Real Estate Newsletter – Understanding Key Provisions of the Maharashtra Cooperative Societies Act, 1960
A. Introduction
The Maharashtra Cooperative Societies Act, 1960 (“MCS Act”) is the foundational legislation governing cooperative societies in Maharashtra. From housing societies to federal and credit societies, the MCS Act comprehensively regulates formation, registration, management, membership rights, transfer of shares, dispute resolution, and governance of cooperative societies.
Given the rising number of transactions involving cooperative housing societies—particularly purchase, sale, and transfer of flats—understanding key concepts such as society registration, membership, share certificates, and the rights and liabilities of buyers and sellers has become essential for residents, legal advisors, and developers.
B. What Is a Cooperative Society?
Under the Cooperative Societies Act, a “society” refers to a cooperative society that is registered (or deemed to be registered) under the MCS Act. Such a society is not a private company or a government body—it is an autonomous, member-driven organisation.
A cooperative society is formed when individuals voluntarily come together to meet their shared economic, social, or housing needs. The society is jointly owned by its members, and decisions are taken through a democratic process, where members collectively control and manage its affairs.
Most importantly, a society operates on cooperative principles and values, such as mutual help, equality, transparency, and shared responsibility, ensuring that the interests of the members remain central to its functioning.
C. What is a “Housing Society” under Maharashtra Cooperative Law?
Under the MCS Act, a housing society is a cooperative society formed specifically to meet the housing needs of its members.
Its primary purpose may be:
a) To provide members with open plots for constructing their homes, or
b) To provide ready dwelling houses or flats to its members.
c) To provide a comprehensive legal frame work for registration, organization and democratic management of cooperative societies within the state of Maharashtra.
d) Where the plots, houses, or flats are already acquired, the role of the housing society extends further-to manage and provide common amenities and services, such as maintenance of common areas, water supply, security, lifts, parking, and other shared facilities.
Key Features of Housing Society Includes:
a) Voluntary Association – Membership is voluntary and open.
b) Common Economic/Social Objective – Members unite for mutual benefit and common economic or social purposes.
c) Democratic Control – Governed on the principle of “one member, one vote.”
d) Registration Requirement – Societies must be registered under the provisions of the MCS Act.
e) Governed by Bye-Laws – Each society operates according to its registered byelaws.
D. Who is a “Member” in a Cooperative Society?
A member is a person who either participates in forming a cooperative society by joining the application for its registration or is admitted as a member after the society has been registered, in accordance with the society’s bye laws.
The definition also includes:
a) Nominal members (with limited rights),
b) Associate members, and
c) In the case of a Primary Agricultural Cooperative Credit Society, depositors or users of its financial services.
In simple terms, anyone who is officially recognised by the society under the MCS Act is considered a member, even if their rights or role may differ depending on their category.
E. Share Certificate:
A society share certificate is a crucial document for members of a housing society in India. It serves as legal proof of both ownership and membership in the society. The share certificate plays an important role in ensuring the legal and financial stability of housing cooperatives and helps in the smooth and orderly functioning of the community.
Restriction on Transfer of Share or Interest of a Member i.e. Section 154B-7 of the Maharashtra Cooperative Societies Act.
Section 154B-7 of the MCS Act provides that, in the case of a housing society, no transfer of a member’s share, interest, or occupancy rights except a transfer in favour of the member’s legal heir or nominee shall be valid unless the following conditions are fulfilled:
(a) All dues payable to the housing society are paid in full; and
(b) The transferee applies for and is duly admitted as a member of the cooperative housing society within the prescribed time.
Provided that, where the transfer relates to leasehold property, such transfer shall be governed by the terms of the lease, so long as those terms are not inconsistent with the lease of the land granted to the housing society or the lease executed by the society in favour of its members.
Importantly, the term “occupancy right” does not include the rights of tenants or licensees who occupy the premises on a leave and license basis.
Meaning of “Dues”
The term “dues” includes all amounts payable to the society, such as:
Maintenance charges, Sinking fund contributions, Repair fund amounts, Transfer fees and other applicable charges, any other outstanding liabilities owed to the society.
Payment of all dues is a mandatory precondition for recognising the transfer as effective, thereby ensuring protection of the society’s financial interests.
F. Registration:
To register a housing society, an application must be submitted to the Registrar in the prescribed format, along with the required documents and the prescribed registration fees.
