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IN THE HIGH COURT OF BOMBAY
G.H.Guttal, J.
Atomica Co-operative Housing Society Ltd..... Petitioner.
Versus
B.R. Ballal others .... Respondents.
Writ Petition No. 5270 of 1985, with Writ Petition Nos. 5271 5272 of 1985, decided on 9-2-1988.
Advocate appeared :
M.L. Dudhat with P.N. Joshi, for petitioner/appellant in W.P. 5270, 5271, 5272/85 and for respondent in W.P. 5399 5400/85.
Madhukar Soochak, N.D. Shetty, for respondent in W.P. 5270, 5271, 5272 of 1985 and for petitioners-appellants in W.P. 5339 5400/85.
Section 25 of the Act lays down the manner in which a person may cease to be a member of the Society. In the present case, the Society has chosen none of these modes, but it has, by its resolution "cancelled" the shares. The cancellation means going away with, destroying, deleting or removing. It has, thus, by cancellation of the shares removed the disputants as members. This is well within the authority of the Society and it can be done any time when the Society finds that certain members are not fit to continue as members. But the procedure prescribed by Law has to be followed. The procedure has been laid down by the Rules which require a notice of one month to the member concerned requiring him to show cause against the proposed expulsion and consideration of his representation. Then, it requires the approval of the Registrar. This procedure has not been followed. The Society has, thus, by indirect method without using the word "expulsion" actually expelled the disputants in violation of the Act and the Rules. The cancellation of the share certificates is, thus illegal.
Section 72 - Allotment of flats to members - Cancellation of - Within the authority of society - But this Is subject to provisions of Act and Rules.
The principal question, is whether the cancellation of shares and the allotment of flats to the disputants is valid. The General Body of the members of the Society, as indeed of any corporation, is the repository of the final authority. On the basis of this principle, the cancellation of the allotment of the flats to member who commit default was within the authority of the Society. But this authority is "subject to the provisions in this Act and the rules". Therefore, the exercise of the authority by the General Body of member is subject to the restraints imposed by the Act and the Rules. The General Body has done two acts apparently distinct, yet connected with each other, the cancellation of shares and the cancellation of allotment of flats. The nexus between these two needs to be understood.
Section 72 - Nexus between allotment of flat and membership - Share of member - Cancellation of - Is member ceases to be a member his comes to hold flat.
Upon forfeiture or cancellation of shares, a member ceases to be a member. Thus, if the disputants are deprived of their shares, either by transfer, forfeiture or cancellation, their membership comes to an end and with it ends their right to participate in the affairs of the Society. The nexus between the membership and the allotment of flats is clearly established in the bye - laws 6 (2) which enjoins the General Body not to admit members exceeding the number of tenements or flats. In other words if there are 51 flats in the Building, there shall only be 51 members. Thus, there is clear nexus between membership and the flat allotted to a member. If follows, therefore that a member shall hold one flat and if he ceases to be a member, he shall cease to hold that flat. This is a Housing Society whose object is to provide houses to its members. Every member has only one connection, with the Society, viz. the house or the flat. For the purpose of fulfilling this objective, the members enter into an association of corporate life which goes by the name Co - operative Society. Therefore, membership and the right to seek a house as a member are inseparable incidents of a Co - operative Housing Society. One does not become a member without the intention to acquire a house. Therefore, when a person ceases to be a member, his right to live in the house comes to an end. Similarly, when the house allotted to a member is taken away by the Society, what remains is the empty shall of membership stripped of the very reason for the membership.
An incidental question is, whether even after taking away the right to occupy the flat on account of default in payment of the call money, the rights as a member survive. The rights which a member exercises, such as the right to vote at a meeting, right to frame policy, right to contest election, and generally govern the affairs of the society are intended to subserve the primary object which, in the context of this case is providing and securing houses through membership. To suggest that a member whose flat has been taken away may still function as a member by participating in the meeting and managing the affairs of the society is to ignore the realities of life. Membership of a Co - operative Society is not acquire for the purpose of exercising the empty right to vote at meetings but for the purpose of acquiring and living in a house. A situation in which a member deprived of his house continues to be a member of a Housing Society is inconceivable. It is opposed to the very object, purpose and reason which lead to the formation of a Co - operative Housing Society. The nexus between the allotment of the flats, the right to occupy the flats and the membership is so close and in separable that one cannot exist without the other.
