MANAGERIAL DISORDERS AND ILL-GOVERNANCE IN HOUSING SOCIETIES

Co-operatives Housing Societies are based on the values of self-help, mutual help, self responsibility, democracy, equality, equity and solidarity. Co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others. The activities of Housing Co-operatives in various States are regulated through respective Co-operative Societies Act and Rules administered by the Registrar of Co-operative Societies appointed by the Government.

Co-operative Housing Societies are ridden with so many problems, that it is difficult for a common man to know how to tackle a situation, many reside in such co-operative housing societies, which is full of administrative ailments and common Members are looking for an answer.

Therefore, it is the need of the day that every Member of the Co-operative Housing Society is well acquainted with a basic knowledge of Maharashtra Cooperative Societies Act (MCS Act), MCS Rules, Model Bye-laws governing the Housing Cooperatives, guidelines and circulars issued by the office of Registrar of Cooperatives, Consumer Protection Act, and Right to Information Act (RTI Act) in order to bring better management in their Societies.

A lot of Cooperative Housing Society Officials, ignorant of the law and disregardful of the same, tend to overstep the line when it comes to administering a society. Very often, a lot of property spaces within Housing Societies are mismanaged to the convenience of members as if it were beyond the purview of the Municipal Authorities.

Every FSI violation within the Co-operative Housing Society by way of extension of balconies or covering of open spaces or extension of shops/residence beyond stipulated values in the original plan of the Society structure that lie with the authorities, is a violation of the law and perpetrators are liable to be pulled up.

Even if a Co-operative Housing Society’s AGM approves a felony or civil wrong through consensus, it cannot legalise a wrong. Increasing the Society income is welcome by all means other than those that contravene the law. The Society should not charge any fees to shopkeepers extending their shops and should instead dissuade them from doing so by, first persuasion or else through registering complaints with the Local Municipal Authorities for space violation.

The knowledge of Laws and Rules helps the Member not to follow the dictates of the Managing Committee because under the pretext of doing free and honorary work in for the Society, they exploit the situation for their benefit only. Members, when they face problems, suddenly wake up when they encounter the high handedness of the Managing Committee instead of getting their problems solved.

Running a Housing Society is a responsible task and any Managing Committee Members trying to derive personal benefit out of his or her position in the Managing Committee promptly needs to be shown the door to ensure that Housing Societies are functioning well and not creating unnecessary harassment for flat owners.  

Managing Committees are considered as the Trustees who are responsible to look after the welfare of all the Members who have elected them to run the Society on their behalf. Therefore, if any Managing Committee is found guilty of running the Society in a manner not conducive to the smooth and honest functioning of the responsibilities, there is no option but to take stern action against them which could even mean its dismissal depending upon the gravity of the offence.

The Members at the time of election must ensure they elect Members who are clean and sincere and dedicated. Care should be taken not to elect Office Bearers who have consistently flouted provisions of Co-operative Act, Rules and Byelaws to nurture their own self interest or committed serious financial irregularities with the Society funds, Members with dubious records, corrupt backgrounds or even Members from the Managing Committee which has year after year not carried out Audit Rectification as required by law as these are the fraudsters who hide the facts from the Members for fear of getting exposed.

In case of those Housing Societies propose to opt for Redevelopment of their Property, such Members of the Committee cannot be trusted to negotiate, finalize and sign Redevelopment Agreements with the prospective Builders. Also there are Officer Bearers who hold on to the posts of Chairman, Secretary and Treasurer for decades by hook or by crook because for them to continuously remain in the Managing Committee and attain undeserved importance amongst the gullible Members of the Society, is a very, very lucrative and money-spinning business.

It is the calamitous need of the hour that those Housing Societies standing on the threshold of redevelopment and want to ensure the successful completion of redevelopment task without any imperil; get genuine advice and educate themselves by the redevelopment experts and counselors like us having both, the experience and expertise.

It is worth to mention here that in the name of redevelopment of old Housing Societies in Mumbai, the Civic Authorities in last few years have carpeted free ground to breed rampant corruption to benefit the private Developers to sub serve their illegal and deceitful objectives to garner huge profits. This is most required of the stringent laws to impede the members of Managing Committees to enjoy the sleep with the Developers for few greens and thrust redevelopment idea on the innocent and gullible members.

