Amendments to the MCS Act 1960
The amended MCS Act of 1960 fails to address some of the important issues that concern residents of cooperative societies. Mohanraj Y provides an insight into the major changes that have been made in the MCS Act with specific application to the Housing Society Sector.
The 97 th amendment to the Constitution has inserted a new Chapter, Part – B regarding “the Co-operative Societies” in the Constitution, which recognizes the right of the people to form cooperative societies as as a fundamental right.
The new Article 43 B in Part IV of the Constitution envisions the state to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies.
This required that all the state governments amend their respective Co-operative Societies Acts to fall in line with the requirement of the amended Constitution. A time frame of one year was given for this purpose. In accordance with the requirement, the Governor of Maharashtra promulgated an ordinance on 14 February 2013. To meet legal requirements, the same was promulgated again on the 25 April 2013 and with some amendments to these ordinances, the amendments to the Act were passed by the State Legislature and published in the official Gazette on the 17 August 2013.
Some of the major changes that have been made in the statute with specific application to the housing society sector are mentioned below.
a. A concept of Active and Inactive Membership, relating the same to the right of the member to vote in any election and to contest in an election or eligible to be co-opted as a member of the Committee has been introduced.
An Inactive member has been defined as one who has not attended any of the General Body Meetings for the last five years and who has not utilised minimum level of services at least once during a period of five consecutive years. In the case of Co-operative Housing Societies, model Bye-Laws specifies this minimum level of Services as payment of one year of maintenance charges during the previous five years.
b. To ensure effective and active participation of members in the management of the societies; to groom talented employees to leadership positions; and to develop professional skills through co-operative education and training, provision of training to the members, to employees and all Managing Committee members including the office bearers has been made. Such training has been made compulsory to the MC members and the office bearers.
c. Investment of funds is permissible only in select banks – District Central Co-operative Banks or the State Co-operative Bank which have been awarded at least “A” Audit class in the last three consecutive years. and in other modes permitted by the Rules, or by general or special order in that behalf by the state government.
d. The major change is in the constitution of the Managing Committee.
… The Managing Committee strength cannot exceed 21 in any society.
… There shall be reservation in the Managing Committee as under.
… Women 2
… SC/ ST 1
… OBC 1
… Vimukta Jati , Nomadic Tribes
and Special Backward Classes … 1
… The vacancy in the reserved seats can be filled up only by active members belonging to the same category. If no candidate is available or willing to take up the post, the seat will remain vacant.
e. A State Co-operative Election Authority has been created, to conduct free and fair election to the Managing Committees of all co-operative societies. Henceforth, all the elections to the managing committees and the office bearers will be conducted by the State Election Authority. The tenure of the managing committees has been fixed for five years.
f. Till the recent amendments, the Annual General Body meetings were required to be held on or before the 14th of August every year. If any society could not hold the AGM by this date, the Registrar had the authority to grant extension of time upto the 14th of November. After the amendment, all the societies are required to hold their AGMs on or before 30th of September each year. The power of the Registrar to grant extension of time has been withdrawn.
g. The qualification and eligibility of auditors for empanelment for audit of co-operative societies audit has been clearly made out. The auditor has to be appointed by the General Body from the panel maintained by the Registrar. The auditor needs to complete the audit and submit his report by 31st of July.
h. Annual Reports have been prescribed which need to be filed with the Registrar within six months of the close of the financial year.
i. Most importantly, the power of Registrar to appoint an Administrator by dissolving the Managing Committee has been removed in the cases of societies where there is no government share holding, loan or financial assistance.
A brief history of housing cooperatives
The co-operative movement in the housing sector has been very strong and effective in the state of Maharashtra, particularly, in Mumbai. Initially, a few citizens joined together to form Co-operative Societies and constructed multi apartment buildings for their own personal use. Over the years, the activity of construction has been taken over by builders, who constructed multi apartment buildings and sold each of these apartments to different people and formed the Co-operative Housing Societies of these apartment purchasers for the purpose of maintaining the common area and to provide common services such as security, cleanliness etc. These Societies were registered under the Maharashtra State Cooperatives Act 1960 (MCS Act of 1960). The other option available to register these apartments under the MAHARASHTRA APARTMENT OWNERSHIP Act 1970 was not used by builders since this provided for conveyance of the land and the building, which the builders did not want to pass on to consumers easily.
