of the flats as well as common areas and amenities in the housing society. As a result, Cooperative Housing Societies have the right to collect any arrears and costs from members who have failed to pay the society on time.
  2. The appellants, in this case, are notified parties who are the owners of mentioned properties and have failed to pay their share towards the Madhuli Cooperative Housing Society Limited’s maintenance costs, interest, and charges incurred in the Society’s repair of the mentioned properties. Madhuli Cooperative Housing Society Limited has sought Rs.1,87,97,011/- in total dues for the eight attached properties in dispute in a letter dated 12.03.2009. The notified parties/entities occupying the attached property are responsible for the maintenance charges, including interest for late payments, whereas the Custodian is responsible for paying the charges incurred by the society for the repair of the mentioned properties from the account of the notified parties. There is no question that the Custodian is responsible for paying maintenance and repair fees to society. 
  3. The Apex Court believed that the appellants should not be charged with interest and punitive fines for non-payment of maintenance and repair expenses to the society since they are battling the matter with the Custodian, the Special Court, and the Supreme Court. As a result, while upholding the Custodian’s claim as allowed by the Special Court for the reasons stated above, the Court emphasised that the Custodian is not permitted to collect interest and penalty charges from maintenance and repair costs arrears.

Indrani Wahi v. Registrar of Coop. Societies (2016)

The present case of Indrani Wahi vs Registrar of Coop. Societies (2016) that appeared before the Supreme Court of India concerned the issue of succession of interest of the Flat No.4-RB 2/3, Purbachal Housing Estate, Phase-II, Sector-III, Salt Lake City, Kolkata. The appellant, Indrani Wahi has been paying maintenance and other charges to the Society, for the aforementioned flat which originally belonged to her father. Subsequently, the appellant’s brother, Dhruba Jyoti Sengupta had claimed that the appellant was not entitled to the flat. This was because the appellant being a married daughter did not fall within the definition of the term `family’ as contemplated under Section 79 of the West Bengal Co-operative Societies Act, 1983. Aggrieved with the decision taken by the authorities of the society which favoured the appellant’s brother, the appellant had approached the Calcutta High Court through a writ petition. The same turned out to be in the appellant’s favour. Further, the appellant’s brother and mother had approached a Division Bench of the High Court concerning the matter in hand which surprisingly dissatisfied the appellant leading her to approach the Apex Court.

Observations made by the Supreme Court 

  1. The Apex Court observed that it is vital to explain that in accordance with Sections 79 and 80 of the 1983 Act, the Cooperative Society has no choice except to transfer membership in the name of the nominee. The Court went further to state that the same has no bearing on the issue of title between the inheritors or successors to the deceased’s property.
  2. The Court ordered ‘the Cooperative Society’ to transfer the society’s stake or interest to the appellant, Indrani Wahi, owing to the fact that she had been paying maintenance charges throughout. The Apex Court concluded that the appellant’s brother would be free to pursue a case of succession or inheritance if he is instructed to do so in accordance with the law.

ITO v. Venkatesh Premises Co-op Society Ltd (2018) 

The issue before the Supreme Court of India with respect to the present case of ITO vs. Venkatesh Premises Co-op Society Ltd (2018) was whether certain receipts by cooperative societies from their members, such as non­ occupancy charges, transfer charges, common amenity fund charges, and certain other charges, are exempted from income tax, based on the doctrine of mutuality or not?

Supreme Court’s observations 

  1. The Supreme Court of India had observed that a leaving member is responsible for the transfer fees. If a portion of it is paid by the transferee for convenience, it does not have the character of profit or commerciality because the money is allocated only after the transferee has been initiated as a member. If you are not admitted, you will receive a refund. The principles of mutuality apply as soon as the transferee is inducted as a member. Non-occupancy costs are also assessed by the society and must be paid by a member who does not use the property but rents it out to a third party. 

