By I C Naik
With a very optimistic challenge this series was launched recommending to members of Cooperative Housing Societies registered in the state of Maharashtra {MAHA-CHS} to undertake “a voluntary but honest self-assessment of clarity in their understanding of their own Housing Society”. This is an attempt to inspire, encourage and help them to utilize the obligatory free time alongside Corona Pandemic and reduce the gap in their understanding of the wonderful scheme of MAHA-CHS. It calls for meticulously going through the Cooperative Housing Societies Regulatory Regime (the MCHSRR).
This regime has one unassuming, neglected but extremely critical identity called the bye-laws. The source of bye-laws can be traced to its definition in clause (5) of Section 2 of the MCS Act 1960: “by-laws” means by-laws registered under this Act and for the time being in force and includes registered amendments of such by-laws”; Registration of bye-laws and amendments there to and being in force are the key elements in this very simplistic definition, but it is very notorious beyond our imagination every reader shall realize as he marches ahead.
This uncharted journey from “actual to virtual” management of MAHA-CHS has one not negotiable prerequisite; a thorough clarity of mind of all members about MCHSRR and of the registered bye-law of one’s own MAHA-CHS, encompassing all their dimensions. One important dimension is; every member realizing “what a specific bye-law requires of the management and the rationale of each one of them? Most shortcomings observed in MAHA-CHS owe their origin to this importance but the least bothered about inadequacy: Absence of clarity on the rationale of most bye-laws has come to stay as a permanent feature of the MCHSRR but this stigma must be consciously eradicated and very fast. For moving to virtual and successful functioning of MAHA-CHS this is a must. Two shortcomings referred to in part 1 ( Part 1 in Coffee Shop July 21) are (i) large number of disputes leading to protracted litigations and (ii) hurdles in smooth functioning of the co-operative housing societies.
In part 1 an important management responsibility of fixation of maintenance charges almost a singular topic of keen interest and tension to every flat owner present and future has been touched upon. As such this topic was identified to start with setting a goal to bring home the rationale thereof to the understanding of every MAHA-CHS member. A large scale dereliction of management responsibility in this matter has been observed in most housing societies the sole reason being ignorance and indifference.
In this part we are going to try and unfold the scheme of MCHSRR as a background. Cooperative regime has many identities; the flagship being Part “IXB COOPERATIVE SOCIETIES” in the Indian Constitution inserted vide the Constitution 97th (Amendment) Act 2011 (in brief 97CAA).This part had caught a rapt attention of the Apex Court in the landmark order in the case of Vipul Chaudhary Vs Amul Dairy (Anand decided on March 19, 2015 [(2015) 42 SCD 494]. Vide this landmark order the Apex court upheld the removal of the Chairman on account of loss of confidence of the board despite the absence of provision of such a procedure under the MCHSRR. Some of the most relevant observations made by the division bench in the order are extracted here as the constitutional mandates inserted under 97 CAA have been recognized as the game changers for the management of Cooperative societies:
- “97th Amendment to the Constitution of India, in fact, gave a constitutional frame to “ The National Policy on Cooperatives announced by the Department of Agriculture and Cooperation, Ministry of Agriculture, Government of India adopted in March, 2002”
ii.The National Cooperative Policy has recognized democracy, equality, equity and solidarity as values of cooperatives. Cooperative society has been declared as a democratic institution. Democratic principles have all through been recognized as one of the cooperative principles though the constitutional affirmation of those principles came only in 2012.
iii.Once the cooperative society is conferred a constitutional status, it should rise to the constitutional aspirations as a democratic institution. So, it is for the respective legislative bodies to ensure that there is democratic functioning. When the Constitution is eloquent, the laws made there under cannot be silent. If the statute is silent or imprecise on the requirements under the Constitution, it is for the court to read the constitutional mandate into the provisions concerned and declare it accordingly.
iv.Despite the constitutional mandate, if the legislative body concerned does not carry out the required structural changes in the statutes, then, it is the duty of the court to provide the statute with the meaning as per the Constitution.
