Cooperative housing societies: Common issues and solutions

Common issues in any cooperative housing societies or CHS can be resolved by discussion. If this does not solve the issue, the complainant may have to raise it to appropriate authorities, like municipal corporation, deputy registrar for cooperatives, consumer court and police

The recent Campa Cola episode shows that co-operative housing societies (CHS) must exercise due caution, when it comes to maintaining and ensuring that their buildings comply with the law. Sometimes, there are infractions between housing societies and individual apartment owners, as well as outsiders. However, many individual apartment owners are at a loss as far as grievance is concerned and do not know how to proceed with their complaint. There are several issues in a CHS, like car parking, leakages, fraudulent auditing, unauthorised construction (ala Campa Cola), and many other issues. Home owners need to know the right recourse to take action to ensure that their rights are maintained and upheld. Advocate Vinod Sampat who is the speaker at a seminar being hosted by Moneylife Foundation has given a brief of what you should do when you encounter various problems.

Some of the common problems related to co-operative societies and the solution to the same are produced as under:

Problem Suggestion Solution
A AGAINST BUILDERS (ACT FAST BEFORE NEW ACT IS INTRODUCED!)
1 Sale of open parking space by builder, sale of pocket terrace by builder, not executing the conveyance, not giving statement of accounts, not obtaining occupation certificate, not obtaining building completion certificate, not handing over original documents of title of the property, not transferring the property card in favour of the legal entity
a) Approach Consumer Court for deficiency of service;

 

b) Approach the criminal court for cheating, criminal breach of trust, mischief, violations of the provisions of Sec. 11 & 13 of MOF Act;

 

c) Lodge  complaint  with  ULC  Department  as undertakings are given that conveyance will be executed within a stipulated period of time at the time of release of the plot from ULC;

 

d) Lodge complaint with ISO authorities if the builder has got an ISO certificate;

 

e) Lodge complaint with SEBI if the builder is going for a public issue and has not made the disclosures in the prospectus;

 

f)  Lodge complaint with BMC to black list the builder;

 

g) Lodge complaint with police seeking permission to take out morcha by peaceful means to protest against the acts of the builder.

2 Builder  not  sharing  the  amounts received from allotment of hoardings, installation of mobile tower on the societies terrace a) Approach the consumer courts for deficiency of service;

 

b) Request police authorities to file an FIR;

 

c) Approach city civil court;

 

d) Approach High Court.

3 Builders developing adjacent plot and apprehension  is  there  that  the FSI/TDR of the society is being used a) Write letters to BMC objecting to the same;

 

b) File a suit in High Court/ city civil court/ consumer courts praying for an injunction restraining the builder from utilizing the FSI/TDR of the plot of land for which the society has already been formed.

B CO-OPERATIVE SOCIETY
1 Society not allowing visitors to park their vehicles in the building premises
a) Approach the police authorities stating that there is violation of the provisions of Table 15 READ WITHRegulation 36 of the Development Control Rules, read with Regulation 36 which stipulates that 10% (now 25%) of the parking space has to be kept vacant for the visitors;

 

b) Lodge a complaint with Bombay Municipal Corporation requesting the Corporation to cancel the occupation certificate as the terms and conditions pertaining to IOD have been violated.

2
Society not allotting car parking space to members
a) Draw the attention to the provisions of Table 15 Regulation 36 of Development Control Rules of Greater Mumbai;

 

b) Approach Consumer Forum for deficiency of service;

 

c) Approach Co-operative Court;

 

d) Approach Registrar’s office;

 

e) Note if you have other like minded members who are deprived of parking one each can approach different authorities;

 

f)  It will not make difference if the builder has sold car parking space to some other flat purchasers.

3 Co-operative Housing Society collecting exorbitant amounts at the time of transfer of flat, collecting exorbitant amount towards non occupancy charges a) Approach consumer court for deficiency in service;

 

b) Approach police station for extortion, mischief against all the members of the managing committee with a specific request to lodge a First Information Report (FIR);

 

c) Approach metropolitan magistrates court;

 

d) Lodge complaint against auditor for professional misconduct.

4 a) Managing committee members not  issuing share certificate to members;

 

b) Co-operative Housing Society not taking action against the members of the managing committee who have misused the funds of the society;

 

c) Co-operative Housing Society not taking action against defaulters who are managing committee members

a) Approach Consumer Forum against society;

 

b) Approach Co-operative Court;

 

c) Approach the office of the registrar to remove the managing committee members;

 

d) If more complainants are there they can approach different authorities.

