National Conference Organized by ICAI - Cell Tower Radiation Hazards

i
National Conference on Co-operative Societies, Trusts,

Redevelopment of Properties, Legal and Taxation Aspects
ii
DISCLAIMER
1. The material contained herein is for private circulation and reference purposes only.
2. The views expressed in the articles, write-ups, surveys, etc., contained in the background material
are those of the concerned authors, individuals, organisations, agencies etc., and should not be
construed as the views of the Institute of Chartered Accountants of India or any of its Committees
or Boards.
3. The Ins titute of Chartered Accountants of India or any of its Boards or Committees does not
undertake the responsibility for the accuracy or otherwise of any views expressed or facts included
in the background material.
4. The Institute of Chartered Accountants of India or any of its Boards or Committees also does not
accept any responsibility for the actions taken by the reader on the basis of the material contained
in the background material.
5. The copyrights in res pect of the material included in the background material res ts with the
respective authors, organisations, etc.
iii
I am pleas ed that Committee for Co-operatives & NPO Sectors of the Ins titute of Chartered
Accountants of India (ICAI) is organising a National Conference on Co-operative Societies, Trusts,
Redevelopment of Properties, Legal and Taxation Aspects, I am glad that the same is being hosted
by Western India Regional Council (WIRC) of ICAI.
It is overwhelming to see progress achieved by the co-operative sector in its century long movement
after experiencing many ups and downs. Over the years, Cooperatives have strived hard to build
a better world by advancing sustainable development, social integration and decent work. Co-
operatives empower their members and thereby strengthen communities. They promote food
security and enhance opportunities for small agricultural producers. They are better tuned to local
needs and better positioned to serve as engines of local growth. By pooling resources, they improve
access to information, finance & technology and their underlying values of self-help, equality and
solidarity. They work for overall improvement of their members & other stakeholders in challenging
economic times.
Committee for Co-operatives & NPO Sectors has been working towards strengthening Co-operatives
& NPO sectors and simultaneously exploring the new professional opportunities for members. In its
endeavours, the Committee has sent various representations to authorities such as CBDT, NABARD,
and various State Governments. The Committee has also been taking initiatives to update the
knowledge of the members through various publications and conducting of conferences, seminars,
workshops, etc. This seminar is another step towards imparting knowledge in the field. CCONPO has
launched a certificate course on Management, Taxation, Laws, Accounting and Auditing concerning
Co-operative societies & NPOs for the benefit of our members.
I believe that programmes like this could be a great learning experience for Chartered Accountants.
By attending these programmes and hearing the learned subject experts, members can emerge
with greater comprehension and knowledge accompanied with invaluable tips and information from
practical wisdom and experience of expert concerned.
I wish all the delegates a fruitful, professionally enriching experience from this National Conference.
With best Regards
CA. Subodh K. Agrawal
President
The Institute of Chartered Accountants of India
MESSAGE
iv
Dear Participants,
It is heartening to note that the Committee for Co-operatives and NPO Sector of the Institute is
organising a National Conference on Co-operative Societies, Trusts, Redevelopment of Properties,
Le gal and Tax ati on As pe cts on 3rd & 4th Augus t at Mumbai . By way of organi s i ng s uch
programmes, the ICAI tries to be instrumental in enriching the professional base of its members.
The Government along with other regulatory bodies takes all possible steps to regulate these
sectors by enacting various laws and assuring their compliance by them. The Chartered Accountants
can play a vital role in this area by ensuring the fulfilment of various regulatory provisions by
these organisations. Definitely this leads to the need for our members to maintain and expand
their knowledge base on these regulatory provisions. In todays busy schedule, taking out time
to read and understand the new regulations or changes made in the existing ones sometimes
becomes difficult. This Conference is aimed at not only towards disseminating the developments
in the regulations in these sectors but also providing guidance to the members to explore more
professional opportunities in other sectors also. Eminent speakers from professional fields have
been invited to share their views with the audience which will be of great help in professional
development not only to our Fellow Chartered Accountants but also for other stakeholders.
