INTRODUCTION

Co-operative Societies is the association of individuals who in pursuit of mutual interest and common objectives, work together and provide support to their members to promote economic interest. The Maharashtra Co-operative Societies Act, 1960 (hereinafter referred to as ‘MCS Act, 1960’), enacted in accordance with the Article 43B, Directive Principles of State Policy of the Constitution of India is a state legislation to amalgamate and affiliate the laws concerning the Co-operative Societies in the State of Maharashtra. The MCS Act, 1960 meticulously acts as a self-contained Code to provide provisions relating to subjects such as registration, rights and duties of the co-operative society, membership and expulsion from membership of the co-operative society. The Government of Maharashtra has enacted Maharashtra Co-operative Societies Rules, 1961 (hereinafter referred to as ‘MCS Rules, 1960’) in accordance with the powers conferred by Section 165(1)[1] and Section 165(2)[2] of the MCS Act, 1960.

EXPULSION OF MEMBERSHIP 

According to Section 22(1)[3] of the MCS Act, 1960, the member of a society can be – an individual competent under the Indian Contract Act, 1872, a firm or body corporate or a society under the Societies Registration Act, 1860, State or Central Government, a local authority, a public trust, depositor of financial service user and society under MCS Act, 1960. For this purpose, the term ‘member’ under Section 2(19)(a)[4] of the MCS Act, 1960 means a person joining in an application at the time of registration of the co-operative society or admitted after the registration including the nominal or associate member. Expulsion of membership means the act of dismissal of a person who is a member of a co-operative society registered under the MCS Act, 1960 in accordance with the provisions and manner provided therein.

A member of a Co-operative Society can be expelled by such society in accordance with Section 35 of the MCS Act, 1960 which confers a statutory Right on the society. According to Section 35(1)[5], a member shall be expelled by the society by the way of a resolution passed by a majority of not less than three-fourths votes of the members eligible to vote and present at the General Meeting being held for the expulsion of such member. A member may be expelled from the society for any act committed by him/her of such nature that is ‘detrimental to the interest of proper working of the society’.

The proviso under Section 35(1) clarifies that any resolution passed without giving an opportunity for representation to the such member concerned before the General Body shall be invalid and the resolution shall not be effective without the approval of the Registrar. The Co-operative Society does not have the exclusive right to determine whether a member shall be expelled from the society as the decision of the society is subject to the approval of the Registrar. However, apart from the Co-operative Society of which such a person is a member, no other authority including the State government is conferred such statutory right under Section 35.

The Bombay High Court in regard to approval of collector for expulsion under Section 35 of MCS Act, 1960 in Prof. (Dr.) D.R. Bharadwaj v. State of Maharashtra and Others[6], wherein the learned counsel for the Co-operative society argued that expulsion can be challenged on grounds of the requirement of prior approval of the Collector, held that the power of expulsion under Section 35 is not upon the collector and no such approval is necessary as the provisions do not provide for any such requirement.

According to Rule 28[7] of the MCS Rules, 1960 a member of a co-operative society may be expelled for persistent default in payment of dues, on failure to comply with provisions under the bye-laws concerning the sales of produce through the society or any other such matter of his dealings connected with the society and which in committee’s perspective has brought ill repute to the society and is of nature detrimental to the interest and proper working of the society. Under MCS Act, 1960 there are no provisions nor there are any rules that provide that a co-operative society can expel any of its members by the reason of bona fide need of the land. The language of the Rule 28 mandates that the expulsion must be for reasons as provided under Section 26 and in the manner under Section 35(1) and failure to do so shall render the resolution invalid.