5 Co-operative Housing Society and its members employing minors a) Lodge complaint for violations of Juvenile Workers Act, 1986, Bye law No 161(C), stipulates a punishment up to one year imprisonment and/or fine up to Rs20,000

 

b) Lodge complaint with labour & police authorities

C CRITICS CORNER
1 Office bearers behaving as dictators.

Some members are having parties and disturbing the peace in the building

To lodge complaints with the registrar of co-operative societies, approach co-operative court or consumer forum;

 

For certain matters contact police authorities

2 Co-operative Housing Society not taking action against unauthorised construction Lodge complaint with Bombay Municipal Corporation (BMC) for unauthorised construction
3 Co-operative Housing Society not responding to queries as regards payment of service tax Do the correspondence with service tax department
4 Co-operative Housing Society not maintaining fire fighting equipments As per section 3(1) Maharashtra Fire Prevention and Life Safety Measures Act 2006 read with rule 4(2) Maharashtra Fire Prevention and Life Safety Measures

Rules every society having a building of ground plus four floors and above have to submit / arrange to submit every half yearly a certificate to the fire authorities. I would like to have a copy of the same at my cost for the last three years. Take up such matters with fire authorities.

5 Co-operative Housing Society not showing records related to

various expenses being incurred by the society

Draw the attention of office bearers to the circular dated 10/3/1995 issued by co operative department.
6 Complaint  against  chartered accountant who has audited the accounts of the society Write to Institute of Chartered Accountants of India highlighting provisions of act, rules and bye laws; Example: Exorbitant amount collected as donation, security not given by persons handling cash. Rule 107-B.

 

Money collected for car parking deposit, amounts of some members waived off, legal expenses recovered from only some members + action at consumer forum.

7 Complaint against auditor on the panel of registrar Request the authorities to take disciplinary action against the auditor;

 

Request the authorities to remove the name of the auditor from the panel of auditors;

 

If it is a case of negligence approach the consumer forum for the losses caused with a prayer to recover the same from the auditor;

 

File criminal case. In our view permission to file criminal case from government authorities is required only if the person is appointed by the government;

 

If the employee is appointed by the head of the state then permission is not required.

8 Complaint against government officers for not giving the proper information

 

Always keep camera spy pen with you. It is not known when it can come handy

Approach the higher authorities;

 

Ask for the actions initiated against him in his earlier postings;

 

Ask the pending departmental proceedings going against him as of date;

 

Here RTI Act can be of help to you.

D COURT MATTERS
1 Government officer not passing the order after the matter is kept closed for order.

 

 

Politely state that the judgment in the case has been reserved since a long time. Order XX Rule 1 of Code of Civil Procedure Code, 1908 fixes a model Time Limit of 30 for pronouncement of Judgment. Therefore please pronounce the judgment at an early date and do the real justice since ‘Justice Delayed is Justice Denied’ (You may also ask for all orders being passed by the said quasi judicial authority)
2 No track record as to the court case Insist on roznamas of all the dates of the hearing
3 Reply received from advocates that

court is not sitting

Tell the advocate to take up the matter with the judge; who has got additional charge of the said court.
4 How to speed up court case

 

 

If you are a senior citizen you have a right to request the court to take up the matter for expeditious hearings in the light of the high court circular dated 3/08/2009. If a long date is given insist for a shorter date;

 

You can approach the higher court for directions to expedite the court case if there is urgency in the matter. File miscellaneous applications to get the necessary information.

5 How to protect ones interest in matters where there is possibility of litigation.

 

ALWAYS  CARRY  LATEST GADGETS AND RECORD

Use modern technologies like Google search and ask for help;

 

Tell your advocate to pray for ad interim injunction;

 

Tell the court for the appointment of court commissioner.

