Bombay HC rejects housing society’s bid to restrict membership transfers

Bombay High Court rules that society bylaws cannot override Maharashtra Co-op Societies Act, reinforcing rights of homebuyers

A single bench of the Bombay High Court recently set aside a petition filed by a housing society seeking restriction of transfer of membership. The HC order gives a new dimension to over 1.2 lakh housing societies in the state, which otherwise believed that the decision of the managing committee and general body is binding on its members. However, the HC stated that Society can’t impose any restrictions on the transfer of Membership overriding the provisions of Maharashtra Co-op. Societies (MCS) Act, MCS Rules and Bylaws, thereunder.

The case

The case concerns Kendriya Vihar Co-operative Housing Society Ltd., a large co-operative housing society in Pune with 307 flats, versus the Divisional Joint Registrar and others. The petitioner society had imposed restrictions on admitting non-government employees as members. In its general body meeting, it resolved that flat transfers through sale-purchase could only involve government employees. If a transfer was made to a non-government employee, their membership application would be rejected.

Advocate Shreeprasad Parab, expert director state housing federation; (right) Subhash Gargote, 49, the petitioner

Advocate Shreeprasad Parab, expert director of the State Housing Federation, representing the non-government employee flat buyers, said, “My clients challenged the society’s arbitrary decision before the deputy registrar of cooperative societies, Pune, in February 2024. The Deputy Registrar ruled in their favor. The society then appealed to the divisional joint registrar, who upheld the deputy registrar’s order on July 11, 2024. Unsatisfied with both rejections, the society further challenged the order in the Bombay High Court.

HC order

After hearing all sides, Justice Sandeep V. Marne held that as there are no restrictions in the bylaws on the transfer of a flat in favour of non-government employees and, therefore the membership of such non-government employees can’t be denied.

Petitioner speak

Subhash Gargote, 49, a businessman and the petitioner in the case, said, “I had bought my flat around two years ago. I am happy that the Bombay High Court has given me relief in the case, as the managing committee had decided in their meeting to refuse my membership  and it would be given only to central government employees, and I challenged this decision. The moot issue is that the housing societies managing committee cannot take frivolous and arbitrary decisions, and they have to follow the MCS rules, acts and bylaws.”

Misconceptions

“Members of the managing committee are under the impression that the general body of the society can pass resolution which will be binding on all the members of the Society,” said Advocate Parab. “The law is very clear as Section 72 of the Maharashtra Co-operative Societies Act, 1960 states that ‘Subject to the provisions in this Act and the rules, the final authority of every society shall vest in the general body of members in general meeting, summoned in such manner as may be specified in the bylaws.’”

Common violations by the General Body in housing societies

>> Redevelopment:  Many General Bodies appoint developers for redevelopment without transparency, fairness, or due process, ignoring members’ rights.
>> Transfer of membership:  Some societies impose restrictions on membership transfers, limiting them to specific communities or professions, charging excessive transfer premiums, or demanding donations.
>> Non-occupation charges:  Certain societies unlawfully levy non-occupation charges beyond prescribed limits on flats given on leave and licence.
>> Restrictions on Bachelors:  Many societies prohibit bachelors from renting flats, restricting subletting and rental rights.

What Act, rules and bylaws state

>> Any individual or a legal entity or a firm who is competent to contract under the Indian Contract Act, 1872, is entitled to become a member of any Cooperative Housing Society.
>> No Society shall, without sufficient cause, refuse admission to membership to any person duly qualified under the provisions of this Act and its Bylaws. 
>> There is only one provision under Section 154 B-7 of the said Act, which restricts the transfer of share or interest of a member if the dues of the housing society are not paid or if the transferee has not applied and acquired membership of the cooperative housing society in due course of time.

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