Recovery of maintenance dues in Housing Society

Recovery of maintenance dues in Housing Society

Overdue outstanding of housing society maintenance from defaulting members is an irritant in every housing society despite 21% p.a. interest charge for the delay. Collection of overdue society charges is an extremely important business of housing society as overdue outstanding adversely impacts cash flow of the Society. With a view to make it easy for cooperative housing societies to recover amounts due from defaulting members speedily new section 154 B (29) has been introduced in the MCS Act in 2019 by State Government after finding that Section 101 in the M C S Act 1960 was found to be cumbersome as Section 101 is more relevant for Credit Society and many such Societies are extending credits to their members. Section 154 B (29) exclusively deal with recovery of dues of housing society only.

Levy of monthly maintenance charges of the Housing Society: In case of housing societies the dues by its members are defined under registered Bye-Laws of every housing society for the sake of simplicity as “the Society Charges” or “monthly maintenance charges” but?they have more than one characteristic. A large chunk is the pre-decided contribution to society funds earmarked for meeting various objects of the Society.

Bye laws for monthly maintenance charges-67 to 72

MCS Act, Section 154B, “CHAPTER XIII-B”:

(11) “defaulter” means a Member or flat owner or occupier who fails to pay the dues of the society within three months from the date of service of bill or notice or due date of payment, whichever is later;

(12) “dues” means the amount payable by a Member or flat owner to the society and demanded by the society by issuing bill or notice in writing and such demand is based on the provisions of this Act, rules and bye-laws of the society

Other sub-sections relevant: 9, 15, 16 & 23.

Recovery of certain sums and arrears due to housing societies as arrears of land revenue

Section 154B-29 of the MCS Act

(1) Notwithstanding anything contained in sections 91, 93 and 98, on an application made by a housing society for the recovery of its dues or for the recovery of its repairs and maintenance, construction cost and service charges, and on the housing society concerned furnishing a statement of accounts and any other documents as may be prescribed, in respect of the arrears, the Registrar may, after making such inquiries as he deems fit, grant a certificate for the recovery of the amount stated therein, to be due as arrears.

?“repairs and maintenance and service charges” means such charges as are so specified in the by-laws of the concerned housing society

(2) Where the Registrar is satisfied ----------

(3) A certificate granted by the Registrar under sub-section (1) or (2) shall be final and a conclusive proof of the arrears stated to be due therein, and the same shall be recoverable according to the law for the time being in force, as arrears of land revenue. A revision shall lie against such order or grant of certificate, in the manner laid down under section 154 and such certificate shall not be liable to be questioned in any court.

(4) It shall be lawful for the Collector and the Registrar to take precautionary measures in accordance with the provisions of the Maharashtra Land Revenue Code, 1966 or any law or provisions corresponding thereto for the time being in force, until the arrears due to the concerned society, together with interest and any incidental charges incurred in the recovery of such arrears, are paid, or security for payment of such arrears is furnished to the satisfaction of the Registrar.

Process to be followed to fix Society’s maintenance Charges

a)?????Prepare the Budgeted Expenses (every 3 years, preferably every year) towards various heads with built in Inflation and discuss that in Committee and recommend to members to pass that in AGM

b)?????Include the Agenda item in AGM as only General Body has the authority (Bye law 111) to fix the rate on the basis provided in Bye Law 70

c)??????Quorum for AGM should be followed

d)?????Maintenance Charges decided or increased in Managing Committee (and not approved at AGM) is not valid

e)?????Managing Committee (Secretary or Treasurer) should issue monthly/quarterly bills/demand notice to members as per amount decided in AGM and on basis provided in bye law. If not done correctly, Recovery proceedings under Section 154B-29 becomes difficult

f)??????Disputes in CHS in case of wrong procedures & basis resulting the amount becoming disputable and not as per bye law. Such disputes then have to be resolved u/s 91.

Increase or revision of Society charges in AGM: Take proper steps for adopting revised charges. Follow the procedure of discussion in Committee meetings. Document the reasons for increase with justification, prepare Agenda for AGM and after approval of the same in Committee give 14 clear days’ clear notice, hold AGM, discuss it in AGM and pass resolution for increase. Circulate draft minutes of AGM to all members, obtain acknowledgement of all members and also display on Society’s Notice Board. After receipt of objections, incorporate final draft in minute book with signature of Chairman, Secretary and Treasurer. In next AGM, draft minutes have to be confirmed by members.

Precautions to be taken by Housing Society

??Prepare detailed statement of Account in respect to defaulting member and get that validated by Statutory Auditor

??Ensure that dues have been clearly established, crystalised

??Avoid and solve disputes with regard to dues with defaulting members

??Ensure that defaulting member’s pending points have been addressed and recorded in Committee minutes along with correspondences as most of the time the member is likely to take shelter under “disputes” for not paying the amount

??If a member fails to pay the dues after issue of the notice for a period exceeding 3 months then he is termed as a defaulter as per the MCS and as per Bye-laws of the society. The member should be classified as “Defaulter” in Society’s records and accounts

??The society has to give a notice of 14 days (1 plus 2 Reminders) to the defaulter member, giving him an opportunity to make payment of dues (including up to 21% p.a.interest)

??Pass the resolution to recover the dues in the Managing Committee Meeting u/s 154B-29

??Issue a final notice to the defaulter indicating that failure to make payment would invite recovery actions under Section 154(b)-29 ??

??If member has not settled, with in time period specified, the over dues after issuing the final notice, apply to the Deputy Registrar (of your range) for initiating the recovery of dues.

??The Deputy Registrar would issue a Recovery Certificate for the amount due, after making a hearing and a summary inquiry on the basis of the affidavits filed by both the parties

??On receipt of the Recovery Certificate, the Recovery Officer shall prepare demand notice for being sent to the Sale-Officer for attaching the property of the member concerned

Registrar of Co-operative Societies is a quasi-judicial authority. One does not have to appoint an Advocate to initiate action u/s 154(b)-29 of the MCS Act, 1960 and any member of Managing Committee or any member nominated by them can also sign the petition and represent the Society before Deputy Registrar. Even a practicing Chartered Accountant (authorised by Managing Committee) can also issue notice and represent the Society before the Deputy Registrar and argue Society’s case

For detailed process & Law refer: https://www.dhirubhai.net/pulse/law-process-recovery-maintenance-dues-housing-society-harshad-shah/?published=t

CA Harshad Shah, Mumbai, [email protected]