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Most important message to all the members of the Managing Committees of Co-operative Housing Societies is that if they are contemplating a redevelopment of their property then their entire exercise of redevelopment process shall be futile, ineffectual and can be derailed if they are not legally elected in accordance with  the strict provisions of “Election Rules” of Byelaws governing the Co-operative Housing Societies in Maharashtra and as per the Acts and Rules of Maharashtra Cooperative Societies, 1960 and 1961 respectively.

Following the holding of lawful elections, most important and the time-bound function is the mandatory filing of Indemnity Bonds executed by each of the Managing Committee members within 15 days from their assuming the charge of the Society (with effect from 14/1/2011 within 45 days).  

Even delay for a single day caused beyond this period and they shall cease to be members of Managing Committee. In other words, the entire Managing Committee shall be considered as non-existent one. These directives are compulsory in nature and the implementation of the same is the bounden duty of every Managing Committee member.

The legislature having experienced and realized that the members of the Managing Committee of different Co-operative Societies were acting in an arbitrary manner, with a view to have some accountability amongst the members of the Managing Committee, enacted a provision in the Maharashtra Co-operative Societies Act, 1960 ("MCS Act") mandating every member of such Managing Committee to execute a bond within specified time frame.

If the Managing Committee member fails to execute the bond, then such member shall be deemed to have vacated his office as member of the Managing Committee. This provision had been given effect by Section 73(1AB) of the MCS Act and Rule 58-A of MCS Rules. 

This legislation was challenged by a Writ Petition filed in the Bombay High Court (Writ Petition No. 457 of 2007) under Article 226 of the Constitution of India on the ground that the same is ultra virus. However, the Bombay High Court upheld the legislature’s act and confirmed the insertion of Indemnity Bond in Form M-20 in MCS Act.

The intention of the legislature was to make the members fully aware of their personal responsibility and liability towards the Society and its other resident members. The time limit laid down under Section 73(1AB) is mandatory and the elected committee members have to hand over the bond to the Deputy Registrar of Co-operative Society within such stipulated time. 

This ruling of the Bombay High Court in the aforesaid writ petition emphasizes the basic principle of "Ignorance of Law is not an excuse" i.e. being unaware of the provision contained in Section 73(1AB) of the MCS Act cannot be used an excuse for the failure to execute the bond within the stipulated time.

Attention is also invited to the Bye-law no 136 of the old Model Bye-Laws and Bye-Law no 138 of the new Model Bye-Laws governing the Housing Co-operative Societies in Maharashtra which read as under:

"The members of the Committee shall be jointly and severally liable for making good any loss which the society may suffer on account of their negligence or omission to perform any of the duties and functions cast on them under the Act, Rules and Bye-laws of the Society."

In addition to the above Bye-Laws, an amendment was inserted by Maharashtra Government, 41 of 2000, S. 3 of the amending Act (i.e. 23-8-2000) to Section 73 by introducing Section (1AB) to the Maharashtra Co-operative Societies Act 1960. Similarly Rule 58-A was inserted by G.N. of 18-2-2002 in the Maharashtra Co-operative Societies Rules, 1961 and an Indemnity Bond in new form, M-20 was also inserted by G.N. of 18-2-2002 whereby the elected members of Managing Committees are required to declare that they are jointly and severally responsible for all the acts and omissions detrimental to the interests of the Society.

Called the MCS (Amendment) Rules, 2002, the new rules were strictly made applicable to Co-Operative Banks, Co-Operative Federations and Co-Operative Housing Societies among the others.

Upon challenging such serious lapse and failure to execute the required Bond on the part of Managing Committee under the recourse of law by any dissenting and rebellious member of the Society, even the resolutions passed and subsequent execution of documents if any, can be considered void of legal importance and handing over of the property of the Society to the Developer for redevelopment could also be considered unauthorized and perhaps be subjected under Indian Penal Code Section 120A i.e. Criminal conspiracy with Developer by attempting illegal act, Section 405 and Section 415 i.e. Criminal breach of trust and cheating with the members of the Society.

Most Societies are found to be uninformed, naive or are simply ignoring to file the Indemnity Bond which is fundamentally an important aspect towards the Redevelopment process. Now what happens to these Housing Societies where managing committees are unaware, ignorant or have simply ignored or not bothered about the bond? In such cases, according to Registrar’s office “We offer to disband the committee and call for fresh elections”

Rule 58-A of Maharashtra Cooperative Societies Rules, 1960 states that every elected member of the Managing Committee shall execute an Indemnity Bond in Form M-20 within 15 days from assuming the charge of the Society (with effect from 14/1/2011 within 45 days).

Such Indemnity Bond shall be executed on the stamp paper as provided under the Bombay Stamp Act, 1958.

The expenditure on stamp paper shall be borne by the Society. The Secretary of the Society shall receive such bonds and keep them on the record of the Society and accordingly shall inform the compliance of such execution to the Dy. Registrar of Cooperative Societies with due acknowledgment obtained, within the specified number of days from the date of election of the Managing Committee and its assuming the charge of the Society.

The Indemnity Bond in required format under Form M-20 has to be filled in and submitted by each Managing Committee Members which states that the member shall be jointly and severally responsible for all the decisions taken by the Managing Committee during its term relating to the business of the Society and shall be jointly and severally responsible for all acts and omissions detrimental to the interest of the Society as provided in Maharashtra Cooperative Societies Act, 1960.  