I am impressed with the topics chosen for the workshop and the experts invited to share their
wisdom amongst the delegates. I am sure that the deliberations in the workshop would be of high
standard and provide an opportunity to the delegates to interact with the experts having experience
and expertise in Co-operative and NPO Sector.
I would like to congratulate CA. Anuj Goyal, Chairman, Committee for Co-operatives & NPO Sector,
CA Tarun J. Ghia, Vice-Chairman, Committee for Co-operatives & NPO Sectors and other members
of the Committee for organizing this National Conference which would surely help our members
and other participants to be well equipped and take a lead.
On this occas ion, I extend warm greetings and felicitations to the participants and wis h the
programme all success.
Date : July 24, 2013
Place: New Delhi CA. K. Raghu
Vice-President, ICAI
MESSAGE
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Welcome to all the participants,
On behalf of the Committee for Co-operatives and NPO Sector of the Institute, I take the pleasure
of welcoming all the participants to the two days National Conference on Co-operative Societies,
Trusts, Redevelopment of Properties, Legal and Taxation Aspects at K.C Auditorium, Churchgate,
Mumbai that is being hosted by Western India Regional Council of ICAI.
With a comparatively new Committee for Co-operatives and NPO Sectors formed in 2011, we
Chartered Accountants are now focusing on yet another sector of the Country. These two dynamic
Sector provides an opportunities to the Chartered Accountants in the field of Internal Audit, Statutory
Audit, Auditors on behalf of donors and funding agencies, reviewers of financial management
systems, advisors on financial management systems, etc. NPOs are generally registered either as
a society or a trust or a section 25 Company under the respective laws namely the Societies Act,
Trust Act or the Companies Act, 1956. Depending upon the law under which it is registered, it has
to get its accounts audited as required under the respective laws.
I am sure that this Conference would enhance the understanding of the participants towards the
importance of compliance and good governance in NPO and Co-operative Sector, professional
opportunities for CAs in NPO Sector, redevelopments, fungible FSI, stamp duty registration aspects
and many more.
I would like to express my gratitude to CA. Subodh K. Agrawal, President, ICAI and CA. K. Raghu,
Vice President, ICAI for giving this oppurtunity to the Committee for Co-operatives and NPO Sector
for organising this National Conference. I wish to place on record my thanks to Justice V. M Kanade,
Honble Justice, Bombay High Court, CA. Tarun J. Ghia, Vice-Chairman, CCONPO who has been
instrumental in successful organisation of this Conference and my colleauges in Central Council for
sparing their valuable time and making efforts for organising the Conference.
I am confident that, this would be a great learning experience for the participants.
Date : July 28, 2013 CA. Anuj Goyal
Place : New Delhi Chairman
Committee for Co-operatives and NPO Sectors, ICAI
MESSAGE
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Dear Participants,
I am immensely happy to welcome all the delegates to the National Conference on Co-operative
Societies, Trusts, Redevelopment of Properties, Legal and Taxation Aspects being organised by the
Committee for Co-operatives & NPO Sectors of ICAI on 3rd and 4th August at Mumbai. The 2 day
Convention aims to focus and offer a clear picture on various functional areas, issues which have
grey areas and require discussion and debate.
It is an open secret that many of our CA members are frequently engaged in drafting of various
property and commercial documents. In this context, it is pertinent to mention that CAs have been
inculcated with high degree of analytical and interpretational skills. Some of the CAs are equally
proficient in usage of the language of English and have very effective communication skills. They
are drafting documents which are not only excellent in language but are second to none in terms
of consideration of relevant laws and addressing minute issues of facts and possible situations.
Such functions by the CAs will also recognise their true capability and will enhance image of
the profession at large. The events like this are in continuation of the position of the ICAI as the
partners in Nation building.
For Chartered Accountants, the importance of updation of knowledge is of quintessential importance.
