By I C Naik
BACKGROUND AND SCOPE OF THIS PART
Cooperative Society’s Bye laws and the Application forms prescribed there under embody contractual terms of membership agreed by and between the members. In this Part 6 we look at the process of giving admission to membership (excluding the Associate and Nominal members) of housing societies in Maharashtra as laid down under the latest Model Bye-laws. This Model has been approved by the Commissioner for Cooperation and Registrar of Cooperative Societies Maharashtra Pune (the CC & RCS) last November.The hallmark of this Model is the Bye-laws are acclaimed as fully aligned to the latest changes in Cooperative Societies Law of the Maharashtra State brought in force effective 14 2 2013.
We will see how far they are flawed in respect of admission to membership keeping in mind the Statutory provisions under the M C S Act 1960 and the M.C.S. Rules 1961 and other applicable statutes. The idea behind pointing out flaws is to help housing societies in Maharashtra to take well informed decisions on amending their Bye-Laws. It is not mandatory for existing housing societies to adopt any Model approved by the CC & RCS. But it is nonetheless mandatory to comply with changes in law as may be applicable whether registered Bye-Laws are amended or not.
A.Membership defined:
1.As per Section (19) (a) of the M C S Act 1960 a “member” means a person joining in an application for the registration of a cooperative society which is subsequently registered, or a person duly admitted to membership of a society after registration and includes a nominal, or associate member;” [Nominal and Associate are kept out of this study]
2.As per Bye-Law No 3(xxiv) “Member” means a person joining in an application for the Registration of a Cooperative Housing Society which is subsequently registered, or a person duly admitted to Membership of a Society after Registration and who holds the right, title and interest in the property individually or jointly;
B.Application for membership
1.As per Rule 19 of the M.C.S. Rules 1961 “No person shall be admitted as a member of a society unless,— (i) he has applied in writing in the form laid down by the society or in the form specified by the Registrar, if any, for membership;”
Critical importance of the Applications is recognized in the requirement of Bye-Law No 142 where under every housing society must keep all Applications of membership in one file listed as the very first item in the list of more than 30 categories of files to be maintained.
2.Eight ways to acquiring membership by eligible persons are as under.
i.Bye-Law No 17(b) : Nominee [MINOR / Heir] on member’s death : Appendix 1
ii.Bye-law No 19 (a) : Flat buyers (an Individual) from builder ; Appendix 2
iii.Bye-law No 19( c ) : Flat buyers (a Body Corporate) from builder : None
iv.Bye-Law No 88(a)(ii) Flat buyers who could not join as Promoters None
v.Bye-law No 34 : Nominee/Nominees on member’s death : Appendix 15
vi.Bye-law No 35: Heir (who is Major) on member’s death: None
vii.Bye-law No 38 : (e) (ii) Transferee being a Body Corporate : Appendix 23
viii.Bye-law No 38(e)(ii): Transferee being an Individual : Appendix 24
C.Eligibility and conditions for membership
1.As can be seen, Model Bye-laws 2014 in its Bye-Laws No. 17, 18, 19(a),19(c), 34. 35 & 38 (e) prescribe the Eligibility and the Conditions for (Original) membership and the forms which are displayed in the Appendices listed above. The contents of the Appendices must obviously conform to the Bye-laws and the Bye-Laws in turn to the Cooperative Societies Law as applicable to all classes of cooperative societies.
2.One very important relaxation which the CC & RCS has approved in 2001 Model is continuing under Model 2014 also namely (vide Bye-Law No 63) that existing members of the Society are free to buy more flats in the same building.
3.The most important membership right in a cooperative housing society is right of occupation of the flats purchased from the builder or inherited from ancestor member as nominee or otherwise or purchased from other members called transferors in accordance with the Bye-Laws.
4.It is but natural that Application forms for membership are very carefully drafted so that members are able to understand their duties and responsibilities with fullest clarity making it easy for members of the managing committee to process them with the least of complications.
D.The flaws
1.Eligibility and conditions for membership and application forms:
A.Bye-Law No 17 (a) starts with a flaw that it lists out persons who can be admitted to membership with these words No individual shall be admitted as a Member of a Society except the following’ The very first flaw is that the list of individuals includes the persons listed below.
i.a Firm, Company or any other Body Corporate constituted under any Law or a Society registered under the Societies Registration Act, 1860.
