Bombay High Court: Separate Co-operative Housing Society Cannot Be Registered Without Following Section 18 & Rule 17 Procedure

Bombay High Court Reaffirms Mandatory Procedure for Bifurcation of Co-operative Housing Societies under the Maharashtra Co-operative Societies Act, 1960

Published by: CsLawship.in

Introduction

In a landmark judgment that will have far-reaching implications for thousands of co-operative housing societies across Maharashtra, the Bombay High Court has held that a separate co-operative housing society cannot be registered unless the mandatory statutory procedure prescribed under Section 18 of the Maharashtra Co-operative Societies Act, 1960, read with Rule 17 of the Maharashtra Co-operative Societies Rules, 1961, is strictly followed.

The Court emphasized that the Registrar cannot bypass the statutory safeguards merely because a group of members seeks separation or because a General Body Resolution under Section 17 may not be possible.

The judgment is likely to become one of the leading precedents governing bifurcation, division and registration of separate housing societies in Maharashtra.

Case Details

Case Title

Yogesh Jayantilal Shah & 169 Others
vs.
State of Maharashtra & Others

Along with

ICC One and Two Co-operative Housing Society Ltd.
vs.
State of Maharashtra & Others

Court: Bombay High Court
Bench: Justice Amit Borkar
Writ Petition Nos.: 2962 of 2026 & 3137 of 2026
Reserved on: 10 March 2026
Pronounced on: 17 March 2026
Neutral Citation: 2026:BHC-AS:12843

Background of the Dispute

The dispute arose from an existing co-operative housing society consisting of two residential towers.

Tower One had approximately 190 members
Tower Two had approximately 340 members

A group of members from Tower One proposed formation of a separate society and submitted an application seeking division of the existing society under Section 18 of the Maharashtra Co-operative Societies Act.

The Assistant Registrar accepted the proposal, ordered bifurcation, and even issued a registration certificate to the proposed society while appellate proceedings were pending. Members opposing the bifurcation challenged the action before the Divisional Joint Registrar, the Minister in revision, and ultimately before the Bombay High Court.

Principal Legal Issues Before the Court

The High Court examined several significant legal questions:

Can the Registrar divide a society merely because one group desires separation?
Is preparation of a draft scheme mandatory?
Can consultation with the Federal Society be done after issuing a draft order?
Is registration of a new society permissible before completion of statutory proceedings?
Whether denial of oral hearing violates principles of natural justice?
Whether numerical imbalance between towers is sufficient ground for bifurcation?

Findings of the Bombay High Court

1. Mandatory Procedure Under Section 18 Cannot Be Ignored

The Court held that Section 18 read with Rule 17 prescribes a complete statutory procedure which is mandatory.

The Registrar must:

Prepare a Draft Scheme
Consult the Federal Society
Consider suggestions
Issue Draft Order
Invite objections
Consider objections
Pass Final Order

Skipping any mandatory stage renders the proceedings legally unsustainable.

2. Draft Scheme Is the Foundation of Entire Proceedings

The Court observed that the Draft Scheme is not a mere formality.

It must clearly explain:

proposed method of division
allocation of assets
allocation of liabilities
future management
rights of members
functioning after bifurcation

Only after preparation of this Draft Scheme can meaningful consultation with the Federal Society take place.

3. Consultation with Federal Society Must Precede Draft Order

One of the most important findings is that consultation with the Federal Society cannot be an afterthought.

The Court found that:

Draft Order was issued on 20 December 2024
Federal Society was consulted only on 20 January 2025

This was contrary to Rule 17.

Since consultation happened after issuance of Draft Order, the statutory procedure stood violated.

4. Registrar Cannot Exercise Section 18 Merely Because Members Cannot Pass Resolution

The Assistant Registrar justified exercise of suo motu powers by observing that members were unlikely to pass a resolution under Section 17.

The High Court rejected this reasoning.

The Court held that:

Section 18 cannot be invoked simply because members disagree or because passing a resolution is difficult.

