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Recovery of Dues from Defaulters in a Housing Co-operative Society

A co-operative housing society is a small housing association run along co-operative principles and is co-owned and managed by its members. These members may be of various cultural and socio-economic backgrounds. A managing committee is elected after each member exercises his/her vote and this committee looks after the day to day activity of the co-operative society which includes all the social, financial as well as all the legal aspects. A cooperative society does not have the motive of profit earning. Thus, it runs on the maintenance charges paid by its members.

When a member fails to pay the charges for 3 consecutive months, he/she becomes a ‘defaulter’. These defaulters then become the debtors of the society and it becomes unfair to the members who pay their share of dues on time. Non timely payments by members may result in cash crunches in the financial accounts of the society. Not only does this increase the workload of the committee, but also hampers the relations between the committee and the defaulter members.

In such situations, the managing committee takes the help of Registrar of Co-operative Societies without much involvement of lawyers or court proceedings, etc. Let’s have a look at the step by step procedure for recovering dues from the defaulters:

How can the dues of defaulters be recovered?

Step 1: A demand notice should be issued to the defaulter by the Chairman or the Secretary of the society requesting the payment of dues within a particular period of time. A warning of non-payment which may result into application before the Registrar (under Section 101 of Maharashtra Co-operative Societies Act, 1960) is also included in this notice.

Step 2: If defaulter still fails to pay, an application before the Registrar of Cooperative Societies is filed (after passing a resolution in a meeting), requesting to issue a Recovery Certificate for recovering the amount due plus interest from the defaulter member. A requisite fee has to be paid to the Registrar through a challan payable at RBI Account 0425 Co-operation, 800 other receipts XVII Notice and recovery fees.

Dues to be recovered Enquiry Fee Court Fee Stamp
Up to Rs. 1,000/- 5.5% of the claim Rs. 15/-
Rs. 1,001- 2,000/- 4.5% of the claim Rs. 20/-
Rs. 2,001- 5,000/- 3.5% of the claim Rs. 20/-
Rs. 5,001/- and above 3.0% of the claim subject to maximum of Rs.1000/- Rs. 25/-

Step 3: The Registrar hears out both the parties: defaulter member and society committee. To verify the records, the defaulter is given a chance to appeal in front of the Registrar. A Recovery Certificate may or may not be issued, as the Registrar deems fit. If the certificate is issued, a Sales Officer is appointed.

Which documents need to be submitted to the Sales Officer?
  • Original Challan deposited by member, if any.
  • Copy of Notice given by the society (bye-law 162)
  • Copy of Notice by legal advisor appointed under bye-law 172 (f) of the society.
  • Application for grant of certificate for recovery.

Step 4: This Sales Officer visits the flat of the defaulter member and sends him/her a demand notice that gives a last chance to make payment of dues. If the payment is still not made, the Sales Officer seizes the defaulters movable property and hands it over to the society’s Chairman/Secretary for further auction. In cases when sale of movable property cannot be enough to recover dues, the flat itself is put for auction (with a predetermined date, time and place).

What happens if a defaulter still fails to pay? (after Step 4)
  • Procedure of attachment of sale of property (Section 156 Maharashtra Housing Cooperative Societies Act and Rules)
  • Expulsion (forcing to leave) of a member (Section 35 Maharashtra Cooperative Societies Act 1960)
  • Notice of transfer of shares, interest of capital and property of society (bye laws 38)
  • Voting powers of defaulter members become null and void.

Society Now aims to provide you an understanding of this topic with easy and simple steps that do not involve much of legal proceedings. We would be happy to serve you in case such situations arise to ensure that the management of the society is not overloaded with unnecessary work and the authoritative framework is maintained.

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