Rights of "provisional member" admitted u/s 154-b-1 (18) clause c of msc act - redevelopment society

It depends on whether the builder recognises the rights of the provisional member in the absence of the original owner or the established  class I legal heirs of the deceased.

Did the society admit him as a provisional member, if yes, what was the basis?

If there's no objection for the admission of the society as a provisional member then the builder cannot raise an objection to that.

Terms and conditions of agreement with the builder has to specify qua membership and their rights.

Show the agreement to a local prudent lawyer for appreciation of facts and professional advise.

Thank you Sirs,
The Society has not admitted nominee as a provisional member as yet on the basis of nomination, the process is ongoing. All the documents, circulars and maintenence bill, receipts are still being issued in the name of deceased flat owner.

The managing committee of the Society is not following the procedure laid down in Section 25, Section 154B-13, Section 154B(1)-18 clause C of MSC act and insisting to produce testamentary document to transmit the Flat.

It is understood that the Society cannot transfer the Flat to the Nominee unless the testamentary document like probate, succession  certificate or release deed of other legal heirs is produced.  Here the provisional member is also one of the legal heir and cannot get testamentary document and it is very unlikely that he may get this documents due to family complexties.

However the questions are:

• Is the Society legally allowed to demand testamentary document just to admit nominee as a "Provisional Member"
• Can the Society refuse "Provisional Membership" to the nominee of the Flat just because he is unable to get any above mentioned testamentary document.

The nominee has even requested NOC letter from Society to transfer the utilities on his name, but the Society is not willing to provide which is again a non compliance of Section 25 of MSC act by the Society - So is the Society legally allowed to refuse NOC letter and still continue to issue circulars in the name of deceased person.

The nominee of the Flat alongwith his application of Provisional membership has also submitted "Nomination form" so that in the event of his death, the duly nominated person can take the owneship and responsibility of the Flat, OR in the event of redevelopment of building, take possession of the redeveloped Flat incase if the Provisional member dies. - The Soceity has also not admitted the new nominee on the basis of nomination form filed by this Provisional member.

• Has the Society got the right to refuse the nomination form filed by Provisional member.
• What happens if the provisional member dies and the building is under construction, can the nominated person as refused by Society take charge of redeveloped Flat.
• What are various rights and limitations of a Provisional member under the MSC act and Model Bye laws.

What are  "the family complexties"? Who was/were the owner(s) of the property? Who are the legal heirs? How is the 'nominee' related to the deceased owner(s)? Was there any Will executed by the deceased?

Though the querist has taken pains for lengthy posting and the subsequent clarification, he is avoiding the material facts and the substantial issues therefrom. 

 

Certain facts and issues are irrelvant to this post and make things unnecessarily long so have mainly concentrated on required advise. However below answers to your queries.

Owner of property - younger brother of nominee who died intestate abroad(was single, unmarried and had no family). Other legal heirs are: One brother and one sister. Nominee related to the deceased as elder brother. Family complexties - The other legal heirs (2 of them above) are also abroad unwilling to provide release deed, are never going to come to India to stay or claim their rights, do not have any objection or concerns if the nominee stays in the flat of the deceased owner. However they are not able to do anything or sign any documents etc etc.

This leaves the nominee in a state of Limbo due to non-co-operation from legal heirs, non co-operation from Society to admit him atleast a provisional member. And now the building is going in redevelopment.

Therefore the above queries as to what are the rights and remedies and precautions available to nominee in this situation as nominee do not want to be in a situation that he evacuates the flat and the builder does not pay him the monthly rent till building is redeveloped and also does not hand over the possession of redeveloped flat to this nominee.

All the legal heirs are 74+ senior citizens, there is also a question that can this nominee who is also one of the legal heir nominate a person to receive the possession of redeveloped flat and monthly rent from builder in the event if he passes away whilst the building is under redevelopment.

The legal heirs are entitled to a share in the property as a right, if one of them dies before completion of redevelopment then his/her legal heirs can claim the share on their behalf.

It is the settled legal position that a nominee is a person who is chosen by an individual to take care of their assets and investments after they die. A legal heir is a person who is designated by law or by the individual's will to receive the property of another person after they die. A nominee is a custodian of the assets and not the owner. The nominee holds the assets until the legal heirs can claim them. The legal heir is the rightful owner of the deceased person's assets. The nominee is chosen by the individual, while the legal heir is designated by law or by the individual's Will. The nominee holds the property in trust for the legal heir, while the legal heir has actual ownership of the property. 