Sections 91, 72, 2 (19) (a), 12 (1) and Section 25 - Maharashtra Cooperative Societies Rules - Rules 10 and 19 - Co - operative Housing Society Object to provide house to its members - Loans to members - Resolution by the General Meeting of the Society that the members to charged for cost of construction on the basis of carpet area with the flat as a unit - Failure of disputant to pay the said charges - Cancellation of share and allotment of flats to the disputant by the Society - Whether such cancellation of share and allotment of flats was valid - Held (i) the order of the Co - operative Appellate Court confirming the decision of the Co - operative Court that the cancellation of the shares and the allotment of flats to Ballal and the other disputants was invalid and illegal; (ii) Petition against the decision of Co - operative Appellate Court confirming the decision of Co - operative Court setting aside the cancellation of shares and allotment of flat to S. N. Misra was dismissed; (iii) petition by Society against the order of Appellate Court whereby the latter had held that the Resolution canceling the allotment and shares of M. S. Bhatia was illegal was dismissed.
The General Body of the members of the Society, as indeed of any corporation, is the repository of the final authority. On the basis of this principle, the cancellation of the allotment of the flats to members who commit default was within the "authority" of the Society. But this authority is "subject to the provisions in this Act and the rules". Therefore, the exercise of the authority by the General Body of members is subject to the restraints imposed by the Act and the Rules. The General Body has done two acts apparently distinct, yet connected with each other; the cancellation of shares and the cancellation of allotment of fiats. The nexus between these two needs to be understood.
It is, thus, clear that upon forfeiture or cancellation of shares, a member ceases to be a member. Thus, if the disputants are deprived of their shares, either by transfer, forfeiture or cancellation, their membership comes to an end and with it ends their right to participate in the affairs of the Society. The nexus between the membership and the allotment of fiats is clearly established in the bye - laws 6 (2) which enjoins the General Body not to admit members exceeding the number of tenements or fiats. In other words, if there are 51 fiats in the Building, there shall only be 51 members. Thus, there is clear nexus between membership and the fiat allotted to a member. It follows, therefore, that a member shall hold one fiat and if he ceases so be a member, he shall cease to hold that fiat. This is a Housing Society whose object is to provide houses to its members. Every member has only one connection with the Society, viz. the house or the flat.
Membership of a Co - operative Society is not acquired for the purpose of exercising the empty right to vote at meetings but for the purpose of acquiring and living in a house. A situation in which a member deprived of his house continues to be a member of a Housing Society is inconceivable. It is opposed to the very object, purpose and reason which lead to the formation of a Co - operative Housing Society. The nexus between the allotment of the flats, the right to occupy the flats and the membership is so close and inseparable that one cannot exist without the other.
It follows that upon the cancellation of the shares the member ceases to be the owner of the shares resulting in the cessation of his membership. In other words, what the Society did by cancellation of the shares was to take away the membership of the disputants. The result is removal or expulsion of the members. A person may be deprived of his membership by an act of the Society, but the law lays down a procedure for doing so.
The Society has, thus, by indirect method without using the word "expulsion" actually expelled the disputants in violation of the Act and the Rules. The cancellation of the share certificates is, thus illegal.
The nexus between the membership and the cancellation of the flats is so close and inseparable that one cannot exist without the other in a Housing Society. The cancellation of the allotment of the flats is the negation of the right to the fruits of membership.
Securing of a flat in a Housing Society is the most immediate and necessary incident inseparable from membership. It is futile to attempt any severance between them. The acquisition of the shares is the vehicle leading to the status of membership. The status of membership provides the requisite legal capacity to acquire and hold a flat in the building of the Society. The acquisition of a house in a Housing Society in the very substance of Cooperative Housing without which the shares and membership loose their meaning and purpose. When the housing part is separated what remains is the Co - operative Society without "Housing". The membership is the medium through which the main purpose of securing a house and continue to live in it, is realised. The two cannot be separated.
Writ Petition No. 5270 of 1985 by the Atomica Co - operative Housin. Society Ltd., Chembur, Bombay - 71 is dismissed. The order of the Maharashtra State Co - operative Appellate Court, Bombay, in Appeal No. 390/1985 whereby it confirmed the decision of the Co - operative Court No. 1 that the cancellation of the shares and the allotment of flats to Ballal and the other disputants is invalid and illegal.
Writ Petition No. 5271/1985 by the Atomica Co - operative Housing Society Ltd., against the decision of the Maharashtra State Co - operative Appellate Court in Appeal No. 391/1985 whereby it confirmed the decision of the Co - operative Court setting aside the cancellation of shares and the allotment of flat to S. N. Misra, is dismissed.
Writ Petition No. 5272/1985 by the Atomica Co-operative Housing Society Ltd., against the order of the Maharashtra State Co - operative Appellate Court in Appeal No. 392/1985 whereby the latter had held that the Resolution canceling the allotment and shares of M. S. Bhatia was illegal is dismissed.