E Right to Information -RTI
1 Despite writing no action is being initiated by government officers Make an application under the Right to Information Act (RTI) to the public information officer.
2 Evasive replies are given by the public information officer. 4578 illegal cell towers in Mumbai. Action taken big zero. If a common man breaks the law will the BMC be lenient. What was our sleeping giant doing when such towers were installed? Why are criminal cases not being filed by BMC suo moto? File an appeal. You may also file another application with the public information officer asking for information which may include copies of all the registers being maintained by the office, when the said registers are being updated, details of the registers which are incomplete, number of files in the office which are misplaced, not traceable, number of letters received per month by the office, details of the number of matters disposed of within one week, inspection of the files with specific reference to the files of the matters disposed of within one week. If you have asked for documents like certified true copy you can also approach the consumer forum as you are a consumer;

 

To put pressure you can tell your relative at say Gujarat to file a complaint from Gujarat in Gujarati. Section 11(c ) of the Consumer Protection Act, which stipulates that a case can be registered where the cause of action wholly or in part arises. (Samajnewale ko ishara kafi hai);

 

Ask for inspection and reply given to RTI queries in the last six months.

3 Society not getting copy of building plan Write to the Bombay Municipal Corporation (BMC) authorities asking for the necessary information using  the Right to Information (RTI) act;

 

Also approach consumer forum for deficiency of services.

F Police-related matters
Police not taking steps to lodge an FIR in case of a cognisable offence Approach the magistrate u/s 154 of Criminal Procedure Code (CPC) to direct the police officers to register an FIR.
G How to draft complaint letters
Letter to Co-operative Society/ Government authorities.

 

 

Address to society, managing committee members and various government authorities;

 

Follow up with email to various government authorities;

 

Take up the matter on Lokshahi Din;

 

Just do not stick to one subject. Highlight all the wrong things done in the society;

 

Dramatise the facts; For eg: Say that the collective value of the property is approx Rs50 crore. If it is government department like BMS say that the yearly budget is Rs2,800 crore and the same is not properly utilised. Ask for information which will result in time being spent by the opposite party which information may not be very important for you;

 

Highlight instances of corruption, inefficiency pointed out by government authorities eg. Anti corruption bureau, comptroller and auditor general;

 

Request the government authorities to download the orders as is stipulated in Right to Information act. It is common knowledge that authorities do not do all their jobs as per provisions of all in all cases, follow up with Right to Information application if the matter pertains to government department.

 

LASTLY reserve your right to take action as per due process of law.

H Action against auditors

 

(Adv Vinod Sampat is a practising lawyer since past 28 years. He has authored several articles on property-related matters and written 46 books on cooperative societies, transfer of flats, recovery of dues, registration and stamp duty matters. He has been an Hon. Patron member of the Estate Agents Association of India. He is also the Hon. Advisor of the Federation of Accommodation Industry of India and is an advisor to the Maharashtra Chamber of Housing Industry as well as the Federation of Accommodation Industry in India, apart from being part of many committees and winning several honours.)

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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

Deemed Conveyance

Deemed Conveyance is a hotly discussed & debated topic these days among the Members of Co- Operative Housing Societies. The credit for these discussions & debates goes to the drive run by Government of Maharashtra for the Deemed Conveyance of the Societies. The Media is also contributing to the information flow on this subject.

The Members of Co- Operative Housing Societies are looking for information on the subject of Deemed Conveyance.

Deemed-Conveyance.in is an initiative of IamResilient Technologies Pvt. Ltd. The objective of Deemed-Conveyance.in is to offer authentic information on the subject for the benefit of Members of Societies Planning to go ahead with the Deemed Conveyance of their Property (Land & Structures).

http://www.deemed-conveyance.in/

Area under walls can’t be included in carpet area

As per the agreement between the builder, and Shailendra Ghaste and his mother Suman as the joint purchaser, the flat, with a carpet area of 760 sq ft, was sold for Rs 25 lakh.

The state commission observed that the requirement to mention carpet area in the agreement was introduced in 2008 by an amendment to the Maharashtra Ownership of Flats Act. Since the agreement was executed earlier, the builder could not be faulted for mentioning the built-up area instead of the carpet area.

The commission posed the question: What should be accepted when there is a conflict between the typed clause of the agreement and the approved floor plan annexed to it?

Going by the plan approved by the municipal corporation, the flat had a built-up of 760 sq ft. Since this plan had been annexed to the agreement, the commission concluded the builder had not suppressed any fact, and dismissed the complaint.

Shailendra then approached the National Commission, which ordered the builder to get the carpet area re-measured. In his report, the architect included the area under the door jams and the walls.

