When Society Committee Breaks the Rules: What You Can Do Legally

Introduction

A Co-operative Housing Society (CHS) is not merely a collection of flats — it’s a legally recognized democratic body governed by the Maharashtra Co-operative Societies Act, 1960 (MCSA) and the Model Bye-laws of 2021. Committee members are elected trustees of the society’s funds and are bound to work transparently, fairly, and in the best interest of all members.

However, when the managing committee starts functioning arbitrarily — ignoring laws, avoiding audits, misusing funds, or suppressing dissent — it constitutes “misconduct and mismanagement”, actionable under various provisions of the MCSA.

Below is an analytical guide on how to identify, prove, and take action against such misconduct.

1. Non-Conduct of Statutory Audit Since Formation

🔹 Legal Requirement

Under Section 81 of the Maharashtra Co-operative Societies Act, 1960, every registered society must get its accounts audited once every financial year by a certified auditor from the panel approved by the Registrar of Co-operative Societies. The audit must be completed within six months of the close of the financial year.

🔹 Relevant Bye-law

• Bye-law No. 153 – The society shall ensure annual audit and submit audit reports to the Deputy Registrar.

🔹 Violation

If since formation no audit is done, it constitutes:

• Violation of Section 81(1) of the MCSA.
• Non-compliance of statutory duty by the Managing Committee.
• Possible financial irregularity or misappropriation of society funds.

🔹 Remedies

1. Complaint to Deputy Registrar – Under Section 81(5), the Registrar can order a special or compulsory audit.
2. Registrar’s Action – Under Section 78, the Registrar may remove or disqualify committee members for dereliction of duty.
3. Inquiry under Section 83 – A member can request a detailed inquiry into the accounts.
4. Criminal Proceedings – If misappropriation is detected, Section 146 allows initiation of prosecution for criminal breach of trust.

2. Absence of Formal Elections

🔹 Legal Requirement

Under Section 73-IB and 73-ICA of the MCSA, society elections must be conducted every five years through the State Co-operative Election Authority (SCEA). The term of the managing committee automatically expires after five years.

🔹 Relevant Bye-laws

• Bye-law Nos. 116–127 – Detail the election process, eligibility, and disqualification.

🔹 Violation

If elections have not been held and the same members continue in power, the committee becomes illegal and unconstitutional. Any decision taken by such a committee has no legal validity.

🔹 Remedies

1. File Complaint to Registrar / SCEA – For violation of election provisions.
2. Section 77A (1)(b) – Registrar can appoint an Administrator until fresh elections are conducted.
3. Disqualification of Committee – Under Section 78(1) for failure to hold elections.

3. No Enforcement of Rules or Penalties on Wrongdoers

🔹 Legal Provision

Bye-law Nos. 166, 167 & 168 empower the committee to:

• Impose fines on members violating rules (e.g., late maintenance, nuisance, illegal use of premises).
• Take disciplinary actions with prior approval of the General Body.

🔹 Violation

When the committee ignores wrongdoers or selectively enforces rules, it:

• Encourages indiscipline and partiality.
• Breaches their fiduciary responsibility.

🔹 Remedies

1. Written Complaint to the Chairman and Secretary citing By-laws violated.
2. If ignored, Approach Deputy Registrar under Section 79(2) for failure of statutory duty.
3. Registrar may issue directions or suspend the committee under Section 78(1).

4. Overlooking Illegal Constructions

🔹 Legal Provision

Under Bye-law Nos. 170 & 174, society must:

• Ensure members don’t make structural alterations without approval.
• Intimate local municipal authority (e.g., BMC, TMC) of unauthorized construction.

🔹 Violation

When the committee ignores illegal constructions, despite being informed:

• It amounts to abetment of illegality.
• Violates Section 79(2) for failure to act in society’s interest.

🔹 Remedies

1. File complaint to the Municipal Corporation (Building Dept.) citing encroachment.
2. Report to Registrar for committee’s negligence.
3. Under Section 78(1), Registrar may remove the committee for misconduct.
4. Members can approach Co-operative Court for injunction or direction.

