1. What they mean for Housing Societies CA Ramesh Prabhu Chairman, MSWA (Maharashtra Societies Welfare Association) 17 th March, 2013 Key Amendments in Constitution of India, Maharashtra Co-op Societies Act & Model Bye-laws for CHS

2. Why? Why are amendments necessary?

3. Because there is corruption & apathy in the system… and we ourselves are part of the problem!

4. Old Problems of Co-op. Societies… Big Problem no. 1 Democratic member control, autonomous functioning & professional management are only in theory… not practiced!

5. High-handedness Denial of necessary documents to ordinary members Bullying Arbitrary behaviour Poor administration Bad reporting & accounting practices

6. Big Problem no. 2 Political Interference & corruption

7. T O P REVENT B AD A DMINISTRATION & C ORRUPTION … R EFORM THE S YSTEM ! People Policy

8. Constitution gives broad mandate at the Centre States laws (like MCS Act, 1960) are amended in specific ways to fulfill mandate… Model Bye-laws for various kinds of Co-operatives (e.g. CHS) are recommended by State Co-op. Dept. Each co-op. society must adopt new bye-laws before 30 th April 2013 to ensure compliance in their day-to-day functioning.

9. Amendments in 1)Constitution 2)MCS Act 1960 3)Model Bye Laws for CHS

11. Amendments in Constitution

12. 97th Constitutional Amendment 97 th Constitutional Amendment Passed in Jan 2012. Process began in 2006. It mandates big changes in Co-operative Sector. Each State has its own Cooperative Societies Act. Co-op is a State Subject. Deadline for Implementation was Feb 16, 2013 Maharashtra Co-op Societies Act, 1960, was amended on 14 th Feb, 2013, vide MCS (Amendment) Ordinance, 2013.

13. 1. Article 19 amended Protection of certain rights regarding freedom of speech, etc.— (1) All citizens shall have the right — (a) to freedom of speech and expression; (b) to assemble peaceably and without arms; (c) to form associations or unions or co-operative societies; (d) to move freely throughout the territory of India; (e) to reside and settle in any part of the territory of India; and * * * * * (g) to practise any profession, or to carry on any occupation, trade or business.

14. 2. Insertion of Definitions of Co-operative Societies into Constitution  Part IX defines “The Panchayats”  Part IX A defines “The Municipalities”  And now, Part IX B defines “The Co-Operative Societies”

15. 3. Electoral Reforms  “The superintendence, direction and control of the preparation of electoral rolls for, and conduct of, all elections to a co-operative society shall vest in such an authority or body, as may be provided by the Legislature of a State...”

16. 4. Right to get information “The Legislature of a State may, by law, provide for access to every member of a co-operative society to the books, information and accounts of the co-operative society kept in regular transaction of its business with such member.”

17. 5. Offences and Penalties “The Legislature of a State may, by law, make provisions for the offences relating to the co-operative societies and penalties for such offences.”

18. 6. New Directive Principle To Ensure voluntary formation, autonomous functioning, democratic member control and professional management of Co-op. Societies -- insertion of Article 43B & Article 243 ZI

19. 7. Other mandates… Maximum no. of directors is 21 Social Justice & Affirmative Action -- 5 Reserved Seats for SC-ST-OBC & women on Board Fixed 5-year term for elected members & office bearers Max. six months for suspension of Board of Directors Independent audit Empower Govt to obtain periodic reports & accounts

20. All this implies that… You are now empowered to get proper persons elected, co-opt or appoint professionals as board members or officers, and hold them accountable.

21. Amendments in MCS Act 1960

22. New MCS Act - Overview I 1. Empower active members. Non-serious participants cannot participate in decision-making. 2. Expel dormant members or force them to become active. 3. No Administrators. Active members will be “authorized officer” or “interim committee”. 4. Regular training to groom fresh leaders through Apex Co-operatives. Allocate funds for that. 5. Managing Committee must attend training at least once in five years.

23. New MCS Act - Overview II 6. Stop washing dirty linen in co-op. court. Resolve internal differences through “Grievance Redressal Committee”. 7. Co-op. court to encourage Win-Win compromise. Not Win-Lose “Justice” in private dispute resolution. 8. Get professionals help for management… Adopt modern methods of management, record keeping etc. 9. Strengthen Audit function. Stop Crime! Auditors, Registrar etc. to pinpoint responsibility for fraud and Register FIR. 10. Realistic penalties for offences. Fine and prison sentences have increased.