The member who fails to execute such an Indemnity Bond within the specified period shall be deemed to have vacated his office as a member of the Managing Committee. Bombay High Court, as stated above, has resolutely upheld this provision of Maharashtra Cooperative Societies Act, 1960.

There are several instances of disgruntled members filing cases against the Managing Committees for not having executed the mandatory bonds and ultimately the process of Redevelopment derailed. The Managing Committees were even got caught and slapped with fraud and forgery charges for entering into Redevelopment agreement with the Builders as had happened with one of the Co-operative Housing Societies named Rachna Co-Operative Housing Society on Hill Road in Bandra, Mumbai.

The Managing Committee of Rachna Co-Operative Housing Society had entered into an agreement with a Developer for redevelopment of their property without executing the mandatory Indemnity Bonds in Form – 20 under Section 73(1AB) and Rule 58-A of MCS Act. When the Managing Committee realized that the deal will fall through for not having executed the Indemnity Bonds within fifteen days of their election, the elected members resorted to trickery by purchasing stamp papers and deceptively back-dating the Indemnity Bonds.

However an alert member of this Society found their trickery and registered criminal case against each of them for forging and falsifying the valuable security under Sections 465, 467 and 471 of the Indian Penal Code. The erring members of the Managing Committee were arrested and later, were released on bail.  

The advocate of the petitioner firmly contended in the Bombay High Court that the members not having filed indemnity bonds with15 days of being elected cease to be the part of Managing Committee and all documents signed by them since they have ceased to be Managing Committee members are illegal and cannot be given effect to proceed in any matter pertaining to the society’s day to day affairs.

First and foremost important aspect for any housing society is that the resident members must ensure that their Office-Bearers and other members of the Managing Committee are elected as per the provisions of Maharashtra Co-operative Societies Act, Rules and Bye-Laws. In short, the Managing Committee must be legitimately constituted.

Housing society members should ensure they elect members who are matured, sincere and having basic knowledge of Bye laws of the Societies. Care should be taken not to elect office bearer’s who have consistently flouted provisions of Co-operative Act, Rules and Byelaws to further their own self interest, committed serious financial irregularities with the Society’s funds, having suspicious records, corrupt backgrounds, continuing in the Managing Committee with no fruitful contribution or the Managing Committee which has year after year not carried out Audit of Accounts of the Society as required by law with an intention to hide their financial mismanagement and economic carelessness from their members for fear of getting exposed. 

Such members cannot be trusted to finalize and sign Redevelopment agreements and related documents with the prospective Developers in a transparent manner. Also there are Office Bearers who hold on to the posts of Chairman and Secretary for decades by hook or by crook because for them it is a very, very rewarding business.

These Office Bearers will make a show of resigning or stepping down when they see there is non-cooperation and commotion from the rest of the resident members, but will never do so in reality. They somehow manage to hang on to their lucrative posts. Hence remember the saying – “Do not trust or follow the Office Bearers of your Managing Committee blindly in any Redevelopment process”.

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 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.

Because of such extensive and widespread irregularities and corrupt practices amongst the Office Bearers/members of the Managing Committees in forcing the other resident members of the Society and to sub-serve their corrupt motives in illegal nexus with the Developers, Dr. Sudhirkumar Goyal, Principal Secretary, Co-operation Department, has come out with a Dos and Don’ts to be strictly followed by Societies going for Redevelopment vide Govt. of Maharashtra notification no. CHS 2007/CR554/14-C dated 3rd January, 2009. First and foremost, Office Bearers of the Managing Committee must be elected as per provisions of Byelaws and permission from the Dy. Registrar of Cooperative Societies is obtained before executing the Development Agreement.

Another most important aspect of administration of any Housing Co-operative is the adoption of new Model Bye-Laws. It has been observed that Societies, who have adopted Model Bye-Laws in their special general body meetings, have not adhered to the procedure of adopting the New Model Bye-Laws. The process is not complete unless these Bye-Laws are sent to the Co-operative Department for registration under Section 13 read with Rule 12 of MCS Act.

The registration is absolutely necessary and that simple adoption of Model Bye-Laws by the Society is not enough to meet the legal requirements and the new Bye-Laws become enforceable and valid only after its registration with the office of Registrar of the Societies and in case of undue delay, the Co-operation Department at Mantralaya may be approached. Hence, to avoid any legal impediments at a later date while the Society contemplates the Redevelopment, they must ensure that their Managing Committee and the Society is a lawful entity to proceed ahead with the Redevelopment of their property.

There are several instances of incomplete or misleading information prevailing among the Housing Societies and flat owners as well that are planning for redevelopment. Controversial court judgments add to the confusion and such Housing Societies get stuck at some point due to lack of information, knowledge, contact with right kind of counselors, analysts, advisors etc. Many societies do not have conveyance and hence, the entire process can break down in an instant.

 

Please educate yourself and caution your friendly neighbors to be vigilant from Irregularities and illegalities in Redevelopment by the Builders, Illegal gratifications showered by Builders on corrupt members of Managing Committees, Rampant Corruption in BMC, Flagrant violation of Rules and Regulations by the Builders, how to beware of Cheat and Fraud Builders and their criminal and felonious acts.

 

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