The MCS Act also specifies who must sign the application:
For a housing society, the application must be signed by the minimum required number of flat or plot purchasers, owners, or intending members, as specified under the MCS Act.
For an association of societies or a co-operative housing association, the application must be signed by the minimum number of authorised office bearers of the member societies or legal entities, as prescribed.
In simple terms, a housing society can be registered only when a sufficient number of eligible members formally apply together, ensuring that the society represents a genuine collective of owners or members and not just a few individuals.
Registration is barred if the society is financially unsound, harmful to the cooperative movement, or against State policy.
G. Transfer on Death:
The MCS Act allows transfer of shares and interest to nominee or heirs subject to admission requirements, including minors or persons of unsound mind.
H. Open Membership
The MCS Act prohibits arbitrary refusal of membership. No society shall, without sufficient cause, refuse admission to membership to any person duly qualified therefore. The provision provides an appeal mechanism and deemed admission procedure through the Registrar.
I. Liability of Past and Deceased Members
Past members or their estates remain liable for existing society debts for two years from the date of cessation of membership. This liability extends until liquidation if winding up occurs within that period.
J. Rights, Liabilities, and Role in Housing Society Transactions
(a) Rights of the Buyer
· Entitlement to Membership: The buyer is entitled to be admitted as a member of the society, subject to eligibility and compliance with the statutory conditions prescribed under the MCS Act.
· Voting Rights: The buyer has voting rights in the society in accordance with the one member–one vote principle and applicable statutory restrictions along with the right to Participate in Society Affairs.
· Share Certificate: The buyer is entitled to the issuance of a share certificate as evidence of membership in society.
· Nomination Rights: The buyer has the right to nominate a person in whose favour the shares and interest shall devolve upon the buyer’s death.
· Legal Ownership : Once registered, a society becomes a legal body that can own and manage property independently. Members hold legal rights to their specific units through a formal certificate of allotment issued by the society.
· Conveyance: Land and building ownership is legally moved from the developer to the society through a registered deed. Reorganization orders from the Registrar also serve as legal documents to transfer these assets officially.
· Occupy and Use the Flat and Use of Common Areas: the buyer has the right to occupy, use, and enjoy the flat and Common Areas and amenities in compliance with Bye Laws and Restrictions relating to use (residential / commercial, as applicable).
· Right to access society records and information: Every member has a legal right to view society books and meeting minutes at the office for free during business hours. Upon paying a fee, the society must provide copies of these documents within 30 to 45 days.
(b) Liabilities of the Buyer
· Payment of Dues: The buyer is required to pay all applicable fees, dues, contributions, and charges payable to the society.
· Compliance with Bye-laws: The buyer must comply with the society’s bye-laws, rules, and valid resolutions.
· Share Capital and Entrance Fees: Members must pay their required share capital and entrance fees before they can exercise any membership rights.
· Transfer Premium: Societies are legally allowed to collect transfer premiums and other service charges as set by the Act and their specific bye-laws. These fees are used to support the society’s general maintenance and reserve funds.
(c) Rights of the Seller
· Right to Transfer: The seller has the right to transfer shares and interest in the society, subject to statutory conditions and requisite approvals.
· Right to Consideration: The seller is entitled to receive consideration for the transfer of shares and interest.
· Right to Resign: The seller has the right to resign from membership upon completion of the transfer and compliance with statutory requirements.
· Right to Seek a No Dues Certificate / Clearance: A society must respond to a member’s request for a sale or mortgage clearance certificate within 30 days. If the request is ignored or unfairly rejected, the member can appeal to the Registrar for help.
(d) Liabilities of the Seller
· Clearance of Dues: The seller must clear all outstanding dues payable to society up to the date of completion of the transfer.
· Transfer of Share Certificate: The seller must submit the original share certificate to the society for endorsement and transfer.
· Pay Transfer Premium: Societies are legally authorized to levy and collect transfer premiums and other service charges as prescribed by the Act and their specific bye-laws. These funds are utilized for the society’s general maintenance and to strengthen its long-term reserve funds.
· Comply with Transfer Procedure: To legally transfer property interest, members must execute registered documents and strictly follow all society-prescribed forms and procedures. The transfer is only finalized once all outstanding dues are cleared and the new owner is officially admitted as a member.
