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Arbitration & Commercial LawSupreme Court

The Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd. vs Sri Aloke Kumar & Anr.

Civil Appeal · Not availableDecided 18 Oct 2022

Civil Appeal No. 7261 of 2022

Uday Umesh Lalit · S. Ravindra Bhat · J.B. Pardiwala · Dinesh Maheshwari

Background

The Appellant Society, a cooperative housing society in Kolkata, owned a nearly 100-year-old, dilapidated administrative building and decided to redevelop it through a joint venture with a private developer, Hi-Rise Apartment Makers Pvt. Ltd., after its General Body approved the plan at Annual General Meetings in 2002. Respondent No. 1, a member of the Society, challenged this through a dispute case, and a 2004 arbitral award directed the Society to hold a Special General Meeting (with full transparency) before proceeding and to refrain from demolition meanwhile; the Society complied by terminating the original work order with Hi-Rise. When the Society's General Body later (in 2007) again resolved to develop the building through Hi-Rise on revised terms — a resolution never itself challenged — Respondent No. 1 sought to execute the original 2004 arbitral award to block this, and the Calcutta High Court (in its supervisory jurisdiction) upheld the executability of that award against the Society, holding that the Society had circumvented the award by simply renewing its old arrangement with Hi-Rise in a "superficially changed format" for commercial profit contrary to cooperative principles.

Decision Breakdown

The Supreme Court held that once a cooperative society's General Body — the supreme decision-making authority — passes a resolution by overwhelming majority, an individual dissenting member has no independent right to override or block it, since a member "loses his individuality" within the society and can act only through it (citing Daman Singh v. State of Punjab and State of U.P. v. Chheoki Employees Co-operative Society). The Court noted that the Society's fresh 2007 resolution to redevelop through Hi-Rise, and the Joint Registrar's 2011 permission for construction based on it, had never themselves been challenged by Respondent No. 1, so there was no legal basis for him to instead resurrect and execute the earlier 2004 award to stall the project. The Court held that redevelopment of a crumbling, unsafe building is a necessity, not merely "business," that courts should not sit in appeal over the General Body's commercial wisdom absent fraud or statutory violation, and that a single objecting member should not be allowed to hold an entire society "at ransom" for nearly two decades. The High Court's order upholding the execution case was set aside, and the appeal was allowed, permitting the Society to proceed with redevelopment; the Court declined to impose costs on Respondent No. 1 despite considering it, in the hope he would accept the outcome.

Lesson Learnt

A member of a cooperative society has no standalone right to override decisions validly taken by the society's General Body through its democratic majority process; unless a specific resolution is itself under legal challenge, a dissenting member cannot indefinitely block collective action (such as urgently needed redevelopment) by relying on an older, superseded arbitral order.

Official Source (sci.gov.in)Download Full PDF
The Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd. vs Sri Aloke Kumar & Anr. – Legal Case Shots | LegalAware