MahaREAT: earnest money can only be held accountable for the alternative claim of reimbursement

By Fiona Mehta

This article examines the matter of Samudra Darshan Co vs. Peter Almeida & Ors (AT006000000053403)

 

Facts of the case: The first two appeals’ appellant, a cooperative society, nominated Respondent No. 3 as developer via redevelopment agreement (RDA) dated 08.07.2005 for developing the property under its occupation, according to the appeals’ brief factual matrix. According to the aforementioned agreements, Respondent No. 3 had the right to sell apartments in the selling component only if the rehabilitation of the members was complete. After receiving the required approvals, Respondent No. 3 started building in 2011 and also started selling apartments in the sale component, which would be built in accordance with agreements with the Society. The claim of the allottees is that they paid a total of Rs. 64.50 lacs for the flat number 1103 in wing “C” of the sale component building, against which a sum of Rs. 6,17,550 was given as an earnest money deposit. To that end, it is asserted that Respondent No. 3 also issued an allocation letter dated 11.06.2011.

With time passing, the Society terminated the RDA through a deed of cancellation signed by the Society and Respondent No. 3 on September 16, 2014, as a result of Respondent No. 3 failing to fulfil the obligations it undertook under the said RDA and due to the project of redevelopment being abandoned. As a result, on 21.10.2014, the Society appointed Respondent No. 7 as the new Developer by signing a development agreement. Subsequently, a public notice dated 30.04.2015 was also published in the newspapers for the general public’s awareness.

The new Developer registered the project under RERA once RERA went into effect in May 2017. Following this, the project’s allottees filed a complaint with MahaRERA asking for instructions to the new developer to assign the flat in the building and further instructions to the ex-developer or the new developer to execute a sale agreement with the allottees in accordance with the allotment letter issued to them by the ex developer on June 11, 2011. Alternately, allottees asked the respondents to reimburse them for their payments, plus interest, and pay them compensation of Rs. 50 lacs.

In the current situation, it appears that Society has no contractual relationship with the allottees under the circumstances, and the transaction is solely and exclusively between the allottees and the former developer. Whether or not the development agreement between the Ex-developer and the Society is cancelled, the facts collected in this case are clearly within the ratio of Vaidehi.

Furthermore, it is noted that the new developer was chosen by the society and has not signed a contract with the former developer. As a result, it cannot be held accountable for keeping promises made to allottees by the former developer, contrary to what the authority incorrectly stated, particularly in para. 19 of the original order and as reiterated in the order under review application. As a result, neither the society nor the new Developer that it chose are required to acknowledge the allottees’ claims as requested in the case.

Order: In light of the aforementioned observations, the Society and new Developer cannot be held accountable to allottees due to the lack of privity of contract, and as a result, allottees are not entitled to the relief claimed in the complaint against the Society or new developer. Since a new Developer has already taken over the project in these circumstances, no flats can be made available to project allottees.

Due to this, the ex-Developer who has received the earnest money from the allottees can only be held accountable for the alternative claim of reimbursement made by the allottees, if any. For the aforementioned reason, it would be acceptable to remand the complaint so that the Authority can decide on the refund amount again and identify the previous Developer’s responsibility for it after speaking with the interested parties.

In the above circumstances, we are of the view that impugned order cannot be sustained and the same deserves to be set aside.

Can residential flat in housing society be used as office?

image description

By Legal Cell

USER of Residential premises for professionals purposes : Relevant Bye-Laws :

Under Bye-Law No.78(d) of the model bye-laws of 1984 and Bye-law no.76(a) of the new model bye-laws of 1984 and Bye-law No. 76(a) of the new model bye-laws of 2001 no mem- ber of the Society should use the flat deemed to have been allotted to him for a purpose other than for the one for which it has been allotted.

Entire flat can be used for professionals and part of the flat can be used for business offices :

In general a misconception is prevailing in the housing societies in Mumbai that a residential flat can be used only partly for professional office or is also misconceived that a residential flat cannot be used for business office at all. CRUZ of the judgements on user of residential flats is that even if the entire flat is used by a professional person for the practice of his profession, there is no change of user to a commercial one and there cannot be a prohibition for the same. If the flat is partly used for business office, then also if the dominant user is residential, there is no violation of the provisions relating to the change of user.

Distinction between business and profession :

The constitution of India while ensuring under Article 19(1)(g) to all citizens the right to prac- tice any trade, business or profession has maintained a clear distinction between carrying on a trade or business as against practicing a profession. The reason underlying the distinction is that unlike in a trade or business, a profession is practiced without any underlying profit motive. What a practicing professional renders to his client is his services essentially based on his qualification, personal skill and intellectual capacity.

All the learned professions have certain common characteristic like statutory recognition of the profession and adoption by the members a self contained code of conduct with statutory checks and boundaries to ensure professional integrity and character alongwith competence of the members of the profession so as to inspire confidence of the people in the profession.

The Supreme Court also has in several judgements maintained the above cited distinction between a trade and business on one hand and the practice of profession on the other hand.

The legality of user of premises is governed by the local laws applicable in various states in respect of Shops and Establishments Act, 1948.

Case law on firm of lawyers :

In V.Sasidharan V/s Peter and Karunakar (1984) 65 FJR 374 (SC), the question for decision before the Supreme Court was whether the office of a lawyer or of a firm of lawyers is or is not a commercial establishment within the meaning of the Kerala Shops and Commercial Es- tablishments Act (34 of 1960). The SC held that it does not require any strong argument to justify the conclusion that the office of a lawyer or a firm of lawyers is not a “shop” within the meaning of section 2(15).”

The Supreme Court has also, in several judgements reiterated this fundamental distinction.

In National union of Commercial Employees V/s Industrial Tribunal (1962) 22 FJR 25, the Court held that a firm of solicitors was not an “industry” within the meaning of section 2(j) of the Industrial Disputes Act and that the services rendered by the firm were only in the indi- vidual capacity of the partners and very much dependent on their professional equipment knowledge and efficiency.

Case law on private dispensary :

In yet another case of Dr. Devendra M. Surbi V/s. State of Gujarat (AIR 1969 SC 63 6T), the Supreme Court had occassion to examine the definition of “Commercial Establishment” in section 2(4) of the Bombay Shops and Establishments Act, 1948 and construing the word “Profession” appearing in association with the words “Business and Trade” in the said sub section, held that a private dispensary of a medical practitioner did not come within the defi- nition of “Commercial Establishment”.In Dev Brat Sharma V/s. Dr. Jagjit Mehta C.A. No. 4216 of 1988, the Supreme Court held that the user of residential premises under tenancy for the purpose of the doctor’s clinic did not tantamount to change of user.

West Bengal Govt. tried amendment of Shop and Establishments Act :

The same conclusion was reached by the Calcutta High Court in Dilip Kumar V/s. Chief Inspector (Shops and Establishments) (1986) 69 FJR 100 (Cal). In this case, the question for consideration was whether the inclusion amounted to an unreasonable restriction violative of article 19(1)(g) of the Constitution.

Yoga Classes :

In the case of Pant Nagar Anandlok CHS LTD. it was decided that carrying out activities like conducting yoga classes in a residential flat does not constitute breach of bye-laws of a Co- op. Housing Society.

The dispute in question had been field by the Pant Nagar Anandlok Co-op. Hsg. Soc. Ltd. against one of its members and his wife, seeking a declaration that the yoga activities of the member were violative of the bye-laws and were illegal. Further the society claimed in the dispute that this member herself or through her agents or servants be permanently restrained by an order or injunction from, in any manner conducting the yoga classes.It was stated in the complaint that the society received complaints from its members that because of the yoga classes, there was a lot of harrassment to the neighbours, the members of the society and to the public at large. The society particularly referred to the fact that fashionable ladies and girls and hippy type persons visited the society’s premises, who spoke loudly that caused a lot of annoyance. The sandals, chappals and shoes in the passage cause obstruction for use thereof by the members of the society.The ailing persons, who could benefit from yoga were sometimes referred to her by doctors. On an average in a day, 30 to 40 persons used to attend the yoga classes which she taught between 7.30 am to 7.30 pm.

