Case For Updated Model Bye-Laws For Cooperative Housing Societies In Maharashtra

Model Bye-Laws

The Commissioner for Cooperation and Registrar of Cooperative Societies, at Pune exercising its powers under Section 14 of the Act and Rule 8 of the Rules periodically issues model bye-laws (“Model Bye-Laws”) a standard bye law template to ensure uniformity of compliances across societies. The last significant version of the Model Bye-Laws was issued in 2014, and the societies have adopted them with minor variations. Though Section 13 of the Act, provides for amendment of bye laws, in practice the scope for amendment is limited and is narrowly exercised by the Deputy Registrars, leading to majority of the societies operating under the same Model Bye-Laws which is issued by the government, and even where the societies do amend their bye laws they are inconsequential in nature.

2019 Amendment To The Act

In 2019, the Vidhan Sabha of Maharashtra passed the Maharashtra Cooperative Societies (Amendment) Act, 2019, through this amendment various provisions of the Act were heavily amended, impacting the functioning of housing societies. The Amendment has lead to numerous conflicting provisions between the Act and the Model Bye-Laws. Section 72 of the Act makes it clear that in the event of a conflict, the provisions of the Act and Rules would prevail over bye-laws of a society and hence even if a society's bye-laws are outdated, the amended provisions of the Act automatically prevail. However, while the legal provision is clear in practice, outdated Model Bye-Laws pose significant difficulties. Members and managing committees often laypersons in legal matters and are not always aware of these legislative changes and therefore continue to operate strictly as per the society's adopted bye-laws. This disconnect leads to confusion, misinterpretation, and in many cases leads to avoidable litigation and disputes .

This gap between provision of the Act and Rules and on-ground application through bye laws is where the need for updating the Model Bye-Laws becomes important. Without updated model bye laws, statutory reforms risk becoming ineffective in day-to-day functioning.

Comparative Analysis On How Model Bye-Laws 2014 Lags Behind The Current Laws.

i. Associate Member – The Bye Law no. 3(xxiv) (a) (i) of Model Bye-Laws define an associate member as a joint member whose name is not first on the share certificate.³ However, the 2019 Amendment to the Act changed the definition completely and now an Associate Member means a close relative authorised in writing by the original member to act on their behalf.⁴ Under the amended law, the old “associate member” is now called a Joint Member and a Joint member is not required to submit any forms for exercising voting or other rights in absent of the member whose name stand first on the share certificate.

Despite the 2019 Amendment, Appendix 5 of the Model Bye-Laws still contains the form for associate member (who, as per the 2019 amendment, are now called joint member) to exercise voting and other rights even though after the amendment, this form is not required for Joint Members and are only for actual Associate Members. The societies continue to use this Appendix 5 for both (Associate members and Joint members), and the language of the form wrongly suggests that the Associate Member has rights, title, and interest that actually belong to the Joint Member. This mismatch between the Act and the Model Bye-Laws has, even after six years of amendment, continued to cause confusion and disputes during elections and general body meetings which has lead to countless unnecessary litigations. In many instances the person whose name stands second on the share certificate has been wrongly prohibited from voting in absence of the person whose name stands first on the share certificate as he/she has not submitted Appendix 5, however, the 2019 Amendment states that in absence of the person whose name stands first on the share certificate, the person whose names stands second can vote, it is only if the person's name is not on the share certificate i.e Associate member that the written consent i.e Appendix 5 is required.

ii. Inspection of Documents: Bye-law No. 23 still refers to Section 32 of the Act, which allowed members to inspect records and obtain copies of documents. However, after the 2019 Amendment, Section 32 of the Act was made inapplicable to housing societies and a new provision i.e Section 154B-8 was introduced specifically for co-operative housing societies.⁵ Though the scope of inspection remains more or less the same, the procedure and timelines are modified to suit the housing societies, and the continued reference to section 32 of the Act is misleading.

iii. Managing Committee Strength: Bye-law No. 114 requires societies with up to 100 members to have a managing committee of minimum 6 and maximum 11 members, which posed difficulties for small societies with less than 50 members in meeting the quorum. To address this, the Department of Co-operation, Marketing and Textiles, Government of Maharashtra, through its circular dated 28th February 2024 (Ref. No. सगृयो-2024/प्र.क्र.4/14-स), reduced the Quorum of the managing committee from 6 to 3 and the strength from 11 to 7 for such small societies,⁶ thereby easing compliance and ensuring smoother functioning which is not reflected in the model bye laws as of now.

There are, of course, several other smaller discrepancies between the Act and the Model Bye-laws; however, for the sake of brevity, this article highlights only a few and emphasizes the larger need for the publication of updated bye-laws rather than cataloguing every inconsistency.

While the Act and Rules always prevail over bye-laws in the event of a conflict, the practical functioning of societies often depends on the bye-laws they have adopted. From my experience as a lawyer practicing in society laws, I have repeatedly observed how outdated bye-laws create operational chaos and disputes that could have been easily avoided. Though it is neither practical nor feasible to amend society bye-laws each time a government amendment or circular is issued, however it will be beneficial to periodically consolidate all such legislative changes and issue an updated version of the Model Bye-laws every few years.

Therefore, there is a compelling need for the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, to issue revised Model Bye-laws incorporating the 2019 amendments and other circulars issued after 2014. While adoption of new bye-laws creates an administrative burden for housing societies, the government could instead consider making the revised bye-laws automatically applicable to all societies by default, with an option for societies to opt out if they so choose. Unless Model Bye-laws are updated, the disconnect between law and operational practice will continue to create avoidable disputes, challenges, and litigation which will underminine the very objective of housing societies.

The author is an Advocate based in Mumbai. Views are personal.

References:

¹ Section 2(5) of the Maharashtra Cooperative Societies Act, 1960.

² Section 8(1) of the Maharashtra Cooperative Societies Act, 1960.

³ Bye Law no. 3(xxiv) (a) i of Model Bye-laws of Cooperative Housing Societies, 2014.

⁴ S. 154B-1 (18)(a) of the Maharashtra Cooperative Societies (Amendment) Act, 2019.

⁵ S. 154B (1) and S. 154B-8 of the Maharashtra Cooperative Societies (Amendment) Act, 2019.

⁶ Government of Maharashtra, Department of Cooperation, Marketing & Textiles, Circular No. सगृयो-2024/प्र.क्र.4/14-स dated 28 February 2024.