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Caution, Housing Societies! Amended Law is Full of Hidden Dangers

1 September 2013 One Comment

RTI Activist News

Mumbai:  Two weeks after the Maharashtra Co-operative Societies (Amendment) Act 2013 was passed by the State Assembly, experts and activists are silent. Sweeping changes in a law that affects almost every citizen of Maharashtra who does not live in a slum, chawl or village – and not a squeak out of citizens! The ground rules have just changed for 80,000 cooperative housing societies throughout the state – a hotbed of disputes at all times – but not a single voice has risen to protest or to welcome the new law.

And so, like AK Hangal after the massacre in Sholay, one is asking, “Itna sannata kyon hai, bhai?” Why this unearthly silence, brother?

Copy of Amended MCS Act with commentaries: http://tinyurl.com/MCS-Act-1960-Updated-Aug2013

Even after the Gujarat High Court verdict practically removed the teeth of the 97th Constitutional Amendment, Maharashtra government pushed through the Amendment Act that is mostly the same as the Ordinance passed in February 2013.

Some new provisions threaten the interests of voiceless and vulnerable sections such as aged citizens, troubled spinsters and NRIs. Such suffering and marginalized citizens – who are normally shy and reticent in every society — will be compelled to attend general body meetings, or lose their voting rights or worse still, face expulsion, eviction notices etc. Their only hope lies in either being condoned by the very general body (which often acts as a mindless mob in the hands of the managing committees, victimizing and ostracizing such people) or in rushing off to appeal to the unresponsive and often corrupt officials of the cooperation department. Even if such society decisions are overturned after months or years of struggle, these vulnerable people will lose their peace-of-mind.

Other new provisions are a big blow to the influential managing committee members and society employees who carry the co-operative movement on their shoulders. Failure to comply with various deadlines can result in severe consequences, including dismissal, disqualification from contesting elections and cash penalties. Vindictive and vexatious members – who are present in every society – can invoke these provisions to do great damage to the society’s peaceful functioning. Auditors, who earn relatively small amounts (like Rs 2,500/-) by auditing the society’s accounts, are given the extraordinary mandate of filing an FIR (First Information Report) at a police station. Whenever this happens, managing committee members will becomeaaropi in an FIR, which may drag on for years, and result in needless harassment to managing committee members without coming to any conclusion. Currently, uniformed cops are a rare sight in societies; but now, as the new provisions slowly seep in, cops coming into societies and office-bearers being summoned to police stations will become a common sight. Needless to say, instances of bribery will become common.

Yes, the changes will also have benefits for various stakeholders namely ordinary members, office-bearers, professionals and service-providers and – last but not least – the State Cooperation Department. Wherever there is a dispute, cooperation department officials receive kickbacks.

Professionals will gain hugely. The law creates many employment opportunities for chartered accountants, advocates, retired officials of the co-operation department, diploma holders in GDCA (Government Diploma in Cooperation and Accounting), and as well as activists who are somewhat knowledgeable in society matters. To ensure that deadlines are not missed, and that the society’s mandatory reports and returns to the Cooperatives Registrar are complete in all respects, housing societies will feel compelled to engage such people as Functional Directors, Expert Director, CEOs etc. But in the years to come, many ill-informed societies, or small societies with only hand-to-mouth funding, are likely to land in trouble because of their inability or unwillingness to foot the bill for engaging professionals.

The amendment has given the law some sharp edges, and also has guidelines and definite dates to societies for smooth functioning. It sets the bar on society administration unrealistically high. Below are the major changes in a nutshell.

 

ABSOLUTE DEADLINES:

  • AuditsLast date for getting books of account audited is four months after close of financial year — 31st July of every year.
  • Annual General Meetings: Last date for holding AGM is 31st September. Default in this respect is almost certain to result in disqualification of the Managing Committee members for five years, and cash penalty on responsible employees of upto Rs 5,000/-
  • Informing Election Authority when election is due. The State Cooperative Election Authority must compulsorily be informed at least six months before the expiry of the present committee’s term of office. Failure to inform will disqualify them from contesting the elections.
  • Elections within 6 months in case of managing committee being suspended. In case the managing committee is superseded for any default of theirs, and administrator/authorized officer is appointed by the Registrar, elections must be compulsorily held within six months, and control must be returned to the society members.

