ORDINANCE FOR CO-OPERATIVE HOUSING SOCIETIES

INTRODUCTION

The Maharashtra Government has introduced the Maharashtra
Ordinance No. IX of 2019 dated 09.03.2019 to amend the Maharashtra Co-operative
Societies Act, 1960 (“the Act”). This Ordinance would remain in
force for a period of six months, i.e., up to 8^th September, 2019
after which it would lapse unless the Government comes out with an Amendment
Act or renews the Ordinance. A new Chapter, XIII-B, consisting of section 154B
to 154B-29, has been inserted in the Act specifically dealing with co-operative
housing societies.

One of the complaints against the Act was that it was geared
more towards general co-operative societies and did not have special provisions
for co-operative housing societies. That issue is sought to be addressed by
this new Chapter. While the Ordinance has made several amendments to the Act,
it has introduced key changes to the concepts of membership of a co-operative
society. This article examines some of the amendments made by the Ordinance in
relation to membership of a co-operative housing society.

NEW CATEGORIES OF MEMBERSHIP

The Ordinance has introduced new categories of membership in
a co-operative housing society. A “Member” has been defined to mean:

(a) a person joining in an application for the registration
of a housing society; or

(b) a person duly admitted to membership of a society after
its registration;

(c) an Associate or a Joint or a Provisional Member.

Thus, an Associate Member has now also been classified as a
Member. A Joint Member has also been categorised as a Member. Further, a new
category of membership called Provisional Member has been introduced. A house
construction co-operative housing society; tenant ownership housing society;
tenant co-partnership housing society; co-operative society; house mortgage
co-operative societies; premises co-operative societies, etc., are all included
in the definition of a housing society.

An “Associate Member” has been defined to mean any of the
specified ten relations of a Member; these are the husband, wife,
father, mother, brother, sister, son, daughter, son-in-law, daughter-in-law,
nephew or niece of a person duly admitted to membership of a housing society.
For this purpose, there must be a written recommendation of a Member for the
Associate Member to exercise his rights and duties. Further, an Associate
Member’s name would not appear in the Share Certificate issued by the society
to the Member. Hence, it is evident from this definition that only one of the ten
relatives can be inducted as an Associate Member. It is worth noting that the
Ordinance has some drafting errors in the definition of Associate Member in the
English text. However, on a reading of the Marathi version the position becomes
clearer.

A “Joint Member”, on the other hand, has been defined to mean
a person who either joins in an application for the registration of a housing
society or a person who is duly admitted to membership after its registration.
The Joint Member holds share, right, title and interest in the flat jointly but
whose name does not stand first in the share certificate. Thus, a Joint Member
would not be the first name holder in the share certificate but would be the
second or third name holder. Thus, the difference between an Associate Member
and a Joint Member is as follows:

The Act defines an Associate Member as a member who holds
jointly a share in the society but whose name does not appear first in the
share certificate. Thus, this existing definition in the Act (applicable for
co-operative societies) is a combination of the definitions for Associate and
Joint Members introduced by the Ordinance which would now be applicable for
co-operative housing societies. Further, this existing definition treats any
person as an Associate Member, whereas as per the Ordinance only ten specified
relatives can be Associate Members. The existing definition under the Act would
apply to general co-operative societies while the definitions introduced by the
Ordinance would apply only for co-operative housing societies. Thus, there
would be two separate definitions.

The society may admit any person as an Associate, Joint or
Provisional Member. However, this has to be read in the context of the
definition of the term Associate Member which states that only the specified
relatives of a Member can be admitted as Associate Members.

VOTING RIGHTS OF MEMBERS

A Member of a society shall have one vote in its affairs and
the right to vote shall be exercised personally. It is now expressly provided
that an Associate Member shall have right to vote but can do so only with the
prior written consent of the main Member.

In case of Joint Member, the person whose name stands first
in the share certificate has the right to vote. In his absence, the person
whose name stands second, and in the absence of both, the person whose name
stands third shall have the right to vote. However, this is provided that such
Joint Member is present at the General Body Meeting and he is not a minor.