Continuing Profes s ional Education is all about abs orption, as s imilation, comprehens ion and
practical application of the knowledge acquired for the benefit of clients, employers and for the
professionals themselves. It is my firm belief that by attending programme like this and hearing the
erudite faculties, one can emerge with a greater comprehension and knowledge, often loaded with
invaluable tips and insights that come out of practical wisdom and experience and which cannot be
readily found in a conventional text book or reference manual.
I thank CA. Subodh K. Agrawal, Honble President, ICAI and CA. K. Raghu, Honble Vice-President,
ICAI for encouraging and guiding in organising this Conference. I also thank CA. Anuj Goyal,
Chairman, Committee for Co-operatives & NPO Sectors for his wholehearted support and able
guidance and involvement in organising the Conference and my colleagues in Central Council of ICAI
for sparing time to join and add value to this Conference. I am extremely thankful to his highness
Justice V. M. Kanade, Judge, Bombay High Court for inaugurating this Conference and sharing his
rich experience and words of wisdom with us.
I welcome all of you to this Conference with the hope that the Conference turn out to be quite a
learning and memorable experience to all of you.
Date : July 28, 2013 CA. Tarun J . Ghia
Place : New Delhi. Vice-Chairman
Committee for Co-operatives & NPO Sectors, ICAI.
MESSAGE
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PROGRAMME STRUCTURE
National Conference on Co-operative Societies, Trusts, Redevelopment of Properties, Legal and
Taxation Aspects organised by Institute of Chartered Accountants of India, Committee for
Co-operatives & NPO Sectors, on August 3 & 4, 2013 at Mumbai
DAY-1 (3
rd
August, 2013)
ACTIVITY SCHEDULE
ACTIVITY/TOPICS GUEST/SPEAKERS TIME
BREAKFAST 8:30 am to 9:00 am
Inaugural Session Shri Justice V.M. Kanade 9.00 am - 11.00 am
Real Es tate s cenari o i n general and i ts i mpact
on property redevelopments (to give complete
picture of market scenario and expected impact
on present as well as near future redevelopments)
Shri D. L. Desai 11.00 am - 11.30 am
Re ce nt de v e l opme nts i n co-ope rati v e l aws
(i ncl udi ng 97th cons ti tuti onal ame ndme nts ,
amendments in laws and procedural aspects, latest
model bye-laws, appointment of auditors, etc.)
Shri N. R. Nikam 11.30 am - 12.00 noon
Re de v e l opme nts , joi nt de v e l opme nts , s e l f
de v e l opme nts : Le gal and tax ati on i s s ue s
(covering MOU, DA, Joint DA, Self development,
Bank Guarante e , POA, fre e hol d, l e as e hol d,
te nancy , MHADA prope rti e s , Tax ati on, TDS,
Corpus Fund, Hards hi p compe ns ati on, re ntal
compe ns ati on, TDR, fungi bl e , rol e of PMC,
tendering, invitation to offer)
CA. Tarun Jamnadas Ghia 12.00 noon - 01.00 pm
LUNCH 01.00 pm - 02.00 pm
Structural Audits in co-op societies - requirements
and compliances responding to notices u/s. 354 of
the MMC Act
Shri Satish Dhupelia 02.00 pm - 02.30 pm
Laws governing co-operative societies, trusts, real
estate transactions
Dr. Sanjay Chaturvedi 02.30 pm - 03.15 pm
TEA 03.15 pm - 03.45 pm
Concept and Working of Fungible FSI (Calculation
and measurement of Fungible FSI, Methodology of
its application, premium payable, division between
present owners and developer, changes in DCR in
view of Fungible FSI)
Shri Manoj Dais aria and
Shri Sudhir Y. Ghate
03.45 pm - 04.30 pm
Cell Towers an income avenue or a menace?
(Analytical studies and views of both sides, Cell
Towers radiation hazards, precautions, probable
s olutions , rights of members dis s enting to cell
towe rs , tax ati on of ce l l towe r i ncome , TDS
compliances)
Prof. Gi ri s h Kumar and
Ms. Neha Kumar
04.30 pm - 05.00 pm
viii
ACTIVITY/TOPICS GUEST/SPEAKERS TIME
Se rv i ce tax as pe cts (w.r.t. re de v e l opme nts ,
ordinary maintenance of co-op. societies, repairs
to properties, renting of properties, cell towers
spaces, trusts, etc.)
