10 Sep 2010

No sale of open-air parking facilities: Supreme Court

Dealing with the issue as to “whether stand alone ‘garage’ or in other words ‘garage’ as an independent unit by itself is a ‘flat’”, the Supreme Court in a recent decision [Nahalchand Laloochand Pvt. Ltd. v. Panchali Co-operative Housing Society Ltd.] has declared that a ‘garage’ cannot be considered as flat even though a statute specifically defines it to that regard. The Supreme Court further declared that; 
  • an open-air parking space cannot be considered as a ‘garage’, which necessarily requires a roof and wall on three sides;
  • Stilt parking spaces would not cease to be part of common areas and facilities merely because the promoter has not described the same as such in the advertisement and agreement with the flat purchaser.
  • Under the provisions of Maharashtra law, a promoter has no right to sell open-parking facilities.  
The Court was dealing with the provisions of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 which defined the term flat as meaning “a separate and self-contained set of premises used or intended to be used for residence, or office, show-room or shop or godown or for carrying on any industry or business (and includes a garage), the premises forming part of a building and includes an apartment”. However despite the above definition, the Supreme Court declared that a stand-along garage does not become a flat. The Bench observed in this regard inter alia as under;
23. Before we analyze Section 2(a-1), if we ask what the term ‘flat’ means, apart from the statutory definition, the reply must be that though it has no uniform meaning but in its natural and ordinary meaning, ‘flat’ is a self contained set of premises structurally divided and separately owned for dwelling. Concise Oxford English Dictionary (10th edition, revised) explains `flat’ —a set of rooms comprising an individual place of residence within a larger building.
24. Webster Comprehensive Dictionary; International edition (Vol. 1) explains ‘flat’— 1. a set of rooms on one floor, for the occupancy of a family; apartment. 2. A house containing such flats.
25. In Stroud’s Judicial Dictionary (5th edition, Vol. 2), a reference has been made to the observations of Somervell L.J, in Murgatroyd v. Tresarden, 63 T.L.R. 62 and it is stated; the natural meaning of the word ‘flat’ is a separate self-contained dwelling.
26. In Words and Phrases, Permanent Edition, (West Publishing Company), Vol. 17, while dealing with the term `flat’ generally, it is stated : “The word ‘flat’ has no technical, legal meaning, so that a court can pronounce absolutely one way or the other. A building is a ‘flat’ or not, and, where the testimony is conflicting, the question is one of fact”.
27. Advanced Law Lexicon by P. Ramanatha Aiyar (3rd edition, 2005) explains the term ‘flat’, in the following way – `in the ordinary use of the term a flat is a self-contained set of rooms, structurally divided and separately owned or let from the rest of a building, which for the most part consists of other flats separated in like manner’.
28. Reverting back to the definition of the term ‘flat’ under Section 2(a-1), for a ‘flat’ within the meaning of this definition clause, the set of premises has to be a separate and self-contained that forms part of the building which is used or intended to be used for residence or office, showroom or shop or godown or for carrying on industry or business. Separateness of one premises from another premises physically and also in use or intended use for one of the uses specified in the definition clause containing the necessary facilities for self-contained accommodation is sine qua non for a unit being covered by the definition of ‘flat’ occurring in Section 2(a-1) which includes an ‘apartment’. In other words, it must be a separate unit conforming to the description capable of being used for one of these purposes—namely, residence, office, showroom, shop, godown or for industrial or business purposes. Alternative uses in Section 2(a-1) do expand the ordinary meaning of the term ‘flat’ but nevertheless such premises that form part of building must be separate and self contained. A set of premises is called self-contained if it has the following basic amenities available: (a) sanitary; (b) washing, bathing and (c) other conveniences (cooking etc.) for the use of its occupant/s although as provided in the explanation appended to Section 2(a-1) such provision may be common to two or more sets of premises. The nature of construction and user are important features of this definition clause. A unit or accommodation to fit in the definition of ‘flat’ must meet twin-test namely: (i) self contained test and (ii) user test. The other predominant characteristic is that it must form part of a building. Crucially, for the relevant premises to be ‘flat’: 
  1. It must be a separate and self contained premises;
  2. It must form part of building;
  3. It must be used or intended to be used for any of the uses namely—residence, office, showroom, shop, godown or for carrying on any industry or business.
29. In the discussion made above, we have not referred to the bracketed portion namely - ‘(and includes a garage)’ so far. What is the meaning and significance of this bracketed portion? On technical linguistic basis, the bracketed phrase can only attach to the word preceding it. That may not be happy construction nor such construction by reading bracketed portion ‘(and includes a garage)’ with the preceding word ‘business’ appropriately reflects the meaning of the phrase. The scope of the bracketed phrase has to be seen in the context of the definition given to the word ‘flat’ which is true indication of intent of the legislature. It was suggested by learned senior counsel and counsel for the promoters that the phrase ‘and includes a garage’ must be read with the ‘set of premises’ and not with the user. This does not appear to be a correct reading of the expression. We are not persuaded to accept such construction. We think that statutory definition of ‘flat’ must be construed keeping in view the intent of the