The National commission observed that the area under the internal and external walls cannot be included in the carpet area. Similarly, the area under the door jams is already accounted for in the floor area and cannot be separately added to the floor space. It concluded that instead of 760 sq ft, the actual carpet area was only 713.39 sq ft, so the area was lesser by 46.61 sq ft. The commission held that the builder was liable for this deficiency and not the estate agent.

Accordingly, in an order delivered by Justice VK Jain on July 24, 2018, the National commission ordered Dailani Developers to refund the value of the deficient carpet area amounting to Rs 1,53,388. In addition, the builder was also directed to refund Rs 7,669 toward stamp duty on the deficit area of 46.61 sq ft. Both these amounts would also carry 9% interest from the date of the complaint till refund.

Conclusion: A builder can be held liable for manipulation in carpet area.

(The author is a consumer activist and has won the Govt.of India & the National Youth Award for Consumer Protection. His email is jehangir.gai.columnist@outlook.in )

Times of India – 30 July 2018

NCDRC rules areas under walls internal or external cannot be included in Carpet area, orders refund of the value of deficient area and stamp duty.

Due Dates For Co-Operative Society in Maharashtra,

Your dates with Co operative Department if you are an office bearers of Housing Society.

Kindly find the references date and month wise course of action and below are some important dates:

1. Finalisation of Accounts – 15th May.
1A Documents to be kept for members inspection 16th May to 31st May

2. Accounts to be handed over for Audit -1st June.

3. Audit Completion: 31st July.

4. Audit Report Upload – 31st August or 15th September.

5. AGM Date – 30th Sept (to be held on or before).

6. Mandatory Annual Return by Society – by 30th Sept.

7. Mandatory Return by Society About Auditor Appointment – One month from AGM or 31st October.

8. Online Audit Order Generation by Auditor – 31st October.

9. Audit Rectification Report by Society: 3 months from the date of submission of report by auditor.

10. Rectification Report Upload by Auditor through Audit login: Once received from Society.

Victory for cooperative societies, as Supreme Court approves the principle of mutuality, for CHS income

The Supreme Court has upheld the principle of mutuality, which states that a person cannot make profit from himself. We look at how this ruling will affect the levy of tax on receipts, such as non-occupancy charges, transfer fees, service charges, common amenity funds, etc

The Supreme Court (SC) of India recently provided a big relief to cooperative societies (societies), by dismissing the claim of the income tax authorities on levy of tax on various receipts (for example, non-occupancy charges, transfer fees, service charges, common amenity funds, etc.) collected by such societies. The dispute of the tax authorities revolved around a notification dated 09.08.2001, issued under section 79A of the Maharashtra Cooperative Societies Act, 1960 and its applicability on such societies.

Based on this notification, the tax department contended that since these societies have received service charges/ maintenance charges in excess of 10 per cent of the non-occupancy charges, it was contrary to the law and hence, the principle of mutuality fails in such cases. The tax department held that such receipts are in the nature of business, having an element of commerciality and hence, principle of mutuality does not apply. The Income Tax Tribunal overruled the decision of the lower tax authorities, on the ground that the said notification was applicable only to cooperative societies and does not apply to commercial societies.

Principle of mutuality and taxation on cooperative societies

In this issue, the Bombay High Court, while dismissing the appeal of the tax department, ruled that the receipts of the societies are not in the nature of business income, generating profits/ surplus and therefore, not taxable. To claim the higher chunk of tax from similar issues, the tax authorities approached the SC. The SC observed that the doctrine of mutuality, is based on the theory that a person cannot make profit from himself. An amount received from a member, therefore, cannot be regarded as income of the society and treated as taxable in nature. The tax department has never challenged that the receipts of such societies have been utilised for purposes other than for the benefit of the members. The essence of the principle of mutuality, lies in the identification of the contributors and the participants, who are also the beneficiaries. Any surplus in the common fund, therefore, does not constitute income but will only be an increase in the common fund, meant to meet sudden/ future events.

