On September 12, 2018 the Hon’ble Bombay High Court passed a judgement in the matter of Shraddha Commercial Premises Cooperative. Society v. The State of Maharashtra dealing with the issue of whether a contract is concluded on deposit of earnest money and if an unregistered corporate society can enter into a contract.

Facts of the case

On December 28, 2005 the respondent  had given an offer of land to the petitioner admeasuring 26,000 square meters and had requested the petitioner to submit blue application with demand draft of INR. 24,70,000 towards the earnest money within 15 days from the date of receipt of the letter. Following this the petitioner on January 10, 2006 within 15 days had accepted the offer unconditionally and had deposited the earnest money as requested by the respondent. The petitioners contented that the offer was deemed to be accepted as per Section 8 of the Indian Contract Act and was concluded.

The respondents on the other hand had contended that the petitioner is a proposed cooperative society, and as such, is not entitled to enter into a contract. 

Issue of the case 

Whether or not, in the facts of the case, the acceptance on the part of the petitioner gave rise to a concluded contract between the parties and if an unregistered corporate society can enter into a contract?

Judgement

In so far as the right of a proposed co-operative society to enter into contract or maintain a petition in its own name (as opposed to the name of one of the members), the Court relied on the decision of the Supreme Court in the case of Ishwru Yatayat Cooperative Society V. State Transport Appellate Authority (1975) 2 SCC 685 and observed as follows:

6. It is undisputed that the petitioner – society is not a registered cooperative society and is merely a proposed cooperative society. A proposed Cooperative society does not possess an independent legal identity. It is only after the cooperative society is registered it has a status of a body corporate. All the privileges and rights enjoyed by the registered society cannot be availed of if the society is not registered. The cooperative society cannot act beyond its bye laws /Constitution. We had asked the learned Advocate for the petitioner as to the bye laws of the proposed society. The learned Advocate could not produce any bye laws of the society. The petitioner being a proposed society does not possess the legal right to maintain the petition. In fact, if at all the petition was to be filed, the same was required to be filed through the members of the proposed society.

The Court further held that in the present case, there is nothing on record to remotely suggest that the present contract was warranted by the terms of the incorporation of the petitioner proposed cooperative society and in absence thereof, sections 15H and 19E of the Specific Relief Act, 1963 does not apply to the present case.

Regarding conclusion of contract on account of deposit of earnest money, the Court noted the principle enumerated by the Supreme Court in Bhagwati Prasad Pawan Kumar v. Union of India AIR 2006 (6) Mh. L. J. 6., that offer may be accepted by conduct, provided it is clear that the offeree did the act with the intention (actual or apparent) of accepting the offer. Looking at the facts of the case, however, it was held that contract was never finalised and therefore, enforceable contract did not come into existence.