legislature and the context of the statute and, seen thus, the phrase, ‘and includes a garage’ in the bracket does not bring in ‘garage’ by itself within the meaning of word ‘flat’. If stand alone `garage’ (or a garage by itself) were intended by the legislature to be a ‘flat’ within the meaning of Section 2(a-1), that could have been conveniently conveyed by use of the expression ‘or garage’ after the word ‘business’ in the same breath as preceding uses. The bracketed phrase is rather indicative of the legislative intention to include a ‘garage’ as appurtenant or attachment to a flat which satisfies the ingredients of Section 2(a-1). To this extent Mr. Pravin K. Samdani is right in his submission. It is clear to us that stand alone ‘garage’ or in other words ‘garage’ as an independent unit by itself is not a ‘flat’ within the meaning of Section 2(a-1) and we answer question (i) in the negative. The judgment of Bombay High Court in Dr. K.R. Agarwal Vs. Balkrishna3 to the extent the expression ‘or garage’ has been read after the word ‘godown’ in para 5 (clause 2) of the report does not state the correct legal position in what we have already said above. 
Regarding the amenability of an open-air parking facility as a garage, the Bench observed as under;
35. We do not perceive any force in the argument that open parking space tantamounts to a ‘garage’ within the meaning of Section 2(a-1) read with condition No. 2 Form V of 1964 Rules. Can a person buying a flat for residence or one of the uses mentioned in Section 2(a-1) really think that open to the sky or open space for parking motor vehicles is a garage? We do not think so. The word ‘garage’ may not have uniform connotation but definitely every space for parking motor vehicles is not a garage. A roofless erection could not be described a garage. What is contemplated by a ‘garage’ in Section 2(a-1) is a place having a roof and walls on three sides. It does not include an unenclosed or uncovered parking space. It is true that in condition No. 2, Form V the words ‘covered/open garage’ have been used but, in our view, the word ‘open’ used in the Model Form V cannot override the true meaning of term ‘garage’ in Section 2(a-1). As a matter of fact, none of the provisions of MOFA regards ‘open garage’ connoting ‘flat’ or an appurtenant/attachment to a flat. We do not think undue importance should be given to word ‘open’ which has loosely been used in condition No. 2, Form V. The true meaning of the term ‘garage’ in Section 2(a-1), we think, is not affected by a Model Form V appended to the 1964 Rules. 
36. The question then is as to whether the stilted portion or stilt area of a building is a garage under MOFA. A stilt area is a space above the ground and below the first floor having columns that support the first floor and the building. It may be usable as a parking space but we do not think that for the purposes of MOFA, such portion could be treated as garage. It was argued that the test accepted by Atkinson, J. in Barnett & Block–that a garage is a place where one can get reasonable protection and shelter for a car—is satisfied by stilt car parking space and such space is a garage. We are unable to agree. The test accepted by Atkinson, J. in Barnett and Block1 also does not support this argument. Even as per that test a place having roof but offering no shelter or protection on two sides cannot be a garage. It is worth repeating what Atkinson,J. said, `….I am inclined to think that the ordinary man in the street does regard a garage as connoting some sort of building; how far he would go I do not know. I do not know whether he would think that there should be a wall all round it, or whether it would be sufficient if there were three sides walled in and a roof. I have one in mind where there is row of sheds without any protection in front, which are commonly spoken of as “garages”.’ Atkinson, J. applied the test of `reasonable protection and shelter for car’ as was suggested by the counsel for the insurer while construing the term `garage’ in a policy of insurance. For the purposes of MOFA, and particularly Section 2(a-1), the term ‘garage’ must be considered as would be understood by a flat purchaser and such person would contemplate garage which has a roof and wall on three sides. 
On the issue of the “rights of the promoter vis-à-vis society (of flat purchasers) in respect of open parking space/s / stilt parking space/s”, the Supreme Court decided as under;
In our opinion, MOFA does restrict the rights of the promoter in the block or building constructed for flats or to be constructed for flats to which that Act applies. The promoter has no right to sell any portion of such building which is not ‘flat’ within the meaning of Section 2(a-1) and the entire land and building has to be conveyed to the organisation; the only right remains with the promoter is to sell unsold flats. It is, thus, clear that the promoter has no right to sell ‘stilt parking spaces’ as these are neither ‘flat’ nor appurtenant or attachment to a ‘flat’.

4 comments:

Anonymous said...

Hi,

Is this ruling applicable to Flats sold in Mumbai or all over India?

Tarun Jain said...

Given the fact that the decision has been rendered in the context of the laws applicable in Maharashtra, the answer seems to be that the decision is only for Maharashtra.
However one would have to examine the relevant laws of a particular state before coming to a definite answer.

psn atmaram said...

The ruling is not a logical one.When the model bylaws recognises sale and purchase of the parking place to a member how the court did not take cognisance of these bylaws

Tarun Jain said...

Dear Atmaram,
I would respond to your comment in this manner.
The court takes into account only the laws which implies act, rules and regulations.
the model bye laws are none of these and only for the purpose of regulation of societies. they do not attain the status of law only on such count.
you are right that they could have been looked into but they cannot overturn what the law specifically says, as how court has taken not of the provisions, if you have a look at the decision.