The Registrar must independently establish that bifurcation is genuinely necessary for:

better administration
collective welfare
efficient management
interests of all members

The power cannot be exercised merely to satisfy one faction of members.

5. Numerical Majority Is Not a Ground for Division

One argument advanced was that Tower Two had more members than Tower One.

Therefore, members of Tower One may lose representation in future elections.

The Court rejected this argument.

It held that:

mere numerical superiority does not establish prejudice
no actual instance of oppression was shown
even the existing Managing Committee had majority representation from Tower One

Accordingly, apprehension of future domination is merely speculative.

6. Natural Justice Is Mandatory

An important aspect of the judgment concerns hearing before the Revisional Authority.

The Minister decided the revision without granting oral hearing despite:

application requesting hearing
written submissions
advocates reaching Mantralaya

The High Court held that:

Written submissions cannot substitute oral hearing where the statute specifically contemplates hearing.

Violation of Section 154 and principles of natural justice was sufficient by itself to quash the revisional order.

7. One-Sided Enquiry Cannot Become Basis of Bifurcation

The inspection report relied upon by the Assistant Registrar was prepared after interacting only with:

Chief Promoter
two office staff

No meaningful interaction took place with opposing members.

The Court held that such an enquiry cannot form a reliable basis for dividing an existing society.

Supreme Court Judgment Relied Upon

The High Court extensively relied upon:

Hemant Vimalnath Narichania v. Anand Darshan Co-operative Housing Society Ltd. (2016) 6 SCC 142

The Supreme Court had already clarified that:

Draft Scheme is mandatory.
Consultation with Federal Society is mandatory.
Members must be invited to submit objections.
Registrar must consider objections before passing final order.

The Bombay High Court reaffirmed these principles and held that they were violated in the present case.

Final Directions of the Court

The Bombay High Court:

Partly allowed both writ petitions.
Quashed the revisional order dated 16 February 2026.
Set aside the order directing division of the society.
Cancelled the registration certificate granted to the proposed society.
Restored the appellate order passed by the Divisional Joint Registrar.
Clarified that fresh proceedings, if initiated, must strictly comply with Section 18 and Rule 17 after granting due hearing to all concerned parties.

Practical Impact of This Judgment

This judgment serves as an important precedent for:

Multi-wing housing societies
Multi-building co-operative societies
Township projects
Redevelopment projects
Large residential complexes
Mixed-use co-operative societies

Registrars across Maharashtra will now be required to ensure strict compliance with every mandatory procedural safeguard before permitting division of an existing society.

Key Legal Principles Emerging from the Judgment

A new co-operative housing society cannot be registered without first complying with Section 18 and Rule 17.
Preparation of a Draft Scheme is mandatory.
Consultation with the Federal Society must precede the Draft Order.
Registrar must objectively consider objections from all stakeholders.
Section 18 cannot be invoked merely because members are unable to pass a resolution under Section 17.
Numerical imbalance between buildings does not, by itself, justify bifurcation.
Registration during pending appellate proceedings is procedurally vulnerable.
Denial of an effective hearing violates Section 154 and the principles of natural justice.

Conclusion

The decision of the Bombay High Court reinforces that the statutory framework governing co-operative housing societies is intended to protect the collective interests of all members rather than facilitate separation at the request of a particular group. Authorities exercising powers under Section 18 must adhere strictly to the mandatory sequence of preparing a draft scheme, consulting the Federal Society, inviting and considering objections, and providing a fair hearing before any order of bifurcation is made. By setting aside the registration of the proposed society and restoring the appellate order, the Court has strengthened procedural safeguards and reaffirmed that transparency, due process, and natural justice are indispensable in matters affecting the structure and governance of co-operative housing societies in Maharashtra.

Disclaimer: This article is intended for educational and informational purposes only. It is based on the uploaded document and the relevant provisions of the Maharashtra Co-operative Societies (Amendment) Act, 2019. Readers should refer to the latest provisions of the MCS Act, Rules, Government Notifications, and applicable Bylaws, or seek professional legal advice before acting on any matter discussed herein.