Know thy rights under the Maharashtra Ownership Flats Act 1963.

Maharashtra Ownership Flat Act, 1963 (MOFA)

As there is an acute shortage of housing, this act was enacted to protect one and all from sundry abuses, malpractices and difficulties relating to the promotion of, the construction of, and the sale and management and transfer of flats taken on ownership basis.

MOFA has empowered the purchaser investing money in purchasing flats with powerful sections such as section 3, section 4, section 5, section 7, section 10, section 11, and section 13. This Act provides that where if promoter/builder commits breach, on conviction promoter/builder could be imprisoned and disqualified from undertaking construction of flats for a period of five years from the date of such conviction.

A brief introduction to relevant sections of MOFA is as follows:

Section 3 – General Liabilities of promoter

This section provides for general responsibilities of the promoter as follows:

·         A promoter is duty bound to disclose the title of the land on which flats are constructed or to be constructed and the same has to be duly certified by an Attorney-at-Law or Advocate of not less than three years standing

·         Make full & true disclosure of all encumbrances, including any right, title, interest or claim of any party on the proposed land where flats are or will be constructed.

·         Disclose the design and the materials to be used in the construction of the building.

·         Disclose the extent of carpet area and sell flat on the basis of carpet area only.

·         Disclose the nature of fixtures, fittings and amenities provided or to be provided.

·         Specify in writing the date by which possession of the flat is to be handed over.

Section 4 - Promoter before accepting advance payment or deposit to enter into agreement and agreement to be registered

This section provides for registration of the agreement. A promoter/builder before accepting payment, which shall not be more than 20 percent of the entire sale price, is duty bound to enter into agreement and have it registered as per Registration Act. Only if the agreement is registered as per section 4 of MOFA can the Flat purchaser claim relief under MOFA. Flat purchaser’s, often over look registration aspect, and keep it pending till the very end, which could be detrimental in case the promoter/builder defaults.

The Bombay High Court’s decision in the case of Ramniklal Kotak v. Varsha Builders, AIR 1992 Bom 62 is relevant in this respect:

“To prevent bogus sales being effected by a Promoter and to put a check to malpractices indulged in by the Promoters in regard to sales and transfer of flats, the Legislature has provided that the Promoter shall :

(a)not accept any sum or money as advance payment or deposit more than 20% of the sale price;

(b)enter into a written agreement with each individual flat owner.” 

The Bombay High Court in the case of Association of Commerce House Block Owners v. Vishnidas Samaldas (1981) 83 Bom. L.R. 339 held that the provisions of s. 4 are mandatory and not directory in nature.

Section 4A: Effect of non-registration of agreement required to be registered under section 4

Section 4A states that even if any agreement is not registered u/s. 4 of the MOFA, it is admissible as evidence in a suit for specific performance or as evidence for part performance u/s. 53A of the Transfer of Property Act. This section was inserted to overrule the Bombay High Court’s decision in the case of Association of Commerce House Block Owners v. Vishnidas Samaldas that non-registered agreements are wholly invalid and void-ab-initio and create no rights between the parties.

Section 5 - Promoter to maintain separate account of sums taken as advance or deposit and to be trustee therefor and disburse them for purposes for which given

This section provides that the builder/promoter has to maintain separate account of sums taken as advance or deposit, and to be a trustee and disburse the same for the purpose for which they are given. Meaning the advance collected from the flat purchasers need to be utilized only for constructing the particular flats as mention at the time of registering the agreement and not otherwise.  The one time maintenance collected by the builder also fall attract this restriction of investment in a separate bank account. The said amout has to be deposited in a separate bank account and the builder has to meet the maintenance expenses from this account till the society is formed and the balance amount is transferred to the Managing Committee of the Society so formed.

