Legal Status of the RWAs in TS is At Stake

Status of RWAs at stake

The Director General of Stamps and Registration in the Telangana state, based on a High Court judgement has recently advised the Apartment RWAs that they cannot remain registered under the Registration of Societies Act and that the society should be formed and function under the Cooperative Societies Acts. In view of this predicament, UFERWAS has solicited the expert view of Sri. G. Jagadeeswara Rao, FCA, DISA (ICAI) to enlighten the RWA managers about the situation and to recommend suitable action. – EDITOR 


By G. Jagadeeswara Rao

RESIDENT WELFARE SOCIETIES:

Broadly speaking Resident Welfare Societies can be classified into (a) Apartment Resident Welfare Societies (ARWS) and (b) Colony or Area specific Resident Welfare Societies (CRWS). The primary aim of both these types of societies is to provide welfare activities of its members. Primary activiters of ARWS are more confined to maintenance and up keep of the Apartment House or a group of Apartments Houses built in a complex. The activity may extend to accumulate and manage resources for rebuilding the apartment house after its life. The activities of the CRWS are to maintain assets of the Colony like parks, community halls, Libraries, reading rooms and to conduct cultural and social activities and to provide welfare activities in general to all residents of the Colony or an area. The activities may incidentally benefit the public in general apart from its own members, as the parks and community halls are used by the general public also. From the above it is evident that the ARWS activities benefit its own members and the pecuniary benefits accrue to its members, whereas CRWS activities benefit not only its members but also  public at large. The user charges, if any collected by CRWAs are used to provide common amenities  in the area and pecuniary benefits  do not accrue to its members. For the present we shall deal with ARWSs.

REGISTRATION OF SOCIETY:

Let us first examine, whether registration of the Association / Society is essential.  If you call it a Society, it should be registered, but if it is called as association, it can be either registered or unregistered. If it is registered, it will have legal backing for all its activities.  As un registered societies do not have legal backing, it may be difficult to proceed through Courts of law for enforcement of its rights to recover money owed to it by its members and  waging legal battle with outsiders, in case of any necessity. Hence it is assumed that the Association gets itself registered.  Now the question arises under which law the association is to be registered.

Now let us examine the basic characteristics  and differences of the Society Registered under Societies Registration and Co-operative Societies Act.

Societies Registration Act Co-operative Societies Act
The Society objects must be –promotion of art, fine art, charity, crafts, religion, sports (excluding games of chance), literature, culture, science, political education, philosophy or diffusion of any knowledge or any public purpose A Society which has, as it main object, the promotion of the economic interests of its members in accordance with the Co-operative principles, which may be prescribed,  or a society established with the object of facilitating the operation of such a society , may be registered under the Act. Maharashtra State Co-operative  Act, include “ welfare its members:’ Telangana / Andhra Pradesh  Co-operative Societies Rules lay down the Co-operative Principles
Societies are generally for the purpose of Charitable objects but not for the benefit of its members. “Pubic purpose”  is main objective For the benefit of its members.

Public Purpose is not main objective

Management procedure is not elaborated in the Act. Administration and Management structure and procedures are elaborated clearly defined.
Except, list of members of the Executive Committee, no other documents need to filed every year. Annual Return, Audited Statement of Accounts along with Audit classification have to be filed every year with the Cooperative Registrar
There is no Government intervention either in the election of the Executive Committee or in the affairs of the Society. Government intervention is more both in Election of Managing Committee and on the affairs of the Society.
Election of the Executive Committee members is simple and generally by a show of hands at the Annual General Meeting. Election notification has to be issued, nominations have to be called and laid down procedure has to be followed for election of the Governing Body
Profits / Surpluses can not be distributed to its members.  In case of winding up of the Society, the surplus of assets over liabilities have to be given away to a similar society Profits and Losses are shared amongst the members. In case of winding up surplus of assets over liabilities can be shared in the share capital ratio.
It is not a body-corporate, hence it acts through the President. The property should held in the name of its president. Suits  for and against shall be in the name of the President. It is a body-corporate i.e., artificial judicial person, it is distinct from its members and can act independently and can hold property on its name and it can sue and can be sued.
No priority claim for its dues from the members. Priority claim of the Society on members for the dues to the society. Such priority shall continue even if the member ceases to be a member.
Seven or more persons coming together can form a society Ten or more persons( in the State of Telangana, Twenty one)  more persons coming together can for a cooperative society

Resident welfare societies (RWSs) are generally being registered either under Societies Registration Act, 1860 (Central Act) or under Societies Registration of the concerned State (State Acts) and in some cases under Co-operative / Mutually Aided Co-operative Societies Acts of the concerned State. In the State of Maharashtra, RWAs are predominantly registered under the Maharashtra Co-operative Societies Act, 1960.Maharashtra Cooperative Societies Act classifies the RWAs as Housing Societies and also defines its activities, whereas no other State Acts has any provision for Housing Societies.