The formation of Co-operative Housing Societies under the MCS Act was, and even today is, just a matter of compulsion, rather than conviction. Even though, the 97th Amendment to the Constitution recognises forming a Co-operative Society as a fundamental right, for a Housing Complex, the Society is formed not as a matter of right, but as a matter of compulsion. Until this fact is recognised by the law makers, whatever changes they make to the Co-operative Societies Act, the impact on Co-operative Housing Societies will be only administrative and not on the management. The way seems to be a separate law to manage the activities of Housing Sector.
Lacunae in the amended MCS Act
The MCS Act, even with recent amendments is not without flaws. Below are some of the shortcomings which should have been addressed.
… The present law does not recognize and define responsibility, liability and accountability of a member towards other members. For e. g., If there is seepage of water from a flat, resulting in damage to the property of the flat below/his neighbour or even the entire building, the MCS Act is silent as to how to deal with such a situation.
The continuation of the provisions of MOFA after the Society is registered, with the result, the builders get away with all the wrong doings, without any remedy under the MCS Act. (This is what you had given and I have rewritten the same…is it ok?)
… The continuation of the provisions of MOFA (Maharashtra Ownership of Flats Act) after the Society is registered allows the builders get away with all the wrong doings, as there is no remedy under the MCS Act after the Society is registered. There is a time lag between the building being ready for occupation and the society being registered and administration handed over to the elected committee. During this period, a builder manages the building, pays the taxes, and meets all the statutory and administrative expenses. For this, the builder collects an advance amount at the time of sale, and also raises regular maintenance charges bills. Some members pay, and some do not pay. At the time of handing over, the builder sets off the outstanding dues from such members against the amount payable by them to the registered society. However, the society does not have any legal standing to recover such outstanding dues from the members. There is a vacuum in law in this regard.
… The Co-operative Sector for which the MCS Act has been framed is a business model, with ultimate goal of making profit. The housing societies, however, function as a nonprofit organisation.The applicability of the present Co-operative Societies Act for the housing sector is therefore a mis-fit.
… The rights of a member in a housing society are subject to the membership rights as defined under the MCS Act. The member`s right over property, i.e, the apartment or flat is subject to Transfer of Property Tax, and various other acts pertaining to property. There is no synchronisation of the two rights- right as a member of the Society and the right as a Property Owner - as a result the law provisions are many a times interpreted very differently. For example, while the MCS Act provides for nomination, wherein after the death of the member, the share certificate is transferred to the nominee, it is ruled that the nominee holds the flat as a trustee of the legal heir/s. While the public perception is that the Share Certificate in one’s name is a sufficient proof of ownership of the flat, in reality, it need not be. There is a conflict of understanding. Similarly, while all the property related laws recognise joint holding of property with equal or proportional rights as stated in the document, the MCS Act does not recognise joint membership. Only the person whose name appears first in the Share Certificate enjoys the rights of the membership, whereas the person whose name appears second in the Share Certificate enjoys limited rights as an Associate Member.
…. The rights of voting through proxy/authorised representative is not provided in the present statute, whereas there is a need for such a provision. The apartment owner may not be in station or may not be able to attend the meeting, but to make his voice heard, it is necessary that he be allowed to send his representative. MCS Act does not provide for this.
… One member One vote is also a mis-fit for a Housing Society environment. Proportionate voting right, based on the property holding must be provided.
… The equitable basis of sharing of expenses by the members is not defined in the Act. Though the Model Bye-Laws provide a basis, they lack legal sanction. Of late, with the ultra modern amenities packed within the complex, and with multi- societies being registered within a complex, there is a need to look into the provisions made in the Model Bye-Laws and probably, a complete free hand given to the societies to determine what is equitable for their society.
The amendments made in the MCS Act do not address these concerns. It is high time, the law makers look into these aspects and make the MCS Act more robust.
This Article published on the magazine OneIndia OnePeople dated November 2013 Vol 17/4.