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Discussion > Local Forums > Maharashtra > Indemnity Bond in Form M-20 Under The Maharastra. Co-Op Societies Act   Unanswered Threads Post New Topic

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DILIP SHAH


Senior Counselor and Analyst for Redevelopment of Housing Societies
[ Scorecard : 182]
Posted On 20 July 2011 at 19:33 Report Abuse

REDEVELOPMENT OF OLD HOUSING SOCIETIES IN MUMBAI: INDEMNITY BOND IN FORM M-20 UNDER THE MAHARASHTRA CO-OP SOCIETIES ACT

I take this opportunity to write something on Bond required to be executed by the members of the Managing Committee of the Co-operative Housing Societies within 45 days from the date of their assuming the office whichever is earlier, under the Maharashtra Co-operative Societies Act 1960.

The provision is important because if the bond is not executed within 45 days from the date of their assuming the office whichever is earlier or if the member fails to execute the bond he shall be deemed to have vacated his office as a member of the Managing Committee.

Now what happens to many housing societies, where Managing Committees are unaware, ignorant or have simply ignored or not bothered about the bond? In such cases, according to Registrar’s office “we offer to disband the committee and call for fresh elections”

The member who fails to execute such a bond within the specified period shall be deemed to have vacated his office as a member of the committee. Bombay High Court too has upheld this provision of MCS Act.

Attention is also invited to the Bye-law no 136 of the old Model bye-laws and bye-law no 138 of the new Model bye-laws which lay down as under:

"The members of the Committee shall be jointly and severally liable for making good any loss which the society may suffer on account of their negligence or omission to perform any of the duties and functions cast on them under the Act, Rules and Bye-laws of the Society."

In addition to the above bye-laws, an amendment was inserted by Mah. 41 of 2000, S. 3 of the amending Act (w.e.f. 23-8-2000) to Section 73 by introducing Section (1AB) to the Maharashtra Co-operative Societies Act 1960. Similarly Rule 58-A was inserted by G.N. of 18-2-2002 in the Maharashtra Co-operative Societies Rules, 1961 and Form M-20 was also inserted by G.N. of 18-2-2002.

Section 73(1AB) of the Maharashtra Co-operative Societies Act 1960 is reproduced below:

"The Members of the Committee shall be jointly and severally responsible for all the decisions taken by the committee during its term relating to the business of the society. The members of the committee shall be jointly and severally responsible for all the acts and omissions detrimental to the interest of the society. Every such member shall execute a bond to that effect within fifteen days of his assuming the office, in the form as specified by the State Government by general or special order.

The member, who fails to execute such bond within the specified period i.e. within fifteen days from joining the Managing Committee member, shall be deemed to have vacated his office as a member of the committee."

Further, the power to decide whether the losses incurred by the society are due to act or omissions of members of the committee is given to the Registrar

"Provided that, before fixing any responsibility mentioned above, the Registrar shall inspect the records of the society and decide as to whether the losses incurred by the society are on account of acts or omissions on the part of the members of the committee or on account of any natural calamities, accident or any circumstances beyond the control of such members."

Rule 58-A of the Maharashtra Co-operative Societies Rules 1961 is reproduced below:

"Every elected member of the Managing Committee shall execute a bond in Form M-20 within fifteen days of his assuming the office. Such bond shall be executed on the stamp paper as provided under the Bombay Stamp Act 1958. The expenditure on stamp paper shall be borne by the society. The Chief Executive Officer / secretary of the society shall receive such bonds and keep them on record of the society and accordingly inform the Registrar within Fifteen days from the formation of the Committee."

It is clear from above that the bond must be executed within fifteen days of assuming of office by each member of the Managing Committee in Form M-20 on a stamp paper. Failure will invite penal consequences.

INDIA: MANAGING COMMITTEE OF CO-OPERATIVE HOUSING SOCIETY MUST EXECUTE BOND

March 2008

Article by Dilip Shah

The legislature having experienced and realized that the members of the Managing Committee of different co-operative societies were acting in an arbitrary manner, with a view to have some accountability amongst the members of the Managing Committee, have enacted a provision in the Maharashtra Co-operative Societies Act, 1960 ("MCSA") mandating every member of such Managing Committee to execute a bond within 15 days of their assuming the office whichever is earlier.

 

If the committee member fails to execute the bond within the specified period, then such member shall be deemed to have vacated his office as member of the Committee. This provision has been given effect by Section 73(1AB) of the MCSA.

 

This legislation was recently challenged by a Writ Petition filed in the Bombay High Court (Writ Petition No. 457 of 2007) under Article 226 of the Constitution of India on the ground that the same is ultra virus. However, the Bombay High Court has upheld the legislature’s act.