The Judge referred to some rulings which were as follows:

Lakshman Sintre V/s. Balkrishna K. Shetye, B.L.R. page 937; B.R. Oswas V/s. Lakshmibai

B.L.R. page 214; University of Delhi and others (AIR 1963 S.C. page 1873); K. K. Karunanidhi and others (AIR 1073 Madras page 443) Appellate Court; Sant Ram V/s Rajinderlal and others, Supreme Court (1979); V Sasidharam V/s. Peter (AIR 1984 SC page 1700).

Drawing analogy from these verdicts, the Judge, in the case in question, decided that there was no breach of bye-laws or regulations of the society. The Court also directed the Respon- dent Society to pay Rs. 100/- as costs of the appeal to the appellant.

Office of Chartered Accountant :


Phillipos & Co. Vs. The State of Karnataka C.C. No. 21496 of 1987 :

Case under Karnataka Shops and Commercial Establishment Act, 1961 – office of the part- nership firm of chartered accountants not a commercial establishment as C.As. carry on profession like lawyers or a doctor and do not carry on trade business.

Observations :“A reading of the provisions of the Chartered Accountants Act 1949 and the Regulations would make it amply clear that a chartered accountant in practice has manifold functions and duties to be observed by him and that apart for possessing required qualifica- tions he requires special skill, learning and experience in the discharge of his duties.A pro- fession is a vocation or occupation requiring special usually advanced education and skill. The work and skill involved in a profession is predominantly mental or intellectual rather than physical or manual.”

Society Landmark Judgement Book Launched for Maharashtra

By Legal Cell

The Book : “Landmark Judgments on Housing Society Matters in Maharashtra”  is launched today on Saptakala.com/books. The e-book is available on the website and hard copy shall be available after Lockdown is lifted.

The book has more than 35 Landmark Judgments reported and analysed with citation and verbatim orders of various courts including Supreme Court, Bombay High Court, Maharashtra Society Appellate Tribunal and government notifications in housing society matters.

The book is Authored and compiled by Advocate Dr Sanjay Chaturvedi along with co-authors Adv Akhand Pratap Singh and Adv Chandni Janyani.

Topics covered are car parking, non occupancy charges, society redevelopment, income tax, GST, charges, membership rights and other main topics.

 

The first edition is available on Saptakala.com along with other books. It can be read on any PC, mobile etc. you can reserve your hard copy also by paying advance.

 

Happy reading.

One member, one Vote For Housing societies: Supreme Court

By SRELJ Bureau

Can   the   bye-laws  of  a   co-operative  housing          society           cur – tail the voting rights of different members of a holding separate flats in the building? No, says the  supreme  court:  it’s  one  flat, one  vote. The multi-flat family problem has cropped up in scores of housing societies throughout India where different wings of a family purchase independent flats in the same building. This allows them the privacy of a nuclear family and the support of a joint family. For the society, however, this agreeable set-up can have its own problems. Since the family owns a number of flats, a little cartel is formed and this influences voting patterns in the society. As a result, one housing society in Mumbai decided to restrict voting rights to one vote per family regardless of the number of flats owned by different members.

 

A dispute arose amongst the members of the Merry Niketan Co-operative Housing Society Ltd at the time of preparing the voter list. A provisional list of voters listed the names of 35 members. While preparing the final list of voters, the managing committee resolved that in accordance with the society’s bye-laws, a member holding more than one flat would be eligible for one vote only. When this was announced, there were objections from those whose family members held more than one flat.

 

When these members filed their nominations for elections, their nomination was rejected. They therefore appealed to the deputy registrar of cooperative societies only to have their appeals dismissed. The matter reached the Bombay HC, which ruled against the society. The matter then went right up to the supreme court.

 

On November 2, 2007, Justice S B Sinha and Justice Harjit Singh Bedi held that Sec- tion 27 of the Maharashtra Co-operative Societies Act 1960 Act clearly provides for one vote per member. The court observed that even though the objective behind “one family, one vote’’ may be laudable, it is necessary to see whether such a concept is provided for under the act. The court held that when the legislative act provided for it, no bye-law could create another concept to defeat the legislative intent. The appeal was dismissed.

No Confidence Motion rule against Office Bearer of Housing Society: Bombay High Court

By Legal Bureau

The unamended section 73-ID indicated that the requisition for special meeting in response to a motion of no-confidence was required to be signed by not less than 1/3rd of the total number of members of the committee who are entitled to vote, the quorum for such a meeting was required to be 2/3rd is a fraction it was to be rounded off to the next higher number and finally the amendment, as made by the Maharashtra Act 7 of 1997, the situation has changed so far as it relates to the motion to be passed by majority and the “word 2/3rd majority” has been replaced by the word “simple majority”.

This was stated by Justice B.M. Marlapalle and Justice D.S. Zoting of the Bombay High Court, allowing the writ petition filed by Jayprakash Raosaheb Salunkhe and other vs. states of Maharashtra and others.

The facts of the case were as follows : The petitioners claimed to be the member of the Managing Committee of the Trimurti Stalkply Sahakari Sanstha, Ltd., Basmant, Taluka – Basmat District Hingoli, which is a registered Co-operative Society under the provisions of the Maharashtra Co-operative Societies Act, 1960. The respondent no.4 was the Chairman of the said Managing Committee and other respondents were members of the Managing Committee. It was contended that total members of the Managing Committee were 15.

On 10th April, 2000, the Petitioners submitted a motion of no-confidence before the District Deputy Registrar against the respondent no.4, the Chairman in the prescribed form and ac- cordingly the District Deputy Registrar (Respondent No.2) issued notice on 16th April, 2000 to all the members of the Man- aging Committee informing them that a special meeting of the Managing Committee to discuss the motion of no-confidence and to vote on the said motion was called and fixed on 24th April, 2000. Along with the requisition of no-confidence the list of the Managing Committee members was also submitted by the petitioners-requisitionist.

On 20th April 2000, the Petitioner no.1 submitted a representation to the Respondent no.2 (DDR) inviting his attention to the amended provisions of section 73-ID of the Act, to the effect that the motion of no-confidence was are required of the total number of the Managing Committee members who were entitled to vote at the election of such Managing Committee and the Pro- visions of Rule 57-A(7)(a)(III) of the Maharashtra Co-operative Societies Rules 1961would not operate. In the meanwhile, the meeting as fixed y the respondent no.2 was proceeded on 24th April 2000 and the respondent no.3 as directed by respondent no.2 by a specific order, presided over the said meeting. Respondent no.3 passed an order on 24th April 2000, stating that as required under rule 57-A (7)(G)(III) of the rules, the 2/3rd members of the total members entitled to vote were not present and the motion of no-confidence was rejected. The petition was therefore amended and the order passed on 24th April 2000 by respondent no.3 was also challenged.

The counsel appearing for the respondent no.4 took objections to the maintainability of the petition on the grounds that (1) the petition involved disputed questions of fact (b) petitioners had an alternative and efficacious remedy under section 91 of the Act to approach the co-operative court by way of a dispute etc.

The counsel for added respondent urged that there was no anomaly or inconsistency between the amended provisions of section 73-ID of the Act Rule – 57 – A (7)(G)(III) of the rules and in any case it was not the function of this (High) Court to declare the provisions as inconsistent or to make laws.

Both the counsel endeavoured to impress upon the High

Court that the provisions of section 73-ID(1) of the Act and Rule – 57-A(7)(G)(III) of the Rules operated in different areas viz. for passing the resolution by simple majority ; Provisions of section 73-ID of the act are required to be considered and for deciding the quorum for the special meeting called by the Registrar by following the provisions of Rule 57-A of the Rules, the provisions of sub rule (7)(9)(iii) were required to be followed and in short there was no conflict between there two provisions.

The counsel for the petitioners submitted that the action of Respondent no.3 in insisting on 2/3 majority as a quorum for the meeting was illegal and the quorum for the meeting was to be decided in keeping with provisions of bye-law no.G.3.2. of the said societies bye-laws, which had been duly approved by the competent Authority. On this point the High Court observed that it was well settled by a cater of decisions that provisions of bye- laws were not statutory in nature and they did not have an over- riding effect on the provisions of the Rules, though no doubt, they were referred to an relied upon for the matters for which there was no provision in the statutory Rules and therefore, the High Court was not impressed by the submissions of the counsel of the petitioners, that the quorum for the special meeting scheduled on 24th April 2000 ought to have been followed in keeping with the provisions of Bye-law No.G.3.2. of the Bye-Law of the said society.

The High Court in its judgement quoted fully section 73-ID of the Act (motion of no confidence against officers of Societies) and observed that Rule 73-ID(I) in the original scheme Provided for 2/3rd majority and the said words simple majority by an amended by the Housing Act 7 of 1997.

The High Court observed that if bye laws be mad to the pro- visions of section 73-ID of the act, it must be held that for the meeting which are called by the Registrar for discussing or for holding vote on the motion of no-confidence, the provisions of Rule 57-A of the Rules must be construed to be mandatory and such meeting would be covered only by the procedure set out therein and not the bye-laws.

The unamended Section 73-ID indicated that the requisitions for special meeting in response to a motion of no-confidence was required to be signed by not less than 1/3rd of the total number of members of the committee who are entitled to vote, the quorum for such a meeting was required to be 2/3rd of the members of the Managing Committee and if the 2/3rd is a frac- tion it was to be rounded off to the next higher number and fi- nally motion of no confidence was required to be passed by 2/3 majority. With the amendment, as made by Maharashtra Act 7 of 1997, the situation has changed so far as it relates to the motion to be passed by majority. With the amendment it is contended that (a) fraction it was to be rounded off to the next higher number and finally the motion of no confidence was required to be passed by 2/3rd majority. With the amended it is contended that (a) the requisition for no-confidence shall be signed by 1/3rd of the members (b) the quorum shall be complete with 2/3rd of the members and (C) the vote of no-confidence shall be simple majority. Referring to the arguments of the counsels for the Petitioners as well as for the Respondents, the High Court allowed the Petition holding that the special meeting for discussing the no-confidence motion and casting vote thereon was required to be proceeded on the basis of simple majority.

The High Court therefore directed Respondent No.3 to hold a fresh meeting by giving due notice to that effect of the Petitioners as well as the respondent members.

There was no order as to costs. (In the High Court of Judicature, Bombay Aurangabad Bench, writ petition No.1559 of 2000 decided on 3-5-2000).

Society cannot Terminate Development Agreement without MAHA RERA’s permission

By Legal Bureau Maharashtra Real Estate Regulatory Authority (Maha RERA) in a landmark order, protected home buyer’s money invested in redevelopment project and directed the builder & society to pay a penalty of Rs 15 lakhs for violating norms of RERA Act, 2016. Maha RERA was hearing the complaint of Kaushal Haria, Girish Chheda & Meghna Visaria and Velbai Haria who had booked flats in New Sangeeta CHS Ltd, Vidyavihar (E) in May 2016. The said project was a redevelopment project between society and builder Valdariya Constructions. The society in December 2011 appointed a builder as a promoter with registered development agreement for sale. In the meantime, a dispute arose between builder and society and matter went to Arbitration and the society terminated the development agreement executed with the builder. Authority in order said, “The termination of the development agreement executed between builder and society is after the commencement of RERA Act and this should have done with the permission of Maha RERA. Therefore, transferring the development rights is not valid as this project is registered with MahaRERA.” The Arbitrator allowed society for self redevelopment. The complainants were seeking interest for delayed project and handover the possession with a parking lot and all amenities. Society submitted the response before the court said, “The flat sold by the builder was illegal and it was sold below the market price. The complainants can seek a refund from the builder however they cannot seek an injunction against them.” Authority said under the provisions of section 2(zk) of the RERA Act, society is all the promoter of the project. Therefore, society is equally liable to the allottees who have booked their flats. Dr Vijay Satbir Singh, Member – 1/ Maha RERA ordered, “Considering the facts the complainants are the allottees of the project registered with Maha RERA and further directs society to join the complainants as its member within a period of 30 days from the date order.” Society is directed to give possession of their flats to the complainants by obtaining occupancy certificate, as the society has taken over the entire project for self-development as per the order of the arbitrator. In addition to this for violation of Section-15, the Maha RERA directs the builder and society to pay a penalty of Rs 15,00,000 to Maha RERA, the order said.

Majority wins in Housing Society Redevelopment : Bombay High Court

By N.P.G Nair

Justice Sharukh Kathawalla, of Mumbai High Court decrees without any

reservations that Disha Constructions, the assigned builder of Datta Ramanand Housing Society, Vile Parle (East) can go ahead with the redevelopment work.

This is considered as a landmark judgment in Housing Society circles, since minority residents in any housing society has had hitherto the rights to get the programme held back or delayed indefinitely under one reason or other. In this typical case 75% of members were in favor and 25% against. And believe it or not this minority lobby could hold back the programme so long.

Now that is nullified with this judgment, the floodgates are open for all societies with dilapidated buildings to go in for redevelopment work once the  Society Management books the support of the majority of residents. In other words, the menace of high handedness   through non co-operation by minority (less than 25 %) is no more possible.  In short, the prescribed 75% members consent agreement with any approved Builder or Developer can be forcefully implemented without much hardship or hindrance whatsoever.

In the Datta Ramanand Housing Scty.’s case, the developer had to wait a prolonged period of about three years from the date of the first redevelopment agreement and had to spend on heavy rent compensation since the last one year and had to deposit amounts for their alternative housing accommodation, as prescribed in the said legally-binding document. Further it is learnt that the said builder had to spend a sum of Rs.27 cr. to getting the required work done in this behalf. This was necessasited simply on account of a minority of 27 members out of 120, who were finally given a chance to sign the agreement with the Builder. Otherwise the Court receiver would have evicted them of their premises on the 3 In the suburbs of Mumbai, there are many such disturbing non-co operative movements organized by few society members in most of the societies. This has resulted in the continuation of dilapidated buildings in an as is where is condition. In other words the rest of the people, say majority of residents have no hope of getting into their dream homes in the immediate future.

Interestingly, there are quite a good number of Societies enthusiastic to go ahead with redevelopment; but alas! Decisions always stand in favor of the minority lobby resulting in all those shabby looking 4-story Buildings continuing their existence without even having the facility of a lift.  Look, most of these residents who want to maintain status quo are Senior Citizens and they are prepared to surrender and sacrifice their future comfort of a semi-luxury apartment. They adopt a rigid attitude to live in the same accommodation and they are ignoring the fact that there is another generation behind them who wants to live in dignity and style. These old people with very narrow attitude always try to put the spoke in the wheel and eventually block the ambitions life style of their kith and kin.

Let us now get into a typical case. In one of the large societies in the western suburb of Mumbai, the procedure and processing of bidding the tender was completed successful. At the edge of finishing the last and final General meeting in which the Registrar was also informed to attend and witness the meeting, it was turned down due to non co-operation of very few members who spread the gossip that there were some vested interests in the redevelopment committee and forced the other members also not to participate rd October 2013, by implementation of by-laws. In the meeting. Look at the ultimate result of this entire non-cooperative attitude. The managing committee has to wait for another year to pass by to revive the issue. That means the residents have to continue living shabby buildings.

Let us compliment our government, for it has provided almost 2.7 and 4 ratio per 1 FSI in the suburbs and the city respectively. This enables the developer extend at least 50% or more of the tenants existing occupied premises without incurring any extra expenditure from the members. On the other hand, generally each occupant member will be given Corpus Fund by the Developer @ Rs.2500/- per sq.ft and above and this covers up the entire security of extra maintenance on account of Lift, and other facilities provided by the Builder. Finally, this decree from the High Court is a silver bullet. It removes the paralysis that has been holding back the housing societies wanting to go for redevelopment with one master stroke.

Look, your dream home is not far off. It is within your reach.

Dispute Resolution in Housing Societies in Gujarat

By Gujarat Bureau

Introduction
(1) There are special provision and special machinery to deal with civil disputes under co-operative law with liberal limitation and special concessional lavad-fees prescribed for the same. They are covered mainly under Section 96 and the jurisdiction of Civil Court is barred under Section 166 of G.C.S, Act, read with Sec. 9 of C.P.C. Therefore, Sec. 96 is incorporated for ready reference before any further discussion:
SEC. 95 : DISPUTES:- (1) Notwithstanding anything contained in any other law for the time-being in force, any dispute touching the constitution, management or business of a society shall be referred in the prescribed form either by any of the parties to the dispute or by a federal society to which the society is affiliated or by a creditor of the society, to the Registrar if the parties there are from amongst the following.
(A) A society, its committee, any past committee, any past or present agent, any past or present servant or Nominee, heir of legal representative of any deceased officer, deceased agent or deceased servant of the society, or the liquidator of the society;
(B) A member, past member or a person claiming through a member, past member or a deceased member of society which is a member of the society;
(C) A person, other than member of the society who has been granted a loan by the society, or with whom the society has to had transactions under the provisions of Sec. 46, and any person claiming through such a person:
(D) A surety of member, past member or a deceased member, or a person other than a member who has been granted a loan by the society under section 46, whether such surety is or is not a member of the society;
(E) Any other society or the liquidator of such a society.
(F) When any question arises whether for the purpose of sub. sec.
(1) a matter referred to for decision is a dispute or not, the question shall be considered by the

Registrar, whose decision shall be final.
EXPLANATION – I:- For the purpose of this sub-section, a dispute shall include
(I) A claim by a society for any debt or demand due to it from a member, past member or the nominee, heir or legal representative of a deceased member, without such a debt or demand be admitted or not.
(II) A claim by a surety for any sum or demand due to him from the principal borrower in respect of a loan by a society and recovered from the surety owing to the default of the principal borrower, whether such a sum or demand be admitted or not.
(III) A claim by a society for any loss caused to it by a member past member; or deceased member by any officer, past, officer or deceased officer, by any agent, past agent or deceased agent, or by any servant, past servant or by its committee, past or present whether such loss be admitted or not;
(IV) A refusal or failure by a member, a past member or a nominee, heir or legal representative of a deceased members . to deliver possession to a society of land or any other assets resumed by it for breach of conditions of the assignment.
EXPLANATION – II :- For the purpose of this section, the expression “agent” includes in
the cases of a housing society, an architect, engineer or contractor engaged by the society.
Parties to Dispute
(1) Before we start any discussion, it is important to note that the Hon’ble Gujarat High Court has struck down secs. 96 (c) (d), (e); the words “any past or present agent, deceased agent” and Explanation
– II as ultravires to Art.14 of the Constitution 1971 (XII)-GLR-P-355 in the case of Rasiklal Patel v/s Kailashgauri Mehta. This judgment was challenged before Supreme Court. The same is confirmed by Supreme Court in Distract Registrar. (Assit.) v. Vikrambhai Ratilal Dalal. SCA, No 2153 of 1972 Dtd.27 -11-1986 reported in 1987 Suppl. SCC- 27.
(2) The above judgment has appreciated the situation that the society can avail the special machinery created under statute against non-member and the same is not available for the non member against the society under Sec. 96 read with Section 167. Therefore, two persons similarly situated are discriminated in law and therefore, is ultravires to Art. 14 of the Constitution, particularly builder, architect etc., are out of the net of Sec. 36. Therefore, it is necessary to amend the law to enable nonmember also to sue against the society by suitable amendment to restore Original position of law which
hold good intentions. Such amendment will abrogate the decision of Hon’ble High Court in 1971-GLB355 and disputes with mixed set of parties will be covered to resolve of complication which has arisen by strucking down the original provisions under Sec. 96.

