“Mistake or Fraud?” Bombay High Court Questions Suppression by Parsi Public Trust, Clarifies 10% Clause and NOC Not Required for Flat Sale
2026:BHC-OS:4262 | Justice Rajesh S. Patil | Section 36 Maharashtra Public Trusts Act | 10% Resale Clause |
NOC Not Required | Arbitration Suppression
Key Issue: Is NOC required to sell a flat in Mumbai, Maharashtra?
On 12 February 2026, the Bombay High Court (Coram: Justice Rajesh S. Patil) delivered a significant judgment
in 2026:BHC-OS:4262, addressing three critical issues in Maharashtra property and trust law:
- Whether trustees of a Parsi public trust suppressed material facts in arbitration proceedings.
- Whether a 10% differential can be imposed on every resale of a flat.
- Whether prior approval / NOC is required for transfer of a flat in a co-operative housing society.
Whether the non-disclosure of withdrawal of the Charity Commissioner application was a mere mistake
or whether it amounted to fraud committed by the Trustees on the housing society and on the Court.
No satisfactory explanation was offered by the Advocate for the Trust
Background: Section 36 Sanction and 10% Clause
The land belonged to The Zoroastrian Radih Society. Flats were constructed for members of the Parsi community.
Under a sanction granted under Section 36 of the Bombay Public Trusts Act (now Maharashtra Public Trusts Act):
- Flats could not be sold for 10 years.
- After 10 years, 10% of the price difference was payable to the Trust.
The controversy arose when the Trust attempted to expand this clause to levy 10% on every subsequent resale,
not just the first transfer.
Attempt to Introduce Mandatory NOC and Expanded 10% Clause
In 2015, the Trust filed Miscellaneous Application No. 238 of 2015 before the Charity Commissioner seeking to introduce:
- Mandatory prior approval (NOC) before sale of any flat
- Pre-emption rights
- 10% on every resale
- Trust nominees in society management
However, the Charity Commissioner questioned jurisdiction and potential prejudice to purchasers.
The application was withdrawn on 3 November 2015.
Suppression Before Arbitrator – Fraud Question Raised
Consent terms were executed before a sole arbitrator on 21 November 2015.
The High Court recorded that the withdrawal of the Charity Commissioner application was not disclosed
to the arbitrator or to Behramshah Shroff Building No. 1 (Yazad) Co-operative Housing Society Ltd.
The judgment specifically notes that the consent terms were signed by trustee H.H. Santoke,
who continues to serve as trustee.
Justice Rajesh S. Patil recorded that the Court directly questioned whether such non-disclosure amounted to fraud.
This is one of the most significant aspects of the ruling.
NOC Not Required for Flat Sale in Maharashtra (Mumbai Housing Society Transfers)
The Court referred to the legal position under the Maharashtra Co-operative Societies Act and Model Bye-laws.
Under Model Bye-law 38(d):
No Objection Certificate (NOC) of the Society is not required to transfer shares and interest of the transferor
to the transferee.
The amendment in Maharashtra law makes it clear:
- A seller does not require prior permission of the society to sell a flat.
- Society cannot impose additional NOC conditions unless specifically required.
In this case, the Trust’s attempt to mandate NOC before every resale was inconsistent with the statutory framework
governing co-operative housing societies.
This clarification has significant impact for:
- Flat resale in Mumbai
- Housing society transfer disputes
- NOC requirements in Maharashtra property transactions
Supreme Court’s Binding Order (27 March 2018)
The Supreme Court had earlier directed:
- No modification of consent terms.
- Transfer to be finalized without additional conditions contained in the withdrawn Charity Commissioner application.
Justice Patil described the Supreme Court’s order as “clear and unequivocal.”
Final Ruling of the Bombay High Court
- 10% differential applies only to first transfer post restriction period
- 10% cannot be levied on every resale
- Mandatory NOC condition cannot be revived
- Withdrawn Section 36 application cannot be reintroduced
- Execution must strictly comply with Supreme Court order
Execution Application No. 694/2019 filed by the society was allowed.
Execution Application No. 1801/2018 filed by the Trust was dismissed.
Lease deed directed to be executed within eight weeks.
Legal Implications for Maharashtra Property Law
- No Perpetual 10% Resale Levy: Public trusts cannot impose endless financial burdens beyond original sanction.
- NOC Not Required for Flat Sale in Maharashtra: Under Model Bye-laws and amendments, prior approval is generally not mandatory.
- Suppression in Arbitration May Invite Fraud Scrutiny: Even consent awards are subject to judicial review where material non-disclosure exists.
- Section 36 Maharashtra Public Trusts Act Has Limits: Modification after sanction requires jurisdiction and fairness.
Appearance of Counsel
For the Housing Society: Advocates Sarosh Damania, Riddhi Shah, Dharmi Patel and Madhura Shah appeared for the housing society.
For the Trust: Advocates Cherag Balsara, H.N. Vakil and Farhad Vakil, instructed by
M/s. Mulla & Mulla & Craigie Blunt & Caroe, appeared for the Trust.
Judgement Download link
Frequently Asked Questions
Is NOC required to sell a flat in Maharashtra?
Generally, no. Under Model Bye-law 38(d), NOC of the society is not required for transfer.
Can a public trust impose 10% on every resale?
No. The Bombay High Court clarified it applies only to first post-restriction transfer.
What did the Court say about fraud?
The Court recorded a question whether non-disclosure amounted to fraud on the housing society and the Court:
Whether the non-disclosure of withdrawal of the Charity Commissioner application was a mere mistake
or whether it amounted to fraud committed by the Trustees on the housing society and on the Court.
Conclusion
This Bombay High Court judgment is important for Maharashtra housing society law, public trust governance, arbitration transparency,
Section 36 compliance, and flat resale NOC disputes.
By formally recording the “mistake or fraud” question, Justice Rajesh S. Patil has reinforced that transparency in arbitration and execution proceedings is non-negotiable.
Advocate Sarosh Damania is the founder of Sarosh Damania & Co., a premier law firm based in Mumbai, recognized for its exceptional legal services to corporations, individuals, and international clients worldwide. With a rich blend of experience and expertise, Adv. Damania and his team specialize in a wide array of legal disciplines, including Civil Law, Criminal Law, Aviation Law, Arbitration, Consumer Law, RERA, Company Law, Succession Law, Wills, Intellectual Property Law, Property Law, Housing Society Law, Debt Recovery, and Banking Law.
Wasn’t a mistake it’s called easy money for the trust, greediness.
Noc should be required so that the buyer is confident about the sale ….