Can a housing society bar its members from letting out their flats to Bachelors, Spinsters and Foreigners? Part-1

Consumer court rules against residents of building at Marol who do not want bachelors, spinsters and Foreigners, as ‘they are causing a nuisance’

Can a housing society bar its members from letting out their flats to Bachelors, spinsters and foreigners? The State Consumer Disputes Redressal Commission last week upheld a District Consumer Forum’s interim order restraining a housing society at Marol from evicting bachelors who are staying in the building as tenants.

In August 2008, Akruti Aneri Co-op Housing Society had passed a resolution that owners can rent out flats only to families. All members who had let out flats to bachelors and spinsters were asked to get them vacated by October 1.

The agenda circulated at the society’s special general body meeting said bachelors, spinsters and foreigners residing in the society were causing a nuisance. “There has been a case of suicide, a few foreigners were involved in a sex racket, inadequately dressed females and males gather in the open area of the society at odd hours...”, it said. The resolution was approved by a majority vote.

Aggrieved by the society’s decision, Cynthia and Salvador Pinto, who had let out two flats to bachelors, challenged the resolution in the district consumer forum.

Advocate U B Wavikar, who represented the Pintos, said, “The society’s resolution was unfair and unjust. Copies of all leave-and-licence agreements and police verification of tenants was submitted by the Pintos to the housing society. All bachelors and spinsters cannot be said to be engaged in unlawful activities and there are legal remedies to take action against offenders.”

In October, the forum ruled in their favour. It noted that society did not give specific instances of wrong-doings and nuisance by the tenants. In an interim order, it restrained the housing society from implementing the resolution till July 31, 2009.

The society challenged the forum’s order before the state commission.

Advocate Rajan Malkani, who represented the society, argued that consumer courts have no jurisdiction to entertain the case, which is essentially a dispute between a housing co-operative society and one of its members.

B B Vagyani, president of the State Consumer Dispute Redressal Commission, rejected the society’s appeal. “The district forum has not committed any impropriety or illegality. The revision petition filed by the petitioner (housing society) is without any merits...”, Vagyani noted in the order. But Malkani said the commission did not go into the merits of the case and had ruled only on whether consumer courts have jurisdiction to pass orders in such cases.

Wavikar relied on Supreme Court judgements and argued that the consumer court can hear such a dispute.

“We have been renting out our flats to employees of software companies for the last five years. I am a retired person and the rent is our only source of income.

“In 2006, the society had taken a decision to levy an annual charge of Rs 10,000 as premium from members who let out their flats. But the decision was not implemented because it was approved by the registrar of co-operative societies.”

CREATION OF EQUITABLE MORTGAGE

The Registration Act 1908, in its application to the State of Maharashtra has been amended vide Maharashtra Act No X of 2012.

- It is coming into force From 1^St April 2013.

-Section 17 of the Registration Act, provides the list of documents which are compulsory for Registration. Through the above mentioned amendment, a new type of deed “The Agreement relating to the Deposit of title deeds, where such deposit has been made by way of security for the repayment of a loan or existing or further Debts.” (Which is generally known as ‘Equitable Mortgage Deed’) is added in this list.

- A new Section 89 B is introduced in the said Act, which requires filling of notice of intimation of Mortgage by way of the Deposit of title deed (where the “agreement relating to the Deposit of title deeds” is not executed and registered)  

In case of Mortgage byway Of Deposit of title deed done on 1st April 2013 and thereafter:

1) If an agreement is executed (signed) between the Mortgagor and the Mortgagee, it has to be compulsory registered. The usual time limit for registration is four months from the date of execution.

2) If such agreement is not executed, then the Mortgagor has to file a notice of intimation of such mortgage. This notice should be filed within 30 days from mortgage.

3) When an agreement is executed and registered as per clause (1), then no need of filing of notice of intimation.

4) The non-registration of Agreement/non filing of notice of intimation may defeat the legality of the Mortgage and cause injury to the interests of parties. Any person who fails to file such notice within the prescribed time limit shall be liable for Punishment under section 89C of the Act.

These days finance, particularly against housing and property is being made available by the banks and the housing finance companies against the security of the properties by way of equitable “Mortgage by Deposit of Title Deeds”.

In terms of Section 58 (e) of the Transfer of Property Act, such a mortgage is created the moment title deeds of the property are handed over to the lender with the intention to create security for loan in the Presidency town of Bombay, Calcutta and Madras and the towns notified by the State Governments.

In most of the States in India, important towns and the District Had Quarters have been notified for the purpose of creation of equitable mortgage. In some States even the Tehsil/Taluka Head Quarter have been notified.

In the State of Maharashtra a number of towns such as Ahmed Nagar, Akola, Ailbagh, Amravati, Bhandara, Bhir [Beed], Buldhana, Chandrapur, Dhulia, Jalgaon, Kolhapur, Nagpur, Nanded,Nasik, Osmanabad, Parbhani, Poona, Ratnagiri, Sangli, Satara, Solapur, Thane, Wardha and Yeotmal have been notified by the State Govt. for this Purpose.

In exercise the powers by virtue of Section 3, Sub Section (4) of The Bombay Provincial Municipal Corporation Act 1949, the State Government has constituted a city of New Bombay for the area specified in the Schedule to the Notification dated 17.12.1991 with effect from the 1^st January 1992, but this city of New Bombay has not yet been notified by the State Government under Section 58 (e) of the Transfer of Property Act for the purposes of equitable mortgage.

In the Area of New Bombay, the Various financial institution are adopting different procedure inasmuch as some of the banks, particularly Public Sector Banks, accepting the documents from the borrowers at New Bombay keep the same in their offices located in the area of Mumbai, whereas some of the banks and financial institutions are keeping the same offices in New Bombay. Legally specking, keeping the documents obtained as a security for loans in the Offices within the area of New Bombay is not in consonance with the provisions of Section 58 (e) of Transfer of Property Act and, in my opinion, such financial institutions/banks may face technical legal problem, if matter goes to litigation. It would therefore, expedient on the part of the State Government to notify the Town of New Bombay for the purpose of creation of equitable mortgage as per the provisions of the Section 58 (e) of the Transfer of the Property Act at the earliest.

As regards creation of equitable mortgage, it is not legally essential that the property, offered as a security, should be located in a notified town. The legal requirement is that the title deeds should be deposited with the lender in a notified town irrespective of the location of the property. As per the judicial guidance pronouncements, the title deeds accepted even an un-notified town but kept at the notified town, the equitable mortgage has come into being and the transaction is legally valid.

There is another practice in vogue that many financial institutions obtain a Memorandum or the Letter of Deposit of the Title Deeds from the borrowers as an additional proof of creation of mortgage. Under the said provisions of the Transfer of Property Act, such a Memorandum or the Letter is not a pre-requisite and not legally required. In the State of Maharashtra, if such Memorandum or the letter or anything in writing about the deposit of title deeds is obtained at any stage, such a Memorandum or letter or writing attracts Stamp duty as per the provisions of Article 6 of the Bombay Stamp Act at the rate as prescribed from time to time.

It may be clarified that wherever such Memorandum or letter is insisted upon, it is obtain at a later date subsequent to the deposit of title deeds (creation of equitable mortgage) to distinguish it from a simple registered mortgage and if it is taken on the same day, it may attract stamp duty and registration as per the provisions of law in care of other type of mortgages.