The grounds for expulsion from membership can be as follows –

1. i) persistent failure to pay charges due on the member to the society
2. ii) willfully deceiving by furnishing false information to the society

iii) use of flat for illegal purpose or misuse for illegal purpose

1. iv) act of breach of bye-laws which are of serious nature
2. v) furnishing of false information or omitting the necessary information at the time of society registration to the registering body

PROCEDURE FOR EXPULSION OF MEMBERSHIP

Rule 29[8] of MCS Rules, 1961 prescribes the procedure to be followed for the expulsion of a member. When it is proposed to expel a member from the society, a notice under sub-clause (1) in writing shall be sent to the Chairman of the co-operative society for such purpose. Such resolution shall be included in the agenda of the succeeding General Body Meeting either upon receipt of notice or when the committee decides to take up the such resolution. Subsequently, a notice shall be sent to such member to be expelled to be at the General Meeting and show cause against the expulsion resolution. The General Body shall not proceed with the resolution until the member is provided with an opportunity to be heard and an inquiry is done. Unfortunately, Section 35 of the MCS Act, 1960 as well as Rule 29 of the MCS Rules, 1961 fails to clear the particular date to be considered for the presumption of one month’s show cause notice and the same has been interpreted by the Courts in different cases. The meeting shall not be held earlier than a period of thirty days from the date of show cause notice is served on the member.

In the case of Bhaskar Laxman Rane v. Shri Gurudev Nityanand[9], a notice was issued to the petitioner on 15^th March 1985, of the alleged acts of breaches committed by him and which were continuously informed, orally along in writing to him. However, the notice failed to disclose the details of such communications as claimed to have been made to him in relation to the amount defaulted by him. The petitioner contended the expulsion to be illegal and void as the meeting was held on 19th October 1986 and the notice was served to him on 23^rd September 1986 and he has not been granted 30 days period under the provision of Section 35 of the MCS Act, 1960 read with Rule 29 of the MCS Rules, 1961. The Bombay High Court observed that the phrase ‘General Meeting to be held not earlier than a period of one month from the date of such notice’ in Rule 29(1) has to be interpreted as ‘not earlier than a period of one month from the date of service of such notice’.

The object of service of notice under Rule 29 of MCS Rules, 1961 is to provide the member to be expelled, an opportunity of being heard against the supposed grounds of default and acting in a manner ‘detrimental to the interests of the society’. The Co-operative Sugar Factory in Baburao L. Patil and Others v. Dashrath R. Patil and Others[10], enrolled 2888 members after scrutinization of their application by the Committee. Out of 2888 members, a show cause notice for purpose of expulsion had been issued to 2102 members for alleged failure to comply with the eligibility criteria. The Bombay High Court holding the principle of ‘audi alteram partem’ held that the procedure under Section 35 is not ‘mere formality’ but mandatory to be considered before expelling a member and under Sub-Section (1) of Section 35 the Registrar is expected to conduct a proper enquiry in regards to ensure such procedure is followed.

After a resolution is passed by the General Body, it is to be sent to the Registrar of the Co-operative Societies Registration accompanied by an application for approval.  The Registrar on such application shall conduct an inquiry and after due process within a period of ninety days from the date of the receipt of the application communicate his decision to the committee and the members. Such resolution shall then onwards become effective from the date of approval. Determining the scope of inquiry conducted by the Registrar under Section 35 of the MCS Act, 1960 in Vishwajit Co-operative Housing Society v. P.P. Damle[11], the Division Bench noted that for any resolution passed under Section 35(1), the Registrar while granting approval has to not only verify the formalities but also the merits of the case against such other member who is being expelled. Further, the Registrar can conduct an inquiry in the manner he deems fit to verify the same.

The member on being expelled has the right to appeal under Section 152[12]. The Bombay High Court in K.V Sundaram and Another v. Raj Rajeshwari Co-Op. Housing Society Ltd and Others[13], held on the issue of whether a dispute challenging the resolution of expulsion under Section 35 of the MCS Act, 1960 can be subject to proceedings under Section 91 of the MCS Act, 1960, that the matter will not be covered under the ambit of Section 91 and its validity shall be challenged under Section 35 in the manner provided and further under provisions of appeal and revision against the order passed under Section 35 of the MCS Act, 1960.