There are numerous instances where firstly, the members of the Managing Committee are hooked and enticed of unlawful gratifications in substantial amount by certain unscrupulous Developers and use these Managing Committee Members as agents to pursue and pass over the rosy dreams and benefits to innocent members of the Society and criminally ensure that the redevelopment project is bagged by the concerned Developer.

The corrupt members of the Managing Committees also resort to arm twisting, harassment and threatening method to the flat owners into submission as per the Developer’s instructions. Scared by such hounding tactics, most members accept and offer their consent towards the redevelopment of their Society without any protest and prefer to go along with whatever the whole Managing Committee decides.

It is well known fact that the illegal gratifications and lavish spending by a large cartel of unscrupulous Developers entice the members of the Managing Committees and provoke them to turn against their own members of the Society in the matter of obtaining consent and force implementation of redevelopment.

It is also observed often that the Chairman, Secretary and Treasurer will threaten or make a show of resigning including stepping down when they see there is non-cooperation from the rest of the Members of the Society, but will never do so in reality and cling on to their lucrative and marketable posts. Do not trust such Office Bearers of your Managing Committee blindly in any Redevelopment Process which is not in benefit of a common Member of the Society.

In order to get the documentary evidences against the wrong doings of the Managing Committees, the Members are entitled to seek any information and copies of such falsified documents from the Managing Committee U/s.32 (1) & (2) of MCS Act, 1960. Managing Committee Members egotistically feel that Members have no right to question their working. In case of disputes, they use unlawful and unfair methods such as not accepting the Members' correspondence, not replying to them etc. 

The Members of the Society are generally geared with an attitude of “Jane do, Kaun aise logo se panga lega” and don’t think of the repercussions due their short sightedness, ignorance, lack of time and daily primary problems in earning their livelihood and at home. 

The lone and old aged Members not having spouse to support, usually face mental trauma from such Managing Committees regardless of paying the maintenance charges promptly to the society.  To fight for rights in a Housing Society demands complete knowledge of laws, lot of patience, sense, time, energy and most importantly, sufficient money to spend in case of litigation.

There are many remedial measures to set right such self occupied, malicious and malevolent Managing Committee while the due procedures of elections are not followed as prescribed in the Byelaws of the Society. Such Managing Committee is considered as unauthorized, illegal and not competent to occupy the Office of the Society.

 Illegal & unauthorized Managing Committee: File a petition under Section 89 of MCS Act with the Dy. Registrar of Cooperative of Local Ward and pray for dismissal of Managing Committee and request for fresh elections by deputing Administrator.

 Indemnity Bond Form – M 20 if not filed before 6th September, 2012: File a private criminal complaint with the Local Metropolitan Magistrates Court against the Managing Committee for criminal misrepresentation and fraud.

 For not providing the Balance Sheet and Income & Expenditure Accounts: Make an application under Section 81(3b) MCS Act to the Joint Dy. Registrar to depute a "Flying Squad" to seize and ascertain the financial manipulation of Society's Fund.

 For not conducting Annual General Body Meeting on or before 14th August every year- Written application under Section 75 of MCS Act to the Dy. Registrar to disqualify the Managing Committee and additionally file a Consumer Court Complaint for deliberate, malicious & negligent delay in providing services to the Members of the Society.

 Failing to maintain and update the Statutory Records of the Society: Every year around June, Member should file an application with a Rs. 5/- Court Fee Stamp to the Dy. Registrar's office stating that the Managing Committee has failed to maintain and update the Records of the Society as prescribed in the Byelaws with a request to carry out Inspection for the default.

 If a Member of the Managing Committee has 3rd child born after September-2001: Such Member is permanently disqualified to become a Member of the Managing Committee: Any Member of the Society can complain to the Chairman for disqualification of such Member of the Managing Committee and may be removed from the Managing Committee within 30 days. If the Managing Committee fails, a Member can make an application under Section 73 of the MCS Act and pray to the Dy. Registrar to dismiss and disqualify the disqualified Member permanently.

The major drawback of the majority of Members of the Society is that they seldom attend the General Body Meetings due to their lethargic stance. On the other hand, those Members who attend such Meetings do not speak due to hesitations and fear of people around and mainly due to the high handed attitude of the Managing Committee.

