Bombay HC: Societies Can Refuse Membership Where Builder Sold 'Refuge Area' as a Flat

The Bombay High Court has held that a co-operative housing society is entitled to refuse membership to a purchaser where the developer had sold a building's mandatory 'refuge area' — a fire-safety floor space required by municipal rules — as if it were a saleable residential flat. Justice Firdosh P. Pooniwalla delivered the ruling in a writ petition filed by several CHS societies challenging orders of the Divisional Joint Registrar that had directed them to admit such buyers as members.

What the case was about

The buyers claimed to have purchased flats in 2019 based on agreements executed by the developer. The societies argued that the spaces sold were in fact refuge areas — floors that municipal fire-safety norms require in tall buildings and which cannot be allotted as flats — and that no constructed residential units existed there. The Court examined sanctioned floor plans and found the areas were consistently marked as refuge areas, with municipal authorities never levying property tax on them, confirming no flat existed. It also noted the developer had not retained membership in the society for any 'unsold' unit at the time of formation, meaning it had no authority to sell that space later.

Why the ruling matters

Section 154B-5 of the Maharashtra Co-operative Societies Act bars a society from admitting members beyond the number of flats actually available for allotment. The Court held that since the 'flats' in question did not exist, forcing the society to admit their buyers as members would itself violate this statutory cap. It distinguished this from cases where societies had wrongly refused membership merely because construction was unauthorised — that principle does not extend to a case where the subject matter sold never existed as a flat at all.

What this means for housing societies

• Before rejecting a membership application over a disputed unit, committees should verify the sanctioned building plan to confirm whether the space was ever approved as a residential flat, refuge area, or other common facility.
• Municipal property tax records and occupation certificates are useful evidence — refuge areas are typically untaxed and excluded from the flat count.
• A society need not treat a Registrar's membership order as final if it can show the underlying 'flat' does not legally exist; this judgment gives grounds to challenge such orders in a writ petition.
• Committees should check whether the developer retained or exercised membership rights for any unsold area at the time of society formation, since post-conveyance sales by a developer without such standing may not bind the society.

The Court quashed the Registrar's orders directing admission of the purchasers and restored the societies' earlier rejection of their membership applications. Societies currently facing similar disputes over refuge areas, terrace rooms, or other non-saleable common spaces being passed off as flats should consult their sanctioned plans and seek legal advice before complying with a Registrar's admission order.