Why Managing Nominations in C H S is so Clumsy – 4

By I C Naik

In Parts 1, 2 and 3 we noticed a deadly conflict between law and practice in managing transfer of flats over to the next generation under the MCS Act 1960 . The conflict is on account of faulty transmission of the law in to the Model bye-laws released by the Commissioner for Co-operation and Registrar of Cooperative Societies (C C & R C ) in 1984 and 2001.

In this part 4 we look at the newer conflicts under the 2014 Model. The conflicts are concerning the controversial Associate member-its definition, nomination procedure and transfer of the deceased member’s title to the flat. We saw that in earlier Models (including the 2009 Model) transfer of the share of the Joint owner of a flat to nominee(s) of the main member is not allowed to the registered nominees. This made Associate member’s share in the flat an orphan upon death of the main member as in that even Associate also ceases to be a member of the Society. A half hearted attempt can be observed as a remedy to this lacuna by tinkering in to Bye Law No 3(xix)(b)  32 and  56.

Now a drastic change is Bye Law No 3(xix)(b) which  restricts admission to Associate membership to that person who is a party to flat purchase agreement as a Joint Holder.  The MCS Act 1960 till date, allowed to join Cooperative Society as an Associate member by virtue of its definition U/S 2(19)(b) subject  to prescribed conditions.  A hardly known and hardly utilized opportunity granted under the MCS Act 1960 [Sec 24(2)] is that the Society can provide for any rights of main member to be exercised by the respective Associate Member by specifying them in the  registered bye-laws. All Models under our scrutiny confers only one right to Associate to vote in general body meeting in the absence of main member [Sec. 27(2)]

The tinkering to Bye Law No 32 in Model 2014 is to extend  the main member’s  right to register nominee(s), , to on Associate member also. As a support to this, bye-law No 56 which provides for cessation of membership of Associate upon death of his main member,  is protected by a following proviso thereto namely:

“However the associate member shall not cease to be Associate Member when the First Member ceases to be the member of the society if Associate Member holds title and interest in the property jointly with the member.”

It is evident that the definition of Associate in Bye Law No 3(XIX) is not convincing to C C & R C also.  The rider to the proviso namely “if Associate Member holds title and interest in the property jointly with the member” is redundant because such Associate member must be a Joint Holder of the flat. [Bye Law No 3 (XIX)(b)].

The result of the failure of the tinkering to bye-laws as afore said, is that the managing committee is at a loss to find the so called “prescribed form” to enable Associate member to register his nominees. This is because the content of the Form 14 prescribed for that purpose clearly indicates that its use is limited the Main member holding shares and flat in his name and is registering his nominee(s) as a sole holder. There is no recognition of the fact of Associate being  a co-owner of the flat . Have a look at the following extracts from this prescribed Form 14:

I, Shri*Shrimati……………………………………….am the member of the ……………………………..Co-operative Housing Society Ltd, ……………..

2.I hold the share certificate No…………………………….., dated ……………………..for ten fully paid up shares of Rupees fifty each, bearing numbers from ………………….. to ………………………..(both inclusive), issued by the said society to me.

3.I also hold the flat no…………………… admeasuring ………………..sq.meters, in the building of the said society, known/numbered as……………………………

4.As provided under Rule 25 of the Maharashtra Co-Op. Societies Rules, 1961, I hereby nominate the persons…..

Para 5 of this Form 14 has not been changed at all. This is fully analyzed in part 3 also explaining the  redundancy of Indemnity Bond and  rendering it ineffectual.

Note appended to Bye Law No 34 is another instant of compounding the confusion to nominees.

“Note:- In case of acquiring Membership on the basis of Nomination, such Member shall hold the flat / unit in ‘trust’ till all the Legal Heirs are brought on record and shall not have the right to ownership and shall not create third party interest or alienation in any way whatsoever.”

This note is in conflict and is against the interest of the Society. It neutralizes the immunity to the Committee under sub-section 4 of Section 30, for its  Sub-section (4) of section 30 reads “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.

It is worth looking at observations  of  the Supreme Court of India in a case of Kolkatta based housing society  in CA4930/2006  11- 03- 2016  at Para 15 and 20   clarifying  “Membership of the Society ” and “the member’s share in the capital/property of the Society ” are quite different in law.

As per this judgment, any dispute about the interest of member is outside the domain of the society  laws. There are other laws and machinery to deal with such disputes and housing society Management need to stay away, leaving it for members to sort it out  themselves.  This note prone to dragging the Committee in to succession issues, where there may be none. It is not even in public interest, as it mandates all successors to obtain succession certificate thus the right to appoint nominees is also rendered redundant.

How to get rid of clumsy process? It is very simple. Amend your bye-laws on the following lines.

Remove all other rights of Associate member even if he is a joint holder of the flat excepting that u/s 27(2).  Only the main member registers nominees for the entire flat in  Form 14  without distributing percentages of the interest. The Society admits the nominees to membership namely No 1 nominee as  the main member as per Para 5 of  Form 14. Main and Joint member may make a will for their respective shares and file a copy thereof with the nomination form in a sealed envelope to be opened upon coming to know of the death of flat holder(s). Beyond that the Society is not concerned except to giving effect to an undisputed  succession certificate issued by a competent court or to a will. Remove form 18 as well as the Note to Bye Law No 34 and modify  Paragraphs 3 and 4 thereof.

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