 

The intention of the legislature is to make the members fully aware of their personal responsibility and liability towards the society and its members. The time limit laid down under Section 73(1AB) is mandatory and the elected committee members have to hand over the bond to the Deputy Registrar of Co-operative Society within such stipulated time.

 

This ruling of the Bombay High Court in the aforesaid writ petition emphasizes the basic principle of "ignorance of law is not an excuse" i.e. being unaware of the provision contained in Section 73(1AB) of the MCSA cannot be used an excuse for the failure to execute the bond within the stipulated time.

 

There are several instances of disgruntled members filing cases against the Managing Committees for not having executed the mandatory bonds to derail the process of redevelopment. The Managing Committee may even get caught or be slapped with fraud and forgery charges for entering into any redevelopment agreement with the builders as has happened with a Co-operative Housing Society on the Hill Road in Bandra, Mumbai.

Bandra building residents unearth100 crore fraud

A resident of Rachna co-operative housing society at Hill Road in Bandra has accused some members of the managing committee of resorting to forgery to strike an100 crore deal for redevelopment rights.

Mohammed Musaddique Shaikh, the resident, alleges the members resorted to forgery fearing the deal would fall through as the papers of the society were not in order.

“After the managing committee members entered into an agreement with the builder for redevelopment in December 2006, they realized that they had not filed the mandatory indemnity bonds,” alleges Shaikh.

When a managing committee is elected, it is mandatory for them to file indemnity bonds (before the registrar of societies) accepting responsibility for wrong-doing, if any, during their tenure. Without the indemnity bonds, the society cannot enter into a deal to redevelop the property.

“The election took place on May 25, 2004. The committee was constituted on the same day. The indemnity bonds ought to have been placed on record by committee members on or before June 9, 2004, which was not done,” alleges Shaikh.

His advocate Pradeep Havnur says, “Members not having filed indemnity bonds within 15 days of being elected cease to be part of the managing committee. All documents signed when they have ceased to be managing committee members are illegal and cannot be given effect to proceed in any matter pertaining to the society’s day to day affairs.”

“When residents of the society insisted on seeing copies of the indemnity bonds, the accused purchased stamp papers and prepared back-dated indemnity bonds,” alleges Shaikh. Another resident, S B Naik, moved the HC alleging fraud. The court asked the additional controller of stamps (Mumbai) to investigate. The investigation revealed that the dates on the indemnity bonds were forged. An officer at Bandra police station said a complaint was registered under Sections 465, 467 and 471 of the IPC.

HIGH COURT ORDERS FRESH ELECTIONS TO MANAGING

COMMITTEE OF INDUSTRIAL COOPERATIVE SOCIETY

Dilip Shah

Posted: Dec 25, 2007 - Article Directory, India

 

Mumbai, December 25 The Bombay High Court recently ordered fresh elections to the managing committee of an industrial cooperative society in Chunabhatti. Following their removal from the committee for non-execution of bonds under the Maharashtra Cooperative Societies Act, Deepak Rao and others had moved the HC contesting the order passed by the Divisional Joint Registrar as he was “facing corruption charges and his anticipatory bail application was rejected by the sessions court”.

 

The Managing Committee of the Shri Mahalakshmi Industrial Premises Cooperative Society Ltd was superseded by an order of the Deputy Registrar of Cooperative Societies on July 6. The members challenged the order before the Divisional Joint Registrar Shivaji Pahinkar — who is under suspension, according to Assistant Government Pleader G W Mattos. Pahinkar dismissed their appeal on October 23, following which the members moved the HC.

 

According to Mattos, the petitioners contested Pahinkar’s order as he had passed it on October 23, a day after his anticipatory bail application was rejected by the session’s court. The petitioners expressed apprehension that the order was “based on consideration other than merit”, according to Mattos.

 

According to Mattos, Justice A M Khanwilkar observed that if the petitioners' contention was accepted, the court would have to order an inquiry into the allegations and, if found true, the matter will have to be referred back to the appellate authority for fresh hearing.

 

Mattos contended before Justice Khanwilkar that the managing committee was removed on technical grounds as they ceased to be members for non-execution of bonds. Mattos submitted that instead of going into allegations and counter-allegations, it would be appropriate to hold fresh elections to the committee.

 

According to Mattos, observing that the removal was technically correct, the court directed that the three members of the seven who had executed the bonds should continue to function as the Board of Administrators (BoA) instead of the single administrator appointed by the Deputy Registrar of Cooperative Societies on July 6.

 

Mattos said the HC then directed the Deputy Registrar of Cooperative Societies to issue order in this regard by December 27. The court also directed that elections to the committee should be held within three months. The court has, however, asked the BoA not to take any major policy decisions during this period.