ii. Society registered, or Deemed to be Registered, under the Act;
iii.the State Government or the Central Government;
iv.a Local Authority;
v.a Public Trust registered under any Law
B.The second flaw is in the Note (2) appended to this Bye-law No 17 namely “Signatories to the application for Registration of the Society shall be deemed to be the Members of the Society after its Registration”
1.Section (19) (a) of the Act provides the same, but that has to be read with the procedure set out in the Rules made to facilitate implementation of the provisions of the M C S Act 1960. As stated earlier as per Rule 19 “No person shall be admitted as a member of a society unless, he has applied in writing in the form laid down by the society or in the form specified by the Registrar, if any, for membership”
2.Bye-laws must require every signatory to the application for Registration of the Society, (besides the builder) called Promoter to submit an Application in the form at Appendix 2 [Under the Bye-law Nos. 19 (a), the Form of application for membership of the Society by an individual]. This Application when addressed to the Builder (Chief Promoter) of the proposed housing society is flawed because a member’s request to Chief Promoter of the Proposed Society namely “ to please admit me as the member of the society” neither the Chief Promoter nor a proposed Society can admit the flat purchaser to the membership. Such a request should legally be to include his name as “a promoter in the application for registration of the society. [Model Bye-laws 1984 Appendix 2 precisely does provide]
3.Bye-Law No 88 (a) enumerates the business to be transacted at the first General Body Meeting of the Society of the Promoters to be held with three months of registration of the Society. Business listed at Sub-Clause (ii) Admission of new Members (other than the promoters) who have applied for Membership of the Society.
a.Members are also admitted if they purchased flats from the builder before the Society is registered but after submission of the application for registration of the Society such purchasers are to be admitted to membership at the 1st general meeting of promoters/members which a Chief Promoter is required to convene as per Section 73(1A) with an Agenda as per Rule 59 of the M.C.S. Rules 1961. The Chief Promoter presides over this meeting and Application in Appendix 2 is to be addressed to him [ and not to the Secretary}
C.Bye-Law No 18 requires the Firms and Companies [by making reference to a statutory proviso to Section 22(1)] to comply with the conditions the State Government may prescribe to become members of specified societies. A note appended thereto reads “For existing terms and conditions of the Government Notification referred to above, see Annexure to these bye-laws” The flaw is no Annexure is appended.
D.Bye-Law No 19(a) lists out various conditions in 8 Sub-Clauses (i) to (viii) for compliance by an eligible individual seeking membership of the society who has purchased the flat from a builder.
1.Three of the 8 conditions are flawed.
a.Sub-Clause (iii) requires information having no utility to the Society, namely the particulars in regard to any house, plot or flat owned by him or any of the Members of his family, anywhere in the area of operation of the Society;
b.Sub-Clause (vi) calls for a certified copy of the agreement, duly stamped and registered entered into by him / her/ them with the builder or the transferor executed under Section 4 of the Maharashtra Ownership of Flats Act; The Flaw is Agreement with the transferor is not covered by Section 4 of the Maharashtra Ownership of Flats Act and a transferee has to comply with the requirements specified under Bye-Law No 38 including giving notice to the Society about his intention to transfer.
c.Sub-Clause viii has to be deleted by housing societies not registered under the jurisdiction of special planning Authority like CIDCO / MHADA / SRA / MMRDA etc. It sounds more like a Rule than a condition for membership.
2.Note appended to this Bye-law exempts Promoter Builder applying for membership to hold unsold flats from conditions at Sub-Clauses (iii), (iv), (v), and (vii) leaving out condition at Sub-Clause No (vi) of submitting a copy of the agreement with the builder, which cannot be complied.
E.Bye-Law No 19(c) lays down conditions for compliance by an eligible body corporate seeking membership of society having purchased a flat from a builder. There are fourflaws namely
1.No form for has been prescribed for making application under this Bye-law.
2.Index at Page 68-70 does not have an entry for this Bye-Law No 19( c ).
3.Condition (ii) requires body corporate applicant to subscribe 10 shares only where as 20 shares are mentioned in APPENDIX No.22, under the Bye law No. 38(e) (i) for application by the transferor. (Being a Corporate Body)
4.Same flaw about copy of the agreement as stated in 2 at Paragraph ix above is visible here also
F.Bye-Law No 88(a)(ii): The Flat buyers who could not join as Promoters can be admitted to membership under the business of the first general body meeting of Promoters convened and presided over by the Chief Promoter listed at Bye-Law No 88(a)(ii) namely Admission of new Members (other than the promoters) who have applied for Membership of the Society. The flaw is it does not refer to any prescribed form in the bye laws nor in the Index on Pages 68-70. Perhaps form At Appendix 2 can be used and hence better it was clarified.