 

CHANGES REGARDING ELECTIONS:

  • Immediate voting right. Members of housing/premises society are now allowed to vote immediately after enrollment. Earlier provision required a waiting period of two years.
  • In a society not having any government grant or loan, no Administrators will be appointed. Instead, an active member or group of active members who were not members of the earlier managing committee (which has been suspended) may be authorized to act as “Authorized Officer”.  In a Society having government aid, an administrator may be appointed, but for six months only.
  • Only active member will have power to vote in the affairs of the society including election. Also, a non-active member cannot contest the election.  A member who does not attend at least one general body meeting and does not utilize minimum level of services as prescribed in bye-laws is liable to be classified as “non-active member”, unless his absence is condoned by a general body resolution.
  • CEOs, Functional Director and other employees will be considered as “representatives” of the society, but not “members” for the purpose of voting.
  • Reservation of three seats for members from SC/ST/OBC etc. and two seats for women-membersThis means that over and above the regular seats on the managing committee, there will be five reserved seats to be filled up by election from such class of members. If such seats are not filled up by election, then they may be filled up by co-opting or nominating suitable members.
  • State Co-operative Election Authority will prescribe procedure and manner of holding electionsEven casual vacancies must be filled up as per such procedure, and under the scrutiny and supervision of this authority.

 

AUDITS & COMPLIANCES:

·         Tough audits. Each and every society must appoint a statutory auditor from an approved panel of qualified auditors, and have their books audited by them in deadline. Auditor is mandated to point out particulars of the defects or the irregularities observed in audit.

·         FIR against managing committee members etc. In case of financial irregularities, misappropriation or embezzlement of funds etc, the auditor is required to investigate and report the modus operandi, the entrustment, amount involvement and file an FIR with the police as per Criminal Procedure Code, after getting necessary permission from the Registrar. If the auditor fails to do so, he may be disqualified from the government panel, and also, the Registrar is required to get the FIR filed by authorizing someone suitably.

·         Fines for offences under Section 146 have been enhanced.For example, where the penalty was Rs 500/-, it has been raised to Rs 5,000/-.

·         For assistance with statutory compliances, legal and financial matters, societies are encouraged to appoint expert directorsExpert directors are defined as persons with experiencein the field of banking, management, finance, and cooperatives, and includes a person having specialization in any other field relating to the objects and activities undertaken by the concerned society.

ASSESSMENT — POSITIVE IMPACTS:

a)      Active members are empoweredMembers – including managing committee members — who are negligent in attending meetings may lose their voting rights after five years. On the flip side, those who diligently attend meetings may be rewarded with more power, and appointed as “authorized officers” if the managing committee trips up. They will gain all the powers that administrators enjoy, for at least six months.

b)      Administrators will normally not be appointed if there is no govt. money involved in the society. If there is a vacuum of power due to managing committee being unable to function, then active members will normally be appointed as “authorized officer” or “interim committee” by the Registrar. Only if there are no active members available to fulfill these responsibilities will an outside person be appointed as “authorized officer”

c)      Regular education & training for office bearersApex Co-operatives or State Federal Society will be required to conduct education and training in running of cooperative societies.  Managing Committee members and employees must compulsorily attend trainingat least once in five years. Each society is required to set aside funds to pay for such training.

d)      Co-op. court will encourage Win-Win compromise, not Win-Lose justice. Cooperative court is mandated to seek settlement on terms that are acceptable to both the parties, through arbitration, conciliation, mediation etc.

e)      Deadlines must be strictly followedManaging committees are required to now observe strict deadlines for completion of statutory audit, submitting returns to the Registrar, holding Annual General Meeting etc. Missed deadlines will have serious consequences such as disqualification of the managing committee, with no chances of being condoned. This may lead to better record-keeping and management.

