Share this

By Ramesh S. Prabhu

Non-Members-Pending Formalities
In case of the flat owners type of Society whether formed with the Co-operation of the Builder or Non Co-operation of the builder, we always find some members do not become the members of the Society. If the flat owners does not become the member, the case u/s. 101 cannot be filed.
When a member expires keeping a huge of amount of Society dues and the legal heirs / nominees also do not pay the dues nor they become complete the necessary formalities to become the member, in such cases also recovery suit u/s 101 cannot be filed.
In many cases the office bearers of the Society commit misappropriation or fraud of the Society funds. Even after proving such fraud /misappropriation the recovery cannot be done u/s. 1010 of the M.C.S. Act, 1960. A criminal case will have to be filed separately to recover such misappropriated funds of the Society.
Many times it so happens that Builder also does not become the member in respect of the unsold flats/shops. It is more seen in case in case of formation of societies under Builders non co-operation category. In such cases also, if builder does not pay the maintenance of the Society, the recovery suit cannot be filed u/s. 1010 of the M.C.S. Act, 1960.
When any recovery suit is to be filed under Section 101 of the M.C.S. Act, 1960, the Society should be aware of the type of dues which can be recovered from the members. If any penalty or charges which are not provided in the Act, Rules or the Bye-law of the Society, the same cannot be recovered u/s 101 of the M.C.S. Act, 1960. Therefore, we have mentioned separately the charges which can be levied and the basis of levy of charges is also explained.

Writing off or outstanding found irrecoverable
Subject to the model Bye-law no. 150, the Society may write off any loan and interest thereon, Society’s charges due from the members, the expenses incurred on recovery thereof and the accumulated losses,
which are certified as irrecoverable by the Statutory Auditor.
The amounts mentioned in model Bye-laws No. 149 shall not be written of unless:
the meetings of the General Body of the society has given due sanction for writing off the amounts.
The approval of the financing agency to the writing off of the amounts, if the Society, is indebted to it, is obtained.
The approval of the registering Authority is obtained.
Provided that if the Society is affiliated to the District Central Co-op. Bank or any other financing agency is not necessary.
Provided further that if the Society is classified as A or B at the last Audit no such permission of Bank or the financing agency or the Registering Authority is necessary, if there is sufficient balance in the bad debt fund, specially created for the purpose to cover the amount proposed to be written off.

Question and Answer
Q. When is the member termed as a defaulter ?
A. If on the due date of bill, the member does not make the payment, than he can be categorised as a defaulter. Societies in such circumstances can also charge interest. However it is important that there should be a demand upon the member.

Election by Defaulter
Q. Can a defaulter contest the election ? Can a defaulter propose or second candidate for the election ?
A. A defaulter cannot contest the election. However, a defaulter can propose or second candidate for the election.

Prior claim of society
Q. Does the society have prior claim on the shares of a member if the member has become insolvent or is unable to pay his debts to the financiers/business associates ?
A. As per Section 47 of the Maharashtra Co-operative Societies Act, 1960, it is clearly specified that the society has prior claim on the amount recoverable from a member subject to prior claim of Government in respect of land revenue, or any money recoverable as land revenue as per the provisions of Section 60 and 61 of Code of Civil Procedure Code 1908. The language used in the section also includes the word notwithstanding anything in any other law for the time being in force. This implies that amongst all the claims except for Government claims the society would be getting the first charge on the shares of the defaulter, therefore in my humble opinion, the claim of the society will have to be discharged first before amounts are payable to the financiers / business associates.

Rebate to members
Q. Can the society give rebate to members for prompt payment of dues ?
A. Normally Societies charge interest from defaulting members. If rebate is being given for prompt payment then the defaulter is penalised twice for the same act (i.e. he looses the rebate facility and simultaneously has to pay interest on the defaulted amount). As per the principles of equity and natural justice a person should not be penalised twice for a particular act. We have not come across any case law on the above said subject. It may be mentioned that there are number of societies which are offering rebate for prompt payment as nothing is mentioned in the Bye-laws pertaining to granting rebate. However, we are of the opinion that Society must not grant rebate to members. Clarification from the office of the registrar with regards to granting of rebate will be of immense help to the Societies.

