Combined response to Shankar Nair’s queries

Most inquisitive Co-operator has kept our Honorary Columnist on high alert by raising very practical issues on cooperative housing society management. We have three mails to respond and the combined issues are restated below to provide a focused guidance.

1. Aligning registered bye-laws (Model 1984) to 97CAA and amended the M C S Act 1960 and the Maharashtra Co-operative Societies Election to Committee Rules, 2013 (the Consolidated Election Rules) before Model 2013 is issued by the Commissioner and Registrar of Cooperative Societies, Pune.

2.  Can an Associate member nominate a person?

3.  One doubt about nominee becoming member and the Note proposed to be appended to Bye Law No 34 in Model 2013 (Under Approval)

4. Legality of an Associate occupying office of an Hon. Secretary and advice for remedial measures.

1. HAPPY GO LUCKY C H S is on right track in amending Bye Laws:

It is a wise and right step to amend bye laws, based on Model 1984 nearly a three decade old draft. The M C S Act 1960 has undergone substantial changes triggered by Constitutional Mandates under The Constitution ( 97th Amendment ) Act 2011.(97CAA)  These changes have rendered several clauses in the registered Bye Laws invalid since 13-02-2013. The Commissioner and Registrar of Cooperative Societies has missed the boat as avowed “objective of   insulating cooperative societies to insulate avoidable interference of bureaucracy and polity” [S C in Thalappalam Ser. Coop.Bank Ltd.& … vs State Of Kerala & Ors. on 7 October, 2013]  has started failing already. Your Bye Laws have been  changed already whether you amend or not. Bye Laws are contracts between members inter se ( S C in Zoroastrian co-operative housing society limited and another v. District registrar co-operative societies (urban) & ors [2005]rd-sc 253] and they must always conform to the changing laws of land. When any clause of the bye laws is superseded, the legal provision starts operating in its place. As 97CAA has superseded several bye laws and imposed additional duties on cooperative societies, aligning Bye Laws to those changes becomes necessary in order to make it easy to ensure easy compliance of changed/new obligations of cooperative society management.

The Commissioner and Registrar of Cooperative Societies Pune has proposed Model 2013 of the Bye Laws of several cooperative societies including for a cooperative housing society,    but it is a fact that the Model Bye Laws are not mandatory for cooperative housing societies to adhereto. As aforesaid Bye Laws are contracts and members are free to enter in to contract they decide, subject to the condition that none of these Bye Laws should be found violating any provision of 97CAA and the M C S Act 1960, the M.C.S. Rules 1961 and the Consolidated Election Rules. Moreover the  Registering Authority should also not find it repugnant to State Policy directions issued under Section 4 of the M C S Act 1960 if any. I had filed RTI application to know the Policy Directions but it seems none are issued as I did not get any reply.

It is also necessary that amendment of Bye Laws is governed by Bye Laws (No 166) Section 13 of the M C S Act 1960, Rule 12 of the M.C.S. Rules 1961 and any mandatory directions issued under Section 79A of the M C S Act 1960 by the State Government. All these must be complied fully otherwise the Registering Authority will refuse registration. The Department issues Model Bye Laws on the assumption that the members of cooperative societies do not have the expertise to draft the same. This assumption has to be proved wrong by alert cooperators and Happy Go Lucky C H S is comprised of such cooperators as it seems.

2.  The Model Bye Laws 2013 being approved are also not free of serious lapses in law. One example is a note to Bye Law No 34 as reproduced below:

“Note:- In case of acquiring membership on the basis of nomination, such member shall hold the flat/unit in ‘Trust’ till all the Heirs are brought on record and shall not have the right to ownership and shall not create the third party interest.”

i.              Inserting this note would mean members and the managing committee bind themselves to bring on record all the Heirs of the deceased member some time or the other.

ii.             The nominee who has been legally  admitted to membership in due compliance of provisions of Section 30 of the M C S Act 1960, Rules 25/26 of the M.C.S. Rules 1961 and the Bye Laws will not be able to exercise his right to ownership and create the third party interest, before the compliance as per i above.

iii.            It may be noted that Section 30 has not undergone any change under 97CAA.

Therefore appending this note to Bye Law No 34 has no legal sanctity.

3.            The implications of phrase in Bye Law No 34 of Model Bye Laws 2013 corresponding to Bye Law No 36 of Happy Go Lucky C H S Bye Laws QUOTE: “[and in proportion with the shares and interest held by the deceased member, in case property is purchased by member and associate member jointly.] UNQUOTE .

This one more evidence of a confusion on the joint owner(s) of the property in cooperative housing societies. Definition of member includes original member, Associate being a co-owner and Associate being “Zero contribution in flat cost” Such a wide definition is bound to create a lot of confusion.  Bye Law No 34 of Happy go lucky C H S empowers member to nominate a person, thus : “A member of the society may, by writing under his hand, in the prescribed form, nominate a person or persons, to whom the whole or part of the shares and/or interest of the member in the capital/property of the society shall be transferred in the event of his death.”  The insertion of the aforesaid phrase proposed in Bye Law No 36 is wholly unwarranted and is not in tune with the original scheme of Cooperative Society Law as can found in Section 30 of the M C S Act 1960. Do not insert this phrase. This will pose innumerable difficulties as requisite changes to empower the Associate member having a legal ownership in the flat are not given any thought.  In practice this condition is unworkable.