A Member of the Society is required to learn to analyze the Balance Sheet & Income & Expenditure of the society and in Annual General Meeting, the irregularities if detected, question the Managing Committee for clarification. Alternatively, a Member can also write to the Auditor of the Society and in event of the Managing Committee and the Auditor refuses to tender any reply, complain can be lodged with the Dy. Registrar to have the Society’s Accounts Re-Audited.

If the financial misappropriation of funds or any other serious irregularities detected and overlooked by the Auditor of the Society, a Member can lodge complaint with the Chartered Accountants Association and also with the Dy. Or Joint Registrar’s office to cancel the registration of such erring Auditor. Simultaneously, a Member can file Criminal Proceedings in Criminal/Consumer Court. 

However, a Member can opt to file a criminal case in the Metropolitan Magistrate’s Court and in Consumer/Co-operative Court against the Managing Committee only when proper documentary evidences are available to prove the fraudulent affairs in the Society. 

The Members desire to enter in to the Managing Committee on their own wish.  They go door to door and propagate to other Members to propose and second their names for contesting elections. Since this is a social service for them and as they are the Trustees to look after the various affairs of the Society, they cannot say that they are providing honorary service to the Society and the Members should agree and accept their every action whether right or wrong.

Generally the Society face more problems caused by the then Members of the Managing Committee who feel the pinch of losing out their chairs resulting in to hostile attitude against the freshly elected Managing Committee. It has also been experienced that though the Members of the Society are no fools or illiterates but due to their peaceful nature and out of fear, are agreeing and resolving every un-constitutional and unlawful proposal backed by ulterior motives moved by the Members of the Managing Committee in various Meetings.

By virtue of their clout or strength in the Managing Committee of the society, whoever tries to protest against their barbarism, the stooges of these Office Bearers and the Managing Committee Members are in a readiness to either snatch away the mike from hands of ordinary Members who raise the voice or physically attack on the protesters in meetings.

A Housing Cooperative is a legally established association that is owned and democratically controlled by its members for the primary purpose of improving their living conditions. Lack of participation by the Members in any Housing Society is mostly due to ineffective leadership of the Managing Committee. The Members of the Managing Committee have, therefore, an important role in the overall administration and welfare of their Housing Society and its Members.

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MCs: DO NOT NEGLECT LEAKAGE ISSUES

The objective of this article is to create awareness amongst the Managing Committees and resident members of Housing Societies about proper maintenance and repairs of their property and develop an understanding approach towards future life of buildings.

It is invariably noticed that in majority of cases where any complaint with regard to repairs received by the Managing Committee is generally neglected due to lack of time, carelessness, lethargic attitude, absence of competence and initiative or inadequate fund.

Do not neglect leakage issues as the repair is an essential activity to make good the damage caused to the Society’s building due to decay or poor maintenance. Hence, it is of utmost importance to identify the defects, plan and implement maintenance and repair work well in time which will lead to the prolonged life of building and safety of the members and appreciation of property value.

In addition to above, the following Bye-Laws have been framed and incorporated by the Commissioner for Cooperation and Registrar, Maharashtra, Pune to have control on repairs and maintenance of the properties of Cooperative Housing Societies.  The members of the Managing Committee and the resident members may take a tour to the Bye-Law No. 77, 156, 157, 158, 159 & 160. 

Under the supervision of Secretary, it is the prime responsibility of the entire Managing Committee to maintain the property of the Society in good condition at all times. The Secretary of the Society, on receipt of any complaint about the repairs from any of the members must take the cognizance of such grievance on priority bases and report to the Managing Committee to consider the same and decide as to which of the repairs should be carried out.

Any administrative failure on the part of Secretary or the Managing Committee may lead the matter to litigation at a later date and may cause financial penalty if negligence proved.

One such recent case of one of the Housing Societies situated at Thane is narrated below. The Society has been ordered by the Consumer Forum to pay Rs.5.00 lakhs as compensation to a member for neglecting the leakage problem in his top floor flat for 16 years.

In an order delivered recently, the Thane District Consumer Forum said that the Society had failed to provide services to its member who had paid necessary funds for repairs of the building.