Recovery fees
Q. What is the amount of Enquiry Fee and Court Fee that has to be paid by the Society when the Society proposes to recover the dues from defaulting member under Section 101 of the MCS Act ?
A. If the defaulter does not respond to the request made by the Society then the Society obviously does not have any other alternative but to recover the dues from the defaulting member. The Enquiry Fees and the Court Fee Stamps have to be paid on the amount of claim as made out against the defaulting member. Increase the amount to be recovered from the defaulter is below Rs. 1,000/- then the Enquiry Fee that has to be paid by the Society is 5.5% of the claim and Court Fee Stamp have to be affixed of Rs. 15/-. Incase the amount to be recovered from the defaulter is between Rs. 1,01/- and Rs. 2,000/- then the Enquiry Fee that has to be paid by the Society is 4.5% of the Claim and Court Fee Stamp have to be affixed of Rs. 20/-. Incase the amount to be recovered from the defaulter is between Rs. 2,001/- and Rs. 5000/- then the Enquiry fee that has to be paid by the Society is 3.5% of the Claim and Court Fee Stamp have to be affixed of Rs. 20/-. Incase the amount to be recovered from the defaulter is Rs. 5,000/- and above then the Enquiry Fee that has to be paid by the Society is 3% of the Claim and Court Fee Stamp have to be affixed of Rs. 25/-. The maximum Enquiry Fee is Rs. 1,000/-. The Enquiry Fee is to be paid to the Reserve Bank of India by Government Challan Account 0425 Co-operation, 800 other receipts XVII Notice and Recovery Fees.

Recovery of Dues with Recovery procedure
Q. Some members of our society do not pay their dues inspire of repeated requests. When the office bearers go to recover the dues from other members raise the plea that even if we are late by a few days to pay the dues you charge us interest. Please inform us in detail about the various steps to be taken to recover the dues including the amounts to be paid to the Government Authorities ? We have been given to understand that now it is not compulsory for housing societies to go to the Co-operative Court to recover the dues and the Asst.Registrar / Deputy Registrar can help us out in the above matter ?
A. IT would be advisable if the members of the Committee meet the defaulting members in person and try to discuss out the issue with the defaulters. The defaulters should be firmly told that the Committee has to keep the same policy for all the members and on account of them being in default other members of the society also complain to the office bearers particularly when members have to pay the interest. In case the defaulters do not wish to pay the dues then the office bearers should issue notice for recovery of dues. Inspite of the same if the defaulters do not pay the dues that a suit can be field before the Asst. Registrar / Deputy registrar u/s. 101 for recovery of dues. With the amendment of Section 101 the dues payable be members of a Co-operative Society can be recovered faster. Even the office bearers can do recovery under Section 101 themselves. It is not compulsory to file a suit in a Co-operative Court for Recovery of Dues.
The procedure for recovery of dues is as under :-
Issue a notice for payment of dues to the defaulter.
Pass the resolution to recover the dues in the Managing Committee Meeting.
Issue a final notice to the defaulter.
Apply to the Asstt. Registrar / Deputy Registrar for the recovery of dues.
Pay the prescribed fee.

The fee has to be paid through a challan payable at the Reserve Bank of India.
The rate of fee payable is as under :
Amount (Rs.) Scale of fee court fee
1,000/- 5.5% Rs. 15/-
1,001/- to 2,000/- 4.5% Rs. 20/-
2,001/- to 5,000/- 3.5% Rs. 20/-
5,001/- & Above 3% Rs. 25/-
Maximum Fee Rs. 1,000/-

The above said fee has to be credited in Reserve Bank of India by Government Challan under the head of account.
“0425 Co-operation
800 Other Receipts
XVIII Notice & Recovery Fees”

Disconnection of Essential Services
Q. Can the office-bearers of the society disconnect essential services like electricity, water supply, etc. of defaulters, who refuse to pay the securities dues inspite of repeated requests ?
A. Law cannot be taken in one’s own hand. Essential services like electricity, water supply, etc. are necessary for the occupants. IT is our sincere advice that office-bearers, and / or manager should not disconnect the essential supplies irrespective of the the dispute with the defaulter. If the aggrieve party flies a criminal complaint then the person found guilty for disconnecting the essential service/s can be punished with imprisonment which can extent upto a period of three months and/or fine. If the member refuses to pay the dues then you can recover the dues by filing a suit against the member. The procedure for recovery of dues u/s. 101 is very simple and the office bearers can themselves recover the dues. We have observed that societies can get the recovery certificate without even appointing a lawyer.