Court underscores doctrine of indoor management, denies injunction due to absence of prima facie case, non-return of sale proceeds, and delay in challenging sale transactions
In a significant judgment dated October 3, 2025, the Bombay High Court, presided by Justice Sandeep V. Marne, delivered a detailed verdict on the legal status of Transferable Development Rights (TDR) and the validity of their sale by a co-operative housing society. The case arose from a suit filed by Green Garden Apartments Co-operative Housing Society Limited against its members and various developers, challenging the sale and utilization of TDR obtained as compensation for land acquired by the Municipal Corporation of Greater Mumbai (MCGM).
The plaintiff society alleged unauthorized sale of TDR by certain managing committee members and consultants without proper authority and claimed the sale was effected through unregistered agreements and at grossly inadequate consideration, resulting in losses exceeding Rs. 51 crores. They sought a temporary injunction restraining the defendants from utilizing the TDR and demanded refund of amounts paid to consultants.
The Court analyzed extensively the nature of TDR, its statutory framework under the Maharashtra Regional and Town Planning Act, 1966, the Development Control and Promotion Regulations (DCPR) 2034, and related provisions of the Maharashtra Co-operative Societies Act, 1960. It differentiated between the "transfer of Development Rights Certificate (DRC)" which requires a registered agreement, and the "utilization of TDR," which does not mandate registration under Section 17 of the Indian Registration Act, 1908.
Rejecting the plaintiff’s contention that TDR is immovable property necessitating compulsory registration, the Court relied on a binding Division Bench precedent in B. Jeejeebhoy Vakharia & Associates v. Sahara India Commercial Corporation Limited, which clarified that TDR, being detachable and transferable separately from land, constitutes movable property. The Court also noted that stamp authorities treat TDR as movable property, levying stamp duty accordingly without insisting on registration.
The judgment also emphasized the doctrine of indoor management, holding that bona fide purchasers of TDR for value without notice of irregularities are protected and not bound to inquire into the internal management or procedural irregularities of the co-operative society. Allegations of fraud and lack of authority are matters for internal remedies under the Maharashtra Co-operative Societies Act and do not prima facie invalidate title of third-party purchasers.
On the issue of inadequate consideration, the Court observed that market forces, location of utilization, and other factors influence TDR pricing and that mere inadequacy of price is not a ground for setting aside a valid sale. Importantly, the plaintiff society’s failure to offer to return the sale proceeds disentitles it from seeking restoration of TDR or injunctive relief, as per Section 65 of the Contract Act and the principle of unjust enrichment.
The Court also took note of the significant delay of nearly two years by the society in filing the suit after the sale and utilization of TDR commenced, during which the defendants had proceeded with construction activities, some having obtained occupancy certificates. This delay militated strongly against the grant of an injunction, as it would cause irreparable harm to innocent third parties and flat purchasers.
Applying the trinity test for temporary injunction-prima facie case, irreparable harm, and balance of convenience-the Court found that the plaintiff failed to satisfy all three conditions. Consequently, the Court rejected the interim application for injunction sought by the society.
This judgment clarifies the legal position that TDRs are movable property not requiring compulsory registration under the Registration Act and that procedural irregularities or internal disputes within a co-operative society do not invalidate bona fide sales to third parties. It also underscores the need for societies challenging such sales to act promptly and to restitute sale consideration to avoid unjust enrichment.
Bottom Line:
Transferable Development Rights (TDR) are movable property and do not require compulsory registration under Section 17 of the Registration Act.
Statutory provision(s): Maharashtra Co-operative Societies Act, 1960 Sections 81(3)(b), 83, 88; Indian Registration Act, 1908 Section 17; Maharashtra Regional and Town Planning Act, 1966 Section 126; Development Control and Promotion Regulations (DCPR), 2034 Regulation 32; Contract Act, 1872 Section 65
