In this article, we shall look into the reasons why a housing society may dissolve and what the procedure is to effect such a dissolution
Introduction
Housing cooperative societies play a pivotal role in the realm of community living, facilitating shared ownership, and cooperative management of residential complexes. Governed by the Societies Act of the respective states in India, these societies follow specific by-laws, often guided by the National Co-operative Housing Federation of India (NCHFI). While adherence to the NCHFI guidelines is not mandatory, most housing societies adopt them to frame their by-laws. Dissolve a cooperative housing society involves a comprehensive understanding of various elements and processes. From engaging with members, vendors and creditors to managing notice periods, contracts, majority votes and settlements, each component plays a pivotal role in the dissolution journey.
Let us now explore the essential aspects guiding the dissolution of a Cooperative Housing Society:
Regulatory Framework
The Societies Act of the state serves as the legal foundation for housing cooperative societies. While the NCHFI provides model by-laws, their adoption is not obligatory. However, the majority of housing societies choose to align their by-laws with the models proposed by the federation. This ensures a standardized framework for operations and governance.
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Understanding the Need for Dissolution
Housing societies may reach a critical juncture where dissolution becomes a viable option. Common reasons for dissolution include bankruptcy, failure to meet objectives, engagement in illegal activities, insufficient membership, prolonged inactivity, violation of laws, or irreparable dysfunction. In most cases, the decision to dissolve is initiated by the members themselves.
However, there are instances where external authorities, such as the Registrar of Societies or the government, intervene and enforce dissolution for reasons like unlawful activities, unfulfilled objectives, insufficient membership, contravention of the Societies Act, prolonged inactivity, insolvency, or inability to clear debts.
Legal Grounds for Dissolution
Before proceeding with dissolution, the registrar typically requests the society to present a show cause to halt the process. If the registrar remains unsatisfied, they may seek court intervention for resolution. The legal grounds for dissolution include:
- Unlawful Activities:
– Involvement in activities deemed illegal under the Societies Act.
- Unfulfilled Object Clause:
– Failure to fulfill the stated objectives as per the society’s by-laws.
- Insufficient Membership:
– When the number of members falls below the required minimum of seven.
- Contravention of Societies Act:
– Violation of provisions outlined in the Societies Act.
- Prolonged Inactivity:
– If the society remains inactive for more than three years.
- Insolvency:
– Inability to settle debts and liabilities, rendering the society insolvent.
Profit Distribution After Dissolution
Upon dissolution, profits are not distributed among society members. Instead, the law stipulates that any surplus funds should be allocated to ‘some other society’ determined by a three-fifths majority vote among members. Some states allow members to decide, by a majority, to confer property to the State Government for utilization in alternative projects.
In cases involving dysfunctional or criminally involved societies, following the legal dissolution procedure is crucial to avoid further complications.
The Dissolution Process
A registered society follows a systematic process for dissolution, encompassing four main parameters:
- Passing a Resolution:
– Members initiate the process by calling a special body meeting to discuss the intent of dissolution. The decision to dissolve immediately or at a later date is debated, and upon agreement, the proceedings are set in motion.
- Notice and General Body Meeting:
– A notice is sent to members, creditors, vendors, and associated entities, including other societies or contracts with pending obligations. A general body meeting is convened, and a vote is taken. A 3/5th majority vote is required for the resolution to be accepted.
- Settlement of Claims and Liabilities:
– Once the resolution is passed, the society must settle all claims and liabilities, including debts to creditors.
- Approval and Certificate of Dissolution:
– A copy of the authorized resolution is submitted to the registrar of societies within fifteen days. The registrar’s approval is imperative for dissolution. If the State Government is a member, contributor, or affiliate, approval from them is also sought. The registrar, upon satisfaction with due process and assurance of no liabilities or assets, issues a certificate of dissolution, striking off the society’s name from the register.
However, if the registrar is dissatisfied after review, a notice is published in the official gazette, inviting objections and appeals. The society is directed to clear unpaid dues within 2 to 3 months.
Legal Reference for Dispute Resolution
Section 13 of the Societies Registration Act 1860 states that in case of disputes related to the adjustment of affairs during dissolution, the matter must be referred to the Principal Court of Civil Jurisdiction in the district where the society’s registered office is situated.
Distribution of Surplus
Upon dissolution, any surplus funds, after settling claims and dues, are not distributed among members. Instead, the law mandates that the surplus must be handed over to another society. The decision on the recipient society is determined by a three-fifths majority vote among members. Some states allow members to decide, by a majority, to confer the property to the State Government for utilization in other projects.
Conclusion
A well-founded housing cooperative society, governed by robust by-laws and vigilant management, can thrive and pass on its legacy seamlessly. However, when dissolution becomes inevitable due to dysfunction or legal complications, adhering to the proper legal procedures is essential.
Seeking clarity on societies and their regulatory framework is crucial. Our team of legal experts are available to assist with any queries or requirements in this domain. To know more, reach out to us today!
FAQ
How do you dissolve a managing committee?
To dissolve a housing society managing committee, a special resolution is passed by the members of the society. The process typically involves calling a special body meeting, discussing the intent of dissolution, and taking a vote. The resolution is passed if it receives a 3/5th majority of the total votes.
Can members remove committee members?
Yes, members can remove committee members. The process usually involves passing a resolution at a general body meeting or a special body meeting, where the members discuss the issue and take a vote.
What happens when a chairman from housing society resigns?
When a chairman of a housing society resigns, the remaining members of the managing committee should elect a new chairman. The election process may vary depending on the society's rules and regulations.
How do I resign from a society committee?
To resign from a society committee, you should send a resignation letter to the society's management or the person responsible for accepting the resignation. The letter should include your name, the reason for your resignation, and the date of your resignation.
When should you resign from a Committee?
You should resign from a committee when you no longer wish to be a part of it, or if you have any conflicts of interest that may affect your ability to act impartially. Additionally, if you are required to resign as per the society's rules and regulations, you should comply with those requirements.
How do you write a powerful resignation letter?
To write a powerful resignation letter, you should include the following information:
- Your name and address
- The name of the society and your membership number
- The reason for resignation
- The date of resignation
- Any outstanding dues or contributions you wish to mention
What is the best reason for immediate resignation?
The best reason for immediate resignation could be a conflict of interest, personal reasons, or any other situation that prevents you from effectively contributing to the committee's work.
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