Sunrise Society's Missing Conveyance and the Redevelopment Offer
Sunrise Co-operative Housing Society Ltd is a 48-flat society in Pune registered in 2009 under the Maharashtra Co-operative Societies Act. The promoter still holds the title to the land and now demands ₹40 lakh to execute the conveyance deed. Maintenance arrears are ₹4.2 lakh, of which ₹3.1 lakh is owed by six flat owners who have paid nothing for over two years; each has been sent reminders and interest has been debited. The sinking fund holds ₹18 lakh and the repairs fund ₹6 lakh. A developer has offered redevelopment: 30% additional carpet area for each member, a ₹75 lakh corpus, and ₹18,000 per month as transit rent per flat during construction. At the special general meeting called to authorise the developer's appointment, 27 of 48 members were present and one of the six defaulters insisted on voting. A member has asked whether the society can sign a development agreement at all when it does not own the land.
1. How should the society obtain the conveyance, and can it proceed with redevelopment before that happens?
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Conveyance route. The society does not have to pay ₹40 lakh. Where a promoter fails to convey the land and building within the statutory period, the society may apply to the Competent Authority for unilateral deemed conveyance, filing the registered sale agreements of flat purchasers, the society's registration certificate, the property card, the layout and sanction, and proof of notice to the promoter. If the promoter does not comply within the prescribed period after notice, the Competent Authority, after hearing him, issues a certificate of deemed conveyance, which the society registers; the property card is then corrected and the society becomes the recorded owner. Stamp duty on deemed conveyance is governed by the concession applicable to such instruments.
Redevelopment sequencing. Redevelopment cannot be done in the society's name as owner without title, because the developer's development agreement, the IOD and the ICR will be processed against the owner. Practically, the society may: (a) start the process - appoint a project management consultant, get members' consent, issue tender and select a developer - while simultaneously filing the deemed conveyance application; and (b) execute the development agreement only after conveyance is registered, or with the promoter joined as confirming party. Signing a full development agreement before title vests in the society exposes members to litigation by the promoter and to refusal of approvals. Sequence: deemed conveyance first, then the development agreement.
2. Was the defaulting member entitled to vote, and was the meeting validly convened? What majority does the redevelopment resolution require?
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Voting right. A member who has not paid dues for a continuous period of six months ordinarily loses the right to vote under the society's bye-laws and the MCS Act framework on defaulters, subject to any exemption the general body has granted on genuine grounds. Here nothing suggests an exemption, so the defaulter's vote should have been excluded. His insistence does not create a right; he can be asked to clear dues first. If his vote is challenged later, the safe course is to record the position in the minutes and, if the margin is narrow, to reconvene.
Quorum. Whether the meeting is validly constituted depends on the bye-law quorum, commonly one-fifth or one-third of members or the number specified. With 27 of 48 present, a one-third (16) or one-fifth (10) requirement is met - so quorum is not the problem; the problem is the eligibility of votes cast.
Majority. Redevelopment is not an ordinary resolution. Under MOFA and the MCS Act requirements, a redevelopment proposal requires approval of at least 75% of the members present and voting (many societies adopt 75% or more in their bye-laws), and the development agreement should be executed only after the general body resolution and, ideally, written consent of at least 75% of members. A bare majority is insufficient. Where the resolution falls short, the society must reconvene properly rather than rely on a defective meeting.
3. The defaulters want redevelopment to proceed so that they can settle their arrears from the corpus. Advise the society on arrears recovery and on the permissible use of the sinking fund.
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Linkage is not acceptable. The ₹75 lakh corpus is society property; it cannot be pre-committed to clear individual members' arrears. A member's arrears are a personal debt to the society. Allowing set-off would reward default and invite the other 42 members to stop paying.
Recovery sequencing. (1) Serve a formal notice with computation as per bye-laws, giving a short period and charging interest at the bye-law rate. (2) After the period, the claim becomes recoverable as arrears of society dues through the Registrar's recovery machinery or by reference to arbitration, which results in a recoverable order. (3) Withhold discretionary privileges - transfer of shares, issue of no-objection certificates, issue of the share certificate - while continuing essential services. (4) Before the development agreement, require every member to obtain a no-dues certificate or clear dues from his own share of upgraded area, corpus or rent, which is a far cleaner route than using society funds.
Sinking fund. ₹18 lakh is a corpus built for major structural repairs, lift replacement and reconstruction, and cannot be used for routine maintenance, electrical bills or to bail out defaulters. Any use requires a general body resolution, and the amount used must be replenished through monthly contributions. Repairs fund (₹6 lakh) is for regular repair cycles. Since the building is going into redevelopment, the general body should decide in writing how the unspent corpus will be treated - carried forward, or divided as per bye-laws - before the developer takes possession.