Cooperative: How to be an Associate Member?

Krishnadas Menon

About Associate membership in Cooperative Housing Society in Maharashtra (CHS for brevity) several important questions have been raised as under.

1.  How to become an Associate Member?

2. What are the Rights of the Associate members?

3.  Consequences of an inordinate delay in in disposing off the application made in Form 7?

4.   Is the managing committee legal if its members elected in the year  2010-11 did not execute the M20 bond?

I C Naik

1.  Becoming an associate member

1.1. “Associate member ” means a member who holds jointly a share of a society with others, but whose name does not stand first in the share certificate (Section 2(19)(b) of the M. C. S. Act 1960 and Bye Law No 3 (xxiv)(a))

1.2.  An individual competent to enter in to contract under the Indian Contract Act, 1872 can be admitted as an Associate Member of the CHS in either of the two ways.

1.2.1. Person whose name appears as a joint owner in the agreement executed under section 4 of the Ownership Flats Act, and by making a joint application along with the original member in the prescribed form and paying entrance fee of Rs 100.[Bye Law No 19A and Appendix No 8]

1.2.2. Person whose name does not appear in the agreement referred to above, by making the application in a form prescribed for such a person to be admitted as Associate member and to make him a joint holder of shares. This application has to accompany a written recommendation of the first member, entrance fee of Rs 100 and the share certificate… [Bye Law No 19 (B) Form in Appendix 7]

1.2.3. As per Bye Law No 19(A) and (B) all applications of Individuals for admission as associate members are to be considered and decided upon by the managing committee.

1.3.  As per Bye Law No 19(C) all applications of firms or bodies corporate for admission as associate members are to be considered and decided upon in the general body meeting.

2.  Rights of associate members

2.1. By now there exists a clear view that associate members can join the Committee and can be elected as office bearers also including Chairman.

2.2. However Model Bye Laws lay down a restriction that “No associate member shall have any rights or privileges of a member except as provided under Section 27(2) of the Act.” [Bye Law No 25]

2.3.  It is therefore necessary to go in to the history of how such a strong right has come to devolve upon the person who may not even own the flat in the CHS.

2.4.         Section 27 is titled as “Voting powers of members” and to day reads as under

“ 27 (2) Where a share of a society is held jointly by more than one person, the person whose name stands first in the share certificate, if present, shall have the right to vote. But in his absence the person whose name stands second, and in the absence of both, the person whose name stands next, and likewise, in the absence of the preceding persons the person whose name is next on the share certificate, who is present and who is not a minor, shall have the right to vote.”

2.5.         Incidentally it may be worth a look at Sub-Section 1 of Section 27 also though strictly not necessary here. It reads as under:

“27(1) Save as otherwise provided in sub-section (2) to (7), both inclusive, no member of any society shall have more than one vote in its affairs; and every right to vote shall be exercised personally and not by proxy”:

2.5.1.     Sub-Section 3-7 are not relevant to the issue

2.5.2.     Section 27(8) is very important: ” No nominal or sympathizer member shall have the right to vote [and no such member shall be eligible to be a member of a committee or for appointment as a representative of the society on any other society]” Mark the absence of the category “associate member”

2.5.3.     Going by its heading Section 27 was meant to govern strictly the voting rights in the general body meetings.  It was amended number of times. The amendments accidentally expanded the scope beyond its title.

2.5.3.1. Prior to the amendments made in this section in 1969 Section 27 (2) read as “Where a share of a society is held jointly by more than one person, only the person whose name stands first in the share certificate shall have a right to vote” Presently 27(2) grants right to associate members to vote in the general body meeting  [Reproduced in 2.4 above]

2.5.3.2. Sub-Section (8) was also amended in 1969 to enable associate member to join the managing committee. [Reproduced  in 2.5.2 ]

2.5.4.     Thus 1969 amendments, expanded the scope of Section 27 (beyond voting powers in the general body meeting) to enable the associate member to join the managing committee.

2.5.4.1. After 1969 amendments a view was that Associate member could contest elections in spite of the Bye Law No 25 prohibiting it. After 30 years, in the Model Bye Laws approved in 2001 this right has been brought to surface in an indirect manner without amending the Bye Law No 25.

