Associate Membership in Housing Society in Maharashtra

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photo BPBy Advt. Bhakti Popat, Partner, ANB Legal,

The definition of ‘Associate Member’ in a co-operative housing society in Maharashtra has undergone change in the recent 2014 Model by-laws (“New By-laws”) published by the Commissioner for Co-operation and Registrar, Co-operative Societies (“Registrar”). An associate member is defined to mean “a member who holds the right, title and interest in the property individually or jointly with other but whose name does not stand first in share certificate”.

However section 2 (19) (b) of The Maharashtra Co-operative Societies Act, 1960 (‘the Act’) defines associate member to mean “a member who holds jointly a share of a society with others but whose name does not stand first in the share certificate”. The definition of associate member in Model By-laws published by the Registrar in the year 1984, 2001 and 2009 (‘Old By-laws’) is identical to the Act. Section 26 of the Act is now amended to provide that no member shall exercise rights until he has made payment for membership or acquired such interest in the society as may be prescribed or specified in the by-laws of the society. The Maharashtra State Co-operation Election Authority (“SCEA”) which is constituted under the provisions of the Maharastra Co-operative Societies (Election to Committee) Rules 2014 (“Election Rules”) in a letter, a copy of which was published in Maharashtra Societies Welfare Association’s Review magazine – July, 2015 interpreted section 2 (19) (b) of the Act and clarified that “associate member” must hold share jointly with a primary member whose name appears in the first place in the share certificate of the society.

Rights of Associate Member: The Act provides that an associate member may subject to the provisions of section 27 (8) have such privileges and rights and be subject to such liabilities of a member as may be specified in the Act, Maharashtra Co-operative Societies Rules, 1961 (“Rules”) and By-laws adopted by Co-operative Society. As per rule 20 of the Rules an associate member is required to submit a declaration in writing that the person whose name stands first in the share certificate shall have the right to vote and all the liabilities will be borne jointly and severally by them as provided in the Act, Rules and by-laws of the society.

Prior to 1969 an associate member was neither eligible to vote nor stand for election to be appointed as a member of the managing committee of the society.

In the year 1969, section 27 (8) of the Act was amended which enabled an associate member to have a right to vote at any general body meeting of society. Rule 20 of the Election Rules provides that in case of associate member, the member whose name stands first in the share certificate shall be eligible to be nominated as candidate for election. In the absence of first member, such person whose name stands second as associate member shall be eligible to be nominated as candidate for the election. A news report appearing in the daily The Times of India published on February 2, 2015 quoted Shrikrushna Wadekar, Assistant State Co-operative Election Commissioner  having clarified that “With consent of the original owner (whose name is first in the share certificate), an associate member can participate in elections and join the managing committee, provided his name is on the share certificate”.

Since the amendment to the Rules, enactment of the Election Rules and clarification issued by SCEA, an associate member is now eligible to stand for election and become a member of a committee of a society provided the original member has submitted a no objection certificate and undertaking stating that he does not wish to participate in the general body meeting or election process and surrenders all his voting rights in favour of the associate member and authorises the associate member to contest elections and become a member of the committee of the society. In respect of housing societies which have adopted New By-laws the prescribed form is Form 10A under New By-law No. 116(d).

Further the Registrar has issued and published Housing Manual as a guide giving information regarding adopting procedure for solving the complaints of members of the society and thereby assists committee in taking decisions based on what is given in the Housing Manual. The Housing Manual published by the Registrar has given the following information with respect to rights of the Associate Members:

“Since more than one person made payment of the cost price in the purchase deed of flat in co-operative housing society, they get ownership rights….. A person, who became an Associate member by paying only admission fee, shall not get any right to vote or stand for election on behalf of the original member. It is necessary for the Associate member that his share/name is included in the ownership of property for holding share jointly…”

Many housing societies currently are still governed by Old By-laws and have admitted associate member/s upon submission of the prescribed form, accepting an entrance fee for associate membership of Rs.100/- and having added the name of such associate member in the share certificate despite such associate member not holding any right, title and interest in the property individually or jointly with other. This practise will no longer be valid in view of the clarification and interpretation of section 2 (19) (b) of the Act issued by SCEA, amended section 26  and the changed definition of associate member in New By-laws.

Currently there are divergent views with regard to the eligibility conditions of an associate member in housing societies governed by Old By-laws. One view is that an associate member who is not a joint or co-owner ceases to be associate member irrespective of the fact which By-laws the Society is being governed and the committee shall take action towards cessation of such membership.   The counter view is that un-adopted model by-laws are not binding upon societies and its members. The Definition in the Act having not undergone any change, New By-laws cannot override the provisions of the Act and the Rules and in any event cannot have any retrospective effect and rights already conferred cannot now be abrogated. It is settled position in law that un-adopted By-laws are not binding and that by-laws have to be in conformity of the Act and the Rules. In the opinion of the author counter view may not be sustainable.

However pursuant to the changed definition in New By-laws and clarification issued by SCEA, it is now abundantly clear that only those individuals who have acquired an interest, share or right in the property under a duly stamped and registered document (agreement for purchase or gift deed or release deed or relinquishment deed or sale deed) is eligible to be an associate member. This is a welcome move and in conformity with other laws governing acquisition of immovable property namely the Transfer of Property Act, Maharashtra Stamp Act and Indian Registration Act.

It would be interesting to see how this concept is further developed by the statutory authorities since it is settled position that the Model By-laws have no binding effect unless it is adopted by society and registered with the Registrar. The best way forward would be for the Registrar to issue direction to societies pursuant to the powers vested in him under section 14 of the Act read with rule 8 of the Rules. In the absence of such directions societies may either adopt New By-laws or amend the definition of an associate member in its by-laws in conformity to the interpretation of section 2 (19 (b) issued by SCEA and amended section 26 of the Act.

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