4.            Associate installed in the office of the Secretary is not consistent with the Cooperative Society Law applicable to Happy Go Lucky C H S.

i.              This is because Section 26(2) concedes a limited right to Associate Member. in these words “A nominal or member shall ordinarily not have any of the privileges and rights of a member, but such a member, or an associate member, may, subject to the provisions of sub-section (8) of section 27, have such privileges and rights and be subject to such liabilities of a member, as may be specified in the by-laws of the society.

ii.             Sub-Section 8 of Section 27 reads : “No nominal member shall have the right to vote and no such member shall be eligible to be a member of a committee or for appointment as a representative of the society on any other society.” It is silent about right of Associate Member.

iii.            As per Section 26(2) members are free to confer on the Associate member, through its Bye Laws any of “the privileges and rights of a member” as they deem fit.

iv.           Bye Law No 27 of Happy Go Lucky C H S concedes a nominal right to Associate Member in these words. “ No associate member shall have any rights or privileges of a member except as provided under Section 27(2) of the Act reading as: “Where a share of a society is held jointly by more than one person, the person whose name stands first in the share certificate, if present, shall have the right to vote. But in his absence the person whose name stands second, and in the absence of both, the person whose name stands next, and likewise, in the absence of the preceding persons the person whose name is next on the share certificate, who is present and who is not a minor, shall have the right to vote.” Incidentally Bye Law No 25 of proposed Model 2013 also concedes to Associate exactly same right in exactly the said words.

v.            As a matter of fact Bye Law No 118 (v) of the proposed bye-laws Model 2013 impliedly concedes this right to Associate in breach of its another Bye Law i.e. No 25. This is another blatant error in Model 2013. So don’t fall in to trap.

5.            A solution to regularize the election of Associate member as Secretary is within reach of the general body meeting as it is poised to pass amendments to Bye Laws to align them to the latest Cooperative Society Law. in the general body meeting pass the following resolutions:

i.              Bye Law No 27 shall be substituted as “Without prejudice to the provisions as per the Bye Law No 117, no associate member shall have any voting rights or privileges of a member except as provided under Section 27(2) of the Act. i.e. where a share of a society is held jointly by more than one person the person whose name stands first in the share certificate, if present, shall have the right to vote. But in his absence the person whose name stands second, and in the absence of both, the person whose name stands next, and likewise, in the absence of the preceding persons the person whose name is next on the share certificate, who is present and who is not a minor, shall have the right to vote “

ii.             Following clause shall be inserted as Clause (iv) in Bye Law No 117 namely:  In case of an associate member, non-submission of the no-objection certificate and undertaking, as prescribed under these bye-laws, by the first named member.

iii.            Following Appendix 10A shall be inserted after Appendix 10.

APPENDIX 10A

[Under the Bye-law No. 117(iv)]

(No Objection Certificate and Undertaking from the Original Member to be

submitted by the Associate Member intending to be a Member of the

Managing Committee of the Society)

From:

Shri /Smt ……………….…………….

Flat No………………..………………

To,

The Chairman/Secretary,

Happy Go Lucky Co-operative Housing Society Ltd.,

Bhayndar, Thane

Dear Sir,

I, Shri /Smt. …… … …… …… …… … ………………………… am a member of the

society holding share certificate No. … … …… .. jointly with Shri/ Smt… …… …

………………………………… whose name stands Sr No. …….. ……. in the share

certificate who intends to be co-opted in / contest the election of the Managing Committee of the society for the year….. ………

Since I do not wish to participate in the said election nor intend to be co-opted and since I have no objection to

Shri/Smt…… …… ………………………… …… …… ……contesting the said

Election/ cooption in the committee. I hereby surrender all my voting rights in favour of Shri/ Smt… …………….to enable him/her to be co-opted or to contest the ensuing election to the managing committee and to hold office of the committee member, if elected/co-opted.

I hereby declare that I will not participate in any manner in general meeting of the

society or in election matter till such time as Shri/ Smt…… ………………………

……… …… …,continues to hold the office of the committee member.

Yours faithfully,

Place:

Date:

(Signature of the Original Member)

iv.           Also Amend Annexture II namely the list of forms appropriately.

6.            Unfortunately the Department seems to enjoy creating confusion around privileges and rights of Associate Membership. The Government has made the Maharashtra Co-operative Societies Election to Committee Rules, 2013 and published in the Gazette on 20-08-2013. Look at the Extract from Rule 20:

20. Nomination of candidates.—

(1) Any member whose name appears in the final list may be nominated as the candidate for the election to fill a seat, if he is qualified to be chosen under the provision of the Act, rules and the bye laws of concerned society:

Provided that, in case of joint or associate members, only the member whose name stands first in the share certificate shall be eligible to be nominated as candidate for the election.

So after the State Assembly Elections are over by November and after the Chief Commissioner of the State Cooperative Election Authority is installed in office and after the elections are announced in accordance with the Consolidated Election Rules, Hon. Secretary of Happy Go Lucky C H S will have to vacate the post notwithstanding the amendment of the Happy Go Lucky C H S Bye Laws as suggested herein before which is no different from the corresponding Bye Law 118(Iv) of proposed Model 2013.

7.            Not the end of the Story, though a tough task, which cooperative housing society management avoid in most cases.

Happy Go Lucky C H S has to challenge the validity of Rule 20 as it abrogates the freedom of cooperative housing society to confer on Associate member “any of the privileges and rights of a member” permissible under Section 26(2) quoted in Para 4. This Rule 20(1) can be assailed on the ground of avoidable interference of bureaucracy and politicians with a view to curtail the autonomy of members in breach of Constitutional Mandate under  Article 243ZI which mandates the states to enact Cooperative Society Law subject to “Part IXB: The Cooperative Societies”