Why Managing Nominations in C H S is So Clumsy – 2

In Part 1 we saw how simple is the nomination law and procedure set for managing the transition of membership / interest in the property of the housing society from generation to generation. The Committees are spared of getting entangled in to the legality of transfer of immovable property is the hall mark thereof. Legally enforceable transfer of titles to immobile property is outside the purview of the MCS Act 1960. The Nomination confers a right to receive and hold the flat and is not like a Will which enables the owner pass on the ownership upon his death. Nomination facility is more to simplify the management and not intended to confer an ownership right to immovable property. Model bye-laws appears to have missed this distinction.Execution of nomination has become increasingly clumsy under Model bye-laws, which the Society is required to  comply. We start with 1984 Model.

Critical study of Bye Law Nos 34, 35 & 36, coupled with the Forms 14(1),14(2),15,16.17 and 18(1) prescribed in this Model is our mission.   . Incongruence to Law and Procedure is found in almost all above bye-laws and Forms. The study is  sharply focused on admission to membership where more than one person has been nominated.  Nomination of one nomination I very simple management as we saw in Indirani Wahi case referred to in Part1.

Bye Law No 34 & Form 14(2):

a)Primary member can  (i) nominate a person or persons, to whom (ii) the whole or part of the shares and/or interest of the member in the  society is to be transferred by the Society in the event of his death.

b)The form 14 (2) is meant for registering nomination of more than one person. Quoting Rule 25, in form 14(2) the nominator must furnish

(i) Relationship with the Nominee and

(ii) Percentage Share of each Nominee.

Critical Observations on Nomination Process

a)Nomination in respect of “the part of the shares and/or interest of the member in the capital/property of the society” is neither contemplated by the State Legislature [Section 30] nor by the State Bureaucracy (Rules are made by State Government).

b)Information regarding Nominees:

i.No rule requires any of the two information stated in 1c above.

ii.Transfer of Ownership right to immovable property cannot take place merely on the basis of nomination.

iii.Splitting of ownership by a “transfer of the Part” in Model bye-laws is outside the scope of Section 30 of the MCS Act 1960.

2.Bye Law No 36 & Form 15 /18(1)

a)“If there are more than one Nominee, on the death of a member, para 3 of the bye-law requires such Nominees to indicate the name of the Nominee who should be enrolled as a Primary member submitting a Joint Application by all nominees for membership.

b) The other nominees may be enrolled as Joint/Associate Members.

c)In case of refusal of other nominees they have to indemnify the Society.

d)Form 15 is a common membership application form to be used either by a single Nominee or by more than one Nominee. Facts extracted below from this form are relevant incase of  more than one Nominee only:

i.Being the first named nominee as per the nomination filed with the society, I am entitled to make an application for membership of the society and for transfer of shares and interest to my name.

ii.We have executed the indemnity Bond in favor of the society indemnifying it against any claim made at any subsequent time by other nominees . The said indemnity Bond is enclosed herewith.

iii.We remit herewith an amount of Rs. 10 as entrance fee

iv.We request you to please admit us as a member of the society and transfer the shares and interest of the deceased member in the capital/property of the society to our name. The share certificate held by the deceased member is enclosed herewith.

Critical Observations on Admission to Membership

i.Signatories to the form 15 requests that the person named first in the nomination form should be made a member. This supersedes the requirement of fhoosing one Nominee for primry membership.

ii.Rule 19(1) makes it a condition precedent for a written application for admission to any class of members. None of the forms prescribed for membership application can be used by Nominees to apply for  Associate/Joint membership.

iii.“Indemnity Bond is” is redundant step on account of

a.the fact that first named nominee in form 14(2) is to be made member as agreed to by all other nominees as per form 15

b.statutory provision at sub-section 4 of Section 30 namely “All transfers and payments duly made by a society in accordance with the provisions of this section shall be valid and effectual against any demand made upon the society by any other person.”

c.Ony Rs 10 are required to be paid which means that only one person is admitted to membership.

d.The Joint Member is nether defined under Section 2(19) of the MCS Act 1960 nor under any of the Bye Laws.

3.CONCLUSION

a)By importing a concept of holding a part of the share in the interest of the capital/property, is not contemplated under the Act or Rules, bye-law 34 is ultra vires of Section 30.

b)It goes beyond the Rule 25 also as no slitting of ownership is contemplated  and stating the share of other than the first named member in the flat is not provided in the Act/Rules.

c)When a first named nominee is to be admitted as a member and others as Associate if willing, where is the question of indemnity Bond as mere nomination confers no right to stake a claim ownership in the flat. They are free to join as Associate member any time as the deceased so desired.

4.RECOMMENDED REMEDIES

a)Delete assigning percentage share.

b)Abolish Indemnity bond.

c)Recommend to make a will alongside Nomination and submit to the Society in sealed envelop which is to be opened by the Society only in the presence of the Chairman/Treasurer and the first named nomiee, not before expiry of 30 days after the death of the member.

d)Replace bye-laws 34-36 and all forms in accordance with these recommendations.

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