Query of Prakash Sheth on CHS

In our housing society, elections were held recently. Out of the elected committee members, 3 are such who have not paid their arrears to the society since more than past 2 years, despite receipt of bill from the society (about major repair fund). Their arrears were shown in the balance sheet, which was duly audited and which was duly approved in the next AGM in which they were present. However, in those 2 years, the society/committee never issued any written notice to them, demanding the arrears.

My query is, Naik Sir, can these 3 committee members be termed as defaulters to attract action u/s 73-CA..?

Do please drop in your reply, with citations/authorities as applicable, if any.

 I C Naik

RESPONSE

As the elections were held recently it is presumed that rules governing Nominations scrutiny and rejections etc laid down under the Maharashtra Co-operative Societies (Election to Committee) Rules, 2014 were complied with by SECA’s representatives. As the Election Authorities did not reject the nominations there are reasons to believe that the requirement of Notice of three months is quite serious. Let us see the legal position ourselves.

1. Sub-Rule (3) of Rule 21 is reproduced below.

“(3) Any person who is not subject to any disqualification as a voter under the Act, these rules or bye-laws and whose name is entered in the list of voters for the constituency, for which the candidate is nominated, may subscribe as proposer and seconder :

 Provided that, the nomination paper shall be accompanied by an affidavit , specified by SCEA, mentioning the candidate is not disqualified under section 73CA of the Act and the attested copies of caste certificates.

2. If your society’s registered Bye-Laws in force, are based on Model Bye-Laws 1984 then these three members are definitely disqualified under Bye-Law No 117 which declares a member to be disqualified to contest election if “(ii) he is in default to the society, in respect of any charges due from him or in respect of the demand made by the society towards the shares, or any other charges payable to the society for more then 60 days prior to the date of filling the nomination.”

As per Bye-Laws No 72 of this Model,” the Secretary of the society, shall prepare demand notice in respect of the charges of the society payable by members” and this is done by every CHS routinely.

In this situation the Election Authorities are at fault. One can raise a dispute under Section 91 for allowing a disqualified member to contest election.

3. However for some weird reasons  under the MCS Amendment Act 1986, when Section 73Ff (now 73CA) was inserted the defaulter definition for a housing society [Sub-Section 1(e)] was drafted as under:

“(e)in the case of housing societies, a member who defaults the payment of dues to the society within three months from the date of service of notice in writing served by post under certificate of posting demanding the payment of dues;

4. In subsequent model Bye-Laws the afore-said Clause (ii) of Bye-Law No 117 has been substituted by the above mentioned text in Section 73FF of the MCS Act 1960. The Act being superior to Bye-Laws the condition for disqualification under 1984 Model Bye-Laws  was made more stringent from the management point of view. For the purpose of suspending a right to join the Committee, a member needs to be served additional Notice giving three months’ time to clear the dues. The reason could be that in CHS most members hesitate to come forward to take responsibility of management hence the disqualification for just 60 days’ default worked against the Society’s interest. A specific Notice is required as an alarm bell for member to wake him up and pay-up so that he is available to join the Committee.
5. If your CHS has by chance adopted Model 2014 as your Bye-Laws, then the three Members would get disqualified even in the absence of additional  Notice referred  to in Section 73CA as can be seen in this clause of Bye-Law No 72.

(a).A Member shall be deemed to have committed default in payment of the charges of the Society, if the payment mentioned in the demand notice/bill is not made within the period as prescribed under Section 73CA of the Act. The Secretary of the Society shall bring the cases of defaults in payment of the Society’s charges to the notice of the Committee for taking further necessary action.

1. In case of default by Member in payment of maintenance and service charges, the committee shall initiate a recovery proceeding under section 101 of the Act.
2. These three members could also be disqualified to contest any cooperative elections up to 5 years for making a false declaration in the Nomination form as required under Rule 20 of the New Election Rules in Form E-5 appended thereto. This declaration reads as under:

“I hereby declare that I do not incur any disqualification under Section 73 CA of Maharashtra Cooperative Societies Act, 1960 .”

7. It is also true that a member in management does not pay the society dues then how they will insist on others to ay regularly. A serious member should make a written request to to the Registrar of cooperative societies for taking steps in respect of over- due outstanding of members of the Committee as provided U/S 101(2) reading as under:

(2) Where the Registrar is satisfied that ⁹ [the concerned society has failed to take action under the foregoing sub-section in respect of any amount due as arrears,] the Registrar may, of his motion, after making such inquiries as he deems fit, grant a certificate for the recovery of the amount stated therein to be due as arrears and such a certificate shall be deemed to have been issued as if on an application made by the society concerned.

8. The Committee will come under pressure to issue Notices as required U/S 73CA to the defaulting members. After three months if the members did not clear up they shall  automatically cease to be the members of the Committee as provided in Bye-Law No  120(1)(a)  Model 2001,2009 and 118 of Model 2014.
9. If you want to put more pressure, you can try this possibility also. Inform the Registrar to disqualify the Secretary for his failure to discharge his duty under Bye-Laws namely “The Secretary of the society shall bring the cases of defaults in payment of the society’s charges to the notice of the committee for taking further notice of the Committee for taking further necessary action.”

If the members are not alert the management of the society will deteriorate and eventually fall in to wrong hands permanently.