Lease Conditions Cannot Trump Statutory Ceiling on Premium, Rules Bombay High Court

The Bombay High Court has held that a co-operative housing society does not enjoy an unfettered contractual right to demand transfer premium or deny membership, and that such powers must be exercised strictly within the statutory limits imposed under the Maharashtra Co-operative Societies Act.

A Single Judge Bench of Justice Amit Borkar dismissed a writ petition filed by a housing society challenging orders of the co-operative authorities which directed grant of membership to purchasers of a leasehold plot, holding that insistence on premium beyond the statutory ceiling could not be treated as legally recoverable dues.

"In the present case, the demand of lease premium and transfer charges arises in the context of transfer of interest in a housing society. If the State Government, in exercise of power under Section 79A, has fixed a ceiling on the premium or charges that may be recovered upon such transfer, that direction has a statutory flavour. A society cannot disregard it based on contractual right. The bye laws or lease conditions must operate within the directions imposed by Section 79A. Any charge levied in excess of the ceiling would fall outside the permissible statutory scheme", the Court observed.

The dispute arose in relation to Plot No. 26 in Vallabhnagar Co-operative Housing Society, Vile Parle, Mumbai, which had been leased by the society in 1963 for a period of 999 years. The lease deed imposed conditions restraining transfer without prior written consent of the society and mandated payment of lease premium as a condition precedent to any assignment.

In 2012, the predecessors of the purchasers sought permission to transfer the plot and requested details of transfer charges. The society responded in 2013 setting out the formal documents required and indicating that it would act upon receipt of such documents and payment of transfer charges. Subsequently, a deed of assignment was executed in August 2024 in favour of the purchasers, who then applied for membership of the society.

The society rejected the application on the ground that the assignment was effected without prior written consent and without payment of lease premium stipulated under the lease. Aggrieved, the purchasers approached the Deputy Registrar, who allowed their appeal and directed grant of membership.

This order was confirmed in revision by the Divisional Joint Registrar, leading the society to approach the High Court under Article 227 of the Constitution.

Before the Court, the society contended that the lease conditions were binding and enforceable, and that the authorities had acted in disregard of contractual stipulations by directing membership without payment of the premium demanded by the society. It was further argued that the statutory ceiling fixed by the State Government under Section 79A of the Act could not override express lease terms.

Rejecting these submissions, the Court undertook a detailed analysis of Sections 79A, 154B(7), and the definition of “dues” under the Act. The Court held that Section 79A empowers the State Government to issue binding directions in public interest regulating the affairs of co-operative societies, including imposition of ceilings on transfer premium. Once such directions are issued, societies are bound to comply.

The Court further held that under Section 154B(7), a transfer can be withheld only if lawful dues of the society remain unpaid. Any demand beyond the statutory ceiling cannot be treated as legally recoverable dues merely because it is claimed under a lease or bye-law. Lease conditions governing transfer must operate subject to the Act and cannot override statutory directions.

On facts, the Court noted that the authorities had recorded findings that the purchasers had submitted the prescribed transfer forms, tendered transfer fees, entrance fees, and premium to the extent permissible under the statutory ceiling. In such circumstances, the essential requirements for membership stood satisfied.

The Court clarified that while lease conditions continue to govern transfers of leasehold property, such conditions are enforceable only to the extent they are consistent with the Act. Where statutory limits exist, contractual stipulations demanding higher premium must yield to law.

Holding that the revisional authority had acted within jurisdiction and in conformity with the statutory scheme, the Court found no error warranting interference under Article 227 and dismissed the petition.

Mr. Venkatesh Dhond with Preteek Pai, Vinodini Shrinivas, Shashwat Rai and Aditya Shete i/b Keystone Partners, for Petitioner.

Dr. Dhruti Kapdia, AGP for State-Respondent Nos. 1 to 3.

Mr. Surel Shah, Senior Counsel with Ms. Kausar Banatwala, i/b Tushar A. Goradia, for Respondent Nos. 4 and 5.

Case Title: Vallabhnagar Co-operative Housing Society Ltd. v. State of Maharashtra & Ors.

Bench: Justice Amit Borkar

Date of Judgment: 03.02.2026