Bombay HC Rules Auction Buyer Must Clear Previous Owner’s Dues Before Getting Housing Society Membership

Mumbai, Nov 20: In a significant ruling reaffirming the rights of cooperative housing societies to recover unpaid dues, the Bombay High Court on Thursday held that an auction purchaser cannot demand membership unless outstanding arrears of the previous member are cleared.

Society Challenges Registrar’s Orders

The court allowed a petition filed by Tanvi’s Diamoda Cooperative Housing Society Ltd., Dahisar. The society had challenged orders passed by the Divisional Joint Registrar and the Deputy Registrar under the Maharashtra Cooperative Societies Act (MCS Act), which had directed it to grant membership to T&M Services Consulting Pvt. Ltd., the auction purchaser of a defaulting member’s flat.

Flat Sold Under SARFAESI After Years of Non-Payment

The dispute relates to Gala No.103, originally owned by society member Saroj Mehta, who had failed to pay maintenance and property taxes for years. Despite multiple notices, her arrears remained unpaid. Indian Overseas Bank eventually took possession of the flat under the SARFAESI Act and sold it to T&M Services through a sale certificate issued in March 2021.

Society Refuses Membership on 87th Day

T&M Services sought membership in June 2021. However, the society, through its advocate, issued a communication on the 87th day stating that membership could not be granted unless outstanding dues — amounting to over Rs 57 lakh up to June 2012 — were paid. The company challenged this. The Registrar and later the Divisional Joint Registrar set aside this refusal, prompting the society to move the HC.

Legal Provisions Cited by Society

The petitioner argued that the refusal was communicated within the statutory 90 days under Section 23(2) of the MCS Act, leaving no scope for “deemed membership”. It further submitted that Section 154B-7 makes it mandatory that “no transfer becomes effective unless dues are paid”.

Auction Purchaser Cites Previous HC Ruling

The auction purchaser contended that he could not be compelled to pay arrears of the previous member and relied on a prior judgment of the high court where it had granted relief due to uncertainty in dues.

Court Rejects Comparison; Says Dues Undisputed

Justice Borkar rejected this comparison, observing that unlike the earlier case,, “the dues here are admitted and undisputed”. He added that the earlier ruling itself clarified that when claims are definite, “payment of the dues before seeking membership cannot be avoided”.

Membership Cannot Be Granted Until Dues Cleared

The court also emphasised that section 154B-7 is “mandatory” and protects the financial stability of housing societies. “The society is not required to record the transfer until dues are cleared,” the court noted, adding that the SARFAESI Act does not override these statutory obligations.

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HC Upholds Society’s Decision

Finding that the society acted lawfully and within time, the court set aside the orders of the Registrar authorities thereby upholding the society’s refusal. The auction purchaser may obtain membership only after clearing the outstanding dues, the court concluded.

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