Salient features of the Maharashtra Co-operative Societies (Amendment) Act 2013

Some of Salient features of the MCS Act 1960 [AMENDMENT 2013] is as follow 

Some new provisions threaten the interests of voiceless and vulnerable sections such as aged citizens, troubled spinsters and NRIs. Such suffering and marginalized citizens – who are normally shy and reticent in every society -- will be compelled to attend general body meetings, or lose their voting rights or worse still, face expulsion, eviction notices etc. Their only hope lies in either being condoned by the very general body (which often acts as a mindless mob in the hands of the managing committees, victimizing and ostracizing such people) or in rushing off to appeal to the unresponsive and often corrupt officials of the cooperation department. Even if such society decisions are overturned after months or years of struggle, these vulnerable people will lose their peace-of-mind.

Other new provisions are a big blow to the influential managing committee members and society employees who carry the cooperative movement on their shoulders. Failure to comply with various deadlines can result in severe consequences, including dismissal, disqualification from contesting elections and cash penalties. Vindictive and vexatious members – who are present in every society – can invoke these provisions to do great damage to the society’s peaceful functioning. Auditors, who earn relatively small amounts (like Rs 2,500/-) by auditing the society’s accounts, are given the extraordinary mandate of filing an FIR (First Information Report) at a police station. Whenever this happens, managing committee members will become aaropi in an FIR, which may drag on for years, and result in needless harassment to managing committee members without coming to any conclusion. Currently, uniformed cops are a rare sight in societies; but now, as the new provisions slowly seep in, cops coming into societies and office-bearers being summoned to police stations will become a common sight. Needless to say, instances of bribery will become common.

The amendment has given the law some sharp edges, and also has guidelines and definite dates to societies for smooth functioning. It sets the bar on society administration unrealistically high. Below are the major changes in a nutshell.

ABSOLUTE DEADLINES:

• Audits: Last date for getting books of account audited is four months after the close of financial year 31st July of every year.

• Annual General Meetings: Last date for holding AGM is 30th  September. Default in this respect is almost certain to result in disqualification of the Managing Committee members for five years, and a cash penalty for responsible employees of upto Rs 5,000/-

• Informing Election Authority when an election is due. The State Cooperative Election Authority must compulsorily be informed at least six months before the expiry of the present committee’s term of office. Failure to inform will disqualify them from contesting the elections.

• Elections within 6 months in the case of managing committee being suspended. In case the managing committee is superseded for any default of theirs, and administrator/authorized officer is appointed by the Registrar, elections must be compulsorily held within six months, and control must be returned to the society members.

CHANGES REGARDING ELECTIONS:

• Immediate voting right. Members of housing/premises society are now allowed to vote immediately after enrollment. The earlier provision required a waiting period of two years.

• In a society not having any government grant or loan, no Administrators will be appointed. Instead, an active member or group of active members who were not members of the earlier managing committee (which has been suspended) may be authorized to act as “Authorized Officer”. In a Society has government aid, an administrator may be appointed, but for six months only.

• Only active members will have the power to vote in the affairs of the society including elections. Also, a non-active member cannot contest the election.  A member who does not attend at least one general body meeting and does not utilize the minimum level of services as prescribed in the bye-laws is liable to be classified as “non-active member”, unless his absence is condoned by a general body resolution.

• CEOs, Functional Director and other employees will be considered as“representatives” of the society, but not “members” for the purpose of voting. 

• Reservation of three seats for members from SC/ST/OBC etc. and two seats for women-members. This means that over and above the regular seats on the managing committee, there will be five reserved seats to be filled up by election from such class of members. If such seats are not filled up by election, then they may be filled up by co-opting or nominating suitable members.

• The State Co-operative Election Authority will prescribe procedures and manner of holding elections. Even casual vacancies must be filled up as per such procedure, and under the scrutiny and supervision of this authority.

AUDITS & COMPLIANCES:

•Tough audits. Each and every society must appoint a statutory auditor from an approved panel of qualified auditors, and have their books audited by them in deadline. The auditor is mandated to point out the particulars of the defects or the irregularities observed in the audit.

•FIR against managing committee members etc. In case of financial irregularities, misappropriation or embezzlement of funds etc., The auditor is required to investigate and report the modus operandi, the entrustment, amount involvement and file an FIR with the police as per Criminal Procedure Code, after getting necessary permission from the Registrar. If the auditor fails to do so, he may be disqualified from the government panel, and also, the Registrar is required to get the FIR filed by authorizing someone suitably.