G.Nomination Process requiring indemnity bonds is flawed:
i.The premises of Bye-law No 34 is Section 30 of the Act as can be seen in the very first sentence of the Bye-law namely : Subject to the provisions of the Section 30 of MCS Act. 1960 bye-law No. 17A or 19, on the Death of a Member, the Society shall transfer the shares and interest of the deceased Member in the Capital/Property of the Society to the Nominee/Nominees …
ii.It further reads ‘ In the event of death of the Member, Nominee / Nominees shall submit the Application for Membership, within six months from the death of a Member.
iii.if there are more than one Nominee on the death of a Member as per Bye-law 34
1.such Nominees shall make Joint Application to the Society and
2.indicate the name of the Nominee who should be enrolled as Member.
3.The other nominees shall be enrolled as Joint/Associate Members unless the nominees indicate otherwise.
4.The nominees shall also file an Indemnity Bond in the prescribed form Indemnifying the Society against any claims made to the shares and interest of the deceased Member in the Capital/Property of the Society by any of them, in case only one nominee is indicated by the Nominees for Membership of the Society.
iv.Sub-Section 4 of Section 30 is an indemnity in itself to the Society namely (4) All transfers and payments duly made by a society in accordance with the provisions of this section shall be valid and effectual against any demand made upon the society by any other person.
v.Para 5 in Appendix 14 (the form to be used for making nomination by a member) is quite categorical; “As provided under Section 30 of the Maharashtra Co-operative Societies Act,1960, and Bye-Law No 36 of the Society I state that on my death, the Shares mentioned above and my interest in the flat, the details of which are given above, should please be transferred to Shri/Shrimati………… the first named nominee [on his*her complying with the provisions of the Bye-laws of the society regarding requirements of admission to membership and on furnishing Indemnity Bond along with the application for membership, indemnifying the society, against any claims made to the said shares and interest in the said flat by the other nominee** nominees]
The flaw here is the nominator wanted the first named nominee to be admitted to membership. Why should a question of indemnity by such member arise, as Sub-Section 4 already providing for the same. Parts shown in brackets also should nt be there.
2.Flaws common to most of the Appendices prescribed to submit application for membership
1.Major relaxation to flat purchasers to buy more than one flat has not been given attention while redrafting Appendices. This has resulted in several flaws common to many Appendices. Transferee having a flat/membership in the same building/housing society.
a.Need not give consent to buy transferor’s shares
b.Need not buy the shares held by the transferor.
c.Need not file an application for admission as a member
d.Need not furnish personal details as they are there on records.
e.Need not pay entrance fee as he is already a Member
2.Almost all Appendices embody a declaration by prospective member that he shall abide by amendments made to Bye-Laws by the Registering Authority which is wholly incorrect statement. The Registrar has no power to amend the Bye-Laws. He can direct an amendment in the interest of the Society r if any Bye-law is found inconsistent with the Act, but in that case that is binding irrespective of the member’s consent.
3.Flaws Specific to Appendix 1: Minor Nominee/ Heir filing application for membership;
a.Salutation “Messers” used in the form is applicable to an incorporated body or a partnership firm, but neither of the two categories of members die.
b.If an heir makes an application for membership, where the member (the deceased)had not made nomination, the Appendix fails to provide for vital information as to how the Applicant was considered entitled to be admitted to membership.
4.Flaws Specific to Appendix 2 – under Bye-Law No 19 (a) the flat purchaser apples for membership;
1.The Application is be addressed to either
a.The Chief Promoter
OR
b.the Secretary of
………. (Proposed) Co-operative Housing Society and the prospective member must declare from whom he has purchased the flat i.e. whether from
1.the Promoters (Builders)
OR
2.Shri / Shrimati / Messrs……………………
[Presumably flat owner who purchased the flat from builder has sold before the Society is registered]
under an agreement under Section 4 of the Ownership Flats, Act a copy of which, duly attested is to be enclosed.(Bye-Law No 19(a)(vi).
There are numerous flaws as explained hereunder.
1.The Proposed Society cannot admit an applicant to its membership because its promoters (the flat buyers as also the builder for unsold flats) become members upon registration [Section (19) (a) of the M C S Act 1960 ].
2.As a matter of fact a flat purchaser must make a request to the Chief Promoter in these words namely “ I request you to please include my name in the application for registration of the society. “[Appendix 2 of Model Bye-laws 1984] This is serious omission in Model 2014.
i.The first Secretary of cooperative society is elected only after a Provisional managing committee is constituted as so required under Section 73(1A) (Read with Rule 59) within three months of the registration of the Society. So no application can be made to secretary of the Society which is still a proposed one and until his election by a provisional committee as Secretary is made.
ii.The applicant in this form has to submit a stamped copy of the agreement entered in to for purchase of a flat under Section 4 of MOFA 1963. Applicant is to specify from whom he has purchased the flat under agreement as afore said which could either be a builder or any other person a non-builder, i.e. a person who had bought the flat from the builder. The Agreement under MOFA is to be executed by a builder with a flat purchaser and there cannot be a party other than a builder.
