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RTI Activist J.B.Patel Explains : What happens if you don’t file M-20 Indemnity Bond in time?

29 October 2011 4 Comments

RTI Activist J.B.Patel,Member of RTI Activists Union & Former Hon.Secy. of  two Co-op.Housing Societies, with key inputs from Dilip Shah, Senior Counselor for CHS redevelopment expains as what are the consequences of not filing a M-20 Bond also known as Indemnity Bond.

Most managing committee members of cooperative housing societies (CHS) feel that they cannot be held responsible by the society members, and as they are “doing service on a voluntary basis”. But quite often, the spirit of service and humility is missing. Dirty politics, bullying and petty corruption are normal in most societies. Some people develop vested interests, become entrenched, and hold the society to ransom.
Within weeks of assuming office, many of us show our true colours. We start overlooking rules and laws to favour someone, and suppressing those who don’t agree with us. We shout and create scenes at meetings if somebody asks us to justify or clarify. We misinform and manipulate general body meetings and write minutes in a way that suits our personal interests. If someone succeeds in proving that we have done wrong, we argue that it wasn’t our individual decision, but the decision of the whole managing committee, or even the entire general body! As a last resort, we make a big show of resigning in a huff to win sympathy and avoid taking responsibility.
To remedy all this and to fix responsibility on each and every managing committee member, Maharashtra state legislature has enacted a provision for mandatory Indemnity Bond to be signed by them. Read this recent amendment to Sec 73(1AB) of Maharashtra Cooperative Societies Act 1960: http://tinyurl.com/MCS-Act-Amendment-M20-Bond
1) DOWNLOAD THIS FORM http://tinyurl.com/M20-Indemnity-Bond
2) PRINT ON RS 200/- STAMP PAPER as provided under the Bombay Stamp Act, 1958.
3) ALTERNATIVELY, PRINT ON PLAIN PAPER or society letterhead, and get it FRANKED at a bank that accepts Stamp Duty payment.
4) Get it NOTARIZED.
5) WITHIN 45 DAYS, submit notarized copy to your Deputy Registrar at your Registrar Ward office.
6) ACKNOWLEDGEMENT OF DY. REGISTRAR must be preserved by both society office and member.
7) SOCIETY OFFICE WILL RETAIN ORIGINAL COPY of completed M-20. All costs for the procedure must be borne by society.
(i) Gulab Khote Vs. State of Maharashtra: http://tinyurl.com/BBayHC-M-20-not-UltraVires
(ii) Shashikant Jesrani Vs. Assistant Registrar: http://tinyurl.com/BombayHC2009-M20-Bond
These two judgments of Bombay High Court give us the below lessons.
1) MANDATORY REQUIRMENT OF LAW. Filing M-20 Bond is not just a formality. It is compulsory for all managing committee members as per Rule 58-A of Maharashtra Coop Society (MCS) RULES and amended MCS Act 1960.
2) 45 DAYS PERIOD. Each managing committee member of a CHS must file M-20 Indemnity Bond within 45 days after elections and/or assuming office. This period is 15 days in case elections were held prior to 14 January 2011, the date of the above amendment.
3) IGNORANCE OF THIS LAW IS NOT AN EXCUSE. All the usual arguments made by managing committee members were dismissed by Bombay High Court, which repeatedly stressed that filing M-20 Bond within the time limit is “MANDATORY, NOT DIRECTORY”.
4) ON THE 46TH DAY OF NOT FILING THIS INDEMNITY FORM, the member’s election will stand annulled, and his authority will be lost. He loses all power to sign any document on behalf of the society, including cheques, statement of accounts, circulars, agenda and minutes of meetings, letters and representations to Registrar of Cooperative Societies, court cases, etc.
5) ALL DECISIONS ARE NULL & VOID. All decisions taken in his official capacity will be without authority. All papers that he has signed, including cheques and agreements, will be invalid in the eyes of law. All resolutions and actions of the entire managing committee with his involvement, INCLUDING REDEVELOPMENT ACTIVITIES, will be null and void, even if the other members filed their M-20 Bond in time. The society will be thrown into a management crisis.
6) RISK OF CRIMINAL PROSECUTION. If a person who has not signed M-20 Bond continues to sign on society documents, then he can be prosecuted for serious crimes including fraud, cheating, misrepresentation and forgery. For example, the managing committee members of Rachna Co-Operative Housing Society on Hill Road, Bandra, Mumbai were slapped with fraud and forgery charges for entering into a redevelopment agreement without filing M-20 Bonds.
7) ABETMENT OF CRIME. If other managing committee members (who signed M-20 Bond in time) try to uphold, support or cover-up the actions of a defaulting managing committee member, then they also will become party to his crimes, and may be prosecuted for abetment.
8) RISK OF CLAIMS ON OTHER MANAGING COMMITTEE MEMBERS. As per No. 138 of New Model Bye Laws (2009), “The members of the committee shall be jointly and severally responsible for making good any loss which the society may suffer on account of their negligence or omission to perform any of the duties and functions cast on them under the Act, Rules and the bye laws of the society.” Section 73(1AB) says almost exactly the same thing in respect of “acts and omissions detrimental to the interests of the society”. If members who have themselves filed M-20 Bonds knowingly or unknowingly allow their defaulting colleagues to continue working, then they will be guilty of negligence. If the defaulting member causes any loss to the society through acts of commission or omission, then criminal and financial liabilities will also fall on them.