The member was residing on the top floor of the ground plus three-storey building, complained to the Consumer Forum that the leakage problem started in 1997 and that the Society turned a blind eye to the problem despite his repeated complaints followed by reminders. No response from the Managing Committee led him to register a complaint against them before the Forum.

The leakage started in 1997, when the complainant’s flat started developing cracks and it started leaking. When he addressed the problem to the Office-Bearers of the Society, they did not pay heed to his complaint.

During the year 2003 to 2006, the bedroom of member’s flat started developing cracks and water seeped profusely through the cracks. Again he informed the Society, but the Office-Bearers turned deaf ears towards his complaint. He then spent money to repair the leakage. However, the problem persisted as stated in his complaint.

The member mentioned that he not only suffered mental harassment due to this problem but his wife slipped and fell in the house on account of the water from the leakage. She was admitted and treated in hospital.

The Consumer Forum noted that the said member had contributed toward the Society’s building repair fund, but the Society did not care to redress his problem.

Asked to reply to the complaint, the erring Office-Bearers of the Society claimed that the damage in member’s flat was the result of alterations that he had carried out. However, the member produced evidences to show that he was compelled to make alterations during the course of repairs.

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WHY CONVEYANCE OF LAND FOR HOUSING SOCIETY IS IMPORTANT

Conveyance is a Transfer the Title of Land and Building by the Promoter/Landowner in favour of Housing Society by execution of Conveyance Deed.

As per the provisions contemplated in section 11 of Maharashtra Ownership Flat Act 1963, Conveyance is the Right of the Co-operative Housing Society and the Duty of the Property Developer/Promoter to be executed within 4 months from the date of Registration of the Co- Operative Society.

After the Land and Building is conveyed in favour of Co-operative Housing Society and the Title of the property is fully and finally recorded in the Property Card and other revenue records then only the property becomes completely free and marketable.

The non- availability of Conveyance to thousands of Co- Operative Housing Societies in Maharashtra is a burning issue which has led to many problems for them. The major problem is with respect to the Redevelopment of such Societies which are about 30-40 years old & are having their buildings in dilapidated conditions.

As per the Housing Society Bye-Laws, the main objective of formation of the Society is to obtain the Conveyance and if Conveyance is not executed by the Promoter/Landowner within four months from the date of Registration of the Society, a case can be filed against the Promoter/Landowner of the land to obtain the Conveyance. As per Section 13 of Maharashtra Ownership Flats Act, 1963, failure to give Conveyance is an offence and the Promoter/Landowner of the land can be imprisoned up to 3 years or fined or both.

Although the Society is governed by the MCS Act, Rules and the Bye-laws, a common situation most prevalent in a Cooperative Housing Societies is where the Members and sometimes even the Office Bearers are ignorant about the importance of the Conveyance Deed. Seldom do the people realize the advantages of obtaining the Conveyance Deed and the registering the name of the Society in Property Card as the next owner of the land that makes it one of the most important Documents that every Society should possess.

Considering the fact that the provisions of the Bye-laws distinctively mention the Conveyance issue right from Bye-law No: 5: The Object of the Society shall be to obtain Conveyance from the Promoter/Landowner in accordance with the provisions of the Maharashtra Ownership Flats Act and the Rules made there under, of the right, title and interest in the land with the building/buildings thereon.

Some of the main reasons prevailing in the matter of Conveyance at the Society level are the ignorance regarding the subject matter, Lack of Knowledge/Information, No initiative from Promoter due to vested interest, Non availability of Documents, Non-Cooperation from Promoter (Builder) & Land Owner, Non Cooperation from Society Members and Fear of Litigation and Expenditure

The Benefits of Conveyance are as under:

 Getting a legal title in the name of the Society.
 Conserve the additional FSI as per the Government announcements.
 Property shall be free and marketable.
 Society can raise the loans for repairs and reconstruction by mortgage.
 Permission from Planning Authorities is possible if the building has to be reconstructed at a later date due to dilapidation of the structure due to age or by earthquake.
 Society can take the benefit of TDR for redevelopment.
 Members can receive compensation from Builder on redevelopment of the property of the Society.