· Liability in Case of Misrepresentation or Suppression: Providing false information during registration or suppressing official records is a serious offence punishable by fines or legal penalties . Additionally, a society’s registration may be cancelled if it was found to be obtained through dishonest claims or misrepresentation.
· Continuing Liability Until Transfer Is Recorded: A person who leaves a society remains legally responsible for its debts as they existed on the date of their exit for a period of two years. This liability continues until the transfer is officially recorded and extends until the end of liquidation if that process begins within those two years.
(e) Society’s Role and Obligations
· Processing Share Transfer: Society is required to process share transfers strictly in accordance with the applicable statutory provisions.
· Maintenance of Membership Records: The society must update and maintain its membership register to reflect the transfer.
· Issuance and Endorsement of Share Certificates: The society must issue and/or endorse share certificates evidencing valid transfers.
· Management of Property and Common Areas: The society’s committee is tasked with the overall management and upkeep of the buildings and shared amenities. They must also ensure that any allotment of units is handled fairly, usually through a draw of lots.
Financial Management and Compliance: Societies must conduct regular audits, maintain a reserve fund, and follow strict rules on how they spend money. Society funds cannot be used to cover the personal legal costs of its officers or committee members.
· Statutory Governance and Administration: The society must be run by an elected committee that operates strictly within the MCS Act and its own registered bye-laws. Committee members are jointly responsible for their decisions and must act in the society’s best interest.
· Society Services and Amenities: The society is responsible for providing essential services like water, security, and general upkeep to its members. It has the legal power to collect charges to ensure these facilities are well-funded and continuous.
K. Disputes and Jurisdiction
The MCS Act confers exclusive jurisdiction on the Co-operative Court for internal society disputes, with specific statutory exclusions.
Understanding Disputes and Jurisdiction: The Role of Section 91
In the realm of co-operative law, the Maharashtra Co-operative Societies (MCS) Act serves as the primary authority. To ensure that the unique needs of these societies are met without the delays often found in traditional litigation, Section 91 of the Act establishes a specialized legal pathway.
1. The Exclusive Authority of Co-operative Courts
The law centralizes all internal disputes under the exclusive jurisdiction of the Co-operative Court. By design, this framework bypasses ordinary civil courts for matters concerning the society’s internal life. This “specialized forum” approach ensures that the people deciding these cases have deep domain expertise in co-operative structures, leading to more informed and relevant judgments.
2. What Qualifies as a “Dispute”?
Not every disagreement reaches the level of a formal legal dispute, but Section 91 covers a wide range of operational and administrative issues, including:
· Constitutional Matters: Issues regarding the society’s by-laws or foundational rules.
· Leadership and Governance: Disputes regarding the election of the Managing Committee or the conduct of General Meetings.
· Operational Management: Disagreements concerning the day-to-day business and management decisions of the society.
3. Who Can Be a Party to the Dispute?
The law is intentionally broad regarding who can seek redress or be held accountable within this system. It encompasses almost every stakeholder involved in the co-operative ecosystem:
· The Society itself and its past or present officers/employees.
· Members, including past members and the legal heirs of deceased members.
· Guarantors and individuals engaging in regulated transactions with the society.
· Other Co-operative Societies involved in mutual dealings.
4. The Strategic Objective: Speed and Consistency
The primary goal of channeling these matters to a dedicated Co-operative Court is to prevent parallel litigation. By keeping these cases out of the overburdened civil court system, the framework achieves three key benefits:
1. Efficiency: Faster resolution of internal conflicts to prevent operational paralysis.
2. Consistency: Uniform application of co-operative legal principles.
3. Specialization: Decisions made by authorities who understand the nuances of the sector.
L. Audit Requirements
The MCS Act mandates regular audit of societies defines audit scope, special audits, auditor powers, and the Registrar’s re-audit authority.
M. Conclusion
The Maharashtra Cooperative Societies Act, 1960 ensures transparent and accountable housing society governance, protecting member rights and enabling smooth buyer-seller transactions. Understanding these statutory provisions and compliance requirements strengthens adherence to the law and promotes better governance within cooperative communities.
As cooperative housing societies continue to play a vital role in Maharashtra’s housing sector, stakeholders—including buyers, sellers, managing committees, and legal advisors must remain informed of their rights, obligations, and the statutory framework governing these transactions.