9) NEXT MANAGING COMMITTEE ALSO DISQUALIFIED. If a managing committee has a chairman or honorary secretary who failed to file a valid M-20 Bond, then this committee will not even have the authority to call for fresh elections. If a disqualified managing committee calls fresh elections, those elected at such elections will be disqualified ab initio, even if they file their M-20 Bonds in time. This chain reaction will continue to all the subsequent elections and managing committees.
10) ONLY ONE REMEDY: DY. REGISTRAR APPOINTS ADMINISTRATOR, WHO CALLS ELECTIONS. If the managing committee of your cooperative housing society has failed to file a valid M-20 Bond, then the only remedy is that any member of that society should approach the Deputy Registrar to appoint an administrator, who will call for fresh elections.
1) DO YOUR HOMEWORK. Being a managing committee member is a serious responsibility. Take this responsibility seriously. Every member of the managing committee – and not just the chairman & secretary – must be well versed in all of the below items:
a) MCS Act 1960: http://tinyurl.com/Maharashtra-Coop-Soc-Act-1960
b) MCS Rules 1961: http://tinyurl.com/Maharashtra-Coop-Soc-Rules
c) Model Bye Laws 2009: http://tinyurl.com/Maharashtra-CHS-Model-Bye-Laws 
d) CHS Manual 2011: http://tinyurl.com/Maharashtra-CHS-Manual-Marathi 
(The 75-page manual was issued only two weeks ago, in mid-October. It is in Marathi, and we are trying to get it translated in English.)
e) If your society is going for redevelopment, be aware of all rules, laws and case-laws (High Court and Supreme Court Judgments) that can affect your project. If your redevelopment gets stalled midway, you may be held liable for crores of rupees of loss to the society. Study the REDEVELOPMENT CIRCULAR 2009 very intensively.
Redevelopment circular in ENGLISH: http://tinyurl.com/English-Redevelopment-GR
Redevelopment circular in MARATHI: http://tinyurl.com/Marathi-Redevelopment-GR
2) NO TRICKS! Dozens of managing committees in different parts of the state have been dismissed for back-dating and forging the M-20 Bonds and a few have gotten into trouble for forgery. Read this recent report in Navbharat Times, where the managing committee members were refused anticipatory bail by sessions court. They were arrested at the complaint of an alert society member, and later released on bail: http://tinyurl.com/Nerul-Forged-M20
3) SPEAK OUT PROMPTLY. If your colleagues in the managing committee are taking shortcuts or doing something against the interest of the society, you are liable to be held responsible for their actions. Even if they manage to get an unlawful or harmful resolution passed by the general body, you will still be held liable. Firstly, oppose any wrongdoing without delay, and ensure that your opposition is noted in the minutes; this will protect you in future if the matter goes to court. Secondly, resign from the managing committee if the wrongdoing continues.
4) TAKE CARE & STAY CLEAN. Maintain proper accounts and records, be careful with your society’s funds, and ensure that accounts are regularly audited. Avoid creating patchy or suspicious records, and don’t continue to be in the managing committee without fruitful contribution. Don’t be part of a team which has avoided audit of accounts for several years. If you give big contracts for painting, major repairs etc., make sure that the due process is followed, and that all the municipal permissions are taken. If you finalize or sign redevelopment agreements, do so in a transparent manner. In case of sale, nomination, death of member etc, transfer the flats promptly and with proper paperwork. Let all members see the society documents, and never use bullying tactics to silence your opposition.
The M-20 Bond has highlighted the weighty responsibility cast upon managing committee members. This responsibility was always there, but, in the absence of proper legal documentation, people used to get away with highway robbery. Hopefully, with society members becoming more vigilant and better informed, the era of unchecked powers is now coming to an end.


  • Deepak Sheth said:

    Very informative and knowledge providing article. Kudos and continue such social sercices for the betterment of the community.

  • J.B.Patel said:

    There was a controversy on the value of stamp paper to be used for executing Indemnity Bond on Form M-20. Maharashtra Govt. has issued clarification in the Maharashtra Housing Co-operative Societies’s Mannual published on 15.10.2011, which says the Indemnity Bond on Form M-20 is to be executed on Rs.100/ Stamp Paper. However, still there is controversy as per Bombay Stamp Act.
    My humble suggestion is to execute the Bond on Rs.200/- Stamp Paper, to be on safer side.

    J.B.Patel (Jeby)

  • Sudesh kumar said:

    Sir even Bond Form M 20 printed by the Coop dept also state Rs 200.This is printed on the form itself.

  • Ramesh Gandhi said:

    Excellent, This is what I was looking for. Thanks you sir, This article will help me a lot.