Section 6 - Responsibility for payment of outgoings till property is transferred

This section provides that the promoter shall, while he is in possession, and where he collects from persons who have taken over flats or are to take over flats sums for the payment of outgoings even hereafter, pay all outgoings (including ground rent, municipal or other local taxes, taxes on income, water charges, electricity charges, revenue assessment, interest on any mortgage or other encumbrances, if any), until he transfers the property to the persons taking over the flats, or to the organisation of any such persons Where any promoter fails to pay all or any of the outgoings collected by him from the persons who have taken over flats or are to lake over flats, before transferring the property to the persons taking over the flats or to the organisation of any such persons, the promoter shall continue to be liable, even after the transfer of the property, to pay such outgoings and penal charges (if any) to the authority or person to whom they are payable and to be responsible for any legal proceedings which may be taken therefor by such authority or person.

Section 7: After plans and specifications are disclosed no alterations or additions without consent of persons who have agreed to take flats; and defects noticed within three years to be rectified

This section provides that after plans and specifications are disclosed, the promoter/builder cannot make any alterations or additions without written consent of persons who have agreed to take the flats. Furthermore after giving possession the promoter is liable to rectify the defects in construction as well as materials. It is usually assumed that once the possession is given or a society is formed the promoter/builder’s liability to rectify defects ceases. This is not the case, as the promoter/builder is liable to rectify defects three years from the date of possession under section 7 of MOFA.

Section 10 - Promoter to take steps for formation of co-operative society or company

This section provides that a promoter/builder is duty bound to take steps in formation of the co-operative society as soon as a minimum number of persons required to form a co-operative society come forward. There is a common misconception that, a promoter/builder will not hand over the control of the building/buildings to the society till all the flats are sold. Section 10 of MOFA clearly states that promoter/builder is duty bound in taking steps to form the society even if certain flats remain unsold. The time frame given is of four months, thereafter it would be termed as default under section 13 of MOFA, which on conviction could lead to imprisonment.

Section 11 - Promoter to convey title, etc., and execute documents, according to agreement

This section provides that a builder/promoter is duty bound to complete his/her title and convey the same to the society by way of conveyance deed. The time frame given is four months after formation of society.

After the period of four months if promoter/builder fails to convey the property to flat purchasers, under Rule 9 of MOFA, promoter/builder has been committing breach of section 11 of MOFA, and as long as he/she continues to do so, it would amount to continued offence and, therefore the provisions of section 472 Cr. Pc. (Criminal Code of Procedure) will be attracted. S. Irani (Sorkhab) v/s Dinshaw & Dinshaw & others 1999 (Supp) Bom C.R. 320; 1999 (O) All. M.R. (Cri) 57; 1998 (O) Bom.L.R. 496

Section 13 - Offences by promoters

This section provides for criminal prosecution of the builder.

(1) Any promoter who, without reasonable excuse, fails to comply with or contravenes, the provisions of section 3, 4, 5 save as provided in sub-section (2) of this section, 10 or 11 shall, on conviction, be punished with imprisonment for a term which may extend to three years or with fine, or with both.

(2) Any promoter who commits criminal breach of trust of any amount advanced or deposited with him for the purposes mentioned in section 5 shall, on conviction, be punished with imprisonment for a term which may extend to five years, or with fine, or with both.

(3) Any promoter who, without reasonable excuse, fails to comply with or, contravenes, any other provision of this Act or of any rule made thereunder, shall, if no other penalty is expressly provided for the offence, be punished, on conviction, with imprisonment for a term which shall not be less than six months but which may extend to one year or with fine which shall not be less than, ten thousand rupees but which may extend to fifty thousand rupees or with both.

Indian Penal Code:

Besides, section 13, the victims of the acts of omission and commission by the builder are also free to invoke the following section of Indian Penal Code:

§  Misappropriation of funds – section 403 of IPC 

§  Criminal breach of trust – section 405/406 of IPC

§  Cheating – section 415, 417, 418 and 420 of IPC

§  Criminal conspiracy – section 120A/120B of IPC

Legislation has given the tool to defend yourself against the fraudsters. It is for you to step forward and initiate appropriate criminal proceedings. Unless the victim does that, builders would not fall in line. Or else, suffer in silence as the Supreme Court has said – “Law is not for the protection of those who sleep over their rights”.