EFFECT OF EXPULSION OF MEMBERSHIP

The effect of the expulsion of membership from a co-operative society is under Section 35(2)[14] of the MCS Act, 1960. Any member after being expelled from the co-operative society shall not be eligible for one year to be admitted or re-admitted as a member of the same or any other co-operative society for the time being. However, on an application made by the society and in special cases, the Registrar may permit such admission or re-admission of the member before the expiry of one year. Further, on being expelled from the co-operative society, the member shall not continue to occupy the place and hand over the property to the Secretary of the co-operative society in such manner on the date and at the time as deemed fit by the decision of the society. On refusal of the expelled member to vacate the place, the co-operative society shall send a notice of legal eviction to such member.

Under Rule 28, the expulsion of membership may also involve forfeiture of shares being held by such member and in such cases, the show cause notice issued under Rule 29 shall refer to and contain for such forfeiture of shares. On the effect of expulsion from the date of approval by the Registrar simultaneously the forfeiture of shares shall also take effect. On other hand, if the member is expelled and the committee does not forfeit his shares then the expelled member shall pass over the possession of the property and within three months from such date of handing the possession, pay the value acquired by the co-operative society of his interest in the property.

CONCLUSION

In conclusion, the provision of expulsion protects the repute of a co-operative society from blemishing by the detrimental acts of the member. On other hand, a combined understanding of Section 35 MCS Act, 1960 along with Rules 28 and 29 of MCS Rules, 1961 shows that the process of expulsion of membership from a co-operative society has severe effects as the person is removed from being a part of the society and is further disqualified from admission for one year from date of such expulsion. Hence, the reasons for expulsion shall be seriously taken into consideration and the Registrar shall assure the removal is not malafide or on lack of justified reasons as under Section 35. 

REFERENCES

1. Maharashtra Co-operative Societies Act, 1960
2. Maharashtra Co-operative Societies Rules, 1961
3. Prof. (Dr.) D.R. Bharadwaj v. State of Maharashtra and Others, AIR 1993 Bom 366
4. Bhaskar Laxman Rane v. Shri Gurudev Nityanand 1994 (4) BomCR 247
5. Baburao L. Patil and Others v. Dashrath R. Patil and Others, Writ Petition Nos. 4200 & 4201 of 1998
6. Vishwajit Co-operative Housing Society v. P.P. Damle, Special Civil Application No. 1466 of 1973
7. K.V Sundaram and Another v. Raj Rajeshwari Co-Op. Housing Society Ltd and Others, Special Civil Application Appeal No. 2761 of 1914

WEBLIOGRAPHY

REAL ESTATE LAW JOURNAL, https://realestatelawjournal.in/expulsion-from-membership-of-housing-society/, (last visited on April 09, 2023)

[1] Maharashtra Co-operative Societies Act, 1960, § 165(1), No.24, Acts of Maharashtra State Legislature, 1960 (India)

[2] Maharashtra Co-operative Societies Act, 1960, § 165(2), No.24, Acts of Maharashtra State Legislature, 1960 (India)

[3] Maharashtra Co-operative Societies Act, 1960, § 22, cl. 1, No.24, Acts of Maharashtra State Legislature, 1960 (India)

[4] Maharashtra Co-operative Societies Act, 1960, § 2(19)(a)), No.24, Acts of Maharashtra State Legislature, 1960 (India)

[5] Maharashtra Co-operative Societies Act, 1960, § 35, No.24, Acts of Maharashtra State Legislature, 1960 (India)

[6] AIR 1993 Bom 366

[7] Maharashtra Co-operative Societies Rules, 1961, Rule 28

[8] Maharashtra Co-operative Societies Rules, 1961, Rule 29

[9] 1994 (4) BomCR 247

[10] Writ Petition Nos. 4200 & 4201 of 1998

[11] Special Civil Application No. 1466 of 1973

[12] Maharashtra Co-operative Societies Act, 1960, § 152, No.24, Acts of Maharashtra State Legislature, 1960 (India)

[13] Special Civil Application Appeal No. 2761 of 1914

[14] Maharashtra Co-operative Societies Act, 1960, § 35(2), No.24, Acts of Maharashtra State Legislature, 1960 (India)