Forced donations sought by housing societies illegal: HC

In a setback to housing societies who get members to make a ‘voluntary donation’ at the time of sale of flat, the Bombay high court has ruled such payments are illegal. A housing society cannot recover excessive transfer fee from a member under the guise of ‘voluntary donation’, the court has ruled.

“A cooperative housing society…is not expected to indulge in profiteering from members and, if such amount is earned, then it is taxable under the law. There is no bar on any member to pay a donation to the society, but it should be voluntary,” said Justice Bhatkar.

The judge remarked housing societies were known to charge extra from members. “Different ways are invented to earn more than legally permissible charges,” the judge said. The HC directed the society to refund Rs 4.75 lakh along with 8% interest from 2005.

In the present case, a former member had accused Alankar Sahkari Cooperative Housing Society of forcing him to make a donation. The member claimed he was facing financial distress and hence had decided to sell the bungalow plot in the housing society. The committee, he claimed, sought a donation of Rs 5 lakh for their approval.

The member paid the amount in April 2005 and, once the sale was through, filed a dispute before the cooperative court in December 2005, seeking a refund of the amount paid under duress. The cooperative courts ordered the refund, which was challenged by the society in the high court.

The society referred to a communication by the member that he was donating the amount voluntarily. The high court refused to accept this admission. “A person facing financial crises will not donate Rs 5 lakh. There is a ceiling of Rs 25,000 for transfer fees,” the judge said. “From this conduct of taking immediate steps… and challenging the transaction, it can be safely concluded the amount was not a donation.”

Shibu.Thomas@timesgroup.com

Times Of India – 030918

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