Shri Sus hi l Sol anki and
CA. A. R. Krishnan
05.00 pm - 06.00 pm
DAY-2 (4
th
August, 2013)
VAT i s s ues (i n re-devel opments , i n repai ri ng of
properties)
Adv. Kishor T. Lulla 09.30 am - 10.30 am
Prope rty trans acti ons by trus ts (Acqui s i ti on of
properties, transfer of properties, development of
properties, permission of Charity Commissioner,
change re ports , docume ntati on, audi tors
responsibility, stamp duty on registration wrt trust
properties)
Adv. Aditya Prakash Rao 10.30 am - 11.00 am
Stamp duty and registration aspects (w.r.t. society
transactions, renting of properties, release deeds,
family partition, gifts, exchange of properties, power
of attorneys, company owned flats, stamp duty in
repairs of properties, see schedule to stamp duty,
wills, etc.)
Shri Santosh Kumar 11.00 am - 11.30 am
Redevelopments and Self Developments Financing
Options Due Diligence and other critical issues
CA. Dilip Pendse 11.30 am - 12.00
noon
Right to Information w.r.t. governance of co-op.
societies and charitable trusts and in the process of
redevelopment (Legal and procedural aspects)
Shri Shailesh Gandhi 12.00 noon - 12.30
pm
Disputes, complaints, petitions, appeals before co-
op registrars, co-op. court : laws and procedural
as pe cts (Cov e ri ng i s s ue s of juri s di cti ons , ov e r
l appi ng juri s di cti ons , co-ope rati v e di s pute s ,
redevelopment disputes)
Imminent Faculty 12.30 pm - 01.00 pm
Labour and welfare laws : Legal and Procedural
Compliances (Concerning co-operative societies
and trusts and associations)
Shri M. B. Gajare 01.00 pm - 01.30 pm
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CONTENTS
Sr.
No.
Subject Page
No.
Technical Sessions
1. Redevelopments , joint developments , s elf developments : legal and taxation is s ues
(coveri ng MOU, DA, Joi nt DA, Sel f devel opment, Bank Guarantee, POA, freehol d,
l e as e hol d, te nancy , MHADA prope rti e s , Tax ati on, TDS, Corpus Fund, Hards hi p
compensation, rental compensation, TDR, fungible, role of PMC, tendering, invitation to
offer) CA. Tarun Jamnadas Ghia
2
2. Laws gov e rni ng co-ope rati v e s oci e ti e s , trus ts , re al e s tate trans acti ons
Dr. Sanjay Chaturvedi
16
3. Concept and Worki ng of Fungi bl e FSI (Cal cul ati on and meas urement of Fungi bl e
FSI, Me thodol ogy of i ts appl i cati on, pre mi um pay abl e , di v i s i on be twe e n
pre s e nt owne rs and de v e l ope r, change s i n DCR i n v i e w of Fungi bl e FSI)
Shri Manoj Daisaria and Shri Sudhir Y. Ghate
20
4. Ce l l Towe rs - an i ncome av e nue or a me nace ? (Anal y ti cal s tudi e s and v i e ws of
both sides, Cell Towers radiation hazards, precautions, probable solutions, rights of
members dissenting to cell towers, taxation of cell tower income, TDS compliances)
Prof. Girish Kumar and Ms. Neha Kumar
47
5. Service tax aspects (w.r.t. re-developments, ordinary maintenance of co-op. societies,
re pai rs to prope rti e s , re nti ng of prope rti e s , ce l l towe rs s pace s , trus ts e tc.)
