Holding that the cooperative housing society (CHS) cannot remain silent for 11 years and then retrospectively impose a hefty penalty, the Bombay High Court (HC) has set aside a ₹15.45 lakh recovery certificate issued against two members for allegedly encroaching on common space by parking a bicycle in a staircase.
In an order last month, the bench of justice Sandeep V Marne said, "Bye-law 169(a) is incorporated in the new bye-law for discouraging the society members from unauthorisedly encroaching upon common areas of the Society. In the event of violation of bye-law 169(a), drastic measures of charging five times the monthly maintenance charges per month with retrospective effect for the period of encroachment have been incorporated. Therefore, when the Society decides to levy a penalty under bye-law 169(a), it must act with necessary alacrity so that the member is made aware of the fact that he/she would be required to pay a hefty penalty equal to five times the monthly maintenance charges, and he can take necessary corrective action."
"Bye-law 169(a) cannot be misused by the Society for retrospectively levying a penalty for 11 long years for the trivial act of parking a bicycle. What is done by Dhanlakshmi Cooperative Housing Society Ltd is an egregious act, which amounts to an arbitrary exercise of power. The district deputy registrar ought to have appreciated this position, and while setting aside the erroneous order passed by the deputy registrar, there was no warrant for remanding the proceedings for fresh enquiry, thereby subjecting the parties to another round of lengthy litigation," the HC said.
Justice Marne also observed that Dhanlakshmi CHS had not adopted the new model bye-laws containing the provision under which the penalty was sought to be recovered. The HC said there was no material before it showing that the old bye-laws empowered the CHS to impose such a penalty.
The court was dealing with a petition filed by Yogini Bhupendra Parikh and Sejal Bhautik Patel against the district deputy registrar of cooperative societies, the deputy registrar and Dhanlakshmi CHS from Mumbai.
The dispute arose from the society's allegation that two members had been parking a bicycle in the staircase area between the building's floors for about 11 years. The bicycle was stated to be worth ₹11,000. Against this, the society ultimately sought recovery of ₹15.45 lakh as a penalty.
The HC described the case as an unusual situation in which a cooperative society sought to recover ₹15.45 lakh in penal charges over the parking of a ₹11,000 bicycle in a staircase.
According to the judgment, Dhanlakshmi CHS issued its first show-cause notice to the petitioners on 13 August 2021, asking why a penalty should not be imposed for the alleged encroachment. A further notice was issued in October 2021, and the society raised a bill for ₹689,220 as a penalty for the period from April 2010 to March 2021.
The demand subsequently increased. After further notices and correspondence, the society filed a recovery application before the deputy registrar seeking recovery of ₹15.36 lakh. On 4 April 2025, the deputy registrar allowed the application and issued a recovery certificate for ₹15.45 lakh.
The petitioners challenged the recovery. The district deputy registrar, in revision, set aside the recovery certificate but remanded the matter to the deputy registrar for fresh adjudication, including verification of the accounts and interest calculation by an auditor.
It was this remand order that brought the matter before the HC.
A central issue before the court was whether Dhanlakshmi CHS had any legal authority to impose the penalty in the first place.
The district deputy registrar had specifically recorded that Dhanlakshmi CHS was still functioning under its old bye-laws and had not adopted the new model bye-laws. The HC noted that the provision relied upon by the authorities — bye-law 169(a) — formed part of the new model bye-laws.
Bye-law 169(a) provides for penalties where members encroach upon common areas such as staircases, landings, parking spaces, lifts and corridors. Under the provision, a member found to have encroached upon such an area may be required to pay an amount equal to five times the monthly maintenance charges for each month of the violation, including retrospectively for the period of the encroachment.
However, the court noted that Dhanlakshmi CHS had admittedly not adopted these new bye-laws.
The society's counsel argued that an old bye-law, 50(a), was substantially similar to bye-law 169(a) and therefore permitted recovery. The court, however, said that no copy of, or specific provision in the old bye-laws empowering the society to impose such a penalty had been placed before it.
Justice Marne held that since the deputy registrar's recovery order was based on bye-law 169(a), and the district deputy registrar himself had found that the new model bye-laws had not been adopted, the recovery order was legally unsustainable. There was consequently no need to send the matter back for another inquiry.
The HC went further and examined the penalty even on the assumption that the society had some authority under its bye-laws to impose a charge for unauthorised encroachment. The court found the retrospective demand for 11 years arbitrary.
It noted that there was nothing on record indicating that Dhanlakshmi CHS had objected to the bicycle being parked in the staircase in the preceding years. The first objection was raised only in August 2021, when the society sought an explanation for parking that had allegedly continued for 11 years.
The court noted that the society subsequently calculated the penalty for the entire past period and raised a demand of ₹689,220, which eventually became a recovery claim of more than ₹15 lakh with further additions.
Justice Marne said Dhanlakshmi CHS ought to have raised an objection when the alleged unauthorised parking first came to its notice. If the society had acted late, the penalty should have been imposed prospectively rather than being accumulated over 11 years, he added.
The court held that by failing to object contemporaneously, Dhanlakshmi CHS had effectively acquiesced in the parking and could not subsequently seek to recover a penalty for the entire 11-year period.
The court also took note of the scale of the demand. During the hearing, the court asked the petitioners about the value of the bicycle. They said it was worth ₹11,000. Against that, the society was seeking to recover ₹15.45 lakh.
The HC said housing societies must act reasonably and that managing committees cannot exercise their powers as though they were superior regulatory authorities over individual members. The court stressed that societies are constituted for collective management of buildings and their members, with managing committees responsible for day-to-day affairs and general bodies handling larger policy decisions.
The court made it clear that its observations were not intended to encourage members to occupy or encroach upon common areas. Instead, the judgment emphasised that a CHS must act promptly and reasonably when it detects such conduct.
The HC also criticised both the recovery order and the subsequent remand. The district deputy registrar had ordered a fresh inquiry primarily because there was a difference between the amount initially claimed in the recovery application and the amount reflected in the recovery certificate. The court found that this is not sufficient reason to prolong the proceedings, particularly when the underlying authority for imposing the penalty itself was absent.
Justice Marne said the authorities had failed to properly address the central issue concerning the society's authority to levy the penalty and had instead proceeded mechanically.
The court observed that bye-law 169(a) was intended to discourage unauthorised encroachment of common areas. As the provision allows a penalty equivalent to five times monthly maintenance charges, societies must act with 'necessary alacrity' so that members are made aware of the consequences and can take corrective action.
The provision, the court said, cannot be used to impose a heavy retrospective penalty after allowing an alleged encroachment to continue unchecked for 11 years.
The court ultimately brought the recovery proceedings to an end rather than sending them back for another round of adjudication.
The petitioners had deposited ₹386,433 while pursuing their revision under the Maharashtra Cooperative Societies Act. Since the recovery certificate had been set aside, the HC directed Dhanlakshmi CHS to refund the amount to the petitioners within four weeks.
The court set aside the direction requiring a fresh inquiry, confirmed the setting aside of the deputy registrar's 4 April 2025 order and directed Dhanlakshmi CHS to refund the ₹386,433 deposit.
The writ petition was accordingly allowed, with no order as to costs.
Importantly, the HC clarified that its ruling is confined to the particular facts before it. It did not hold that housing societies can never impose penalties for encroachment of common areas, nor did it declare that retrospective penalties are prohibited in every situation.
(Writ Petition No.11021 of 2026 Date: 25 August 2026)