Sections 25, 25A and 30 of the Maharshtra Cooperative Societies Act, 1960 (it is MCS, not MSC,  Act)provides as follows -

 Section 25 - Cessation of membership:

A person shall cease to be a member of a society on his resignation from the membership thereof being accepted, or on the transfer of the whole of his share or interest in the society to another member, or on his death, or removal or expulsion from the society, or where a firm, company, any other corporate body, society or trust is a member, on its dissolution or ceasing to exist.

25A. Removal of names of members from membership register: The committee of a society shall remove from the register of its members the name of a person who has ceased to be a member or who stands disqualified by or under the provisions of this Act for being the member or continuing to be the member of a society : Provided that, if the society does not comply with the requirement of this section, the Registrar shall direct such society to remove the name of such person, and the society shall be bound to comply with such direction.

30. Transfer of interest on death of member:

(1) On the death of a member of a society, the society shall transfer the share or interest of the deceased member to a person or persons nominated in accordance with the rules or, if no person has been so nominated, to such person as may appear to the committee to be the heir or legal representative of the deceased member:

Provided that, such nominee, heir or legal representative, as the case may be, is duly admitted as a member of the society;

Provided further that, nothing in this sub section or in section 22 shall prevent a minor or person of unsound mind from acquiring by inheritance or otherwise, any share or interest of a deceased member in a society

(2) Notwithstanding anything contained in sub section (1), any such nominee, heir or legal representative, as the case may be, may require the society to pay to him the value of the share or interest of the deceased member, ascertained in accordance with the rules.

(3) A society may pay all other moneys due to the deceased member from the society to such nominee, heir or legal representative, as the case may be.

(4) All transfers and payments duly made by a society in accordance with the provisions of this section shall be valid and effectual against any demand made upon the society by any other person.

In my considered view, the provision as bove mandates that the nominee ought to admitted as regular member on the demise of the original member. Of course, he is only a trustee on behalf of the legal heirs and they have claim to membership, at their discretion. In this context, the Apex Court has held in the case of Indrani Wahi vs.Registrar of Coop. Socieities -

19. Insofar as the instant aspect of the matter is concerned, there is no doubt in our mind, that even Rules 127 and 128 of the 1987 Rules, lead to the inference, that in case of a valid nomination, under Section 79 of the 1983 Act, `the Cooperative Society' is liable to transfer the share or interest of a member in the name of the nominee. We hold accordingly.

20. Having recorded the above conclusion, it is imperative for us to deal with the conclusion recorded in paragraph 6 (already extracted above) of the judgment of this Court in the Usha Ranjan Bhattacharjee case (supra). In this behalf, it is necessary to clarify that transfer of share or interest, based on a nomination under Section 79 in favour of the nominee, is with reference to the concerned Cooperative Society, and is binding on the said society. The Cooperative Society has no option whatsoever, except to transfer the membership in the name of the nominee, in consonance with Sections 79 and 80 of the 1983 Act (read with Rules 127 and
128 of the 1987 Rules). That, would have no relevance to the issue of title between the inheritors or successors to the property of  the deceased. Insofar as the present controversy is concerned, we
therefore hereby direct `the Cooperative Society' to transfer the share or interest of the society in favour of the appellant – Indrani Wahi. It shall however, be open to the other members of the family (presently only the son of Biswa Ranjan Sengupta – Dhruba Jyoti Sengupta; we are informed that his mother – Parul Sengupta
has died), to pursue his case of succession or inheritance, if he is so advised, in consonance with law.

The decision above has been based on the provisions of the West Bengal Act. The ratio has been unequivocal in holding that the Society has no option but  to transfer the membership in the name , leaving it to the discretion of the legal heirs to pursue the claim based on succession or inheritance.

In the instant case, it appears that the Society is relying on the alleged provisions of Section 154B (18)(c) of the MCS Act (notified by  MAHARASHTRA ORDINANCE No. IX OF 2019 amednding the MCS Act) in denying regular membership -

(18) “Member” means a person joining in an application for the registration of a housing society which is subsequently registered, or a person duly admitted to Membership of a society after its registration and includes associate or joint or provisional Member ;

( a) “Associate Member” means husband, wife, father, mother, brother, sister, son, daughter, son-in-law, daughter-in-law, nephew, niece a person duly admitted to Membership of a housing society on written recommendation of a Member to exercise his rights and duties with his written prior consent and whose name does not stand in the share certificate ;

( b) “Joint Member” means a person joining in an application for the registration of a housing society jointly, which is subsequently registered or a person who is duly admitted to Membership after its registration and who holds share, right, title and interest in the flat jointly but whose name does not stand first in the share certificate ;

( c) “provisional Member” means a person who is duly admitted as a Member of a society temporarily after death of a Member on the basis of nomination till the admission of legal heir or heirs as the Member of the society in place of deceased Member ;

However, it could be seen the said provisions are not part of the statute as could be accessed on the official website of the Maharashtra Government (https://mahapanan.maharashtra.gov.in) and India Code (https://www.indiacode.nic.in). 