•Fines for offenses under Section 146 have been enhanced. For example, where the penalty was Rs 500/-, it has been raised to Rs 5,000/-.

•For assistance with statutory compliances, legal and financial matters, societies are encouraged to appoint expert directors. Expert directors are defined as persons with experience in the field of banking, management, finance, and cooperatives, and includes a person having specialization in any other field relating to the objects and activities undertaken by the concerned society.

ASSESSMENT -- POSITIVE IMPACTS:

a)      Active members are empowered. Members – including managing committee members -- who are negligent in attending meetings may lose their voting rights after five years. On the flip side, those who diligently attend meetings may be rewarded with more power, and appointed as “authorized officer” if the managing committee trips up. They will gain all the powers that administrators enjoy, for at least six months.

b)      Administrators will normally not be appointed if there is no govt. money involved in the society. If there is a vacuum of power due to managing committee being unable to function, then active members will normally be appointed as “authorized officer” or “interim committee” by the Registrar. Only if there are no active members available to fulfill these responsibilities will an outside person be appointed as “authorized officer”

c)      Regular education & training for office bearers. Apex Co-operatives or State Federal Society will be required to conduct education and training in running of cooperative societies.  Managing Committee members and employees must compulsorily attend training at least once in five years. Each society is required to set aside funds to pay for such training.

d)      Co-op. The court will encourage Win-Win compromise, not Win-Losejustice. Cooperative court is mandated to seek settlement on terms that are acceptable to both the parties, through arbitration, conciliation, mediation etc.

e)      Deadlines must be strictly followed. Managing committees are required to now observe strict deadlines for completion of the statutory audit, submitting returns to the Registrar, holding the Annual General Meeting etc. Missed deadlines will have serious consequences such as disqualification of the managing committee, with no chances of being condoned. This may lead to better recordkeeping and management.

f)       Professionalism in management. Societies are mandated to adopt modern methods and technologies for management, record keeping, compliance with deadlines, statutory requirements etc. For this, they are encouraged to appoint professionals as “functional directors” and “expert directors”.

g)      Auditing is beefed-up. Statutory auditors will have to be appointed, and they are mandated to strictly ensure that accounting is proper.

h)      Filing First Information Report (FIR) will be filed in case of fraud, misappropriation etc. If manipulation of accounts is suspected, auditors and Registrar are mandated to register FIR with the police against the managing committee. In many wealthy societies, where office-bearers who have been skimming away handsome amounts and ordinary members have been struggling to expose them, a scalding hot cup of justice is about to be served!

ASSESSMENT -- NEGATIVE IMPACTS:

a)      The 97th Amendment (which was NOT entirely struck down) has added a Directive Principle of State Policy to ensure “autonomous functioning” and “democratic control” of cooperative societies. So, it is sad and ironic that many provisions of the Amended MCS Act are diametrically opposed to autonomous functioning. They have the potential to vitiate the cooperative atmosphere and harm housing societies in the following ways:

b)      Curbing their autonomy and creating scope for constant interference by officials from State Cooperation Department, State Co-operative Election Authority etc.

c)      Giving scope for police interference and bribery, and making some managing committee members “aaropi” (accused persons) in criminal cases, which may drag on for years with “tareekh-pe-taareekh”.

d)      Declaring aged people, widows, NRIs etc. as non-active members for not attending meetings, depriving them of voting rights and ultimately expelling and evicting them from the flats. This is a grave violation of their fundamental rights. Although there is a provision for the general body to condone their absence, it is well-known that the general body often acts as a mindless mob, and can be vengeful to individuals who do not tow the line.

e)      Disqualifying managing committee members for petty procedural reasons. The many provisions for disqualifying the actual doers in societies will make them vulnerable to some vexatious and vindictive society members.

f)       Giving additional scope for disputes in co-operation department and lengthy court litigations arises from the increase in the number of statutory deadlines will cause

g)      Poisoning the atmosphere with divisiveness, caste-based quarrels and misuse of Atrocities Act, due to caste-based reservations mandated in every society. So far, nobody knows the cast of their neighbors, especially in cities like Mumbai. But now, caste-knowledge and caste-insults will be in everybody’s tongue.