Very Important Point
In the allotment of flats to its members by the Co-operative Housing Society, principle of seniority alone irrespective of default in the payment of dues cannot be said to be the correct criteria and the criteria resolved by Appellant’s General Body (viz., payment-cum-seniority) being just, proper and fair does not call for any interference by Supreme Court.

Headnote:(i) Delhi Co-operative Societies Act, 1972-Section 28-Vesting of final Authority in the General Body of a Cooperative Society-Delhi Co-operative Societies Rules, 1973-Rule 36-Procedure for expulsion of members in case of persistent defaults in payment-Whether in the allotment of flats to its members by the Co-operative Housing Society the criteria is seniority irrespective of default in the payment of dues or whether it is payment-cum-seniority? Respondent 3 (Member) committing default-Appellant-Society cancelled her I phase allotment and offered II phase-She offered payment and claimed allotment in I phase by seniority-Tribunal held principle of seniority as the only criteria in the matter of allotment upheld by High Court-Whether correct? (No) (Delhi Co-operative Societies Rules, 1973-Rules 39, 59 and 60-Delhi Co-operative Societies Act, 1972-Sections 60, 61 and 76).
       Held : The question is, when a member is in default then is it that power of a Society is concretised within this Rule to expel such defaulting member or can it within its peripheral jurisdiction resolve to take recourse to any other policy decision, to enable such defaulting member to deposit the balance amount either by extending time or giving any such incentive as it deem fit and proper or to take recourse to such consequential measures as it deem fit and proper. The present case is similar to the cases which arose in the Delhi High Court. The question is, in the matter of allotment of flats, can a Society not lay down its own policy as to how instalments are to be paid, within what time and in doing so can it not place certain conditions under it? In other words, can or can it not resolve that members must pay the stipulated amount by fixing any cut off date. If in spite of that if any member defaults can it not cancel the allotment. Similarly, can it not decide instead of cancelling the allotment to give him an offer to get the flat in the next phased construction clearing ways for non-defaulters. The question is, can it be said, Society have no option except to allot strictly by seniority rule in spite of such members defaulting in making the payment. If power could be said to be limited then it means let seniors default, let juniors wait as long as seniors do not pay but in no case cancel or even modify preferences in their allotment. In our considered opinion, such an interpretation would be squeezing the power of the general body of a Society within the limits of Rule 36 belying all the objectives of the cooperative spirits of the Act. Thus by this, if this be so, either bear with the defaults of such members at the cost of non-defaulting members or expel them from membership. Such an interpretation would be too harsh even on senior members if only recourse could be the later. Even a senior member may have financial stresses resulting into default of not able to pay for a flat even the minimum fixed amount within the stipulated time, then will it be fair to expel him? The option has to left with the society to deal with different situations as may arise from time to time. Taking away this discretion and binding it to exercise powers under Rule 36 would be interpreting against the very objective of the Act, leaving no option with the Cooperative Society. The Cooperative Society is formed, with laudable objective to inculcate spirit to work in a group freely for rendering benefit to its members through the cooperative contributions. This is only possible by confering wide range of discretion to a society, not restricting its discretions by interpreting a law otherwise. This has to be for furthering the cause of cooperative movement. That is why various rigours of laws including taxes and fees are diluted for enhancing the spirit of the cooperative movement. We have no hesitation to hold, the power of Society cannot be circumvented within Rule 36 in a case of default by its member of any of his dues. Such an interpretation would be contradictory to the very cooperative spirit or objectives of the creation of Cooperative Societies. (Para 9)
       The principle referred earlier that if a thing is required to be done in a manner as provided under the law has to be done in that manner alone and no other manner will apply with equal force under Rule 36, when a Society decides to expel its member. In case of expulsion the procedure provided under it and the expulsion has to be only under the mode provided therein and no other which is mandatory in nature. But this is only after decision is made to expel its member. This rule does not take away discretion of the Society to expel a member or not which is preceding the exercise of power under Rule 36. For this there is nothing under this Rule which either circumscribes or webs this discretion. Since this Rule is for the expulsion of its members, it is stringent in its application. Even after giving opportunity and even after general body passes such a resolution, it requires approval of the Registrar. Outside this, there is nothing which restricts a Society at act freely and to lay down its own policies. Thus it is not possible to uphold that Society has no option but to proceed under Rule 36 to expel its member. Hence once a society has a discretion, it cannot be said its power is restricted to allot only under strict rule of seniority. (Para 10)
       We find Section 28 of the Act vests final authority in the general body of a Cooperative Society. It has wide powers including residuary power except those not delegated to any other authority under the Act, the Rules and its bye-laws. In other words, its power, if any, is only restricted by the Act, the Rules, the bye-laws and any order having force of law. This exercise of power by the general body which is in issue cannot be said to be excluded by Rule 36. (Para 11)
       Rule 36 does not deal with every default for one to come under it. In fact, mere default itself is not covered under this Rule. Default has to be persistent. Even in a case of persistent, a society may or may not take recourse under it. Apart from this Rule there are other rules dealing with default. So there are rules laying down how to deal with defaulting member. One of them is, if society desires to expel one then it has to bring him under Rule 36. This itself shows defaulters can be dealt with in various ways and what is not provided, not covered by these rules, the field is open for the general body to exercise its discretion. (Para 12)
       Held on facts : Reverting back to the facts of the present case, it cannot be said when respondent No. 3 or such other member, who defaulted by not even paying the minimum as resolved could claim as a right for allotment on the principle of seniority alone or that the resolution of the general body dated 6.1.190 could in anyway be said to be unfair, unjust, arbitrary, mala fide or irrational liable to be struck down. It may be where a very senior defaulting member paid the balance amount only one week after very junior member paid the full amount, it is open for a Society to resolve as it deem fit and proper by giving weightage to the seniority. It is within the permissible discretionary field of such Society. (Para 13)
       (ii) Delhi Co-operative Societies Act, 1972 - Section 60 - Claim petition by member under-Appellant Housing Society alleged to have served notice of demand and default-No payment-Allotment modified - Denial of receipt of notice by member-Not considered by Tribunal or Court-Case remanded on this limited point of notice to respondent 3 before Tribunal.
       Held : We find this question of notice to Respondent No. 3 has not been adverted to by any of the said authority or Court which requires consideration. For this we send back this case to the Tribunal for deciding this sole question whether there was notice to the respondent No. 3 or not as aforesaid. In case the Tribunal find she had notice she would not be entitled for any relief but in case she had no notice her claim for phase I flats cannot be defeated. (Para 15)