There are Drawbacks of Conveyance listed as under:

Managing Committee to get Conveyance of Land & Building in the name of the Society to avoid following consequences

 Even though anyone has purchased ownership flat, he/she is not the owner of the land and building.
 In the event of a building collapses or damage sustained by the building, one cannot reconstruct the building without the permission of the Promoter/Landowner of the land.
 The Promoter/Landowner may mortgage the property purchased by anyone as the Promoter/Landowner is the legal owner and holding the Title Deeds of the Property.
 The Promoter/Landowner may transfer the FSI/TDR to his other projects and enjoy the commercial benefits, depriving the flat purchasers/Society of its legal entitlement.
 The Promoter/Landowner may make profit by sale of open spaces, gardens, terrace and parking space supposed to be belonged to the Society.
 The Promoter/Landowner may demand a huge amount from the Society, if Conveyance is sought by the Society after a lapse of many years.

The Promoter/Landowner may sell the entire Development Rights and the Legal Rights on the land to third party and create a third party interest in the Property and the Society will have to incur an exorbitant amount of expenses to clear the same which may be difficult for the Society to sustain.

The reasons which hinder the Promoter/Landowner for not executing conveyance are as under;

 The original owner of the land finds it difficult to get Certificate under Section 230 (A) of the IT Act, as he has not cleared his liabilities.
 Internal disputes between the members of the family, Board of Directors in case of limited companies, or among trustees in case of trust.
 Difficulty in getting a certificate under Urban Land (Ceiling & Regulation) Act, 1976 also creates difficulty in executing conveyance.
 The Promoter/Landowner delays or avoids the work of executing conveyance as he wants to retain control over ownership of land and building.

Directly or indirectly the Promoter is benefited if there is an additional FSI as well as Transfer of Development Right (TDR) due to change in Law from time to time for the purpose of construction. When the flats are transferred from one purchaser to the other he gets transfer money or a share in the second sale.

According to rule 9 of MOF Rule, it is mandatory to take necessary steps to execute the conveyance within a period of four months of registration of the society or limited company. If Builder does not comply with these provisions,

1. He can be prosecuted u/s. 13 of MOF Act.
2. If Builder is found guilty, the Criminal Court may punish the Builder.
3. If the Builder is still adamant a civil suit under the Specific Relief Act can be executed.

The consequences of non-execution of Conveyance can be disastrous in the long run. If Conveyance is not executed, it means that the Society does not have legal rights or ownership of the land on which the society’s building stands.

Similarly, it may not be possible to redevelop the building. Even for using additional FSI or for carrying out major repairs, Municipal Authorities will insist on NOC from the Land-Owner. In such cases, losses to the Members will be huge.

It is statutory obligation on the Promoter/Landowner to execute a Deed of Conveyance in favour of Housing Society within prescribe period and if he fails to comply with the provision, the Society can file a suit in the Civil Court and obtain a decree against the Promoter.  

However, in a judgement which is very beneficial to Housing Societies, Bombay High Court held that in a suit filed by a Co-operative Society against the promoters for conveyance, it is not necessary to calculate the value of property for the purpose of court fees. (Reported in 1982

Maharashtra Law Journal, Page 607) Hence, the Housing Societies can file suits against the Promoter for conveyance by paying a nominal amount of Court Fees which otherwise would have been in lakhs.

Secondly, under chapter-II of the Specific Relief Act, the purchaser of the flat can file suit for specific performance of the contract. The Housing Society can apply to the Court for directions to the Promoter/Landowner to executive the Deed of Conveyance in favour of the Society.

The Provision of Rules 21 and 34 of the Civil Procedure Code provides the remedy to face a situation when a Promoter/Landowner does not execute the conveyance even after a decree is passed by a Court. In such a situation the Society which filed the suit should prepare a Draft of Conveyance and submit it to Court. The Court will issue a notice to a Promoter/Landowner along with a copy of the Conveyance Deed.

After considering the objection if any raised by the Promoter/Landowner, the Court will finalise the Conveyance Deed. If the Promoter/Landowner still fails to executive the document, the Court will authorise and officer of the Court to executive the Deed of Conveyance in favour of the Society.

In case if the Promoter/Landowner does not exist or traceable, the Society can file a case in the Consumer Court or in the Civil Court and obtain ex-parte decree in favour of the Society. The same decree can be registered with Sub-registrar as Conveyance and the Property Card can be changed in the name of the Society thereafter.

