Bombay High Court Rules That Unutilised FSI Is No Ground to Curtail Deemed Conveyance of Entire Leased Land Under MOFA

Background and Nature of the Dispute

In New Sonal Industries Premises Ltd. Vs District Deputy Registrar (2), the Bombay High Court was called upon to resolve a significant question arising under the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA): where a promoter had executed agreements to assign leasehold rights over an entire plot of land but had utilised only a fraction of the available Floor Space Index (FSI) during construction, could the Competent Authority restrict the area covered by a deemed conveyance certificate to the extent proportionate to the FSI actually consumed?

The petitioner was a co-operative society comprising 30 industrial units spread across three buildings, all constructed on leasehold land by the promoter, M/s. Nandu Builders. The promoter had originally secured a 98-year lease over land admeasuring 8647.80 sq. mtrs. under an Indenture dated 22 September 1972 from the lessor, Vrajlal Damodar Mehta. The buildings were completed pursuant to a Commencement Certificate dated 29 June 1973, and an Occupancy Certificate was issued on 11 June 1974. The petitioner-society itself had been registered on 19 January 1976 under Section 10 of MOFA.

More than four decades later, the society applied to the Competent Authority for unilateral deemed conveyance of the entire leased land under Section 11 of MOFA. However, by its order dated 24 August 2023, the Competent Authority restricted the conveyance to 3832.30 sq. mtrs. — the area corresponding to the FSI of 0.57 that had been utilised for construction — while excluding the recreational ground, internal roads, and the portion corresponding to unutilised FSI. The society challenged this limitation before the High Court, seeking conveyance of the entire parcel.

Key Facts and Contractual Arrangements

The layout of the development involved three buildings designated as Building A (12 industrial units), Building B (11 industrial units), and Building C (7 industrial units), aggregating to 30 industrial units on a total land area of 8608.00 sq. mtrs. taken up for development. Within this area:

  • 1330.84 sq. mtrs. was reserved as a Recreational Ground (RG)
  • 484.40 sq. mtrs. was occupied by internal roads for access to the three buildings
  • The FSI of 0.57 was consumed over the balance area of 6792.76 sq. mtrs., resulting in a total constructed area of 3832.30 sq. mtrs.

The agreements for sale executed with individual unit purchasers under Section 4 of MOFA — including the Agreement dated 24 March 1975 placed on record — contained express covenants requiring the promoter to assign the lease over the entire land described in the First Schedule to the agreement. The First Schedule specifically described the land as admeasuring 8647.80 sq. mtrs. (equivalent to 10,295 sq. yds.) being part of Plot No. 1, CTS No. 186(A), Village Tungawa.

Clause 18 of the agreement further provided that upon receipt of full payment from all unit holders, the builders would execute the necessary assignment of the land more particularly described in the First Schedule in favour of the co-operative society or limited company to be formed.

Promoter's Contentions

The promoter, opposing the petition before the High Court, advanced the following arguments:

  • The Competent Authority had correctly relied on the Architect's Certificate submitted by the society itself, which disclosed that FSI of only 0.57 had been utilised, and had appropriately granted conveyance of 3832.30 sq. mtrs. on that basis.
  • Clause 14 of the agreement expressly reserved to the promoter the liberty to deal with the remaining portion of the land and the units to be constructed thereon, which demonstrated that the balance land after construction of the 30 units was carved out of the agreement.
  • The promoter was not seeking to exploit additional FSI generated after construction but was merely asserting a right over the unutilised FSI of 0.43 that existed at the time the original buildings were constructed.
  • The impugned order was consistent with the Government Resolution dated 22 June 2018 and was supported by two earlier decisions of the Bombay High Court: Solitaire Co-operative Housing Society Ltd. Vs Vertex Newton Projects Pvt. Ltd. & Anr. and Marathon Era Co-operative Housing Society Ltd. Vs Competent Authority & District Deputy Registrar, Co-operative Societies & Ors.

The High Court's Analysis

Section 11 of MOFA — Conveyance Must Follow the Agreement

The Court began its analysis with Section 11 of MOFA, which mandates that a promoter shall convey his right, title, and interest in the land and buildings "in accordance with the agreement executed under section 4." The statutory text of Section 11(1) of MOFA reads as follows: