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By Legal Bureau
Although Bye-law clearly says that the amount of transfer fee should not exceed Rs. 25000/-. Many housing societies in Maharashtra are still charging ad-hoc transfer fees. Sometimes it goes in lakhs. The sum Rs. 25000/- is the maximum limit a society can charge transfer charges. Many society are charging the same but it can be much less than the maximum limit. As per Bye-Law no. 40(d)(vii) the Society should collect transfer charges 2.5% of the difference between the book value of the flat and the price realised by the transferor on Transfer of the flat OR maximum Rs. 25,000/- whichever is less. Supposed difference between purchase and sale of the flat is Rs. 4,00,000/- hence the society cannot charge transfer fee more than Rs. 10,000/-. But not many society know the provision of charging 2.5% on the difference, instead they directly jump to maximum limit of Rs. 25,000/-.

 

Latest Transfer Fees Judgement
THE MAHARASHTRA STATE
CO-OPERATIVE APPELLATE COURT, MUMBAI
Shri L. H. Patil, Member
Shri Ramana Co-operative Housing Society Ltd., Bombay
Versus
Shri S. D. Chittar, Bombay
(Appeal No. 17 of 1986, decided on the 19th December, 1986)
Maharashtra Co-operative Societies Act, 1960 – Section 91 – Transfer fees or charges of the flat – Claimed by the Society and recovered accordingly – Question of refund of the amount – Principle of estoppel – Applicability – Held, Society had no right to charge transfer fees in excess of provision of Re. 1/- under bye-law – The member had right to demand the money back, with damages in the form of interest – (Co-operative Society – Transfers fees or charges of flat – Recovery – Refund; Estoppel; Evidence Act, 1872- Section 115).
Where the Society has not said a word for what reasons it has to charge these transfer fees, as passing of a resolution to charge cannot be a reason on legal ground to authorise the Society to collect such charges which are in no way less than levying toll or a tax. In the absence of that the charges levied by the Society would be absolutely an arbitrary act and restriction illegally right over the property held by the member in the Co-operative Society. The Society is no doubt entitled for recovery of the maintenance charges for management of the Society and allied expenses which are required to be paid off to other statutory bodies. [Para 5].
The Maharashtra Co-operative Societies Act and Rules made thereunder, do not provide for such a right with the Society to charge transfer fees in addition to Re. 1/- prescribed by the bye-laws when the member intends to transfer his property in the Society in favour of third party. One can very well understand a reasonable restriction which can be imposed on a member, who would induct the third party as a member of the Society on the grounds of safeguarding the interest of the Society which may cause nuisance from unwanted element but that does not mean that the Society can have such a right of profiteering out of the Co-operative movement. [Para 5].
The Society would be ignoring this object and putting a penalty on its member on such occasions when it was ready to help him to solve his problems. Generally they are not suppose to squeeze by arbitrary acts to whomsoever once they get benefit but of the Co-operative movement. [Para 5].
The resolution only, even if passed, by General Body of the Society would have no overriding effect and binding on the members inter se if it is not approved by the Registrar and even if approved it would be totally illegal. How any Society can charge transfer fees in the manner in which it has been passed in this matter also. The lower Court was absolutely right in granting the award for refund of the amount with interest in the form of damage as claimed. The Government had already imposed the penalty on a member that was also irrational, improper as the Government is not supposed to profit out its subjects and difficulties, investment of his own hand earned money in the Society when he is compelled to liquidate his investment for some difficulties and to ask him to pay 50% of the excess money of the cost of construction forgetting how long his money was locked. The member cannot be penalised in such manner even by the Government and the Society atleast had absolutely no right to charge transfers fees in excess of its provision of Re.1/- under bye-law. The member had therefore right to demand the money back, with damages in the form of interest. [Para 5].
Judicial reference:
Co-operative Society- Property held by a member-Reasonable restriction on transfer-Limit.
It is well-settled law now that the property held by a member in Co-operative Society is a property heritable and transferable and if such a property is held by a member there cannot be such restrictions which could rather amount to be a sort of tax or toll amounting to putting a log as the rights of the member over his property. The Society charges transfer fees only with a view to enrich itself and for neither count. However, reasonable restrictions on transfer are always approved by the Court. [Para 5].
Case-law referred:
(1) 77-BLR 549.
Advocates appeared:
Shri Vaidhya, Advocate for the appellant.
Shri. Rajiv Naroola, Advocate for the respondent.
JUDGEMENT
1). L. H. Patil, Member – This appeal arises out of the judgement and award passed by the learned trial Judge in the dispute filed by the Respondent, holding that the Society was liable to pay to the disputant Rs.6,000/- with interest at the rate of 9% per annum from 25-7-1977 till realisation within 15 days from the date of award and the costs of the dispute. The dispute was filed by the respondent for recovery of the sum of Rs.6,050/- with interest at the rate of 12% per annum alleging that this amount was illegally recovered from him by the Society as transfer fees or charges of the flat by him in favour of other. The disputant was a member during the period 1964 to August, 1977 of the appellant-Society which was registered under the M.C.S. Act, 1960. The Government through its Additional Collector of Mumbai had allotted 2 plots of land to this Society. One of the conditions of the allotment was that the Society should not enroll any additional members or substitute any member in place of those members approved by the Government except with the previous written approval of the Government. The disputant was admitted as a member after due approval by the Government. By August, 1972 building was constructed by the Society and the disputant was allotted one flat in the said building in October 1972. In 1975 the disputant, for certain reasons wanted to transfer his flat and for that purpose he applied to the Society for approval. It was in favour of one Mr. A. V. Patkar, who was posted as District and Sessions Judge at Sholapur since deceased. After some time he was required to pay Rs. 25/- to the Society on application for transfer. The Society had accepted his application so the disputant applied to the Secretary to the Government of Maharashtra in the concerned Department in July 1975 for permission to accept the said Mr. Patkar as a member in place of the disputant. As usual the Government was not so prompt in disposing of the application of the disputant. Somewhere in December, 1976 the Government called upon the disputant and asked him whether he was ready to pay to the Government 50% of the difference between the cost price of the flat and the sale price of the flat, as a matter of policy of the Government, it seems that before the matter could be finalised by the Government, Mr. Patkar died somewhere in January, 1977. The natural effect was that the said proposal was fissled out. The disputant had to apply again with fees of Rs. 25/- to the Society for transfer in favour of Mr. H. S. Rao, another officer from Marmugan Port Trust. The Secretary of the Society with the approval of the Managing Committee sent application to the Secretary of the Government Department in April, 1977 for permission to accept Mr. Rao as a member in the disputant’s place. It seems that the Government in this matter was very prompt which was also an unusual features of the Government working as it finalised in May, 1977 in the matter of application in April 1977 which is contrary to the personal experience and a condition was put up that on payment of this sum of Rs. 11,700/- within a fortnight to the Government the proposal would be accepted. The disputant accordingly paid the amount to the Government through the Reserve Bank of India and the final orders were passed by July 1977. Now inspite of this payment, the Society also recovered from the disputant somewhere in the last week of July, 1977 an amount of Rs. 6,000/- as transfer fees. It had also recovered Rs. 50/- as above in addition to those Rs. 6,000/-. Therefore a grievance is made that the Society had no right to recover such transfer fees from the disputant. But as the disputant was a needy person for liquidating his investment as early as possible, he had submitted to this illegal demand under a sort of a duress and after the payment and after completion of transfer, he is asking for refund of the amount with interest as stated above. The fact which is alleged in the dispute application is that the Society had subsequently reduced the transfer charge Rs. 6,000/- to Rs. 1,500/- even then that was also illegal. Hence, the dispute was filed for the recovery of this amount.
2. The Society filed its written statement opposing the claim on the ground, that the dispute was not maintainable since the disputant was stopped from claiming the amount as he was stopped from challenging the recovery by the Society since he was party to the resolution passed by the Managing Committee at the relevant time. It is said that he was a member of the Managing Committee and also some time a Chairman, some time in the year 1974-75. So the principle of estoppel is raised against him for the claim. It is said that the Government had approved the transfer with a copy, subsequently sent to the Society for information. According to the Society, the Special General Body Meeting held on 1-9-1973, had adopted resolution which was sent to the Registrar for approval on 2-11-1972. Again in the year 1973 the Managing Committee had referred to the General Body for revised amounts chargeable on transfer of tenament which were also considered by the Special General Body in its meeting held on 15-4-1973, wherein a resolution was passed unanimously, adopting the said rules and it is said that the disputant had paid in accordance with these rules, However, it is asserted that it is not correct that the Society is not entitled under the provisions of the Co-operative Societies Act to recover an amount as a transfer fee. The payment to the Government made by the disputant did not include charges levied by the Society, therefore, the claim for refund was also opposed by the Society. The learned trial Judge after hearing the parties examined the issues on merits and passed the impugned order.
3. It is now urged before me on behalf of the Society as well as the original disputant that the facts regarding claim of the rival parties as stated before the lower Court were correct. I have to consider which out of them is more correct for acceptance by the Court for grant of the reliefs in the dispute or for rejection thereof as per the defences raised. Mr. Vaidhya the learned Advocate for the appellant against whom the award is passed contended that the payment made by the respondent to the Government had nothing to do with the resolution passed by the Society and further the disputant had approached directly to the Government and had obtained permission, therefore that payment is not a payment which is binding on the Society for consideration of the transfer fees It is then said that the disputant was a member of the Managing Committee and was present when the resolution for charges was passed and therefore he was estopped by conduct challenging the recovery in view of the resolution adopted. Therefore, it is said that the trial Court wrongly appreciated the issues and the effect resulted in wrong decision thereof.