f)       Professionalism in management. Societies are mandated to adopt modern methods and technologies for management, record keeping, compliance with deadlines, statutory requirements etc. For this, they are encouraged to appoint professionals as “functional directors” and “expert directors”.

g)      Auditing is beefed-upStatutory auditors will have to be appointed, and they are mandated to strictly ensure that accounting is proper.

h)      Filing First Information Report (FIR) will be filed in case of fraud, misappropriation etcIf manipulation of accounts is suspected, auditors and Registrar are mandated to register FIR with the police against the managing committee. In many wealthy societies, where office-bearers who have been skimming away handsome amounts and ordinary members have been struggling to expose them, a scalding hot cup of justice is about to be served!

 

ASSESSMENT — NEGATIVE IMPACTS:

a)      The 97th Amendment (which was NOT entirely struck down) has added a Directive Principle of State Policy to ensure “autonomous functioning” and “democratic control” of cooperative societies. So, it is sad and ironic that many provisions of the Amended MCS Act are diametrically opposed to autonomous functioning. They have the potential to vitiate the co-operative atmosphere and harm housing societies in the following ways:

b)      Curbing their autonomy and creating scope for constant interference by officials from State Cooperation Department, State Co-operative Election Authority etc.

c)      Giving scope for police interference and bribery, and making some managing committee members “aaropi” (accused persons) in criminal cases, which may drag on for years with “tareekh-pe-taareekh”.

d)      Declaring aged people, widows, NRIs etc. as non-active members for not attending meetings, depriving them of voting rights and ultimately expelling and evicting them from the flats. This is a grave violation of their fundamental rights. Although there is a provision for the general body to condone their absence, it is well-known that the general body often acts as a mindless mob, and can be vengeful to individuals who do not tow the line.

e)      Disqualifying managing committee members for petty procedural reasons. The many provisions for disqualifying the actual doers in societies will make them vulnerable to some vexatious and vindictive society members.

f)       Giving additional scope for disputes in co-operation department and lengthy court litigations arises from the increase in number of statutory deadlines will cause

g)      Poisoning the atmosphere with divisiveness, caste-based quarrels and misuse of Atrocities Act, due to caste-based reservations mandated in every society. So far, nobody knows the caste of their neighbours, especially in cities like Mumbai. But now, caste-knowledge and caste-insults will be in everybody’s tongue.

Please read the Amended MCS Act (attached), and try to understand where we all have to go from here. But for heaven’s sake, think and discuss; do not remain silent and passive.

SELECTED SECTIONS of Amended Maharashtra Co-operative Societies Act, 1960 FOR HOUSING SOCIETIES – 27th August 2013 (1)

 

TIME BOUND REDRESSAL AT CO-OPERATIVE HOUSING DEPARTMENT

The Article on The Meeting of J.B.Patel (Jeby), Housing Societies’ Activist and a founder member of MAHARASHTRA CHS RTI FORUM met the hon’ble Joint Registrar of Co-operative Societies – Mumbai, Mr Vikas Rasal on 30.07.2013 to discuss various issues on housing matters across Mumbai and how along with the department could try, address and solve various problems on TIME BOUND REDRESSAL SYSTEM. The views and view points of Mr Rasal were very important and encouraging that will stimulate our thinking on various challenges and critical issues.

Time_Bound_Redressal_otherwise_concerned_official_will_be_held_personally_liable_–_Mumbai_HC_order_Maharashtra_Govt_Circular

_4__Nagarikan_chi_Sanad_-_Citizens__Charter_-_06.05.2011

_3__MAHARASHTRA_CO-OPERATIVE_HOUSING_SOCIETIES__79_A__MANNUAL_-_15.10.2011_-_ENGLISH

_2__Video_Shooting_for_AGM_-_Circular_dated_15.03.2010_from_Co-operative_Commissioner___Registrar__Pune

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