In a significant ruling that clarifies the legal position on “defunct members” in cooperative housing societies, the Maharashtra State Co-operative Appellate Court has dismissed an appeal filed by three shop owners of Irla Co-operative Housing Society Ltd. (Prime Mall, Irla, Vile Parle West, Mumbai) and upheld the society’s decision to remove 50 members who had sold their flats and shops during the 2003 redevelopment.
The judgment, delivered on 14 May 2026 by President Sau. S.S. Sapatnekar in Appeal No. 06 of 2026, confirms that once original members transfer their entire interest in the society’s property to a developer, their membership automatically ceases under Section 25 of the Maharashtra Co-operative Societies (MCS) Act, 1960. The society’s subsequent formal recording of this fact through a Managing Committee resolution and public notice was held to be lawful.
Background: The 2003 Redevelopment and Lingering Names
The Irla society originally had 67 members (36 flat owners and 31 shop owners). In June 2003, it executed a development agreement with M/s. Prime Developers, later rectified in September 2003. Under the terms, 50 original members accepted consideration and sold/surrendered their flats or shops to the developer. They received no new premises in the redeveloped Prime Mall, which received its Occupancy Certificate in June 2009.
Only 17 original shop-owning members continued with new shops in the mall. The developer acquired control over a large number of units. However, the names of the 50 members who had exited remained in the society’s I and J registers for over 20 years. These members never attended meetings, their whereabouts became unknown, and they contributed nothing to maintenance or property tax.
Society’s 2024 Cleanup Move
Faced with mounting dues (the developer alone owes over ₹36 crore in maintenance) and plans for further redevelopment, the society’s Managing Committee passed a resolution on 26 August 2024. It declared the 50 members “defunct” under Byelaw No. 55(f) of the Model Bye-laws (whereabouts unknown for more than 7 years and no claim on shares).
The society:
- Obtained confirmation from the developer.
- Issued public notices in Free Press Journal and Navshakti newspapers.
- Affixed the notice on the society board.
- Sought and received advice from the Deputy Registrar, K/W Ward.
- Removed the names from the registers.
No objections were received from anyone, including the removed members or their heirs.
The Challenge and Lower Court Order
Three current shop owners — Vijay Bharatbhai Badiyani, Jaynish Likesh Shah, and Paresh Bharmani — filed Dispute No. 111/2025 before the Co-operative Court No. IV, Mumbai. They challenged the resolution as illegal, alleging collusion with the developer, and sought interim relief to stay the removal and restore status quo.
The trial court partly allowed the interim application in July 2025. The three shop owners then appealed to the State Co-operative Appellate Court.
Appellate Court’s Detailed Reasoning
The Appellate Court thoroughly examined the facts and law before dismissing the appeal. Key findings include:
- Automatic Cessation of Membership: Under Section 25 of the MCS Act, membership ceases on transfer of the whole share or interest in the society. Since the 50 members had sold their entire interest to the developer in 2003, they had already ceased to be members by operation of law. The society’s later action was merely a formal recording of an existing legal position.
- Membership is Tied to Unit Ownership: Citing the definition in Section 2(19) of the MCS Act, the court held that there cannot be a member without a flat or shop in the society building. The 50 individuals held no premises in Prime Mall.
- Byelaw 55(f) and 59 Correctly Applied: The society followed due process — public notice and intimation to the Deputy Registrar. The court rejected the appellants’ argument that Byelaw 38 should have been followed, noting that Byelaw 38 applies to active members facing expulsion, not to persons whose membership had already ended years earlier.
- No Prima Facie Case or Balance of Convenience: The court found no strong prima facie case in favour of the disputants. Granting a stay would cause greater hardship to the society by forcing it to retain “ghost members” on its rolls, complicating redevelopment and record-keeping. The trial court’s exercise of discretion was held to be judicious.
- Locus Standi and Nature of Dispute: The court noted that the removed members themselves had not come forward. The dispute was filed in a representative capacity, but the appellants failed to show direct legal injury.
The court relied on settled principles from the Supreme Court (Wander Ltd.) and Bombay High Court judgments on the limited scope of interference in discretionary interim orders.
Final Order
The appeal was dismissed. The trial court’s order was confirmed. No costs were awarded. The society’s resolution and removal of the 50 names stand.
Implications for Housing Societies
This judgment provides clarity for cooperative housing societies across Maharashtra dealing with old redevelopment cases where original members have long exited but their names linger in records. It reinforces that:
- Societies have the right — and duty — to maintain accurate membership registers.
- Formal cessation under Byelaw 55(f) after public notice is a valid mechanism when membership has already ended by operation of law.
- Clean records are essential for redevelopment processes, recovery of dues, and proper governance.
The ruling is expected to help societies streamline membership before embarking on fresh redevelopment or conveyance proceedings.