As it stands the parties covered under sec. 96 are discussed as under :
(3) The society is the main party to the dispute since the dispute would invariably be touching the constitution, management or business of a society The society is a body corporate under section 37 and the society is having its supreme authority vested in general body in general meeting under section 73.
Therefore, the society exercises its powers either in the general body under Sec. 73 or by the managing committee as per Sec. 74 If the society is not joined as party in the dispute, it cannot be said to be a dispute under section 96. The internal dispute inter se members in which there is no direct or indirect role of the society is not a dispute under sec. 96. However, whether a society has role is a question of fact related to each case. This has been decided by the Hon’ble ‘. High Court in 1982-GLH (UJ) 8.
(Govindlal Jivanlal Desai v/s Girishchandra Vadilal Vani).
Similarly, legal heirship of a member can be decided under section 31 by the society: but the society cannot be compelled to decide disputed question of legal heirship for which a separate forum of civil court is available. The question of legal heirship is a question f succession for which Succession Law like Hindu Succession Law and Hindu Succession At are there under which civil court has jurisdiction.
Since Succession Law is a special law for succession matters, Registrar’s Nominee has no Jurisdiction.
Since co-operative law is a general law for succession matters, succession law prevails over cooperative Law and therefore, Nominee, has no jurisdiction to decide purely a succession matter, which is not coming under the regular business the society. Therefore, the society is an important and inevitable party either as a plaintiff or defendant whose action is a real cause of dispute touching the business, management and constitution of the society. The other parties to be dispute are either ,aggrieved or connected as beneficiary to the dispute.
(4) Committee :- Committee is also a party connected with any decision of the society as a body corporate. The society as body corporate is a distinct legal person and the committee members are distinct natural persons and in some cases committee members may be personally liable for the deeds rather misdeeds of the society. The definition of the word “committee” is given in section 2(5) which is reproduced herein below :
“Sec. 2(5) “committee” means the committee of management, or other directing body, to which the management of the affairs of a society is entrusted :”
Herein sec. past committee is also included. I Equally administrator or liquidator replaces
committee and enjoys all power of the committee and, therefore, liquidator/administrator is also include.
(5) Officer :- Any past or present officer is included as party to the dispute and the legal
representative of any deceased officer is also included as party under section 96. The definition of officer is given under sec. 2(14) of the act. It is reproduced as under :
Sec.2(14) :- “officer” means a person elected or appointed by a society to any office of such society according to its bye-laws and includes a chairman. vice-chairman, president vice president, managing director, manager, secretary, treasurer, member of committee, and any other person elected or appointed under this Act, the rules or the bye Laws, to give direction in regard to the business of such society; The officer includes all the committee members and officers, office bearers and they may be either elected or appointed by a society. The main criteria of officer are that he should be able to give direction in regard to the business of the society as per Act, Rules and the Bye-laws.
(6) Agent: – Any past or present agent, deceased agent is included in 96(1) (a) as parties to the dispute. However, these words are struck down as ultravires to the constitution Act. 14 by Hon. High Court in 1971 (XII)-GLR-P-355 as mentioned above along with the explanation II, wherein the definition of agent is given
(7) Member:- A member is included as party to the dispute and the liability and the rights of the member will be subject-matter of the dispute in which even past member or the deceased member can be joined as party. The act is also incorporated to protect the right of a person claiming through a member or past member or deceased member. Here, the situation of a society which is a member of other society is also included, However, if the society is, not a member of the other society, a dispute falls within the purview of Sec. 96(1) (e) which is struck down by hon’ble High Court in 1971 (XII)-GLR-355. It is also important to note that transactions with non-member u.s.
46 were sought to be covered u/s 96(1) (d); if he is a surety of a member of surety of a
nonmember. However such surety covered under section 96(i) (d) is now not covered since Sec. 96 (i) (d) is struck down as ultravires by hon’ble High Court in 1971 (XII)-GLR-355. Therefore, the surety will be covered only if he is a member himself in view of sec, 96(1)(b).
(8) Transactions – Qua Member:- It is possible that a person entered into a transaction with a proposed society which is subsequently registered and he incidentally becomes a member e.g. if a person enters into society in an agreement to sell (Satakhat) which is subsequently registered saledeed with a society, in which housing co-operative society is registered and the person joins the society as a member, he cannot sue the society for his outstanding dues of the contract of agreement of sale since it is not entered into the capacity of the member. Therefore the capacity in which the transaction is entered into with the society is important. In case, the member has two different distinct capacity in one capacity, he is either a land-lord or tenant of the society for hiring the premises and another capacity as member of the society, then the transaction in the capacity of
a member is covered under sec.96 of the Act and the transaction in a different distinct capacity other than a member which is not regular course of business between a member and society will not be covered under section 96. Similar case was decided by hon’ble Supreme Court in AIR 1969-SC-1320 in case of Deccan mercantile co-operative Bank v/s Dalichand.
Membership on the Date of Transaction Relying upon AIR-1969-SC-1320 Deccan mercantile coop bank, the tribunal in a case of Vijay Cooperative Bank Ltd. In 30-CTD-95 came to the conclusion that if u person is not a member on the date of transaction and is subsequently made a member, then the transaction is not a qua-member,
therefore, the nominee has no jurisdiction. This judgment is thereafter followed consistently by Hon’ble Tribunal and similarly by the board of nominees creating great hardship to the cases of cooperative Banks.
It was a normal practice of a bank to take the loan applications along ,with membership application form, and enter into documents and release, the finance and the resolution of admission of membership was subsequently passed by the committee under rule 33. The bank have, therefore become alert not to repeat such type of mistake and have strictly followed the procedure of completion of membership, formalities first and thereafter completing the formalities of loan documents. However past cases of such mistake have all gone up to Hon’ble High Court in case of almost all the cooperative banks and the numerous petitions on similar subjects are pending before Hon’ble High Court for final decision.
Though the matter is sub-judice before Hon. High Court, it will be interesting to comment upon various aspects of the situation. In the case of Navdip Cooperative Bank in appeal No. 11 of 1994, decided on 11-3-96, the very issue was prominent in which two members of the bench differed arid the matter was referred to the Hon. President. Therefore this issue is discussed in detail in this judgment from all angles by three decisions in a single judgment of the Tribunal. Though the view of the president is final, the matter is again taken up before Hon’ble High Court as in another case. The original statute has intended to cover the transaction with non-members covered under section 46, by Section 96(1)(c)
which is struck down as ultravires in 1971 (XII)-GLA-355. The scope of the jurisdiction against the non-member is further reduced by narrow interpretation of membership on the date of transaction.
When a person applies for loan as well as for membership simultaneously the whole process of admission of member and granting of loan is a part of continuous transaction and cannot be separately dealt with to treat a person as non-member, relying upon AIR-1969 SC 1320. The judgment of Hon’ble Supreme Court deals with a situation in which a person with two distinct capacity enters into the transactions with the society which is not qua member. In this situation, we can only hope that the Hon’ble High Court may resolve the issue to end up a state of confusion prevailing now before Board of Nominees and The Tribunal in similar cases. It is also important to appreciate the word “transaction”
of a bank with member in which the relation starts from the date of document or the date of membership, but the relation is a continuous relation that continues in all transactions reflected in the books of accounts and, therefore, the date of transaction also will not have a very narrow meaning as the date of document on which date membership has to be ensured according to the hon’ble Tribunal in Revision No. 58 of 1991, as mentioned above.
Dispute Regarding Service Matters Another important cause of controversial disputes arises from the service matters of the employees of the co-operative society which are mainly related to the service conditions prescribed by the contractual relations of appointment of the employee as well as the contractual relations arising in terms of the bye-laws. The bye laws are not enforceable by writ jurisdiction under Art. 226 or 227, as per the Hon. High Court judgment reported in 1976(XVII) GLR.53J (Rajabhai Ranmal Mori v. Members of the Managing Committee of Shri Una Taluka Sahakari.
Kharid Vechan Sangh) by which earlier judgment of 1973(XIV) GLR-786 (Lambha Vividh
Karykari Seva Sahakari Mandli v. Dist. Registrar) is overruled. Bye-laws have got no statutory force as per that judgment which is also confirmed by the Supreme Court judgment prior to 1976(XVII)-GLR-583 referred to above and subsequent to this judgments referred hereunder (1) AIR.1970-SG-245 (Co-operative Central Bank Ltd. v. Addl. Industrial Tribunal, A.P.) .
(2) AIR-1984-SC-192 (Babaji Kondaj, Garad v. Nasik Merchants Co-op. Bank Ltd.)
The above views regarding enforceability of bye-law in 1973(XIV) GLR-786 and 1976(XVII)
GLR-503 are in the two different extremities and the importance of bye-laws are placed in the right perspective in 1977{XVIII) GLR-P.692 (Rajkot Nagrik Sahakari Bank Ltd. v. Rajkot Dist. Co-op. Bank Ltd.) 1996-(2)-GLR-433 : 1996( 1)GLH-753 (Ranuj Nagarik Sahakari Bank Ltd. v. State).
Therefore, bye-laws cannot be disregarded in the service matters by any authority like the
Registrar or the Registrar’s Nominee or the Tribunal and the misreading of bye-laws is considered as an error of law which can be interfered under supervisory jurisdiction by Hon’ble High Court under Art. 227. Keeping, this view in mind, the Hon. High Court recently in 1998-(3)-GLR-2318 in the case of Janata Cooperative Bank Dholka has confirmed the enforceability of bye-laws in the service matter.
Servant and Officers are parties enumerated in Section 96 as the parties to the dispute. The cases of misappropriation or recovery of some dues of the employees are covered under Section 96. The main controversy remains regarding jurisdiction, of the Board of Nominees and the Jurisdiction of Labour Court in general disputes.
SECTION 76 :-
Section-76 has made an enabling provision to prescribe service conditions by making rules and the last attempt was made on 18-1-94 by a draft notification which was not converted into final notification under sec. 168 of GCS Act. .Therefore, this draft notification has not taken the form of rules. However, it is important to note that the service conditions are under the ambit, of cooperative law. Service condition as referred to in the bye-laws and the disputes regarding the conditions certainly touches the management if not the business or the constitution. Similar view has been expressed by the Rajasthan High Court in AIR-1991-RAJ-121. Para-12. Therefore, in the humble opinion of the authors, the disputes relating to the relations of the servants and officers of the society with the society are covered under section 96 and the Board of Nominees has jurisdiction to deal with such disputes. Similar view has been recently expressed in above referred judgment in 1998-(3)GLR-2318.
However, in P.R. Mankad’s case in AIR-1979-SC-1203, 1979-GLR-701 (SC), the Hon’ble Supreme Court has held that the co-operative law is a general law and the labour law is a special law dealing with the special disputes. Therefore, only labour court has jurisdiction and not the Board of Nominees.
With due respect to Hon’ble Supreme Court, the author submits that the society has a right to recover its normal dues as well as the dues arising out of misappropriation or misconduct from the employees for which the forum of Board of Nominees is available. However, if the servant or the officers of the society are excluded from available forum of Board of Nominees for recovering their dues from the society arising out of service conditions or bye-laws, the same will be violative of Art. 14 of the Constitution. Therefore, it is necessary to have a thorough look at the position of the statutory provisions and the case law and make a sharp distinction of purely labour disputes and the disputes arising out of contract in terms of service conditions and bye-laws. The Labour Court may allowed to deal with disciplinary matters whereas mutual finical obligations may be allowed to be entertained by the learned Board of Nominees. It is also important to note that the draft rules made under Section 76 read with Section 168 of GCS Act made provisions for dealing with service matters also and in the last rule, there was provision to refer the dispute to the learned Board of Nominee under section 96.
However, if the draft rules are made final by any subsequent attempt, the question remains whether Section 96 itself as interpreted by hon’ble Supreme Court in P.R. Mankad’s case reported in 1979(XX)-GLR-701 conferring no jurisdiction to learned
Nominees, whether the jurisdiction can be resumed by, the rules under section 76; i.e. when the statute does not confer the jurisdiction, the rules cannot confirm the jurisdiction since rules are subordinate Legislation to the original statute. Therefore, the controversy needs to be resolved regarding the jurisdiction of the Board of Nominee for service matters since the jurisdiction of the labour court covers only employees below certain pay-scale and parties to the dispute under sec. 96 covers servants and/or officers, they may not be rendered remedy less.

