- within Litigation and Mediation & Arbitration topic(s)
- with readers working within the Utilities industries
- within Litigation, Mediation & Arbitration, Environment and Energy and Natural Resources topic(s)
The Bombay High Court recently dismissed a writ petition filed by Tirthankar Darshan Co-operative Housing Society Ltd. ("Society") challenging orders of the Deputy Registrar and the Divisional Joint Registrar. The case arose from the Society's refusal to admit two shop purchasers as members and its demand for a "welfare fee" in addition to the statutory transfer fee.
This ruling clarifies the legal limits on a co-operative society's power to levy additional charges during membership transfers and underscores the restricted scope of judicial review over the decisions of co-operative authorities.
Facts
Respondents Nos. 4 and 5 ("Respondents") purchased Shop No. 4 in the Society's premises through a registered sale deed dated 24 July 2019. They subsequently applied for membership under the Maharashtra Co-operative Societies Act, 1960 ("Act").
The Society allegedly failed to communicate its decision on the membership application within the time prescribed under Section 22(2) of the Act. The Respondents appealed to the Deputy Registrar, who on 17 November 2023 allowed the appeal, holding that the Respondents had satisfied all membership conditions, including payment of the statutory transfer fee of Rs.25,000/-.
The Society then filed a revision under Section 154 of the Act before the Divisional Joint Registrar. On 25 February 2025, the Revisional Authority upheld the Deputy Registrar's order and dismissed the revision application.
Society's Arguments
The Society argued that the Respondents had misrepresented facts before the Deputy Registrar and failed to comply with a mandatory precondition regarding payment of a welfare fee, introduced by a General Body resolution dated 23 July 2017.
The Society further stated that this requirement had been communicated to the Respondents through its reply dated 23 March 2023. Since the Respondents had not paid the welfare fee, the Society maintained that it was justified in refusing their membership. The Society also alleged that the authorities under the Act had not properly considered either the Society's resolution or the requirement of the welfare fee while passing their orders.
Respondents' Arguments
The Respondents asserted that they had complied with all statutory requirements by submitting their membership application and paying the statutory transfer fee of Rs. 25,000/-. They contended that the Society had no legal authority to levy any additional charge beyond the Government-prescribed transfer fee. Consequently, the Respondents argued that the Society's refusal to admit them as members was arbitrary, without legal basis, and contrary to the provisions of the Act and the Government's directive.
Court's Analysis
The Court rejected the Society's contentions and upheld the orders of the Deputy Registrar and the Divisional Joint Registrar. The Court observed that, it is fairly crystallised that for transfer of membership fee, a society is precluded from levying any amount apart from the transfer fee of Rs. 25,000/-.
The Court found the "welfare fee" to be a camouflage attempt to recover more than what the Government directive permitted. The Court held that such a levy was illegal and could not be used as a ground to deny membership to otherwise eligible applicants.
On these grounds, the Court concluded that the Authorities had correctly directed the Society to admit the Respondents as members and that no interference under Article 227 of the Constitution was warranted.
On these grounds, the Court concluded that the Authorities under the Act were justified in directing the Society to admit the Respondents as members, as the Society's basis for refusing membership was unsustainable and required no interference.
Conclusion
The Bombay High Court declined to interfere with the impugned orders, reiterating that co-operative societies cannot collect sums beyond the statutory transfer fee. The ruling reinforces the supervisory role of co-operative authorities and the limited scope of judicial review when such authorities correctly apply the law.
Significance of the ruling for Co-operative Housing Societies
Levy statutory transfer fee only
Co-operative societies may recover only the Government-prescribed
transfer fee of ₹25,000 when admitting new members. Any
additional sum whether termed as "welfare,"
"administrative," or "maintenance" is illegal
and can be struck down.
Align Society by-laws with Act and Government
directives
All by-laws and general body resolutions must comply with the Act
and Government directives. A society cannot rely on an internal
resolution to override statutory provisions.
Respond promptly to membership
applications
Under Section 22(2) of the Act, societies are legally bound to
decide membership applications within the prescribed timeframe.
Delays may result in legal action.
Maintain transparency and records
Societies to maintain written records of membership decisions,
statutory fees paid, and communications with applicants. This
safeguards societies and members in the event of disputes.
Understand the limited scope of judicial
review
High courts hardly interfere with decisions of Co-operative
Authorities unless there is illegality or a breach of natural
justice. Compliance with applicable law safeguard societies from
litigation.
In essence, adherence to applicable law and statutory rules is the most effective way for co-operative societies to avoid disputes, ensure transparency, and uphold the co-operative framework.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.