The Real Estate (Development and Regulation) Act 2016 and the Andhra Pradesh Apartments (Promotion of Construction and Ownership) Act, 1987 and similar laws for Promotion of Construction and Ownership Acts passed by various other states lay down the objectives of the associations / societies formed for the purpose of maintenance of the apartments, but did not discuss under which law the association or the Society is to be registered.

The Choice is left to the concerned association, but Andhra Pradesh High Court, in the case of M/s. Nuggest Estates Private Limited Rep. by its Managing Director Smt. Nirmala Reddy, Secunderabad Vs Government of Andhra Pradesh Represented by its Secretary Department of   Revenue, A.P. Secretariat Hyderabad, and three others, ruled that Apartment Resident Welfare Societies cannot be registered under Societies Registration Act, as these societies are not formed for the “PUBLIC PURPOSE”. This judgement was delivered on March 05, 2013. Telangana State Real Estate (Development and Regulations) Rules 2017 were promulgated vide G.O M.S. No. 202 dated 31-07-2017.  Clause 19 of Annexure A to these Regulations lays down as under:

“19. FORMATION OF ASSOCIATION OF ALLOTTEES AND CONSENT OF ALLOTTEES):

The Promoter shall take the following steps to enable formation of an   Association of Allottees under section 11(4)(e) of the Act:-

  1. a) with respect to a real estate project, the Promoter shall submit an application to the Registrar for registration of the Association of Allottees as a society under the A.P. Societies Registration Act, 2001 (as applicable to the state of Telangana), within two months from the date on which the occupation certificate in respect of such project is issued and a minimum of sixty per cent of the total Allottees in such a project have taken possession and the Promoter has received the full consideration from such Allottees. All the Allottees on payment of full consideration shall become members of such Association of Allottees formed by the Promoter.

b) If the promoter fails to form the Association of Allottees, the Authority shall by an order direct the Promoter to apply for formation of such Association or may authorize the Allottees to apply for formation of the said Association. “

As these Regulations have come into force, subsequent to the High Court Judgement, it may be concluded that even now it is possible to register, Apartment Resident Welfare Association, as a Society under Societies Registration Act, 2001 in the State of Telangana. If the Registrar refuses to register the Society under administrative instructions, if any, the same can be challenged in a Court of Law, as he is duty bound to follow the regulations laid down by the Government, which are superior to the administrative instructions. However such provision is not there in the Andhra Pradesh Real Estate (Regulation & Development) Rules, 2017

Though it is cumbersome to follow Co-operative Scotties Act, it is better to register the  Society / Association under Co-operative Societies Act for the following reasons:

  1. Real Estate (Development and Regulation) 2016, Andhra Pradesh Apartments (Promotion of Construction and Ownership) Act, 1987 and similar other Apartments ownership Acts, passed by some other states lay down that the Common areas and undivided interest in land other common facilities have to be transferred to the Apartment Owners / Allottees Association. As per these Acts, all common facilities and undivided share of land is required to be registered in the name of these Associations / Societies. Co-operative Society being BODY CORPORATE, it can hold all the common facilities in its own name rather than in the name of the President in case of Society registered under Societies Registration Act.
  2. Society may accumulate and manage resources for the Major repairs and also for construction of a new building after the life of the existing building through collections under Sinking Fund The investments can be made in the name of the Society and there is external supervision by the Co-operative Registrar, mismanagement of these funds shall be minimized.
  3. As the main principle of “Public Purpose” as defined in the Societies Registration Act is not fulfilled in the case of Apartments Resident Welfare Associations, it may not be appropriate to Register them under Societies Registration Act.

A cooperative Society can also be registered under “Mutually Aided Co-operative Societies Acts of various States, which provide more autonomy to the members and governing body and less cumbersome to follow . However in case of Telangana State, while adapting the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995, had made far reaching amendments vide GO MS No. 28 dated 19-04-2016, which was stayed by the High Court at Hyderabad and the stay is continuing now.

The Procedure for Registration of the Society under Societies Registration Act / Co-operative Societies Act together with model bye-laws will be hoisted on “Tarnaka Times” website shortly. In the case of Telangana State, the application and all other forms have to be submitted online and the website address is: https://registration.telangana.gov.in/societyRegistration.htm

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