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Maharashtra Housing societies, Red Alert !!! Oppose Amendments to MCS Act URGENTLY!

16 March 2013 No Comment

Maharashtra Housing societies, Red Alert !!! Oppose Amendments to MCS Act URGENTLY!

 

RTI Activist Krishnaraj Rao alerts us how the recent amendments to Maharashtra Co-operative Societies Act 1960 (MCS Act) vide an ordinance has some dangerous issues. The 97th Constitutional Amendment mandated the States to amend the laws so that co-operatives could become truly autonomous and democratic. However, the amendments in Maharashtra’s law encroach on the fundamental rights of people living in co-operative housing societies, and will reduce the autonomy of the housing societies. Before the ordinance is ratified in the ongoing budget session, we – the residents and managing committees of co-operative housing societies – must make representations to the government and to the state legislature. We need to move quickly, as the ordinance may be tabled before the state legislature in the next few days or weeks.

There is a saying in Hindi, “Gadha-ghoda ek karna”, which literally means, “equal treatment to horses and donkeys”. The MCS Act does exactly that. This Act is not exclusively intended for the regulation and administration of co-operative housing societies, it also covers co-operative enterprises such as dairy co-operatives, sugar co-operatives, credit co-operatives, agricultural, and various other marketing and procurement co-operatives. Unlike housing societies, such co-operatives have hundreds or even thousands of members, and are involved in business activities spanning several districts. Some of them have turnover of several hundred crore rupees, and they attract the involvement of powerful politicians. Many of the recent amendments make sense when seen in the light of such enterprises, where members join in order to earn incomes and profits. These enterprises are expected to be run profitably, following the principles of the market economy.

We involuntarily become members of co-operative housing societies. We generally cannot own a flat in a particular building without becoming a member of that society. So, we flat owners elect a managing committee to manage the building and compound, water supply, garden area etc. We don’t want the managing committee to be profit-minded; we don’t expect it to earn profits and distribute a dividend. The scope of operation of a CHS is limited to its building and compound, and its turnover is mainly in the nature of maintenance dues, property tax collection etc.

Unlike flat owners, take the example of a person who owns buffalos. He can voluntarily choose to be a member of a dairy co-operative. Alternatively, he can sell his milk in the open market if he chooses not to become a member of any milk-marketing co-operative society. Also, unlike flat-owners, he also has the option of getting together with others like himself, and floating a new milk-marketing co-operative society if he does not like the existing one in his region.

The recent amendments in the MCS Act 1960 are largely designed to curb the corruption, politics and state interference in CO-OPERATIVE ENTERPRISES… BUT CO-OPERATIVE HOUSING SOCIETIES (CHS) ARE NOT BUSINESS ENTERPRISES! The yardstick for governing co-operative housing societies and co-operative enterprises cannot be the same!

WHY YOU SHOULD BE ALARMED:

 1)      EVICTION OF MEMBERS WHO DON’T ATTEND MEETINGS: The recent amendments give a mandate to the managing committee to categorize all members as “Active” and “Non-Active”, mainly on the basis of their attending annual general meetings [see section 26(2)]. It then allows them to deprive the non-active member of his right to vote, and to initiate expulsion proceedings against the non-active members after 10 years have elapsed. The Act and the recent bye-laws have many ambiguities which can lead to multiple interpretations, e.g. if associate member attends meetings, and main member never attends meetings. Co-operative courts are full of cases where managing committees of some societies have deliberately and persistently misrepresented such facts on paper, or taken advantage of gray areas; and therefore, such a power is dangerous. Further, when such disputes are taken before the Registrar of Co-operatives, it gives the Registrar (and office of the registrar) a dangerous amount of discretionary power. The common experience is that such powers are misused by managing committee members to settle scores, and by the Registrar’s office to make money. This amendment infringes on the life and liberty of individual flat-owners, as the Act then gives the society powers to evict the expelled member from his flat… for the heinous crime of not attending meetings!!!

2)      POWER OF AUDITOR TO FILE FIRST INFORMATION REPORT AGAINST OFFICE-BEARERS ETC: The recent amendments give a mandate to the auditor to directly file an FIR against specific managing committee members, office-bearers and society employees if they find instances of misappropriation and fraud. As the fees of the auditor are not fixed by law; they are generally decided and approved by the managing committee with general body approval, this clause [See section 81(5B)] gives the auditor power to virtually blackmail the managing committee and the society, who are his clients, to increase his fees, or to appoint him or his colleagues in other capacities e.g. functional director. Please remember that the managing committee members of many housing societies are only doing a voluntary job. Serving on the committee is usually an unpaid and thankless job, which very few society members are willing to take up. Being a managing committee member – especially the chairman or secretary – means sacrificing ones peace of mind. According to this amendment, the handful of people who voluntarily serve on the managing committee must be mortally afraid of antagonizing the auditor! In the hands of the auditor, who is basically a commercial person out to squeeze maximum amount of money from his clients, this power is likely to be misused, and lead to widespread misuse of the police and magistrate’s courts. (Note: In the Indian economic environment, making “adjustments” to the books of account is a routine practice, and almost every chartered accountant does it in everybody’s accounts. So, it is easy for any auditor to find faults in almost anybody’s books of accounts and to allege fraud, misappropriations etc.)

 

3)      INVOLVEMENT OF POLICE & CRIMINAL COURTS: Currently, the police avoid getting involved in housing society matters, and it is very difficult to get an FIR registered even in genuine cases of blatant fraud. Matters concerning housing societies generally land up before the Registrar’s office, or before co-operative court. However, Section 81(5B) will lead to multiple forums taking up housing society matters. The police, who are overloaded and understaffed, have no time or inclination to investigate even pick-pocketing, theft and kidnap cases; and police will now be expected to register FIRs filed by auditors and Registrar, and investigate in the society’s books of account?! Police will be expected to visit co-operative society office and summon various society members to the police station for their say in matters relating to accounts etc! Housing society members will be summoned as witnesses by magistrate’s courts! Can you imagine the chaos and unhealthy environment that this will create?

This file has sections that are only relevant to Housing societies: http://tinyurl.com/Amended-MCS-Act-4-CHS   (The provisions relating to agricultural co-operatives, credit co-operative etc. have been deleted from this copy of MCS Act 1960, and the amendments from the ordinance relating to housing societies have been included)

 

I would request friends in Mumbai Metropolitan Region (Mumbai, Navi Mumbai and Thane) to call for neighbourhood-level meetings to discuss the various implications of these amendments, and the steps that we can collectively take to oppose them. My colleagues and I will be happy to come to your neighbourhoods and help you understand the MCS Act and new Model Bye-laws. Alternatively, you may come to Maharashtra Societies Welfare Association in Andheri West (A2/302 Laram Centre, near Railway Station) with a prior appointment, to understand these issues. You may call me on 9821588114 between 9 am and 9 pm.

Act now. Please don’t delay. Otherwise, we all will be badly hurt by this Act.

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