Taxation on non-occupancy charges, transfer charges and contributions to the common fund

It was also observed by the SC that transfer charges are generally paid by the outgoing member. If part of it is paid by the transferee, it would not partake the nature of profit or commerciality, as the amount is utilised only after the transferee is admitted as a member. The moment the transferee is included as a member, the principle of mutuality comes into picture. In the event of non-admission of such transferee, the amount is returned. The same applies for non-occupancy charges, which are levied by the society and are payable by a member, who does not occupy the premises but lets it out to a third person. The charges are, again, utilised only for the common facilities and amenities for the members of society. Similarly, any contribution to the common fund, by a member disposing of a property, is utilised for meeting sudden or regular heavy repairs, to ensure continuous and proper maintenance of the society, which ultimately accrues to the enjoyment, benefit and safety of the members.

The SC further ruled that once a member is admitted to the society, the members form a class and accordingly, the identity of such members is irrelevant and the principle of mutuality is attracted automatically. The SC, relying on a plethora of rulings, went on to conclude that there was no profit motive or sharing of profits amongst the members. The surplus, if any, was not shared amongst the members but was available for providing better facilities to the members. There was a clear identity between the participants and the contributors, to the common fund of the society.

Conclusion

By bringing an end to the prolonged war between such societies and the tax department, the decision of the SC would be welcomed by such societies, as going forward, they would be free from tax hassles and will be governed by the principle of mutuality, leading to all receipts from the members being tax-exempt.

Further, the SC has not specifically mentioned anything about the income received by cooperative housing societies. It is interesting to note that although the decision is restricted to non-residential societies, it should also provide shelter to residential societies, as the underlying principle of mutuality remains the same for all types of societies. Further, once the principle of mutuality is established, all the receipts shall be exempt from tax, even though the same are in excess of the quantum as specified under some other law for time being in force.

 

BY ASHOK SHAH AND PRAVEEN KUMAR DARAK

https://housing.com/news/victory-cooperative-societies-supreme-court-approves-principle-mutuality-chs-income/

Landmark Judgement on Transfer Charges

Please find herewith land mark judgment delivered on 10-4-2018 pertaining to refund of transfer charges by Bombay High Court with interest. Basically Transfer of flat is a contract between outgoing and incoming member. Just to have involvement of the society in the earlier years RS. 1/- was charged as transfer Fee. Now transfer fee is RS. 500/- and maximum amount collected under share premium account is RS. 25,000/-

For Co-operative Societies Residents Users & Welfare Association.

President
Adv Vinod Sampat

⭐😀HC says the demand of admission fees in sum of 5 % of the sale price for purpose of admitting a new member against purchase of a flat, has no legal sanction or propriety under the scheme of MCS Act, Rules and Byelaws to be framed thereunder..⭐

⭐Membership of chs is an open membership. It is not possible to put any restriction on such membership save and except as may b provided undr Act, Rules, Byelaws made consistently with the Act and Rules.. section 23(1) of MCS prohibits any society from refusing membership duly qualified under mcs rules and byelaaws of such society for such membership without sufficient cause.. if any person were to be refused admission on account of certain fee or charge, such fee or charge must be legally justified so as to give rise to sufficient cause. If any person were to be refused payment of such fee or charge, in other words, so as to amt a sufficient cause, must hav a sanction of law.. the particular GBR dated 7th Jan 1993, which autborizes society to charge a sum of 5 % of sale price of flat as admission fee for the purpose of new membership has no legal sanction. There is no such provision in d Act or the Rules or indeed in the byelaws of the society in the present case, which enables the society to pass such GBR..⭐

In law, it.must be shown that the society, which is a creature of statute, has the power to take particular action complained of witjin d framedwork of such statute or otherwise under law..

⭐What is important in law is not the identity of the person, who actually makes payment but d identity of the person on whose behalf the payment is made. It is very clear from resolution of the society that this payment is in the nature of admission fee for the purpose of admitting new members against purchase of flat in the society. In other words, it is a charge to be levied on new member.. it is immaterial who makes this payment.. such payment has no sanction of law and wrongly recoverd frm new member. It is wholly immaterial who made this payment willingly or under protest. As long as it is money wrongly paid, it can be recovered by the payer from the payee within the period of limitation..

There is nothing to suggest that this payment was made voluntary by new member and hav taken the advantage of this payment.. thid is also not a case of voluntary donation..

There is no doubt that the period of limitation in such case is years from the date on which the act or omission with reference to which the dispute arose took place section 92(1)(b) of Limitation Act 1963.. As this dispute is related to an act or omission on the part of the society against the member⭐😀👇👇

 

Click Here for the full judgement