appointment of legal advisor in a cooperative housing society

The MC can decide about engaging a lawyer to defend the interests of the society/association, there is no legal infirmity or embargo in it.

However a resolution has to be passed by the MC members  to approve this proposal.

The MC of the Society enjoys all the powers vested in AGM and can appoint a lawyer, which has to be submitted/ approved in ensuing (next) meeting of members.

Many thanks sir for your valuable comments. 

There is already a legal advisor on the MC team who is taking care of the legal matters of the society for free of charge. 

Can still the MC appoint a new legal advisor  by paying him fixed Rs .10000 pm and also paying additional charges case by case thus causing financial burden on society 

Your legal inputs appreciated highly

Best regards 

Are you a co-operative housing society in Maharashtra? If so the position is like this. On the question of appointment of a legal advisor or even meeting legal expenses the Act, the Rules and the Model byelaws are silent. As regards expenditure on repairs there is a Repairs Fund.. The Managing committee can approve expenditure on repairs up to Rs. 1 lakh at a time. For higher expenditures approval of the General Body is necessary. If the Society has to fight a case there is no provision of funds under the Model Byelaws. In our Society I created a Legal Fund. Member have to contribute at a fixed rate to the fund. All penalties and penal interest levied on members will be crdited to the Fund. Legal expenditures are met from the fund. 

A society has to meet legal expenditures when it becomes necessary. Normally the Societies meet legal expenditures form the funds available with them or even post-facto collect from the members. Whether your Society should commit themselves to legal expenditure to the extent stated by you would depend on the size and finances of the Society and legal cases that your society has to commit itself. Whether the Managing Committee can decide or whether approval of the General Meeting is necessary is also debatable.

You make a complaint to the Registrar or go to the co-operatve court. Let the court decide.

read society constituion

My society appointed a legal counsel, who's appointment was not brought upon as a resolution in any of the  general body meetings. Even his scope of work has not been disclosed as a circular or notice. On questioning, they hired another lawyer to prosecute me for defamation. The Deputy Registrar, during the complaint hearing, said that the Society can appoint whomsoever they want without a general body approval. 

I agree with T. Kalaiselvan, Advocate - "The MC can decide about engaging a lawyer to defend the interests of the society/association, there is no legal infirmity or embargo in it."

But i have a question that, When MC is defendings its own personal decisions by using the Society funds then does the law permit it? For example, in our society, the MC has not filed an audit rectification reports for last 5 years, AGM's are not conducted as per the law, With GBM approval, society funds are used as per them whims.
So, the members filed a complaint to Deputy Registrar and also some in Co-operative Courts. 
The above stated non-compliances are "Administrative Failures", they are defending their actions using Society funds, where ethically they should defend it from their personal expenses.

 

The answer depends on the society's registered bye-laws, the applicable State Cooperative Societies Act (or Apartment Ownership Act, if applicable), and the powers delegated to the Managing Committee (MC). As a general proposition of law, the following principles apply:

Legal Position

1. Managing Committee is a creature of the Bye-laws
   The Managing Committee cannot exercise powers beyond those expressly conferred by the Act, Rules, and the registered Bye-laws of the Society. Any resolution contrary to the Act or Bye-laws is void and unenforceable.

2. Appointment of a Legal Advisor
   The MC may appoint an advocate or legal advisor for conducting litigation, issuing legal notices, or rendering legal opinions only if such power is vested in it under the Bye-laws or is incidental to its management functions.

   However, appointing a person as a retainer/legal advisor on a monthly salary or fixed monthly retainership of Rs.10,000/-, particularly where the appointment creates a recurring financial liability, may require approval of the General Body if:

   • the Bye-laws require sanction for expenditure beyond a prescribed limit;
   • the expenditure is not provided in the approved budget;
   • the appointment amounts to creation of a permanent contractual obligation.

3. Payment of Monthly Retainership Plus Separate Case-wise Fees
   Paying a legal advisor:

   • Rs.10,000/- per month as retainership; and
   • additional professional fees for each case,

   is permissible only if authorised by the Bye-laws or approved by the competent authority of the Society. Otherwise, it may amount to misuse of society funds and arbitrary expenditure.

4. Retrospective Appointment
   As a general rule, administrative or contractual appointments cannot be given retrospective effect so as to create financial liability for a past period unless:

   • the Bye-laws expressly permit it;
   • the General Body ratifies such action; or
   • the appointment merely ratifies services already rendered pursuant to an earlier valid authorization.

   A Managing Committee cannot ordinarily pass a resolution today and direct payment of monthly retainership for a past period without legal authority. Such retrospective financial benefit is open to challenge as being arbitrary, without authority of law, and contrary to fiduciary duties owed to the members.

5. Approval of AGM
   If the appointment involves:

   • recurring expenditure,
   • creation of a contractual post,
   • financial commitment beyond the Committee's delegated powers, or
   • expenditure outside the approved budget,

   approval of the Annual General Meeting (AGM) or General Body may be mandatory under the applicable Bye-laws.

Legal Principles Recognised by Courts

Courts have consistently held that:

• A cooperative society functions strictly according to its registered Bye-laws.
• The Managing Committee acts in a fiduciary capacity and cannot spend members' money arbitrarily.
• Any expenditure incurred without authority under the Act, Rules, or Bye-laws is liable to be set aside.
• Ratification cannot validate an act that was beyond the powers of the Managing Committee (ultra vires).

Conclusion

In law, unless the registered Bye-laws specifically empower the Managing Committee:

• the MC cannot unilaterally appoint a legal advisor on a monthly retainership of Rs.10,000/- along with separate case-wise professional fees if doing so exceeds its delegated financial powers or requires General Body approval;
• the MC cannot ordinarily make such appointment with retrospective effect so as to create financial liability for the Society without proper authority or subsequent valid ratification by the competent General Body;
• if the appointment or payment is contrary to the Act, Rules, or Bye-laws, it is liable to be challenged before the competent authority, Cooperative Court/Registrar (where applicable), or Civil Court, depending on the governing statute.

This is a good essay though two years too late. The Model Byelaws recommended by the Registrar of co-operative societies in Maharashtra is silent on the question of powers of the MC to incur legal expenditures like fighting a case in a court of law or appointment of lawyers etc. . If and when a society is challenged or if a dire situation develops and going to court is necessary, the Managing Committee cannot seek and wait for the approval of the General Meeting. In such situations General Meeting can often mean politics. Things may have to be settled on a post-event basis if necessary going to the Registrar or to the court. Probably that is the reason the Model Byelaws are silent on the question of powers of the MC to incur legal exlenditures.