5. Misuse or Mismanagement of Society Funds

🔹 Legal Provision

Under Bye-law Nos. 148–152, society funds can be used only for approved purposes and with General Body approval.
No individual member can incur expenditure without resolution.

🔹 Violation

• Expenses without GB sanction.
• Payments made without bills or vouchers.
• Fund diversion to non-society purposes.

🔹 Remedies

1. Audit Complaint – Request audit under Section 81(5) or special inquiry under Section 83.
2. Misappropriation Inquiry – Registrar can order inspection under Section 84.
3. Criminal Action – Under Section 146, members responsible can face imprisonment up to three years for willful misappropriation.
4. Registrar’s Power – Suspend or remove office bearers under Section 78.

6.  Improper Conduct of Meetings, Non-Circulation of Minutes or Accounts

🔹 Legal Provisions

• Bye-law No. 109 – Committee must meet at least once a month.
• Bye-law No. 110 & 111 – Minutes must be recorded and circulated within 15 days.
• Bye-law No. 138–140 – Members have the right to inspect society records and obtain certified copies.

🔹 Violation

When meetings are not properly held or records withheld:

• It’s a violation of transparency.
• Constitutes non-cooperation and breach of trust.

🔹 Remedies

1. Written Demand under Section 32 of MCSA – For inspection of records.
2. Registrar Complaint under Section 79(2) – For failure of duty.
3. Co-operative Court Application – Under Section 91, for directions against committee.
4. Appointment of Administrator under Section 78(1) for persistent mismanagement.

7. Misconduct through Digital Platforms (WhatsApp, Social Media)

🔹 Legal Aspect

• Circulating defamatory, false, or misleading information about society or its members constitutes an offence.
• Sections 499 & 500 of IPC – Defamation.
• Section 66 & 67 of IT Act, 2000 – Publishing false or offensive material through digital means.

🔹 Remedies

1. Legal Notice or Police Complaint for defamation / cyber harassment.
2. Complaint to Registrar if such behaviour affects society harmony.
3. General Body can issue warning or suspension to errant member under Bye-law 173.

8. How to File a Complaint Against Committee Misconduct

1. Step 1: Draft a detailed written complaint with evidence.
2. Step 2: Submit to the Deputy Registrar, Co-operative Societies (District Office).
3. Step 3: Request inquiry under Section 83 (Inspection & Inquiry).
4. Step 4: If Registrar finds prima facie misconduct, he can:
• Suspend the committee (Section 78)
• Appoint administrator (Section 77A)
• Order audit or inspection (Section 81–84)
• Initiate prosecution (Section 146)
5. Step 5: If no relief, approach Co-operative Court under Section 91 for further remedies.

9.Member’s Right to Transparency

Every member has the right to:

• Receive minutes, financial statements, and audit reports (By-law 139).
• Attend and vote in General Body Meetings (By-law 94–101).
• Inspect society records with 3 days’ notice (By-law 138, Section 32 MCSA).
• Question irregular expenditure and demand explanation from the committee.

If the committee refuses, the member can escalate the issue legally through the Registrar or Co-operative Court.

 

10. Punishment and Liability for Misconduct

As per Section 146 of the MCSA, 1960, any officer or member guilty of:

• Misappropriation of funds,
• Tampering with records,
• False accounting or withholding information,

shall be punished with imprisonment up to three years and/or fine.
They may also be disqualified from holding office in any co-operative society under Section 73FF.

Conclusion

The managing committee’s authority is a trustee role — not a position of power.
Failure to audit accounts, conduct elections, maintain transparency, or obey by-laws converts a co-operative institution into a personal empire, defeating the very spirit of co-operation.

Members must remember: “Silence is complicity.”
Every housing society member has the legal and moral duty to question irregularities and report misconduct.

A vigilant, informed, and assertive membership is the foundation of a transparent and healthy co-operative housing society. 

More details
Adv Vishal Gade ( M.com, LL.M)
Iconic Legal
9987112056