Based on the above, the differences between an Associate and
a Joint Member can be enumerated as follows:

PROVISIONAL MEMBER

One of the perennial issues
in the case of a housing society has been that of the role that a nomination
plays in the case of the demise of a Member. A nomination continues only up to
and till such time as the Will is executed. No sooner is the Will executed,
than it takes precedence over the nomination. A nomination does not confer any
permanent right upon the nominee nor does it create any legal right in his
favour. Nomination transfers no beneficial interest to the nominee. A nominee
is for all purposes a trustee of the property. He cannot claim precedence over
the legatees mentioned in the Will and take the bequests which the legatees are
entitled to under the Will. In spite of this very clear position in law,
several cases have reached the High Courts and even the Supreme Court. The
following are some of the important judicial precedents on this issue:

(1) The Bombay High Court in the case of Om Siddharaj
Co-operative Housing Society Limited vs. The State of Maharashtra & Others,
1998 (4) Bombay Cases, 506, has observed as follows in the context of a
nomination made in respect of a flat in a co-operative housing society:

“…If a person is
nominated in accordance with the rules, the society is obliged to transfer the
share and interest of the deceased member to such nominee. It is no part of the
business of the society in that case to find out the relation of the nominee
with the deceased Member or to ascertain and find out the heir or legal
representatives of the deceased Member. It is only if there is no nomination in
favour of any person that the share and interest of the deceased Member has to
be transferred to such person as may appear to the committee or the society to
be the heir or legal representative of the deceased Member.”

(2)  Again, in the case of Gopal Vishnu
Ghatnekar vs. Madhukar Vishnu Ghatnekar, 1981 BCR, 1010, the Bombay
High Court has observed as follows in the context of a nomination made in
respect of a flat in a co-operative housing society:

“…It is very clear on the
plain reading of the Section that the intention of the Section is to provide
for who has to deal with the society on the death of a Member and not to create
a new rule of succession. The purpose of the nomination is to make certain the
person with whom the society has to deal and not to create interest in the
nominee to the exclusion of those who in law will be entitled to the estate.
The purpose is to avoid confusion in case there are disputes between the heirs
and legal representatives and to obviate the necessity of obtaining legal
representation and to avoid uncertainties as to with whom the society should
deal to get proper discharge. Though in law the society has no power to
determine as to who are the heirs or legal representatives, with a view to
obviate similar difficulty and confusion, the Section confers on the society
the right to determine who is the heir or legal representative of a deceased
Member and provides for transfer of the shares and interest of the deceased
Member’s property to such heir or legal representative.

Nevertheless, the persons
entitled to the estate of the deceased do not lose their right to the same…
the provision for transferring a share and interest to a nominee or to the heir
or legal representative as will be decided by the society is only meant to
provide for the interregnum between the death and the full administration of
the estate and not for the purpose of conferring any permanent right on such a
person to a property forming part of the estate of the deceased. The idea of
having this Section is to provide for a proper discharge to the society without
involving the society into unnecessary litigation which may take place as a result
of dispute between the heirs’ uncertainty as to who are the heirs or legal
representatives…

It is only as between the society and the nominee or heir or
legal representative that the relationship of the society and its Member are
created and this relationship continues and subsists only till the estate is
administered either by the person entitled to administer the same or by the
Court or the rights of the heirs or persons entitled to the estate are decided
in the court of law. Thereafter, the society will be bound to follow such
decision… To repeat, a society has a right to admit a nominee of a deceased
Member or an heir or legal representative of a deceased Member as chosen by the
society as the Member.”

(3) A single judge of the
Bombay High Court in Ramdas Shivram Sattur vs. Rameshchandra Popatlal
Shah 2009(4) Mh LJ 551 has held that a nominee has no right of
disposition of property since he is not an absolute owner. It held that the law
does not provide for a special Rule of Succession altering the Rule of
Succession laid down under the personal law.

(4) The position of a
nominee in a flat in a co-operative housing society was also analysed by the
Supreme Court in Indrani Wahi vs. Registrar of Co-operative Societies, CA
No. 4646 of 2006(SC).This decision was rendered in the context of the
West Bengal Co-operative Societies Act, 1983.The Supreme Court held that there
can be no doubt that the holding of a valid nomination does not ipso facto
result in the transfer of title in the flat in favour of the nominee. However,
consequent upon a valid nomination having been made, the nominee would be
entitled to possession of the flat. Further, the issue of title had to be left
open to be adjudicated upon between the contesting parties. It further held that
there can be no doubt that where a Member of a co-operative society nominates a
person, the co-operative society is mandated to transfer all the share or
interest of such Member in the name of the nominee.

It is also essential to
note that the rights of others on account of an inheritance or succession are a
subservient right. Only if a Member had not exercised the right of nomination,
then and then alone, the existing share or interest of the Member would devolve
by way of succession or inheritance. It clarified that transfer of share or
interest, based on a nomination in favour of the nominee, was with reference to
the co-operative society concerned and was binding on the said society. The
co-operative society had no option whatsoever, except to transfer the
membership in the name of the nominee but that would have no relevance to the
issue of title between the inheritors or successors to the property of the
deceased. The Court finally concluded that it was open to the other members of
the family of the deceased to pursue their case of succession or inheritance in
consonance with the law.