 

Dilip Shah

Counselor and Analyst for Redevelopment of Housing Societies

9819825752, 32411533

dilip7shah@gmail.com

 

 

     
     



Total thanks : 2 times


Kanaksinh P.Boda


Educationist/Lawyer
[ Scorecard : 913]
Posted On 21 July 2011 at 10:06 Report Abuse

The fact remains that most of the elected members hesitate to submit bond because of its strictly worded draft and they consider functioning for the society like a social work. Irrespective of submission of bond, the other clauses in the Act are sufficent to hold each responsible for their act. The bond has created fear, which is main reason for avoiding the submission. In most of the CHS very few people are coming forward to take up this thankless and penniless work, particulrly young and honerst people remain away from these  responsibilities and only retired or comparatively free people are chosen fore these kind of work. All preffer to go to their jobs and remain busy in their personal development and expect that the people left behind are to take care of problems. This kind of tratment descourage most people to considere society's work as reponsibility equal to paid work.


DILIP SHAH


Senior Counselor and Analyst for Redevelopment of Housing Societies
[ Scorecard : 182]
Posted On 21 July 2011 at 13:47 Report Abuse

I fully endorse your views with regard to the hurdles in active participation to look after the Society’s work. However, the whole community of efficient and dedicated members suffer due to few established interest in the Societies.

However, the legislature having experienced and realized that the members of the Managing Committee of different Co-operative Societies were acting in an arbitrary manner, with a view to have some accountability amongst the members of the Managing Committee, enacted a provision in the Maharashtra Co-operative Societies Act, 1960 ("MCS Act") mandating every member of such Managing Committee to execute a bond within specified time frame.

 

If the Managing Committee member fails to execute the bond, then such member shall be deemed to have vacated his office as member of the Managing Committee. This provision had been given effect by Section 73(1AB) of the MCS Act and Rule 58-A of MCS Rules. 

 

This legislation was challenged by a Writ Petition filed in the Bombay High Court (Writ Petition No. 457 of 2007) under Article 226 of the Constitution of India on the ground that the same is ultra virus. However, the Bombay High Court upheld the legislature’s act and confirmed the insertion of Indemnity Bond in Form M-20 in MCS Act.

 

The intention of the legislature was to make the members fully aware of their personal responsibility and liability towards the Society and its other resident members. The time limit laid down under Section 73(1AB) is mandatory and the elected committee members have to hand over the bond to the Deputy Registrar of Co-operative Society within such stipulated time.

 

This ruling of the Bombay High Court in the aforesaid writ petition emphasizes the basic principle of "Ignorance of Law is not an excuse" i.e. being unaware of the provision contained in Section 73(1AB) of the MCS Act cannot be used an excuse for the failure to execute the bond within the stipulated time.


Anil Agrawal


Retired
[ Scorecard : 7445]
Posted On 23 July 2011 at 14:13 Report Abuse

Can any Hon. member quote the notification under which 15 days has been changed to 45 days.


sudha


g.m.mktg
[ Scorecard : 22]
Posted On 29 September 2011 at 18:10 Report Abuse

dilipbhai,

a crystal clear article written by you. thanx. i'm a resident of a big chs ltd on ghodbunder road. though i was a secretary for the last 2 years ( here our people want the m.c for a year only and i was elected twice out of the 6 years) the rest of the members abhor the idea of signing this bond. last dec'2010 saw me resigning once again on this issue. this year i am a m.c. member and my fellow mc. are yet to sign this. despite my several pleas its gone unheeded.pls suggest a way out..

thanks & rgds,

 

s.i.jhaveri

 


DILIP SHAH


Senior Counselor and Analyst for Redevelopment of Housing Societies
[ Scorecard : 182]
Posted On 30 September 2011 at 10:20 Report Abuse

   

When it is mandatory with no exception under the law, there is no way out other than to vacate the chairs.

  


Kishor Satwick


Chartered Accountant
[ Scorecard : 40]
Posted On 31 October 2011 at 22:25 Report Abuse

Dear Mr Shah

I would appreciate of you could give me the citation or case number of Rachana Co-op. Hsg. Soc. Ltd. case.

Regards

Kishor Satwick, FCA


Atul P. Shah


Retired.
[ Scorecard : 28]
Posted On 04 January 2012 at 11:00 Report Abuse

Builder has made co op housing society and is calling The First Constituted General Body Meeting wherein I am also one of the promoters signed in bank account. Shuold I know the accounts prepared by them?? I have ask them to furnish me a copy of accounts. What is my role in first meeting??  


Anil Agrawal


Retired
[ Scorecard : 7445]
Posted On 04 January 2012 at 11:16 Report Abuse

There is a way. Bribery,.


DILIP SHAH


Senior Counselor and Analyst for Redevelopment of Housing Societies
[ Scorecard : 182]
Posted On 04 January 2012 at 13:18 Report Abuse

Yes. You are right that the period of filing the Indemnity Bond has been extended from 15 days to 45 days w.e.f. 14/01/2011.




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