Shri Sushil Solanki and CA. A. R. Krishnan
73
6. VAT issues (in redevelopments, in repairing of properties) Adv. Kishor T. Lulla 86
7. Property trans acti ons by trus ts (Acqui s i ti on of properti es , trans fer of properti es ,
devel opment of properti es , permi s s i on of Chari ty Commi s s i oner, change reports ,
documentation, auditors responsibility, stamp duty on registration w.r.t trust properties)
Adv. Aditya Prakash Rao
103
8. Stamp duty and re gi s trati on as pe cts (w.r.t. s oci e ty trans acti ons , re nti ng of
properti es , rel eas e deeds , fami l y parti ti on, gi fts , exchange of properti es , power of
attorneys , company owned flats , s tamp duty in repairs of properties , s ee s chedule
to stamp duty, wills, etc.) Shri Santosh Kumar
123
9. Ri ght to Informati on w.r.t. gov e rnance of co-op. s oci e ti e s and chari tabl e
trus ts and i n the proce s s of re de v e l opme nt (Le gal and proce dural as pe cts )
Shri Shailesh Gandhi
126
10. Labour and welfare laws : Legal and Procedural Compliances (Concerning co-operative
societies and trusts and associations) Shri M. B. Gajare
137
x
Sr.
No.
Subject Page
No.
11. Redevelopments & Self Developments Legal and Tax Issues CA. Tarun Ghia 145
12. 97th Amendment - Gujarat High Court Judgment Order (1) 153
13. Multi State Co-operatives Bill, 2010 192
14. The Maharashtra Co-operative Societies (Amendment) Ordinance, 2013 221
15. Salient Features on 97th Amendment Act 261
16. The Multi State Co-operative Societies Bill, Summary 263
17. The Constitution 97th Amendment Act, 2011 264
1
Shri D.L. Desai (Shankarbhai) has been elected as the Trustee of Builders
Association of India (BAI) after having served as the Hon. Gen. Secretary,
Hon. Gen. Treasurer, and Vice President of BAI. He was earlier the Chairman
of Mumbai Centre during 1998-2000. Family circumstances compelled him
to give up his studies after matriculation and he joined the family firm M/s.
Desai Lallubhai & Co., doing business of trading in tiles, sanitaryware, cement
and cons truction material. Later s ometime in 1979, he s tarted real es tate
business. He joined BAI in 1966 and is one of the founder members of BAI
Mumbai Centre. He has the unique distinction of actively participating in all
the All India Builders Convention held by the Centre in 1981, 1996, 2001 and
2003.
The vexed probl em of Sal es Tax on Works Contract from 1986 to 1988
coul d be res ol ved duri ng hi s tenure 1998-2000 as Chai rman of Mumbai
Centre. (Incidentally, he was heading the Centres Sub-Committee from 1988
onwards).
It is due to his efforts that Indian Construction is now recognised as number
one journal of the Cons truction Indus try in India. He gave it a new look,
refurbished it and started a series of new features in it. As a matter of fact,
he charted a new path of giving service to the members through Bombay
Construction and Indian Construction. Another area, which held his interest,
was publis hing s eries of books on topics affecting the indus try. It is als o
worthwhile to mention here that, during his tenure, the financial strength of
the Centre has leaped to greater heights.
As an Editor, he has also published the following books for and on behalf of
BAI Mumbai Centre:
1. Central Excise and the Construction Industry also covering Service Tax.
2. Civil Contractors Referencer Statutory requirements.
3. Select Labour Laws for Construction Industry A Profile.
4. Empl oy e e s State Ins urance Act, 1948 Its appl i cabi l i ty to the
Construction Industry An insight through judicial pronouncements.
He i s the re ci p i e nt of Journal i s t of the y e ar 2001 Award from
Accommodation Times and Institute of Construction Management & Research,
Navi Mumbai, presented him an Award for his contribution to journalism in
construction related journals and publications.
Duri ng hi s tenure, as the Mumbai Centres Chai rman, he s tarted a new
experiment of the Centre taking up s talls in cons truction indus try related
exhibitions . This res ulted in a better co-operation with other likeminded
organisations. In addition, BAI could increase awareness amongst architects,
consultants and contractors by taking part in such exhibitions.
