Bombay HC’s Big Call for Developers & Societies on TDR, FSI, DRC & Registration
Judgment of the High Court of Bombay (OS) in Interim Application (L) No.5342 of 2025 in Commercial Suit (L) No.5307 of 2025 of Green Garden Apartments Cooperative Housing Society Limited
In 1986, the Defendant No.19 MCGM acquired 7,284.10 sq.mts land of the plaintiff society.
Between 14 August to 26 September, 2013, unregistered agreements for sale of TDR and utilization of FSI were executed between the plaintiff society and the defendant Nos.5 to 18.
On 17.2.2025, the plaintiff filed for various declarations on various agreements including Agreements for Sale of TDR in favour of defendant nos.5 to 18. The plaintiff- society applied for temporary injunction against defendant nos.5 to 18 to act on the Agreements in their favour for transfer of TDR.
Doctrine of indoor management – that the defendant nos.5 to 18 need not be concerned with nitty-gritties of the internal working of the Society and the sale transaction of the TDR would remain unaffected even if it is observed that proper procedure was not followed by the society while taking decisions.
TDR does not always involve any right in the land from which it is generated. It is like a floating right which is freely transferable. A DRC is like a negotiable instrument which can be trade multiple times. Though the first person selling DRC may be the owner of the land from which TDR is generated, however, in respect of subsequent sale transactions of TDR, the same may not always involve connection with any land. It can happen that TDR is purchased by a person not owning any land and can be sold by him to another non-land owner. Therefore, though the TDR may emanate from land, it is not necessary that the sale of TDR must always involve any connection to a land. This is dealt with greater details in latter part of the judgment. In any case, TDR cannot be treated as profit a prendre for the proposition that the instrument of TDR transfer is compulsorily transferable.
Paras 64 to 68 of the Judgment
DRC Transfer in DCPR and UDCPR.
25.3.1991 – Amendment of Section 126 of the MRTP Act to introduce TDR to the land owners in lieu of compensation.
On 20.2.1991, the Development Control Regulations 1991 for Greater Mumbai was notified with effect from 25.3.1991. Regulations 33 and 34 and Appendix VII of the DCR 1991 provided for generation of TDR and grant of DRC.
DCR 1991 provided for manner of utilization of TDR on same or another land.
DCPR 2034 – Regulation 32 deals with generation of TDR and clause 5 deals with the utilization of TDR. Clause 6.2 of DCPR 32 is provided as follows:0
“6.2 DRC shall be issued by the Municipal Commissioner as a certificate printed on bond paper in an appropriate form prescribed by him. Such a certificate shall be a “transferable and negotiable instrument” after the authentication by the Municipal Commissioner. The Municipal Commissioner shall maintain a register in a form considered appropriate by him of all transactions, etc. relating to grant of, or utilization, of DRC.
Thus, there is a marked difference in the concepts of “utilization of TDR” and “transfer of DRC”.
A holder of DRC desiring to use the FSI credit therein can attach valid dRC to the extent required with application for development purpose.
Para 67 – Distinction between utilization of TDR & DRC transfer
DRC contains FSI credit and it is not mandatory that while of the FSI must be sold to one entity for being utilized on one land alone. It is permissible to sell quantum of FSI in DRC to multiple developers at different points of time. A DRC holder with FSI credit of 10000 sq.mts can sell only FSI of 1000 sq.mts in 2025 to one developer and remaining can be sold in phases.
Another option for DRC holder is to transfer the DRC where he needs to sell the whole of DRC to another entity. In this case, the name of DRC holder changes and the purchaser becomes the DRC holder. New DRC holder can further sell the DRC to another entity or exercise the right of selling of FSI credit for utilization in phased / staggered manner.
Para 68 – The concept of TDR sale for utilization does not permit TDR purchaser to further trade the purchased FSI and profiteer therefrom. However, the concept of transfer of DRC, the DRC purchaser can trade the DRC and profiteer therefrom. Where the TDR is sold for being utilized the DCPR 2034 or UDCPR do not require the agreements to be registered, whereas the registration is mandated when the whole of DRC is traded by sale thereof.
Para 69 – DC Regulations provide additional condition of registration of instrument in case of DRC for changing the name of holder of DRC. Thus, a delegated legislation of DCPR 2034 or UDCPR 2020 cannot lay down the requirement for registration or otherwise of document by transfer of DRC or sale of TDR when such requirement is not provided for in the parent statute of MRTP Act.
Suffice it to observe that even the DCPR or UDCPR do not prescribed the requirement of registered agreement for sale of TDR for utilization.
Thus, Clause 6.2 of Regulation 32 of DCPR 2034 does not prescribe registeration of agreement for utilization of TDR.
Bombay HC’s Big Call for Developers & Societies on TDR, FSI, DRC & Registration
Trading – Bombay HC Defines the Nature of TDR & DRC Rights
Bombay HC Clarifies Legal Status of TDR, FSI & DRC
TDR is not immovable property once detached from the originating land – It becomes movable, tradable right akin to development credit – Sale of TDR does not require registration under the Registration Act nor does it attract stamp duty as immovable property.
Housing Society cannot repudiate transactions with third parties by citing internal lapses after accepting the benefits.
The doctrine ensures commercial certainty and protects bona fide purchasers.
The Court re-affirmed that third party dealing with a registered cooperative housing society is entitled to presume that internal procedures have been duly followed.
Developers who purchased TDR from the society relied on resolutions passed in the general body meetings and official communications. The doctrine of indoor management protects such reliance.
The Society later alleged procedural irregularities and unauthorized actions by the office-bearers.
External parties (Developers) were not bound to investigate internal compliance, when Resolutions were duly recorded, Payments were accepted and Benefits were enjoyed by the society.