The reasons are obvious. A statutory brought into force by means of an Ordinance, in terms of the provisions of Artice 213 of the Constitution,  is of limited life unless duly enacted as an Act of the Legislature -

213. Power of Governor to promulgate Ordinances during recess of Legislature.

• (1) If at any time, except when the Legislative Assembly of a State is in session, or where there is a Legislative Council in a State, except when both Houses of the Legislature are in session, the Governor is satisfied that circumstances exist which render it necessary for him to take immediate action, he may promulgate such Ordinances as the circumstances appear to him to require:

Provided that the Governor shall not, without instructions from the President, promulgate any such Ordinance if-

• • (a) a Bill containing the same provisions would under this Constitution have required the previous sanction of the President for the introduction thereof into the Legislature; or
  • (b) he would have deemed it necessary to reserve a Bill containing the same provisions for the consideration of the President; or
  • (c) an Act of the Legislature of the State containing the same provisions would under this Constitution have been invalid unless,
    having been reserved for the consideration of the President, it had received the assent of the President.
• (2) An Ordinance promulgated under this article shall have the same force and effect as an Act of the Legislature of the State assented to by the Governor, but every such Ordinance-
  • (a) shall be laid before the Legislative Assembly of the State, or where there is a Legislative Council in the State, before both the Houses, and shall cease to operate at the expiration of six weeks from the reassembly of the Legislature, or if before the expiration of that period a resolution disapproving it is passed by the Legislative Assembly and agreed to by the Legislative Council, if any, upon the passing of the resolution or, as the case may be, on the resolution being agreed to by the Council; and
  • (b) may be withdrawn at any time by the Governor.

  Explanation.- Where the Houses of the Legislature of a State having a Legislative Council are summoned to reassemble on different dates, the period of six weeks shall be reckoned from the later of those dates for the purposes of this clause.

  • (3) If and so far as an Ordinance under this article makes any provision which would not be valid if enacted in an Act of the Legislature of the State assented to by the Governor, it shall be void:

Thus, Section 154 B is not there in the Statute Book; it has been rendered void in course of time. And, the the Society management is relying on void provision in continuing deceased person as the member and thus, denying you the membership.

You may serve a legal notice on the Society and escalate the issue further through judicial proceddings, if so necessary.

Thank you Sir for your detailed reply and pointing out the correction. :)

If you make an application for membership and the Society does not give you a reply for 3 months, it will be deemed that your application has been accepted. In order to make things sure, you may appeal to the Registrar (actually the Assistant Registrar of your Ward in Malhotra Building) with true copies of all the documents submitted to the Society. The Registrar will send them to the Society asking them what action they are taking. If the Society does not reply within the stipulated period or gives a negative reply, the Registrar himself will issue orders and it will be binding on the Society.

In continuation to this thread, after repeated follow-up and conflict the Society has now provided Provisional Membership and the Share certificate has been endorsed with the name of the person who has been granted provisional membership, the secretary, treasurer and the chairman have signed the share certificate and the remark has been mentioned in the Share Certificate "ADMITTED AS NOMINEE, PROVISIONAL MEMBER"

There is a lot of disputes within the society and its managing commitee regarding redevelopment, recently the Deputy Registrar has issued an order suspending the managing commitee members for a period of 5 years and an Administrator is appointed to take charge and oversee Society's affairs.

The builder redeveloping the Society and the suspended Secretary/Managing Committee have hired a reputed law firm and are going to appeal against and bring stay order against Registrar order.

Going Back to the thread; as per the response given by Sir P Venu - "Section 154 B is not there in the Statute Book(MCS Act); it has been rendered void in course of time. And, the the Society management is relying on void provision in continuing deceased person as the member and thus, denying you the membership."

Hence can I now write to the Deputy Registrar of CHS to amend the membership i.e. change from Provisional Membership to Full Ownership on the basis that Section 154B is void and not existing in the Statute Book and the Society commitee has wrongfully provided only provisional membership and hence now it needs to be corrected to full membership and ownership rights.

How can I get the contact details of the Administrator who has been duly appointed by the Deputy Registrar so that I can also mark a copy to him.

The judgments that a nominee in a co-operative society is not the owner of the property in only some 15 or 20 years old. Before that flats were transferred to nominees and the nominees enjoyed the property as the ultimate owners. I know this. I am member of a society for more than 50 years and for decades I was also secretary when flats were transferred to nominees. The judgment that nominees are not absolute owners has created havoc and uncertainities. There has been no discussion of the merits of the judgment among the legal community. In the case of Company Law the Section on nomination was amended.and a non-obstante clause 109A(3) was introduced which says

"Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such shares in, or debentures of, the company, where a nomination made in the prescribed manner purports to confer on any person the right to vest the shares in, or the debentures of the company, the nominee shall, on the death of the share holder or holder of debentures of, the company or, as the case may be, on the death of the joint holders becomes entitled to all the rights in the shares or debentures of the company or, as the case may be, all the joint holders, in relation to such shares in, or debentures of, the company to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner."