Judgment

Misra, J.-The short question raised in this appeal is, “whether in the allotment of flats to its members by the Cooperative Housing Society (hereinafter referred to as `the Society’) the criteria is seniority irrespective of default in the payment of dues or whether it is payment-cum-seniority?” The appellant is a registered Housing Cooperative Society, registered in the Office of Registrar, Cooperative Societies, Delhi, under the Delhi Cooperative Societies Act, 1972 (hereinafter referred to as “the Act”) and the Delhi Cooperative Societies Rules 1973 (hereinafter referred to as “the Rules”). It was constituted for the purpose of allotment of flats to its members. At the relevant time 460 members were in roll. This Society applied for allotment of land to the Delhi Development Authority (hereinafter referred to as “DDA”) for the purpose of construction of flats for its members. This Society was alloted only 5 acres of land in Patparganj which was not sufficient for the construction of flats for the aforesaid members. However, later on, in view of relaxation to the ceiling limit DDA decided to make additional allotment as per actual requirement, that is to say, to the extent of 7.666 acres of land instead of 5 acres. The society was also directed to deposit a sum of Rs. 11,87,190.80p. towards the cost of additional land. In 1988, the Society raised demand for the construction of first phase of flats on the said 5 acres and also sent reminder notice to all its members through registered post including the main contesting Respondent No. 3 Mrs. Veena Kumar vide notice dated 26th April 1989 (the receipt of the notice was denied by Respondent No. 3). As per the said notice the cost of construction of flat of each of its member was said to be Rs. 2,75,213/- approximately. The mode of payment as per the first notice was, to pay initially Rs. 2,21,705/- by each of such allottee but since only Rs. 85,100/- was paid hence through the aforesaid notice it was directed to pay the balance amount of Rs. 1,36,705/- within thirty days. Further it resolved those defaulting shall be expelled from the Society. A general body meeting was convened by the Society on 6th January, 1990. In this meeting the general body took a softer view inspite of the said notice dated 6th (? 26th) April, 1989. It resolved, all its members who were allotted HIG(L) and HIG(S) category and had paid Rs. Two lakhs and Rs. 1,75,000/- respectively, their allotments have been provisionally confirmed and all those members who have paid the minimum credit balance of Rs. 1,32,221.50p. were accommodated at Plot No. 60, Patparganj, Delhi subject to their qualifying requirement for being a member in the Society and subject to their making payment of the balance amount, but those who failed to pay even Rs. 1,32,221.50p. would only be accommodated on the flats to be constructed on the additional land which were to come in phase II construction. Phase I construction is on the said 5 acres of land.

2. Respondent No. 3 filed a claim petition under Section 60 of the Act on the ground that the decision taken by the General Body on the 6th January, 1990 was illegal, malafide, discriminatory and without jurisdiction. The matter was referred to the Arbitrator under Section 61 of the Act. The Arbitrator gave the award in favour of the appellant-Society on the basis of a decision in Civil titled A.V. Ashokan & Ors. v. Registrar Cooperative Societies & Ors.1. On appeal filled by Respondent No. 3 under Section 76 of the Act the Appellate Authority (Respondent No. 1) set aside the said award by its order dated 29.9.92. It held that in a matter of allotment of flats in a Cooperative Society, seniority has to be the prime criteria notwithstanding the default made by a particular member. It also recorded so far as lapse of payment, it could be dealt with under separate provisions by charging interest including penal interest or by taking steps for expulsion of concerned mem

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1998 Supreme(SC) 648

Cases Referred (2)