2.5.4.2. Sub-clause (v) in Bye Law No 118 which disqualifies an associate member to contest election reading as under was inserted:

“118(v) In case of an associate member, non-submission of no-objection certificate and undertaking, as prescribed under these bye-laws, by the member”

2.5.4.3. At the same time Appendix 10(a) has been inserted in Model Bye Laws 2001 prescribing a format for the original member to fill up and sign for

2.5.4.3.1.  surrendering all his voting rights in favour of the associate member

2.5.4.3.2.  enabling him/her to contest election to  the managing committee, and

2.5.4.3.3.  to hold the office of the committee if elected.

2.5.4.3.4.  giving a declaration that

2.5.4.3.4.1. he will not participate in any manner in the general body meetings of the society or

2.5.4.3.4.2.  in election matters till such time the Associate member continues to hold the office.

2.5.4.4. So one more right was created to cast a vote for a candidate in election of the managing committee.

2.5.4.5. Section 27(2) of the M. C. S. Act 1960 confers a right to cast a vote by Associate member in General Body Meeting in case of absence of original member. Election of the managing committee being a business of General meeting associate member can cast vote in election likewise in the absence of an original member even if original member has not filed the form 10(a).

2.5.4.6. An Associate member if elected as a member of the managing committee he has a right to cast vote for election of an office bearers of the society as also to  propose himself to be elected as an office bearer.[Bye Law No 126(a)]

2.5.4.7. However I noticed a contradiction about the rights of associate members, in the Housing Manual posted on the website http://sahkarayukta.maharashtra.gov.in/SITE/Secetions/Finance.aspx of the Commissioner for Cooperation and Registrar,  Cooperative Societies (CC & RCS) Maharashtra State, Pune

2.5.4.8. For Associate members on page 16 it says:

“A person, who became an Associate member by paying only admission fee, shall not get any rights in voting or 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.’

2.5.4.9. If this view is upheld we are back to square one i.e. Bye Law No 25 hold good.

2.5.5.     Section 27(2) envisages holding of share jointly by several number of persons. The format of the Share Certificate appended to the Bye Laws envisages holding of shares in a single name. There is no room or an intention to enter a joint name.

3.  Delay in disposing off application for Associate membership

3.1.  As per Bye Law No 65 (g)“If the society does not communicate the decision to the applicant within three months from the date of receipt of applications for membership, including nominal or associate membership, the applicant shall be deemed to have been admitted as a member as provided under Section 22(2) of the Act.

3.2.         Thus in case of wife’s application committee’s decision having not been communicated she has already become an Associate member of the Society.

3.3.         The managing committee is duty bound to insert the name of Associate member in the share certificate also enter the name of the Associate member in the Membership Register/list of members.[ Section 38(1) of the M. C. S. Act 1960 and Rules 32,33 and 65  of the M.C.S. Rules 1961 and Bye Law No142(i) and (ii)  ]

3.4.         Section 22(2) reads as under “Where a person is refused admission as a member of a society, the decision (with the reasons therefor) shall be communicated to that person within fifteen days of the date of the decision, or within three months from the date of receipt of the application for admission, whichever is earlier. If the society does not communicate any decision to the applicant within three months from the date of receipt of such application the applicant shall be deemed to have been admitted as a member of the society. If any question arises whether a person has become a deemed member or otherwise, the same shall be decided by the Registrar after giving a reasonable opportunity of being heard to all the concerned parties”.

3.5.         If the managing committee refuses to accept this position make a complaint to  Dy Registrar of the Ward as per Bye Law No 173(A)(j)

 4.   Non execution of M20 Bond

4.1.  The Maharashtra State Government issued an order pursuant to the power conferred under section 175 of the M. C. S. Act 1960 to exempt a society from operation of any provision of law and accordingly the provision that newly elected members were required to execute an Indemnity bond with in 45 days of joining the managing committee and in case of failure they have ceased to be members on the 46th day without any procedure. CHSs are now given exemption of this requirement with effect from 6/9/ 2012.

4.2.  This exemption is not retrospective. The members who had joined the committee 45 days  prior to the above date, ought to have executed the Bond. Those who have failed in executing this Bond are no longer members of the managing committee.

4.3.         The questioner can file a complaint as provided under Chapter XVIII Bye Law No 173- 175 ending up with a complaint to the Registrar for failure to hold elections as the managing committee was constituted of all persons who had ceased to be members of the managing committee on the 45th day after the committee was constituted in the year 2010-11.