Cooperative housing societies (CHS/Society) often encounter unique legal and procedural challenges when managing shared property and making collective decisions. Conflicts of interest, membership transfers and redevelopment projects can lead to complex situations that require careful handling, both to uphold the CHS bye-laws and to ensure fair treatment of all members. For instance, a conflict of interest arises when an office-bearer has a personal stake in a decision authorised during the general body meeting (GBM). In such cases, bye-law 116 outlines specific protocols, yet societies often question whether a new resolution or resignation can fully address the conflict.
Similarly, transferring membership or share certificates—especially when properties change hands due to court auctions or inheritances—can become tangled in disputes over prior owners' liabilities. Membership transfers also raise questions about legal requirements and the appropriate steps for issuing share certificates under bylaws.
This week, we will explore these issues in detail, offering guidance on addressing conflicts of interest, facilitating smoother membership transfers and navigating the nuances of partial redevelopment within a shared property framework.
Handling Conflict of Interest within Managing Committee
Question: How should a conflict of interest be handled when a GBM has authorised a contract in which an office-bearer has a vested interest, according to bye-law 116? Would it be necessary to pass a new resolution in another general body meeting, or would the subsequent resignation of the office bearer after the resolution suffice to resolve the issue?
Answer: In this situation, the issue of conflict remains, even if the office bearer resigns after the contract is authorised. To ensure procedural clarity and avoid future disputes, it would be prudent for the Society to pass a fresh resolution in the next general body meeting. This step will confirm that the GBM, with full awareness of the prior conflict, has reviewed and approved the contract independently of the office bearer's interest.
Transfer of Share Certificate
Question: In 2020, Manoj (name changed) bought four flats through a court auction after the previous owners had passed away. He applied to the Society for a membership transfer on 10 October 2020. The Society requested payment of past dues owed by the previous owners and this dispute went to court. In July 2022, Manoj sold one of the flats to me and, in June 2023, the court resolved the dispute, determining that Manoj was not liable for past dues. The Society issued a share certificate to Manoj on 10 August 2024.
Subsequently, in September 2024, I submitted all necessary documents and fees to the Society for membership transfer. The Society is willing to admit that I am a member but is uncertain if they can transfer the share certificate to me immediately or if Section 29(2)(a) applies. If it does apply, can the Society issue a provisional letter approving my membership, stating that the share transfer will take effect one year from 10 August 2024?
Answer: Manoj, after purchasing the flats through a court auction, promptly applied for membership transfer on 10 October 2020. The Society was required to process this application within three months, but the issue remained unresolved until June 2023 due to no fault of Manoj. Since Manoj's transaction with you for one flat was registered in 2022, this should not prevent the Society from transferring the membership and share certificate now.
Under the latest bye-laws, a no objection certificate (NOC) from the Society is not necessary to sell a flat. It is also relevant to note that the share certificate itself is not a title document. Rather than taking this matter to a quasi-judicial authority, such as the deputy registrar of cooperative societies, it may be more practical to accept the Society's proposal to avoid further time and expense.
Redevelopment of Two Adjacent Buildings in Housing Society
Question: Our property consists of two buildings, A and B, on a single plot. The residents of building A wish to proceed with the redevelopment of their building alone. Is it possible for them to proceed without the consent of building B's residents? Additionally, building A has obtained deemed conveyance. Please advise.
Answer: Since building A has completed the deemed conveyance, it effectively separates the original plot into two distinct plots, allowing building A to move forward with redevelopment independently. However, details like the total plot area, pertinent land and terms of the agreement were not provided in your query which may impact the process. If the residents of building B have any concerns, they should review building A's deemed conveyance application and order. Consulting an architect and a lawyer is advisable to identify potential grounds for objection, if any, within the time limits specified by the Limitation Act.
NOTE
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Disclaimer: The guidance provided in these columns and on our Legal Helpline is on the sole basis of the facts provided by the reader/questioner and does not amount to formal legal advice in any form whatsoever.
(Shirish Shanbhag has an MSc in Organic Chemistry, a Diploma in Higher Education, and a Diploma in French and has completed his LL.B. in first class in 2021. Before his retirement, he was a junior college teacher at Patkar College from July 1980 to May 2012, teaching theoretical and practical chemistry. Post-retirement in 2012, he started providing guidance and counselling to people on several issues, specifically focusing on cooperative housing society-related matters. He has over 30 years of hands-on experience in all matters about housing societies and can provide out-of-box solutions for any practical issue.)
