In this blog post, Isha Singh,  a student pursuing her LL.B (5h year) Hons. fromRajiv Gandhi National University of Law, Patiala, Punjab and a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, provides and an overview of the Maharashtra Ownership of Flats Act, 1963.

Introduction

The Maharashtra Ownership Flats (Regulation of the Promotion, Construction, Sale, Management and Transfer) Act, 1963 (Hereinafter referred to as “the MOFA”) was an attempt to mitigate all the unscrupulous practices pertaining to promotion, construction, sale, management and transfer of flats sold on an ownership basis within the State of Maharashtra.

The Act defines a “flat” as:

“A separate and self-contained premises, which is used or is intended to be used as a Residence, Office, Showroom, Shop, Godown, carrying on of any industry or business including a Garage and the premises forms part of a building.

Explanation: Notwithstanding that provisions are made for sanitary, washing, bathing or other conveniences as common to two ‘or more sets of premises, the premises shall be deemed to be separate and self-contained.”[1]

Moreover, a “promoter” is one who is defined as follows:

“…a person who constructs or causes to be constructed a block or building of flats [or apartments] for the purpose of selling some or all of them to other persons, or to a company, co-operative society, or other association of persons, and includes his assignees; and where the person who builds and the person who sells are different persons, the term includes both.”[2]

The Sections 10 and 11 under MOFA jointly regulate the conveyance of title. Section10 mandates that as and when the minimum requisite individuals for a co-operative society or company have purchased flats, the promoter is required to submit an application, within the prescribed period, for the registration of the conglomerate of persons who take the flat either as a cooperative society or as a company.

This is followed by Section 11, wherein, the promoter shall take all the necessary steps to complete his title and convey, to the conglomerate of persons, registered either as a company or a co-operative housing society, who purchase flats, his right, title, and interest in the building and execute all the relevant documents thereof in accordance with the agreement. This period for the execution of the conveyance could either be agreed upon or if not, then the execution must be done in the prescribed period and documents of title, in the promoter’s possession or power is delivered.

Therefore, once the title is conveyed to the conglomerate of persons registered as a society, here is when the question of transfer of shares crops up, which is discussed in detail in the following paragraphs.

Law Relating to Transfer of Shares of a Society in Maharashtra

Section 29 of the Maharashtra Co-operative Societies Act, 1960 and Rule 24 of the Maharashtra  Co-operative Societies Rules, 1961 and Bye-laws 37 and 38 are the major provisions concerned with the transfer of flats.

Procedure for Transfer: Compliance with Essential Requirements

Under Section 29 (2) (a) of the Maharashtra Co-operative Societies Act, 1960, a member has to hold the shares for at least a period of one year before he transfers his shares together with his interest in the flat. According to the Rule 24 of Maharashtra Co-operative Societies Rules, 1961 every transfer of shares, as a mandate, has to be as per the bye-laws adopted by the Society, order to be effective. Further important requirements for transfer are as under:

• Clear fifteen days’ notice in writing is required to be given to the Society indicating therein the name of the proposed transferee, his consent and the value proposed to be paid by the transferee.[3] On receipt of this notice, the secretary of the society will place it before the meeting of the committee held next, pointing out whether the member is prima facie eligible to transfer his shares and interest in the capital or property of the society or not. If the committee is satisfied that the member is prima facie eligible to transfer his shares and interest in the capital or property of the society or ineligible therefor, it will direct the secretary to inform the member within three days.[4]
• All dues and liabilities of the transferor due to the Society including any charge in favor of the Society on the share so transferred, are to be discharged[5];
• Application in the prescribed form, for transfer of shares and interest in the capital/property of the society, along with the share certificate are to be submitted[6];
• Resignation by the original member has to be tendered[7]
• The application has to be submitted by the proposed transferee for membership of the Society[8]
• Payment of Transfer fee as may be prescribed under the bye-laws of the Society, i.e., Rs.500[9]
• Transfer premium at the rate fixed by the general body, but within the limit prescribed by circulars issued by the Government from time to time. As per the circular dated 20/12/1989 the transfer premium should not exceed 25,000/-[10]
• A copy of duly registered agreement with appropriate stamp duty must be paid to the Society[11]
• Declaration by the transferee to use the flat for residence purpose only, or state the reasons otherwise when use is apart from residential purpose[12]
• An Undertaking by the transferor to discharge all liabilities to the Society[13]
• If the transferor has availed of any loan for purchasing the flat from any bank, housing financing agency, no objection from that bank or housing financing agency is required to be submitted to the Society.[14]

Disposal of Transfer Applications

The Bye-Law no. 38 deals with the disposal of transfer applications. The Secretary should scrutinize the documents received and verify as to the conformity with the Act, Rules, and Bye-laws of the Society and place the same before the Managing Committee of the Society for its approval. If such application is rejected, the Secretary has to communicate the decision to the applicant within 15 days from the date of the decision or within 3 months from the date of receipt of the application, whichever is earlier. If the applicant does not receive intimation from the Society within 3 months from the date of submission of application, it is deemed that the application for membership is accepted.[15]

Restrictions on Transfer of Shares 

Under Section 29 (2) (a) of the Maharashtra Co-operative Societies Act, 1960, no share can be transferred unless the share has been held for one year before the transfer and it is made to no one else but the member of the society, or one whose application for membership has been accepted or one who is deemed to be a member of the society.

Transfer v. Transmission of Shares

Transfer of shares in a CHS together with the interest of the member in the flat allotted to him as a member of the society can be by way of sale or by gift whereas transmission takes place on demise of the member either according to the will of the deceased member or according to personal law of succession applicable to the deceased member, in absence of his valid will.

In case of transfer by sale, proper sale deed is required to be executed by and between the seller and the buyer, proper stamp duty as per the market value of such flat as specified in the Stamp Duty Ready Reckoner is required to be paid and the sale deed also needs to be registered as required under The Registration Act,1908. Further, as per the bye-law of the Society, transfer premium up to a maximum of ` 25,000/- is payable to the Society. Whereas in the case of transmission no such documentation is required and as such, no stamp duty is payable as well no transfer premium is payable to the Society.[16]

Conclusion

Every Society must have their bye-laws laid down so that compliance becomes easier in cases of transfers between members.

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Footnotes:

[1] Section 2 (a), MOFA.

[2] Section 2 (d), MOFA.

[3] Rule 24(1)(b) of Maharashtra Co-operative Societies Rules, 1961.

[4] Bye-Law No. 37 (a) & (b) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[5] Rules 24(1)(c) & 24(2) of Maharashtra Co-operative Societies Rules, 1961.

[6] Bye-Law No. 37 (e)(i) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[7] Bye-Law No. 37 (e)(iv) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[8] Bye-Law No. 37 (e)(ii) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[9] Bye-Law No. 37 (e)(vii) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[10] Bye-Law No. 37 (e)(ix) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[11] Bye-Law No. 37 (e)(iv) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[12] Bye-Law No. 37 (e)(v) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[13] Bye-Law No. 37 (e)(vi) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[14] Bye-Law No. 37 (e)(x) of Model Bye-Laws of Cooperative Housing Societies, 2014.

[15] Retrieved from < http://ctconline.org/pdf/chamber-journal/CJ_April_2013/CJ_April_2013_09.pdf> on 31.05.2016 at 23:19 hours IST.

[16] Retrieved from < http://ctconline.org/pdf/chamber-journal/CJ_April_2013/CJ_April_2013_09.pdf> on 31.05.2016 at 23:19 hours IST.