A bicycle worth Rs 11,000 parked in the staircase of a Mumbai co-operative housing society has triggered a significant Bombay High Court ruling on the limits of societies’ powers to penalise members for alleged common-area encroachment.
The dispute saw the society demand Rs 15,45,730 for alleged encroachment over nearly 11 years. The court set aside the recovery proceedings and directed the society to refund Rs 3,86,433 deposited by the petitioners. Justice Sandeep V Marne, in his August 25, 2026 judgment, held the action arbitrary in the peculiar facts of the case and cautioned committees against unreasonable or disproportionate exercise of their powers.
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The dispute
The petition was filed by Yogini Bhupendra Parikh and Sejal Bhautik Patel, members of Dhanlakshmi Co-operative Housing Society Ltd., Matunga West, concerning Flat No. 9, Building No. 1. The society alleged that they had encroached on common space by parking a cycle between floors for nearly 11 years. A show-cause notice was issued on August 13, 2021, followed by a demand of Rs 6,89,220. Recovery Application No. 8 of 2024 ultimately led to a Rs 15,45,730 recovery certificate on April 4, 2025. The petitioners challenged the proceedings.
Legal basis questioned
A key issue before Justice Marne was whether the society had the legal authority under its registered bye-laws to impose the penalty. It relied on Bye-law 169(a) of the new Model Bye-laws, prescribing a penalty equal to five times the monthly maintenance charges for each month of encroachment. However, the District Deputy Registrar found that Dhanlakshmi Society had not adopted the new Model Bye-laws. The High Court held that the provision could not apply.
11 years of silence
The court also examined how the penalty was imposed. Justice Marne noted that nothing on record showed that the society had objected to the bicycle being parked in the staircase between 2011 and 2020. The first objection came in August 2021, followed by a retrospective penalty demand. The court found this approach unacceptable in the peculiar circumstances. If an act is considered encroachment, society should object when it is noticed and require its removal.
Disproportionate demand
The disparity between the bicycle’s value and the penalty demanded also featured prominently. The court strongly criticised the demand and cautioned that managing committees cannot act as “super-regulatory authorities” over fellow members by raising disproportionate demands. However, it clarified that its observations do not encourage encroachments.
‘Not to generate revenue’
According to According to Advocate Shreeprasad Parab, expert director, Maharashtra State Cooperative Housing and Apartment Federation Ltd, a key feature of the proposed bye-laws is their enforcement philosophy. The provisions prioritise restoration of property, removal of unauthorised work, structural safety and legal compliance, expressly stating that the objective is “not to generate revenue through penalties.” Parab said, read with the Bombay High Court ruling, the framework establishes an important principle for housing society administration,
Court clarification
The High Court did not lay down an absolute bar on retrospective penalties. Justice Marne clarified that the decision was based on the unique facts and circumstances of the case and should not be read as holding that housing societies can never penalise encroachments or that retrospective levies are categorically prohibited. The Court’s concern was how the power was exercised, particularly the absence of timely objection, the disputed legal basis for the penalty, and the enormous amount sought to be recovered.
Notice before penalty
Parab pointed out that the proposed bye-laws prescribe a more structured procedure before a penalty is imposed. The managing committee is expected to inspect and record the violation, obtain professional reports wherever necessary, issue a detailed notice requiring discontinuance or restoration, and provide the member a reasonable opportunity before imposing a penalty. This approach places the emphasis on correcting the violation rather than allowing it to continue while the financial penalty accumulates.
Recovery claims scrutinised
The judgment also has implications for proceedings before co-operative authorities. The court held that the recovery process could not simply convert the society’s claim into a certificate without examining its legal basis. Once it was established that the society had not adopted the bye-law supporting the penalty, there was no justification for remanding the matter for another round of adjudication. The court, therefore, brought the recovery proceedings to an end.
* This article was originally published here
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