Litigation Update | Bombay Hc | Prospective Fsi Cannot Delay Deemed Conveyance

Recently, the Bombay High Court in the case of Ariisto Realtors Private Limited v. District Deputy Registrar, Co-operative Societies, reaffirmed the position that deemed conveyance cannot be withheld indefinitely by the builder, to exploit additional FSI made available by a change in the FSI Regime.

FACTS:

• The Petitioner, Aristo Realtor Private Limited (“Developer”) was granted the right to construct a building, "Ariisto Cloud”, under a Development Agreement dated 3 March 2010. Another building had been constructed on the same plot by a different developer, Kum Kum Apartments Co-Operative Housing Society Limited (“Kum Kum CHSL”).
   
• Pursuant to disputes between the Developer, landowners and Kum Kum CHSL, a Tripartite Deed of Irrevocable Perpetual Lease dated 9 September 2011, was entered into by which all FSI over and above 2674.13 square meters, was to be utilised solely by the Developer. Though the future additional FSI and TDR was to exclusively belong to the landowners, the Developer was given the right to utilise the same by paying additional consideration of Rs.51,000/- per square meter to the landowners.
   
• The Developer claimed that additional FSI of 841.16 square meters was made available in terms of Development Control and Promotion Regulations, 2034 (“DCPR, 2034”) on 8 May 2018 and filed an application dated 23 October 2024 with the Municipal Corporation for utilisation of additional FSI.
   
• Meanwhile, the flat purchasers of Ariisto Cloud formed a Society in June 2016 and demanded conveyance of the land vide a letter dated 16 August 2024. Upon the Petitioner’s failure to convey the land om their favour, the Society filed a deemed conveyance application. The Society's first deemed-conveyance application (No. 179 of 2024) was rejected as premature by the Competent Authority on 10 March 2025, on the following grounds and the Society was given the liberty to reapply:
  • The construction of the building was incomplete;
  • The Petitioner was yet to consume unutilised FSI admeasuring 81.03 sq.m; and
  • The Petitioner was entitled to utilize additional FSI by paying the landowners additional consideration at Rs.51,000/- per sq meter.
     
• Following consent terms between the Society and the landowners on 16 June 2025, under which the landowners expressed willingness to convey the land to the Society, the Society filed a fresh Application (No. 56 of 2025), now asserting that construction was complete and only 3.25 square meters of FSI remained unconsumed. The Competent Authority allowed this application on 14 July 2025, granting a certificate of unilateral deemed conveyance in the Society's favour.
   
• The developer challenged this order before the Bombay High Court by way of a writ petition.
   

Developer’s Case
The Developer contended that the Development Agreement granted them the right to exercise an option to purchase any future FSI from the landowners by paying the additional consideration of Rs.51,000/- (Rupees Fifty-one thousand only) per square meter of such additional FSI/TDR to the Owners. Owing to DPCR 2034, the Developer was now entitled to a substantial FSI of 841.16 sq.mts. The Developer argued that the land could be conveyed to the Society only after such additional FSI had been exploited by it.

Court’s Findings
The Hon’ble Court held once a society has been formed, the Developer must convey the land to the Society within a period of 4 months, as prescribed by Rule 9 of the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Rules, 1964 (“MOFA Rules”). Relying on its earlier decision in Flagship Infrastructure Ltd. vs. The Competent Authority, the Court reaffirmed that the word period in Rule 9 denotes a fixed, definite block of time running from registration of the society and cannot be contractually extended by clauses permitting the promoter to retain title pending further construction or future FSI exploitation; such clauses are void to that extent. The Society was formed on 28 June 2016 and the Developer was under the statutory obligation to convey the land and building to the society within 4 months of 28 June 2016.

The Court relied on its decision in Lakeview Developers vs. Eternia Co-operative Housing Society Limited, which held that once a developer has exhausted the sanctioned development potential and the obligation to convey has crystallised, any subsequent benefit accruing from an increase in FSI cannot be availed of by a developer who has failed to convey the property despite being under a legal obligation to do so. Any increase in FSI, that is available subsequent to the date on which conveyance ought to have taken place, belongs to the Society, and a defaulting developer cannot retrospectively claim a right to exploit it.

MHCO Comment
Builders must note that they cannot rely on a prospective increase in FSI, even where purportedly reserved by contract to defer or resist deemed conveyance once the society has been registered and the statutory period to initiate deemed conveyance has begun.