4. As against this, Mr. Naroola has contented that the conduct of the respondent would not operate as a estoppel in law as the estoppel is alleged against the legal principle and not on factual aspect only, when the Society had no legal right in asking for transfer charges, the payment by a member itself would not amount to an estoppel by conduct and therefore if a thing which is accepted for unjust enrichment in equity, has to be set right by asking to refund the same with an order of interest for the unlawful loss resulted out of this inequitable and unlawful acts on the part of the Society. It is then said that there was no approval of the Registrar for any such bye-laws of the transfer fees. Then he relied on certain rulings of this Court earlier passed in the matter of Lajpatrao in Appeal No. 387 of 1975 and in a matter of Ramesh Shah V/s. Harsookh Joshi, [77 BLR 549].
5. It is a matter of record and to be clear on this aspect that the Maharashtra Co-operative Societies Act and Rules made thereunder, do not provide for such a right with the Society to charge transfer fees to in addition to Re.1/- prescribed by the bye-laws when the member intends to transfer his property in the Society in favour of third party. One can very well understand the reasonable restriction which can be imposed on a member, who would induct the third party as a member of the Society on the grounds of safeguarding the interest of the Society which may cause nuisance from unwanted element but that does not mean that Society can have such a right of profiteering out of the Co-operative movement which I have come across on several occasions in different ways adopted ingenuously by the Society and one of them is charging arbitrarily when it has no legal foundation to charge such amounts. It is well-settled law now that the property held by a member in Co-operative Society is a property heritable and transferable and if such a property is held by a member there cannot be such a restrictions which could rather amount to be a sort of tax or toll amounting to putting a log as the rights of the member over his property. The Society charges transfer fees only with a view to enrich itself and for neither count. However, reasonable restrictions on transfer for the reasons stated above are always approved by the Court, as we understand it from the Constitution. Here in this matter the Society has not said a word for what reasons it has to charge these transfer fees, as passing of a resolution to charge cannot be a reason or legal ground to authorise the Society to collect such charges which are in no way less than levying toll or a tax. In the absence of that the charges levied by Society would be absolutely an arbitrary act and restricting illegally right over the property held by the member in the Co-operative Society. The Society is no doubt entitled for recovery of the maintenance charges for management of the Society and allied expenses which are required to be paid off to other statutory bodies. It is therefore difficult for the people like me to understand the attempts of such Societies in enriching themselves by such levy when they appear to me diagnomically in contrast to the spirit of Co-operative movement as we understand it is basically for the benefit of lower strata of the Society and when it is enshrined with all favours from Government to attain the said laudable object to serve the poor needy people. The Society would be ignoring this object and putting a penalty on its member on such occasions when it was ready to help him to solve his problems. Generally they are not suppose to squeeze by arbitrary acts to whomsoever once they get benefit but of the Co- operative movement. Here in this matter it is said that the General Body had passed a resolution, I am afraid of endorsing any legality to the decronic resolution passed by majority of the Society which is basically detrimental to the spirit and law of co-operation and against the interest of individual members which has no legal sanction. It is said that bye laws No.51(I) also requires that any regulation or bye-law if to be amended requires approval of the Registrar for imposing such charges of the Society. The resolution only, even if passed, by the General Body of the Society would have no overriding effect and binding on the members inter se if it is not approved by the Registrar and even if approved it would be totally illegal. Therefore argument in favour of Society would be over simplification if it is to be accepted. I am unable to understand till today how any Society can charge transfer fees in the manner in which it has been passed in this matter also. In this matter I find that the lower Court was absolutely right in granting the award for refund of the amount with interest in the form of damage as claimed. The Government had already imposed the penalty on a member that was also irrational, improper as the Government is not supposed to profit out of its subjects and difficulties, investment of his own hard earned money in the Society when he is compelled to liquidate his investment for some difficulties and to ask him to pay 50% of the excess money of the cost of construction forgetting how long the capital investment was made and how long his money was locked. I can only say that the member cannot be penalised in such manner even by the Government and the Society at least had absolutely no right to charge transfer fees in excess of its provision of Re. 1/- under bye-law. The member had therefore right to demand the money back, with damages in the form of interest. Therefore, in order to avoid the judgement being lengthy, I pass the following order:-
ORDER
The appeal is dismissed. The Appellant-Society shall pay Rs. 150/- as costs of this appeal to the respondent.