In accordance with the above a learned single judge Smt. Roshan Dalvi, in the case of Harsha Nitin Kokate vs. The Saraswat Co-perative Bank and others held that the nominee shall be the beneficial owner of the shares.

The judgment of the single judge was held per incuriam by another single judge in another case and referred to the Chief Justice..

When a court does not agree with a judgment they refer the matter to another bench increasing the number of judges. The Chief Justice did accordingly in another group of appeals and assigned them to a bench of two judges Justice A.A. Sayed and Justice A. S. Oka. The two judge bench held that the Company's Act cannot derogate the Succession Act.

In the case of the Insurance Act, the law has been amended by the Parliament. Now a nominee is a benefcial nominee, if he or she is a legal heir under the Succession Act. Some lawyers say that the legislature has created a new class of nominees called beneficial nominee. No such thing has been done, The word beneficial has been used only as an adjective.

Courts and judges are not law-makers. Law-making is a prerogative of the legislatures. In the case of co-operative societies act the law should be amended to make nominees beneficial owners of the property as in the case of the Insurance Act.  The confusion has continued for too long. Section 154 without amending Section 30 of the Co-operative Societies Act has played havoc. The person who conceived Section 154 should be awarded a special prize.

(A) If the provisions of Section 154B (18)(c) of the MCS Act (notified by  MAHARASHTRA ORDINANCE No. IX OF 2019 amending the MCS Act) passed by the governor of Maharashtra has neither been accepted nor disapproved/withdrawn in the State Assemblies, it therefore ceases to operate on the expiry of six weeks from the reassembly of the State Legislature.

Therefore if it is VOID and not incorporated in MCS Act then:

WHY did the Bombay High Court in the case of Karan Vishnu Khandelwal v. Honourable Chairman/Secretary Vaikunth (Andheri) Co-operative Housing Society Ltd. & Ors gave judgement that a nominee is merely a trustee and shall hold the flat in his capacity as trustee till the time the legal heirs are ascertained by relying on Maharashtra Cooperative Societies (Amendment) Act, 2019 whereby Section 154B-13 came to be inserted in the said Act.

This judgement of Bombay High Court was never challenged on above stated above in (A), hence can someone please clarify if Maharashtra Cooperative Societies (Amendment) Act, 2019  is VOID or not and the judgement given by Bombay high court is wrong.

If there is another case like this then can a judge rely on any previous judgement even if there is no statute or such law incorporated in the legislation.

The judgment cited by Mr.Solanki as well as prevous judgments say that a nominee is not a beneficial owner.  A nominee is a trustee is just a conclusion derived from the jugments. No law says so. A nominee is not necessarily a legal heir does not depend on the validity or otherwise of Section 154B-13 of the Maharahtra Act, though the Section is mentioned in the cited judgment. Hence the judgment was not wrong and cannot be challenged on that ground.

As per the response given by Advocate Sir P Venu as above on 27-10-2023, Section 154B-13 is void, now if section 154 is void then how can the judge state in his judgment to include Section 154 in MCS act, because Section 154 is void and has limited validity and cannot be included in MCS act unless it has been approved in both the houses of state legislative assemblies.

Either MAHARASHTRA ORDINANCE No. IX OF 2019 amending the MCS Act must have been approved in states assemblies or the judge has made a mistake to include void provision in MCS act, it is very unlikely that the judge must have made a mistake otherwise by this time it could have been challenged in higher court as we have so many experienced and knowledgeable lawyers in our country to point out such error.

A nominee is not necessarily a legal heir is true. HOWEVER, whenever an application for transfer of a Flat is received by the Society from the nominee, he/she should not be told to bring testamentary documents by placing reliance on Section 154 if Section 154 is void.

In the absence of Section 154, the society should process the application for transfer of Flat as per usual practice in the past and if there is any dispute or future dispute from any other legal heir the matter can be referred to court and the court can decide.

The housing Societies have now started to stop transferring the Flat and insisting to get testamentary documents even when there is no disputes or issues raised by other legal heirs. This is certainly creating harrassment for nominees as the process to get testamentary documents in not only time-consuming but expensive and at times frustrating.

It is therefore necessary to establish whether Section 154 on which the housing Societies are now-a-days placing reliance on, is really legally existing or not and whether incorported in MCS act and approved in both Maharashra state assemblies.