The other identities of the MCHSRR are like the descendants to the Constitutional mandates briefly outlined above, are (i) the Maharashtra Cooperative Societies Act 1960 and (ii) the Maharashtra Cooperative Societies Rules 1961. Most members of MAHA-CHS are not satisfactorily familiar with the true role of the bye-laws. The Apex Court has held that bye-laws are not laws: The Supreme Court in Zoroastrian Co-Operative Housing Society Limited Rd-Sc 253 (15 April 2005) held that “Normally the bye-laws of a society do not have the status of a statute and as held by this Court in Co-operative Central Credit Bank Ltd. vs. Industrial Tribunal, Hyderabad (AIR 1970 SC 245) bye-laws are only the rules which govern the internal management or administration of a society and they are of the nature of articles of association of a company incorporated under the Companies Act.
They may be binding between the persons affected by them but they do not have the force of a statute.” The Apex Court in the aforesaid order in Zoroastrian Co-Operative Housing Society case also clarified at Paragraph 15 that “Membership in a co-operative society only brings about a contractual relationship among the members forming it subject of course to the Act and the Rules. One becomes a member in a co-operative society either at the time of its formation or acquires membership in it on possessing the requisite qualification under the bye-laws of the society and on being accepted as a member. This is the rationale of inevitable adherence to the provisions of bye-laws by the members as their contractual obligation. As the bye-laws are not the laws of land their making is left to the members of the concerned MAHA-CHS: to make alter or abrogate the same in accordance with the provisions of the MCS Act 1960 and the MCR 1961. The very first bye-laws are to be drafted by the promoters of the Cooperative Housing Society i.e. the very first group of the flat purchasers as they have a contractual obligation to join the builder to form a Cooperative Housing Society.
Unfortunately, the MCHSRR has created confusion in the minds of cooperators, despite clear obligations of the promoters to ensure that proposed bye-laws are gone through and understood by all co-promoters. Casual drafting of rule 9 of the MCR 1961 creates a false narrative that bye-laws are approved by the Registrar, quote rule: “9. First bye-laws of a society:- When a society has been registered the bye-laws of the society as approved and registered by the Registrar shall be the bye-laws of the society. “Words “As approved” are misleading / false and are not in sync with the overall scheme of the MCHSRR.
In fact another misleading and serious example is found in the draft of membership application to be submitted by a flat purchaser reading: “I have gone through the registered Bye-laws of the society and undertake to abide by the same with any modifications the Registering Authority may make in them.” These instances are brought out for members to assess that the MCHSRR has not been aligned to Constitutional mandates which stand revised after coming in to force of the 97CAA.The bye-laws of every cooperative society must be re-drafted accordingly and registered in substitution of the registered bye-laws of the concerned C H S.
Members planning to move from actual to virtual are bound to get confused with such information. This demonstrates the magnitude and dimensions of the challenge involved in this journey. In fact the legislature has added a multidimensional unprecedented confusion after inserting a following proviso to Section 14 (1) of the MCS Act by the MCS amendment Act 2013 which was enacted as a part of the exercise of aligning the MCS Act to the new constitutional mandates as per 97CAA.
The proviso reads;
“Provided further that, the Registrar may specify the Model by¬laws, for such type of societies or class of societies, as he may deem fit.” This provision is in conflict with the order of the Apex court in Zoroastrian Co-Operative Housing Society (supra).that bye-laws do not have a force of statute. “The principle that rules framed under a statute have the force of statute does not apply to bye-laws of a cooperative society. They merely govern the internal management, business or administration of a society and may be binding between the persons affected by them but are neither law nor do they have the force of law.- Supreme Court of India in Co-Operative Central Bank Ltd. & … vs Additional Industrial Tribunal, … on 3 April, 1969[1970 AIR 245, 1970 SCR (1) 206]” .Drafting new bye-laws will be a beginning of a serious part of our journey of helping the members of MAHA-CHS moving from actual to virtual management [in part 3].