The fees are once again used only for the benefit of the members in terms of facilities and perks. Contributions to the common amenity fund obtained from members selling of property are similarly used to cover sudden and frequent expensive repairs to maintain ongoing and proper hazard-free upkeep of the society’s properties, eventually benefiting the members’ enjoyment and safety. These fees are charged in accordance with the society’s bye-laws and on the basis of decisions issued by the society. The receipts in the present cases have indisputably been used for mutual benefit towards the maintenance of the premises, repairs, infrastructure, and provision of common amenities.

  1. If a society has excess FSI (Floor Space Index), it has the right to use it by building new structures in compliance with the legislation. Naturally, more costs for maintenance, infrastructure, common facilities, and amenities would be incurred as a result of the increased building. If a society first inducts new members who are required to contribute to the common fund in order to use common facilities, and then only grants them occupancy rights by lot, with the ownership remaining with the society, the receipts cannot be divided into two segments, namely, receipts and costs, so that the former is classified as income of the society with commerciality. Noting the same, the Apex Court concluded that the fact that the earnings exceeded the State Government’s restrictions does not imply that the society performed services for profit thereby attracting a commercial element, and so were taxed.

The Managing Director (Shri Grish Batra) M/s.Padmini Infrastructure Developers (i) Ltd. v.  the General Secretary (Shri Amol Mahapatra) Royal Garden Residents Welfare  Association (2021)

In the present case of The Managing Director (Shri Grish Batra) M/s.Padmini Infrastructure Developers (i) Ltd. vs. the General Secretary (Shri Amol Mahapatra) Royal Garden Residents Welfare Association (2021) that appeared before a bench of Justices Hemant Gupta and V Ramasubramanian of the Supreme Court of India, the Court had ruled that the builder must compensate the Residents Welfare Association for failing to provide promised amenities.

Facts of the case 

On property allocated by the New Okhla Development Authority (‘NOIDA’), M/s Padmini Infrastructure Developers (India) Ltd. (‘the opposing party’) marketed a residential apartment complex. The opposing party appears to have built and sold around 282 flats. Despite the fact that the purchasers were given ownership between 1998 and 2001, the completion certificate was only issued in December 2001. The Royale Garden Residents Welfare Association was created by the apartment buyers and registered under the Societies Registration Act, 1860 on September 30, 2003. On November 15, 2003, the Residents Welfare Association and the opposing party reached an agreement to take over the apartment complex’s maintenance. Following that, the Residents Welfare Association (‘complainant’) filed a consumer complaint with the National Consumer Disputes Redressal Commission under Complaint No.9 of 2007, seeking relief from the opposing party. 

By interim decision dated 04.06.2008, the National Commission appointed a local Commissioner to investigate the systems/facilities related to the reliefs sought in petition clauses 2 to 6 of the complaint and produce a report. After conducting a local inspection in the presence of representatives from both parties, the stated Commissioner delivered a report on July 8, 2008. The National Commission partially approved the complaint through a decision dated 05.01.2010, thereby accepting the local Commissioner’s findings and overruling the opposing party’s position about restriction. Aggrieved by the order of the National Commission, the opposite party (builder) had approached the Supreme Court of India. 

Supreme Court’s observations 

  1. The Supreme Court observed that in light of the conclusions of an independent architect selected by the National Commission, it is not permissible for the opposing party to construct a facade as if all essential services and facilities were turned over fully operational. If all of the services were delivered in a fully operable form, the opposing party should have received a written acknowledgment from the complainant. Alternatively, the opposing party should have insisted on an adequate clause in the Agreement dated 15.11.2003.
  2. In lieu of the reliefs sought in the case, the complainant shall be entitled to all promised monetary compensation in the amount of Rs 60 lakh, which was on deposit with the Registry of the Apex Court, with interest accruing thereon. Within two weeks, the opposing party (builder) must remove all building materials from the club house in Tower Eden’s basement and transfer over custody of the club house to the complainant.

Conclusion 

The judgments which have been explained in this article can appear to be complicated for some readers because of the complexity in the wordings used by the Apex Court in these decisions. But this article will largely help the readers understand the concept of society maintenance charge in a better way. 

References 

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