24. Strict Audit & Reporting Accounts to be audited at least once in each financial year… before AGM notice Auditor or auditing firm from a panel approved by State Govt Auditor shall lay audit report before AGM Every society shall file audited annual returns within six months of the close of every financial year to the Registrar or to the person authorized. Read Sec 79 and Sec 81

25. New MCS Act - Tough on Crime! CHAPTER VIII Audit, Inquiry, Inspection & Supervision 81. Audit.-- 1 (e) The auditor’s report shall have: (i) All particulars of irregularities observed in audit… the auditor/auditing firm shall investigate and report the modus operandi… fix the responsibility for such misappropriation or embezzlement of funds or fraud, on the members of the board or the employees of the society… with all necessary evidence.

26. 81. (5B) The auditor shall submit an audit memorandum report within a period of one month from its completion and in any case before issuance of notice of the annual general body meeting, … The Auditor concerned shall after obtaining written permission of the Registrar, file a First information Report… Failure to file First information Report… would make Auditor liable for disqualification and removal of his name from Panel of Auditors or any other action as Registrar may think fit.

27. 146. Offences… (a) any member of a society transfers any property or interest in property in contravention of sub-section (2) of section 47 … (d) any person, collecting share money for a society in formation, does not within a reasonable period deposit the same in the State Co-operative Bank… (g) … officer or member willfully makes a false return or fails to furnish a return under section 75 or 79 of the Act, or furnishes false information to person holding an inquiry under section 83, officer authorized under section 88 or as

28. 147. Punishments… Every society, officer or past officer, member or past member, employee or past employee of a society, or any other person, who commits an offence under section 146 shall, on conviction, be punished- (a) If it is an offence under clause (a) … imprisonment for … six months, or with fine … five hundred thousand rupees; (b) if it is an offence under clause (b) … imprisonment which may extend to three years, or fine … five fifteen thousand rupees;

29. Elections to be monitored closely 73-E. State Co-operative Election Authority: Superintendence, direction and control of the preparation of the electoral rolls… and conduct of… every election of the members of the board and of the office bearers

30. No Administrator In a society not having any government grant or loan, no Administrators will be appointed. In a Society having government aid, Administrator can be appointed maximum for six months. After 6 months, elections must be held. Provisions are in Sec. 78 and 78-A

31. Active Member Only active member can vote in affairs of the society including elections. Non-active member cannot contest election. Member who does not attend at least one general body meeting and pay maintenance for at least one out of five years to be classified as “non-active member” (See Sec. 26 & 27) Non-active member liable for expulsion & eviction from flat after 10 years

32. Dispute Redressal Committee Committee to settle disputes of members & society within 3 months. 3 active members -- knowledgeable & senior, preferably experts whom general body considers impartial Aggrieved to submit written application along with documents relied upon. Assist the parties in an impartial manner to reach amicable settlement within the framework of the Acts, Rules and Bye-laws Sign Grievance Settlement Agreement Read Sec 89AB

33. Amendments in Model Bye-Laws

34. NEW BYE-LAWS Bye-laws & Promoter… 3. (ii) Bye-laws' means by-laws consistent with Act and registered under this Act for the time being in force and includes registered amendments of such bye-laws. (xiii) "Promoter Builder" means a person and includes a partnership firm or a body or association of person, [whether registered or not] who constructs or causes to be constructed a block or building of flats [or apartments] for the purpose of selling some or all of them to other persons, or to a company, Co-operative Society or other association of persons, and includes his assignees; and where the person who builds and the person who sells are different persons, the term includes both

35. NEW BYE-LAWS Professional Management… 3 (xxix) ‘Authorized person’ means a person duly authorized to take action under the provisions of this Act. (xxx)‘State Co-operative Election Authority’ means an authority constituted or nominated by the State Government for the purposes of superintendence, direction, and control of the preparation of the electoral roll for and conduct of the elections of committee of a society or such class of societies as may be notated. (xxxi)‘Expert director’ means and includes a person having experience in the field of Housing and the field relating to the objects and activities undertaken by the society. (xxxii)‘Functional director’ means and includes a Chief Executive Officer or Manager or by whatever designation called, nominated by a committee and who is available for whole time to look after the working of the society and discharge the duties and functions as may be assigned to him by the committee. (xxxiii) ‘Officer’ means a person elected or appointed by a society to any office of such society and includes any office bearer such as a chairman, vice-chairman, chairperson, secretary, treasurer, manager, member of the committee and any other person elected or appointed to give directions in regard to the business of such society.