Writ Petition No. 5399/1985 by B. R. Ballal against the decision of the Maharashtra State Co - operative Appellate Court upholding the validity of the Resolution dated 20 - 4 - 1980 is also dismissed.
Writ Petition No. 5400 of 1985 by Ballal, Misra and Bhatia, whereby they challenge the validity of the order of the Maharashtra State Co - operative Appellate Court in Appeal No. 390, 391 and 392 by which the Appellate Court set aside the order of the Co - operative Court No. 1 in so far as the grant of penalty, manse profits and refund of money are concerned is also dismissed, subject however to the order at (vi) below which shall be a common order in all these petitions.
MAHARASHTRA CO-OPERATIVE SOCIETIES RULES, 1961
Rule 10 and 19.
See Maharashtra Co-operative Societies Act, 1960, Section 91 72, 2 (19) (a), 12 (1) and Section 25.
(i) Writ Petition No. 5270 of 1985 is by the Atomica Co-operative Housing Society Ltd., Chembur, Bombay---71, hereinafter referred to as "the Society". It is against B. R. Ballal, a member of the Society. In this petition, the validity of the order dated October 14, 1985 made by the Maharashtra State Co-operative Appellate Court, Bombay in Appeal No. 390 of 1985 confirming the decision of the Co-operative Court No. 1 in Case No. ABN/632/1922 of 1980 dated 10th June, 1985 is challenged. By this order the Appellate Court confirmed the finding of the Co-operative Court in Case No. ABN/632/1922 of 1980 that the cancellation of the shares and allotment of the flat to Ballal, a member of the said society was illegal.
(ii) Writ Petition No. 5271/1985 is also by the Society. In this petition, the Society challenges the validity of the order dated October 14, 1985 made by the Maharashtra State Co-operative Appellate Court in Appeal No. 391/1985 confirming the decision of the Co-operative Court, whereby the latter held that the cancellation of the shares and the allotment of the flat to S.N. Misra, a member of the society was illegal. That was in dispute No. ABN/635/1925 of 1980 decided on 10/6/1985.
(ii) Writ Petition No. 5272 of 1985 by the Society is against the order of the Maharashtra State Co-operative Appellate Court dated October 14th, 1985 in Appeal No. 392/1985 whereby it confirmed the decision of the Co-operative Court No. I in Case No. ABN/636/1926 of 1930, whereby Co-operative Court No. I had held that the Resolution cancelling shares of M.S. Bhatia and the allotment of flat was illegal.
The Judgment in Appeal Nos. 390, 391 and 392 was common
(iv) Write Petition No. 5399/1985 is by B.R. Ballal, Mishra and Bhatia in which they challenge the legality of the order of the Maharashtra State Co-operative Appellate Court dated September 16, 1985, in Appeal No. 393/1985 reversing the order of the Co-operative Court No. I in Case No. ABN/320/630 of 1980 dated 10/6/85 whereby the latter had set aside the Resolution dated 20/4/1980 revoking the earlier Resolution dated 25/1/1976. The Appellate Court confirmed the order of delivery of possession of flats to Ballal, Bhatia and Misra. While dismissing the appeal by the Society, the Appellate Court also set aside that part of the order by which the Co-operative Court had awarded compensation, mesne profits and refund of certain money to Ballal, Misra and Bhatia.
(v) Writ Petition No. 5400 of 1985 by B. R. Ballal, Mishra challenges the validity of the order of the Maharashtra State Co-operative Appellate Court, dated October 14, 1985 in Appeal Nos. 390, 391 and 392 of 1985 by which it set aside the order of the Co-operative Court No. I in so far as the grant of penalty, mesne profits and refund of money are concerned.
2. The facts out of which these petitions arise are few and mostly undisputed.
The Society was created by the employees of B.A.R.C. for housing themselves in the buildings proposed to be built by the Society. The project comprises of 51 flats in 7 buildings on a land admeasuring 6748.48 sq. metres at Chembur. There are three types of flats. Type A consists of 23 flats in three building each admeasuring 810 sq. ft. Type B flats are 8 in numbers, all in one building each flat admeasuring 610 sq. ft. Type C flats are 20 in numbers spread over in three buildings each flat admeasuring 510 sq. ft. The society was registered sometime in 1974. Ballal, Mishra and Bhatia are the three members of the Society whose names will appear in this judgement as the disputants. These disputants are the holders of "A" category of the flats.
3. The Society has been classified as a Housing Society. Its object is to provide houses to its members. The members needed loans for the purpose of commencing the work of construction.
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