In a project of multiple buildings being constructed and where half of them are completed and individual Society formed, the Builder can give the Conveyance to these individual Societies and need not to wait for the entire projects to complete.

If a Member of the Society, while buying the flat, has not got his Agreement registered with due Stamp Duty paid, at the time of process of execution of Conveyance being undertaken by the Society, the concerned Member will have to pay Stamp duty at the market value and the rate applicable on the date of executing the Conveyance.

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SALIENT FEATURES OF 97^th CONSTITUTIONAL

AMENDMENT

Government of Maharashtra has already passed 97th Constitutional Amendment on 14th February, 2013. State Government has amended Maharashtra Co-operative Societies Act, 1960 by Maharashtra Co-operative Societies (Amendment) Ordinance, 2013.

The Dy. Registrar of each zone in Mumbai has issued Circular No. 503 dated 28.02.2013 to adopt New Model Bye Laws before 30th April, 2013 in General Body Meeting.

It is mandatory for all Co-operative Housing Societies to call for a Special General Body Meeting before 30th April, 2013 to adopt the New Model Bye-Laws of Co-operative Housing Society as per 97th Constitutional Amendment and Maharashtra Co-op. Societies (Amendment) Ordinance 2013.

After approval of New Model Bye-laws, Co-operative Housing Societies need to send the approved Model Bye-Laws to Dy. Registrar of Societies for their approval.

The silent features of these amendments governing the Co-operative Housing Societies in Maharashtra are described hereunder:

1. There will be only 2 types of Members i.e. Nominal & Associate Member as against Nominal, Associate & Sympathiser Member as per old Act. Sympathiser Member is deleted.

2. Member is further classified as Active Member & Non-Active Member. Active Member is defined as one who participates in the affairs of the Society and utilizes the minimum level of services or products of that Society as may be specified in the Bye-Laws.

3. Member not attended 1 AGM in 5 years and if does not utilizes minimum level of services at least once in 5 consecutive years as may be specified in Bye-Laws shall be classified as Non-Active Member.

4. Non-Active Member shall be liable for expulsion u/s 35 and also not entitled for Vote. Non-Active Member can be Active Member on fulfilment of above criteria.

5. A new State Co-operative Election Authority would be constituted by State Government u/s 73CB to conduct elections of Co-operative Societies to have transparency in election process.

6. It is the duty of present Managing Committee to intimate State Co-operative Election Authority for holding of its election before expiry of its terms. If there is any default on the part of Managing Committee to inform, action u/s 77A will be initiated against Managing Committee Members.

7. Every Society will have to deposit in advance the estimated amount of election expenses as the Election fund with State Co-operative Election Authority.

8. Every Managing Committee Member shall undergo co-operative education and training through State Federal Societies or the State Apex Training Institutes for the prescribed period as decided by Govt.

9. Every Society shall contribute annually towards such Education and Training Fund of State Federal Societies or the State Apex Training Institutes at the rates as may be prescribed.

10. Contribution to Education Fund as per old provision u/s 68 discontinued.

11. Maximum number of Committee members shall be 21.

12. Section 73BBB with regard to reservation of Woman Member in Managing Committee is deleted. But reservation for women is given in new section 73C for 2 women irrespective of size of Managing Committee.

13. Managing Committee Member will be disqualified if he is classified as Non-Active Member

14. Government has withdrawn powers of Registrar to suspend the Managing Committee of Housing Societies as also to appoint an Administrator in Housing Societies.

15. Due date for taking AGM will be 30th September i.e. 6 months after end of each financial year. No extension will be granted for postponing the AGM after 30th September. If Society fails to conduct AGM within due date, Registrar will have the authority to conduct AGM.

16. Society has to file Returns to Registrar within 6 months after end of each financial year and inform the name of Auditor to Registrar within 1 month of AGM.

17. Auditor should not accept audits more than 20 Societies (excluding paid up share capital of less than Rs. 1 Lac) in a financial year.

18. Audit Rectification report should be placed before next AGM and also to be submitted to the Registrar.

19. Every Co-operative Housing Societies has to form Grievances Settlement and Redressal Committee to deal with the grievances of the Members and the Society, relating to its business & management. The Grievances Settlement and Redressal Committee shall be formed in AGM. The said Committee shall consist of 3 active members & shall be other than Managing Committee members.

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