Taking a cue from these
cases, the Ordinance seeks to make certain changes to the Act. It has
introduced the concept of a Provisional Member. This is defined to mean a person
who is duly admitted as a Member of a society temporarily after the death
of a Member on the basis of nomination till the admission of
legal heir or heirs as the Member of the society in place of the deceased
Member. The salient features of Provisional Membership are as follows:

a)
It is temporary in nature;

b)  It comes into force only once the main Member
dies;

c)  It can apply on the basis of a valid
nomination;

d)  It would continue only till the legal heirs of
the deceased Member are admitted as members of the society. This could be by
way of a Will or an intestate succession.

Thus, the Ordinance seeks to clarify the legal position which
has been expounded by various Court judgements, i.e., the Provisional Member
would only be a stop-gap arrangement between the date of death and the
execution of the estate of the deceased. However, it proceeds on one incorrect
assumption. It states that such membership will last till such time as the
legal heirs of the deceased Member are made members. What happens in case of a
Will where the Member has bequeathed his right in favour of a beneficiary who
is not his legal heir? A legal heir is not defined under any Act. It is a term
of general description. The Law Lexicon by Ramanatha Aiyar (4^th
Edition) defines it as including only next of kin or relatives by blood. It is
known that a person can make even a stranger a beneficiary under his Will. In
such an event, a strict reading of the Ordinance suggests that the Provisional
Membership would also continue since the legal heirs of the deceased have not
been taken on record.

However, that would be an absurd construction since once the
Will is executed, it is the beneficiary under the Will who should become the
Member. Hence, it is submitted that this definition needs redrafting. The
position has been correctly stated in the proviso to section 154B-13
also introduced by the Ordinance. This correctly states that the society shall
admit a nominee as a Provisional Member after the death of a Member till the
legal heirs or person who is entitled to the flat and shares in accordance with
succession law or under Will or testamentary document are admitted as Member in
place of such deceased Member. Hence, this recognises the fact that a person
other than legal heirs can also be added as a Member.

The Ordinance also provides for the contingency of what
happens if there is no nomination. In such cases, the society must admit such
person as Provisional Member as may appear to the Managing Committee to be the heir
/ legal representative of the deceased Member. It further states that a
Provisional Member shall have right to vote.

PROCEDURE ON THE DEATH OF A
MEMBER

Normally, in the case of a housing society, any transfer of
share or interest of a Member is not effective unless the dues of the society
have been paid and the transferee applies and acquires membership of the
co-operative housing society. However, this provision does not apply to the
transfer of a Member’s interest to his heir or to his nominee.

The Ordinance introduces
section 154B-11 which states that on the death of a Member of a society, the
society is required to transfer the share, right, title and interest in the
property of the deceased Member in the society to any person on the basis of:

• Testamentary documents, i.e., a Will;

• Succession certificate / legal heirship
  certificate – in case of intestate succession;

• Document of family arrangement executed by
  the persons who are entitled to inherit the property of the deceased Member; or

• Nominees.

This is the first time that
a document of family arrangement has been given statutory recognition. The
amendment equates a Memorandum of Family Arrangement to be at par with a
testamentary or intestamentary succession document. Scores of Supreme Court
judgements, such as Ram Charan Das vs. Girja Nandini Devi (1955) 2 SCWR
837; Tek Bahadur Bhujil vs. Debi Singh Bhujil, (1966) 2 SCJ 290; K. V.
Narayanan vs. K. V. Ranganadhan, AIR 1976 SC 1715, etc., have held that
a family arrangement does not amount to a transfer and hence there is no need
for registration of a Family Settlement MOU. In spite of this, in several cases
the Registration Authorities are reluctant to mutate the rights in the Property
Card or the Record of Rights based on an unregistered Family Settlement MOU. In
several cases, even co-operative societies do not agree to transfer the share
certificates based on the Family Settlement MOU unless it is registered and
stamped.

The Ordinance now provides that the society must transfer the
flat based on a Document of Family Arrangement executed by the persons who are
entitled to inherit the property of the deceased Member. However, this has
restricted the transfer only to those persons who are entitled to inherit the
property of the deceased. For instance, in the case of an intestate Hindu male,
his Class I heirs, Class II heirs, agnates and cognates are entitled to inherit
his property. Thus, a document signed between any of these relatives should be
covered under this provision.

CONCLUSION