Jurisdiction of Registrar V/S Jurisdiction of Learned Nominees
There are two machineries prescribed under the GCS Act with provision of appeal and revision.
Looking to such provision of the Act, Hon’ble High Court in 1978(XIX)-GLR-92 (Jintendra Natvarlal Thaker v. Hirabag Co-op. Housing Society), has held that the Board of Nominees has no jurisdiction for the disputes arising out of the application of Section 36, 23, 11 etc. for which the Registrar has the jurisdiction and the separate machinery for appeal and revision is prescribed under the law. Similar view can be taken for the powers of Registrar under Section 106, 139 etc. However, in case of the resolution of expulsion under Sec. 36 the resolution is a business of the society and it has been held by Hon. Tribunal in revision No. 75 of 1988, that the Nominee has jurisdiction for challenging the resolution before the resolution is submitted to the District Registrar for approval. The jurisdiction of the Registrar i.e. ‘District Registrar starts when the resolution reaches the Registrar/District Registrar and the jurisdiction of Nominee ends. This view was referred to by the Tribunal in Revision No.106 of 1994 by judgment dated 28-6-95 in/the case of Swami Gunalitnagar Soc. Review application No. 20 of 1995 decided on 15-9-97 is allowed by Hon. Tribunal and the decision of the same is stayed by Hon.

High Court in SCA No. 7535 of 1997.
Jurisdiction of Learned Nominee in Sucession Matters Section 31 confers powers to the society to act upon the Nomination for admitting legal heirs of the deceased member and also confers the power on the society in absence of nomination to make reasonable inquiry and admit legal heir as member. However, in case of disputed questions of Legal heirship, the learned Nominee has no jurisdiction to decide the succession matters for which a special court and special law is in force. Since succession law is a special law and to-operative law is general law for succession matters, special law prevails and, therefore the learned Nominee has no jurisdiction.
This view was expressed by Tribunal in Appeal No. 307 of 1995 & 311 of 1995 decided on 9-5-97. 2004(1) GLR-337 V/S P.B. Vagadia-sec-98(1). Jurisdiction to Challenge the Validity of Bye-Laws As mentioned in the foregoing paragraph, the bye-laws are in the nature of contract as in the case of articles of association as per the reported of Hon. High Court in 1976(XVII)-GLR-583. The validity of bye-laws can be challenged under section 153 for which time-limit of two months has been prescribed and the revision application lies under Sec. 155 before State Government. We may contemplate a situation in which bye-laws are contrary to Act and Rules as it happened in 1975(XVII)-GLR-382 (Ambalal Manilal Makwana v. Khambhat Taluka Sahakari Vechan Sangh). In such a situation when the
actual byelaws are in force in an election matter in which a member is deprived of his important rights to vote or contest the election, his cause of actions is related to the bye-laws which he would take up as a dispute under section 96 together with challenge of validity of bye-laws. If the bye-laws are ultravires to act and rules they can be challenged at any time as and when the cause of action arises by enforcement of bye-laws which are in the nature of contract interse between the member and the society. In the humble opinion of the authors, the time limit of challenge of bye-laws under section 153
and the authority of the Additional Registrar under Sec. 153 will not come in the way of ,the jurisdiction of the learned, Nominee for entertaining the dispute under section 96 for the validity of bye-laws which are ultravires to act and rules. The contract as prescribed under bye-laws gives rise to cause of action and the dispute as and when it is enforced and the members may choose to challenge the same as and when he is aggrieved by enforcement. Our view finds support by Hon’bIe High Court judgment reported in 1975(XVI)-GLR382.

Jurisdiction for the Election Dispute Petitions
Before 1982, all the election disputes were entertained by the learned Nominee under section 96 and as per 1975(XVI)-GLR-1058, the dispute were entertainable before the election is concluded. After the amending Act 1982 under which the Chapter XI (A) is added for the specified society listed under Section 74 (c), the situation has changed for the specified society whose election is conducted by the Collector. The provisions of Chapter XI (A) and the provision of rules under Section 145(Y) i.e.
Gujarat Specified Co-operative Societies Elections to Committee Rules 1982 are parallel to the provisions under Representation of Peoples Act 1951. Section 145(U) takes away the powers of learned Nominee under section 96 to entertain election petitions for the specified societies for which Tribunal is vested with original jurisdiction to entertain such petitions. However, it is important to note that the distinct features under which learned Nominee U/S 96 is still having original jurisdiction to entertain election disputes touching to the elections of specified societies which are mentioned as under:
(I) In case of the specified society which is also a federal society having affiliated societies as its members, the representatives of the affiliated society will be nominated by the affiliated society by a resolution and the voters list of the federal society will contain the names of the societies as well as the name of the representatives as decided in 1975(XVI)GLR-382. The challenge of validity of such resolutions for nomination of representative to the federal society will lie before the learned Nominee under Section 96.
(II) In the case of federal society having individual members, who have representatives in the general body as well as in the committee through their delegates, the election of delegates amongst individual members is not an election as per Section 14S-B(b), and, therefore, the same is required to be conducted by the society and not by the Collector. As per the judgment of Hon’ble Gujarat High Court reported in 1983 (2) GLR 1301 : 1983 GLH – 1080 (Hasmukhbhai Jugatram Raval v. The Collector, Surat) and unreported judgment of Hon’ble Gujarat High Court Division Bench in SCA No. 8356 of 92 and 8083 of 92 the election of delegates cannot be conducted by the Collector. Therefore, if any dispute arises out of election of delegates, the same is not covered under Section -145(U) and it can be referred to under Section 96. Election petition before the Tribunal lies only against the election of managing committee. Therefore, the role of Collector in the election process in the case of specified federal society starts only after the election of delegates from individual members and the resolutions by the affiliated societies nominating their
members. If there is a dispute relating to this process, the same can be referred to Board of Nominee under Section 96 and not to the Tribunal under Section 145-U (III) The election process starts by the Collector by publication of notification under Rule 16 of the
Gujarat Specified Societies Election to Committee Rules and that election process is concluded by the declaration of result under Rule 62 of Specified Societies Committee rules. Thereafter, the election of office bearers is held under Section 14S-z, for which again the dispute will lie before, the Nominee under Section 96
(IV) Therefore, in such cases, the Tribunal will have only revision/appeal jurisdiction and accordingly Tribunal has entertained revision application No. 4 of 94 decided on 4-8 95 reported in 34- CTD.70.