iii.if a flat purchaser makes a second sale that agreement cannot be entered in to under MOFA. That is a normal contract under the Contract Act between transferor (the Promoter becoming a member) and transferee as provided under Bye-Law No 38 for which forms are prescribed under Appendix 23 for individual and 24 for Corporate bodies. Even such sale is prohibited for one year from the date of purchase under Section 29(2) of the Act.
iv.This form in Appendix 2 needs to be tailored for conferring membership; there is an intervening period of three months after a housing society is registered when a person may enter in to agreement under Section 4 of MOFA with the builder for an unsold flat. Such buyers are to be admitted under agenda (ii) prescribed under Rule 59(2) of the M.C.S. Rules 1961. Appendix 2 can be used to make this application to Builder/ Chief promoter prior to the election of the Secretary and to the Secretary as soon as one is elected by a Provisional Committee. If an unsold flat is sold after Provisional Committee takes charge an application can be made by the flat purchaser in this form – 2 but it is no longer a Proposed Society as the form suggests..
3.The Applicant has to choose either (a) or (b) declarations from the following two inserted in the form ;
a.I declare that the said agreement is duly stamped as required under Bombay Stamp Act-19 as to registration, the copy of which is enclosed.
OR
b.I give below the particulars of the Plot/ flat/ house owned by me or by any of the members of my family or the person dependent on me in the area of operation of the society :
1.Name(s) of the holders of the flat
2.Particulars regarding such plot/flat/ house.
3.Place where plot/flat/house situated
4.Reason for which additional flat is required in this society
The flaw “Neither of statement makes any sense to be in this form, nor either is required.”
4.Another flaw in Appendix 2 is in the applicant making a declaration that “he has seen the registered Bye-Laws of the Society” . Just as there cannot be a Secretary of the proposed society, no registered Bye-Laws of such society could be shown to the applicant of Appendix 2 before the proposed Bye-Laws are registered.
5.Flaws Specific to Appendix 15 under Bye-law No. 34 Nominee’s application
i.Being the only nominee/ the first named nominee as per nomination [ Appendix 14] filed with the society by the deceased member; the following statement is wrong and creates confusion for nominees as well as the managing committee.
“I/We am /are entitled to make an application for membership of the society and for transfer of shares and interest of the deceased member in the capital/property of the society to my/ our name.”
ii.The next declaration is also wholly unnecessary namely “ I/We have executed the Indemnity Bond in favour of the society indemnifying it against any claim made at any subsequent time by other nominee/ nominees to the shares and interest of the deceased member in the capital / property of the society. The said Indemnity Bond is enclosed herewith.[Appendix 18(1)]”
6.Flaws Specific to Appendix 23 (Bye-Law No 38(e) (ii) Transferee being an Individual
i.He/she is required to choose a Salutation “Shri or Shrimati” for disclosing the name of the transferor, thereby indicating that the individual cannot buy a flat from a Member who is a Corporate Body.
ii.Number of shares held by the Transferor being 10 supports the above interpretation as Body Corporate must hold 20 shares
iii.As a contradiction to above, the Appendix 22 displays a form of application for transfer of shares and interest in the capital/ property of the society by the transferor (Being a Corporate Body) as prescribed under Bye law No. 38(e) (i). Para 2 thereof provides three salutations being “Shri/ Shrimati/ M/s “ for disclosing name of the proposed transferee indicating that a Corporate Body can also sell its flats to any individual.
7.A Flaw Specific to Appendix 24 (Bye-Law No 38(e) (ii)] Transferee being a Firm or a Corporate Body:
In Para 1 of this Appendix the applicant has two options to disclose the name of the transferor namely “Shri / Smt” thereby indicating that a Corporate Body must buy the flat from the transferor being an individual only. As against this as mentioned above Application in Appendix 22 for transfer by a Corporate Body has all three salutations indicating a Corporate Body can sell the flat to individual or a Corporate Body.
8.Unthinkable plight of members/ managing committee on account of sheer absence of Applications forms as claimed to be prescribed
A.Bye-law No 19( c ) : Flat Purchaser (a Body Corporate) from builder
B.Bye-law No 35: Heir (Adult not nominated) on member’s death
As a second check to reconfirm this flaw one can look up the Index of List of Appendix with Housing Societies Bye-Laws on pages 68/69/70 to locate a reference to an Appendix against above two Bye-Laws one comes across an Appendix No 19 being a FORM OF INDEMNITY BOND to be given by the heir of the deceased as a prospective member where there is no nomination.