1) I am based in Mumbai and member of a society in Mumbai having Regn. No. MUM/MHADB/W-HE/TC/11322/2001-2002 dt.07.08.2001. The society with 96 members undertook redevelopment through a developer.
2) Due to increase in FSI during redevelopment the developer offered and the society accept 10 flats from the developer.
3) Post redevelopment there are three Wings A, B and C in the society. The OC for Wing A and B having 134 flats was received in June 2015. All 96 old members are housed in A & B Wings and 38 new members who purchased flats from the developer. For A and B Wing society started charging maintenance from July 2015. Full OC for all three wings i.e. A, B and C Wings was on 25 January 2016.
4) I purchased a flat in September 2016 in the society from one of existing/old 96 members in B Wing. Society approved my membership in February 2017 from May 2016 to November 2017.
5) My queries detailed below are related to legality of certain financial transactions in the society which are solely designed to benefit Secretary as well as old 96 members
- a) Society in 2015-16 (for 9 months) generated surplus of Rs 1.49 crores. This was transferred to Old 96 Members Reserve Fund. Can the surplus generated from maintenance contribution from old and new members be credited exclusively for old members benefit?
- b) In 2016-17 society had created Repairs and Maintenance Fund of Rs 22.88 lakh @ 0.75% of the construction cost. This amount was also transferred to Old 96 Members Reserve Fund. Is this permissible?
- c) The society had certain disputes with the developer for A and B Wings which was settled in 2017-18 pursuant to which society received net benefit of Rs 23.14 lakh which was transferred to Old 96 Members Reserve Fun. Is this transfer not illegal?
- d) In April 2018 the society settled a dispute with one of its member and received Rs 90 lakh against claim of Rs 4.13 crores shown in the society balance sheet. The society did not take Registrar’s approval for writing off receivable of Rs 3.23 crores. There are no entries passed in the books of society for receipt of Rs 90 lakh and loss of Rs 3.23 crore. The amount receivable is simply removed from society books. The amount of Rs 90 lakh received was distributed by way of cheque among old 96 members. Is this not illegal and amount to fabrication of society books accounts?
- e) Similarly society had a claim of Rs 9.88 lakh against another member. This amount was also removed from 2017-18 balance sheet without passing any entry in the books for recording the loss. Would it not be illegal and amount to fabrication of society books of accounts?
- f) In April 2016 for sale of 10 society flats the old members formed a Flat Sale Committee comprising of Chairman, Secretary and Treasurer and authorised the Secretary to charge society commission @ 0.75% of 10 flats sale value. The Secretary thus earned more than Rs 40 lakhs as management fee. Incidentally all the 10 flats were sold through brokers for which 1% commission was paid. Thus, commission earned by the Secretary was an additional burden. Proceeds of 10 flat sold is not recorded in the society books and distributed among the 96 members outside society books. Therefore, commission of Rs 40 lakhs paid to Secretary is not reflected anywhere in society records. Is Secretary entitled to such a huge payment as commission?
I look forward to your reply to above queries.
I C Naik
These are serious legal issues pertaining to financial management of the Society. Large amounts are in doubt. Legality has to be verified with contractual terms concerning redevelopment for which detailed scheme has been mandated by the Government.
The reporting requirements for society audit have been made very stringent in 2014 Amendments. You can give a copy of your mail to the auditor to take in to account. You can file a dispute in the cooperative Court about maintenance and about financial transactions of dubious nature.
One good option is file a Consumer complaint in the district consumer redressal forum on deficiency and unfair treatment to certain members by the Society. This is a most economical route as you need not hire a lawyer.