Disputes Against A Firm
Under the Partnership Act, the decree against a firm can be executed against the property of the firm as well as from the personal property of the partners and the liability of the partners are joint and several and the liability is unlimited except in case of insolvency of one or more of the partners in which case the liability will be shifted to the remaining partners. Therefore, in lavad case when award or decree is sought against the firm, the partners are interested in the property of (he firm and decree also affects the
partners by virtue of their unlimited personal liability over and above the liability of the firm. In this background of the Section 25 and 49 of Partnership Act 1932, it will be important to examine the parties to the disputes, when the firm is a member and the partners are not members of the society in a suit by a co-operative bank against the firm for the dues of the bank. It is very clear that in view of Section 99(3) (a) the partners are interested in the property of the firm and, therefore, they will have to be joined as parties to the dispute.
If the firm is a member and the partners are not members, partners are claiming their rights through firm and, therefore, also they are covered Section 96(1) (b) as well as Section 99 (3) (a).
In view of the above discussion, it is also important to note that the decree against I firm can be executed against partners from their personal property after the firm’s property is applied for payment of debts. Therefore when the partners are made liable to the unlimited extent under partnership act for the dues of the firm, they are covered under Section 99(3) (c) also which is paramateria same as CPC Order 1 Rule 10.
In view of above discussion, the! Tribunal has held in 2S-CTD-G7 that the Nominee has jurisdiction against the partners, when the firm is a member and the partners are not members of the society.

The Cooption of A Committee Member
The cooption of a committee member on a vacant seat of the director is an issue before the Nominee and Nominee has jurisdiction so far as the specified societies arc concerned, the Societies Election to Committee rules 1982 Rule that no cooption can be made on a vacant seat of the Moreover, as decided in the case of Bhogilal Patel v/s Yusuf Gaziawala reported in 1971 (XII) G.L.R. 215 nominated director by institution or by the Government should not hold disqualification as per the Act, Rules and bye-laws

The jurisdiction against the legal heirs of the deceased member :
In a money suit, the legal heirs of the deceased are covered under, section 96(1) (b) but the real question is the limitation regarding the liability, of the deceased. As regards the limitation for the dues of the society from the member, Section 34(a), the liability of the member is unlimited and Sec. 34(b) prescribes limited liability for a period of three years in case of the liability of deceased member for the debts of the society to the third party. This has been interpreted in details in 27-CTD-81, 3.2-CTD-262.
However, the liability of the legal heirs shall attach to the estate of the deceased as per the section 34 as well as CPC Sec. 50(2). In short the limitation is liberal and unlimited against the heirs of the deceased.
However, the liability is limited to the extent of the estate of the deceased.
Annual General Meeting The general Body is supreme authority under Sec. 73 and exercises the powers through general meeting. There are four kinds of general meeting prescribed under the Act and Rules,
(1) First General Meeting under Rule 5
(2) Last General meeting under section 114(3) before cancellation of the society to consider the final report of the Liquidator.
(3) Annual general Meeting under section77.
(4) Special general meeting under section 78 since the general body is supreme authority for internal management of the society; the general body cannot be restrained to function by any kind of stay order against holding of a general meeting
AGM exercises certain statutory functions prescribed under section 77 and also transacts special business like amendment of bye-laws etc, Restraining AGM to conduct lawful business is also violative to article 19(1) (c) of the constitution. The general body should be allowed to consider and contemplate any agenda and ordinarily should be allowed to take the decision by democratic process and thereafter, the decision of the general meeting can only be a subject matter of the dispute. Therefore, normally
instead of granting the stay against considering any agenda it should be allowed to consider and the decision only can be challenged as dispute and examined on merits. However, purely unlawful agenda may b8 restrained e.g. if the society wants to consider an agenda to start a business prohibited by law like smuggling etc.
In short an agenda in general meeting cannot be restrained and members should be free to consider any agenda by a democratic process and the decision only should be made a subject matter or the dispute under section 96 and a dispute regarding the agenda is premature before actually passing through a democratic process of decision making.

Whether Bye-laws have Statutory Force in Gujarat

By Gujarat Bureau

The question came up for consideration before Hon’ble Gujarat High Court in the case of Lambha Vividh Karyakari Seva Sahakari Mandli Ltd., Ahmedabad & Ors. v. District Registrar, Rural & Ors., reported in 1973 GLR 786. in which Hon’ble High Court has held by reading Sec. 28(9), 64 & 74 of Bombay Co-operative Societies Act 1925 that the formation of managing committee and the voting rights of the member to be regulated by the bye-law of the society, and therefore, bye-laws, which are required to be registered and part of the status. It was further held in this judgment: -Therefore to the extent that these bye-laws are in terms referred and cited in any provisions of the Act, they are rewritten in the Section and the Section could not be read without the language of the bye-laws: being rewritten therein. Therefore, it was held by Hon’ble Court that the bye-laws have statutory force and be enforced by writ petition under arts. 226 and 227. This decision was also followed in the judgment reported in 1975 GLR 1058, wherein the rejection of nominations was held to be illegal by Hon’ble High Court by enforcing the bye-laws under writ Jurisdiction. However, the above view of the judgment reported in 1973 GLR 786 was dissented in the case of Rajabhai Ranmal Meri & Ors. v. Members of the Managing Committee of Shri Puna Taluka Sahakari Khan’d Vechan Sangh Ltd. & Ors.,
reported in 1976 GLR 583. Hon’ble High Court in this judgment held that the bye-laws made by cooperative societies have their origin in contract and such bye-laws could not be enforced by a writ under Art. 22G or Art. 227. It was held that they do not have the force of a statute and law like Article;
of Association of a Company, they constitute a contract between the parties. Therefore, such bye-laws of a co-operative society could not be enforced by a writ of the High Court under Art. 226 or Art. 227 of the Constitution. In this judgment in para 4, an extract from reported judgment of AIR 1970 SC 245 is incorporated and the relevant portion is reproduced herein below:
” we are unable to accept the submission that the bye – laws of co-operative society framed in pursuance of the provision of the Act can be held to be law or to have the force of law. It has no doubt been held that if a statute gives power to a Government or other authority to make rules, the rules so framed have the force of statute and are to be deemed to be incorporated as a part of the statute. That principle, however, does not apply to bye-laws of the nature that a co-operative society is empowered
by the Act to make the bye-laws that are contemplated by the Act can be merely those which govern the internal management, business or administration of a society. They may be binding between the persons affected by them, but they do not have the force of a statute.”
In the same judgment, para 7 refers a Division Bench judgment of Hon’ble Gujarat High Court tin S.C.A. NO.1005 of 1965 and 1531 of 1965 decided on April 24-25, 1972 in the case of The Gujarat State Co-operative Bank Ltd. v. Ahmedabad District Bank’s State Union & Ors. In AIR 1984 SC 192, para 15, it was held that “they are neither statutory in character nor they have statutory flavour so as to be raised to the status of law.” The importance by bye-laws diluted by the above decisions was raised to its right level in case of Rajkot Nagrik Sahakari Bank Ltd. reported in 1977 GLR 692. In this judgment,
it was held that High Court has powers to issue writ of certiorari under Art. 227 and not a writ of mandamus under Art. 226 enforce a bye-law. It was held that the erroneous Legal proposition, which is the basis of its decision by misreading the bye-laws can be interfered by a write of certiorari under Art.
227. The same view is again taken in Ranuj Nagrik Sahakari Bank Ltd. by Hon’ble Gujarat High Court In decision reported in 1996(1) GHL 753. Therefore, the bye-laws when they are registered can’t be misread while taking a decision. The erroneous decision of the Registrar or the Nominee based on misreading of bye-law is an error of law and can be interfered with by Hon’ble High Court by a writ of certiorari under Art. 227.”