36. NEW BYE-LAWS Objects… 5 (a) To promote peaceful co-habitation amongst the members on the Co-operative Principles and ensure Voluntary formation, Democratic Member Control, Member - Economic Participation and Autonomous Functioning. (b) To provide co-operative education and training to develop co- operative skills to its members, committee members, officers and employees of the society. (c) To initiate Redevelopment of the building as per the norms of the authority. (e) To provide co-operative education and training to develop co- operative skills to its members, committee members, officers and employees of the society.

37. NEW BYE-LAWS Creation of Funds… 7. The funds of the society may be raised in one or more Modes of raising of the following ways: the funds of the society… (i) by and for Election Fund. (E) Creation of Other Funds (d) To create Education and Training Fund from the Members as contribution of Rs 10 per month / per unit or as decided by the General Body.

38. NEW BYE-LAWS Active Member… 22. (B) (1) A member shall be called as 'Active Member' if:- a. He has purchased and owns the Flat I Unit in the Society. b. He has attended at least One General Body Meeting within a consecutive period of Five years. c. He has at least paid the amount equivalent to one year of society Maintenance and Service charges, within a consecutive period of Five years.

39. NEW BYE-LAWS Non-Active Member… 22 (B) A member who is not an 'Active Member' shall be the 'non-Active Member'. (2) Society shall classify the members as 'Active' or Non-Active' member at the close of every financial year. (3) Society shall communicate to every Non-Active member about his classification, within a period of 30 days from 31st March of every year as prescribed under these By-laws as per Appendix - - (4) lf a question, of a member being Active or Non-Active arises, an appeal shall lie to the Registrar within a period of 60 days from the date of communication of such classification. (5) The ' Non-Active' member can be reclassified as 'Active member' if he satisfies the conditions laid down under Byelaw no. 22(B)(1).

40. NEW BYE-LAWS Access to Documents… Inspection of Books and Records Getting Copy of the Bye-laws. 23. (a) A member shall have right to inspect free of cost books, registers documents etc. as provided in Section 32 (1) of the Act and get copies of the documents … on payment of the fees prescribed under the bye-law No. 172. 172. 1. Certified copy of the approved Bye-laws of the Society Rs. 5/- per page. 2. Amendment of the bye-laws of the society Rs. 5/- per page. 3.Last audited Balance Sheet of the Society Rs. 10/- per page. 4. Application for membership of the Society Rs.25/- 5. Second and Subsequent Nomination by the member of the Society Rs.50/- 6. Share Certificate of the Society (Dup|icate) Rs. 100/- 7. List of members of the Society Rs. 10/- per page. 8. Correspondence (related to member) Rs. 10/- per page. 9. Minutes of the general body meetings and committee Meetings Rs. 10/- per page. 10. Indemnity Bond Rs. 20/- 11. Copy of Audit Report, Annual Returns and Periodicals -- Rs 10/- per page. 12. List of Non-Active members -- Rs 5/- per page. 13. Any other document as per section 32 of the Act -- Rs. 5/- per page.

41. NEW BYE-LAWS Annual General Meeting… 96. The annual general body meeting of the Society shall transact the following business : … (x) To receive from committee the Audit Rectification Report and Action taken thereon. (xi) To appoint the Grievance settlement and Redressal Committee as provided in Bye-law No. 173.

42. NEW BYE-LAWS Election… 116. (a) Election of all the members of the Committee shall be held once in 5 years, before expiry of its term, in accordance with the provisions of Sec 73- CB of the Act and the Rules / procedure framed there under. It shall be the duty of the committee to intimate to the State Election Authority for holding of its election before expiry of its term. On failure, the committee members shall cease to hold office after expiry of its term and attract action by the Registrar under section 77 A. (b) The Committee of the society may co-opt Two "expert directors" relating to the objects and activities under taken by the society. The number of such co- opted members shall not exceed two in addition to the strength of the committee as provided in bye-laws No. 115., Such co-opted members shall not have the right to vote in any election of the society in their capacity as such member or to be eligible to be elected as office bearers of the committee. (c) The Committee of the society may co-opt Two "functional directors", such members shall be excluded for the purposes of counting the total numbers of the committee and shall have no right to vote.

43. CONCLUSION: Amend your CHS Bye-Laws by 20/4/2013. Call Special General Meeting for discussion. Don’t blindly approve… Understand!!! Don’t worry, be happy!

44. CA Ramesh Prabhu Chairman, MSWA (Maharashtra Societies Welfare Assn.) 17 th March, 2013