Mere membership of a deceased member of a housing society can be inherited by nominee?: Delhi High Court

By Delhi Bureau

IN THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : Delhi Cooperative Societies Act, 1972
Writ Petition (Civil) No. 4209 of 2001
Judgment reserved on: April 20, 2009
Judgment delivered on: May 08, 2009
Swayam Sidha Cooperative Group
Housing Society
6, Bhagwan Dass Road
New Delhi.
Through its Joint Administrator:
Ms. Vidya Prabhadayal
Col. B. Kumar (Retd.) Petitioner
Through Ms.Rachna Joshi Issar with
Mr.Shailendra Kumar, Advs.
Versus
1. The Financial Commissioner, Delhi
5, Shamnath Marg
Civil Lines
Delhi.
2. The Registrar, Cooperative Societies
Government of N.C.T. of Delhi
Old Court Building, Parliament Street
New Delhi-110001.
3. Sh. R.S. Bairva
S/o Late Shri Kana Ram
R/o Flat No. 92 (Type-II)
Gandhi Sadan, NDMC Flats
Mandir Marg, New Delhi.
4. Ministry of Employment, Social
Welfare, Labour and Scheduled Caste
& Scheduled Tribes
Government of N.C.T. Delhi
New Secretariat
I.P. Estate, New Delhi. Respondents
Through Ms. Sujatha Kashyap, Adv. for
Respondent No. 1.
Ms.Indrani Ghosh, Adv. for LRs of
Respondent No. 3.
Coram:
HON’BLE MR. JUSTICE MADAN B. LOKUR
HON’BLE MR. JUSTICE SIDDHARTH MRIDUL
MADAN B. LOKUR, J.
1. The question for our consideration is whether the mere membership of a deceased member
of a cooperative group housing society can be inherited by his nominee, who is otherwise ineligible
to be a member of that society. Our answer to this question is in the negative in view of the
decision of the Supreme Court in Gayatri De v. Mousumi Cooperative Group Housing Society &
Ors., AIR 2004 SC 2271.
2. The Petitioner is a cooperative group housing society and one of its objects is to acquire
land on lease for development from the slum wing of the Delhi Development Authority and
construction of residential houses or flats for allotment to its members. The membership of the
Petitioner-Society is restricted only to widows having an income which does not exceed Rs.1,500/-
per month from all sources.
3. The mother of Respondent No. 3, Smt. Ganesh Devi, was a widow who satisfied the
eligibility requirements for membership as per the Bye-Laws of the Petitioner-Society. As such,
she was made a member of the Petitioner-Society. However, before she could be allotted a flat, she
passed away leaving her son (Respondent No. 3) as her nominee.
4. Respondent No. 3 sought to take over the membership rights of his deceased mother but the
Petitioner-Society did not accept his membership since he was not eligible.
5. On these broad facts, Respondent No. 3 filed Complaint No. 2471/1992 before the
Consumer Dispute Redressal Forum (District Forum-II). By an order dated 13th July, 1994, the
District Consumer Dispute Redressal Forum came to the conclusion that Respondent No. 3 was not
eligible to be a member of the Petitioner-Society and, therefore, his complaint was devoid of any
merit. We are told that the order passed by the District Consumer Dispute Redressal Forum has
attained finality.
6. Not being satisfied with the above decision, Respondent No. 3 raised a dispute before the
Registrar, Cooperative Societies claiming membership of the Petitioner-Society. We are not
concerned with the first round of litigation that took place before the Registrar but eventually by an
order dated 30th November, 2000 (passed in the second round) the Registrar came to the
conclusion that Respondent No. 3 was entitled to step into the shoes of his deceased mother and
was, therefore, entitled to membership of the Petitioner-Society.
7. Feeling aggrieved, the Petitioner-Society filed a revision petition under Section 80 of the
Delhi Cooperative Societies Act, 1972 being Case No. 24/2001-CA. The revision petition came to
be dismissed by the Financial Commissioner by the impugned order dated 15th February, 2001.
8. The only contention urged before us by learned counsel for the Petitioner is that
membership of the Petitioner-Society was restricted to widows who have an income of less than
Rs.1,500/- per month from all sources. Respondent No. 3 is not a widow (being a male) and is also
earning well over Rs.1,500/- per month as a bank official. The purpose of setting up the Petitioner-
Society was to assist indigent and homeless widows and Respondent No. 3 does not fall in this
category by any stretch of imagination. On the other hand, the submission of learned counsel for
Respondent No. 3 was that her client was entitled to step into the shoes of his deceased mother
being her nominee, and he was merely seeking to enforce this entitlement that was available to him.
9. In our opinion, the dispute is really covered by the decision of the Supreme Court in Gayatri
De v. Mousumi Cooperative Housing Society Ltd.& Ors, AIR 2004 SC 2271. There are in fact two
situations that can arise in a case such as the present. The first is where the deceased member has
not been allotted any plot or flat and is merely a member of a society. The second situation is
where a deceased member has been allotted a plot or flat by virtue of his or her membership of a
society.
10. In the first situation as mentioned above, there is no interest of a deceased member that can
devolve on a nominee. It is merely a membership of a society and this cannot be termed as the
estate of the deceased which can be inherited by the legal heirs of the deceased. A somewhat
parallel situation would be a membership to a club or an association. The death of a member of a
club or an association does not confer any entitlement on any of his legal heirs to membership of
that club or association. In the second situation the allotment of a plot or flat is an interest that can
devolve upon the legal heirs of a deceased. This is what has been held in Gayatri De. We may
note that we have followed Gayatri De in a recent decision rendered by us in Manmohan Nath N.
Puri (Deceased) through L.Rs. v. Shri Madan Jha and Ors. (WP(C) No.182/1990 decided on 18th
March, 2009). In another Division Bench decision being Pran Nath Mallick v. Dr. Netar Prakash
Mallick & Ors., 2000 III AD (Delhi) 843, a Division Bench dealt with the second situation
mentioned above and concluded that after allotment is made, legal rights get vested in the member
and the society cannot stop inheritance of those rights on the legal heirs of the deceased on the plea
that such a person is not a member of the society. Of course, this decision would not be applicable
to the first situation that we are concerned with but is being mentioned only to indicate the two
distinct situations that can arise.
11. In view of the above, in our opinion Respondent No.3 could not succeed to the mere
membership of his deceased mother, more particularly on the facts of this case because Respondent
No.3 did not satisfy the eligibility conditions laid down in the Bye-Laws of the Petitioner-Society.
We may note for the record that learned counsel for the Petitioner contended before us that the
decision of the District Consumer Dispute Redressal Forum having attained finality, Respondent
No.3 is bound by that decision and cannot agitate the claim all over again in a different forum. We
are not going into this aspect of the matter because even otherwise on merits we are of the view that
the impugned orders passed by the Registrar, Cooperative Societies and the Financial
Commissioner are not sustainable in law.
12. The writ petition is allowed. No costs.
Sd./-
MADAN B. LOKUR, J
Sd./-
May 08, 2009 SIDDHARTH MRIDUL, J

1 2 3 5