He i s the reci pi ent of Honorary Members hi p from Practi ci ng Engi neers
Architects & Town Planners Association (India).
2
Elected Central Council Member of the ICAI
At the ICAI, Member of the Direct Tax Committee, Member of BOS, Member of Committee on Industry,
Member of Public Finance Committee, Member of the Disciplinary Committee, Member of Committee
on Banking, Insurance and Pension, Member of Professional Development Committee, Member of
Committee on Economic, Commercial Laws and WTO, Member of Editorial Board, Member of Internal
Audit Standards Board, Member of Committee on International Taxation.
Vice Chairman of the Committee on Co operatives and NPO Sectors of the ICAI Vice Chairman of the
Committee on Governmnet Accounting of the ICAI Member, Committee for Government Accounting,
South Asian Federation of Accountants (SAFA)
Brief details of professional contributions:
Born and brought up in Saurashtra and completed schooling from Kamani Forward High School, Amreli,
Saurashtra, Gujrat.
B. Com. From H R College of Commerce & Econ., Mumbai.
Practicing Chartered Accountant since 1984. Partner in M/s . TMG and As s ociates with core area
of practice being cons ultancy, appellate and drafting/documentation works . Cons ultant to various
redevelopment projects.
Pleaded in person Writ Petitions at Bombay High Court and
Brought directions for transparency in empanelment for and allotment of bank branch audits.
Obtained directions of transparency and objectivity in empanelment for and allotment of co-
operative audits at State level as well as Divisional level.
Has ihitiated steps for trahsparehcy ahd objectivity ih empahelmeht for ahd allotmeht of co-
operative audits at State level as well as Divisional level in Gujrat State. As also in empanelments
in concurrent audits in banks.
As a speaker addressed
Several times Commissioners of Income Tax on Taxation of shares and securities transactions and
Tax issues in construction industry, redevelopments and immovable property transactions etc.
Officers of Registrar of Companies, Sales Tax Officers and Assistant Commissioners of Sales Tax
on topics of professional interests.
The lhstitute of Valuers comprisihg Architects, ehgiheers ahd other valuers oh legal ahd tax aspects
on redevelopments.
lCAl All lhdia cohferehces oh accouhtihg ahd tax aspects ih ehtertaihmeht ihdustry, tax issues ih
construction industry and immovable property transactions.
CA. Tarun J amnadas Ghia
3
Various semihars orgahized by WIRC.
Fublic meetihgs oh uhioh budget proposals.
Addressed more than 250 meetings of Chartered Accountants and others organized by WIRC, ICAI
and others.
As a writer contributed articles in
Newspapers like Times of lhdia (Froperty Sectioh), DNA (Mohey Sectioh), Jahmabhoomi, Vyapar,
Commodity World, Asian Age, and trade journals like Construction World, Bombay Construction and
lhdiah Cohstructioh. Was ihterviewed live oh CNBC Awaz News wheh MOFA was hot revalidated
for a short period after March 2005.
Frofessiohal jourhals like the Chartered Accouhtaht Jourhal, lhcome Tax Feview, Bombay Chartered
Accouhtahts' Jourhal, the Chartered Accouhtaht Fractice Jourhal, Taxmahh, Sales Tax Feview.
Association with professional organisations:
Co-opted member on the Representation Committee of the Institute of Chartered Accountants of India.
Co-opted member oh the Jourhal Committee of the Bombay Chartered Accouhtahts' Society.
Co-opted ih the Core Group of the Chamber of Tax Cohsultahts.
Was Member of WlFC ahd a Chairmah of Members ih lhdustry Committee of WlFC of lCAl.
Was a member of the Mahagihg Committee of Sales Tax Fractiohers' Associatioh of Maharashtra,
Cohveher of Jourhal Committee ahd a Member of Committee for Frotectioh of Tax Fayers.
Advisor to:
Builders Association of India on direct tax matters and for their representations to the Government and
other concerned authorities.
Right to Information Act:
Regular writer on RTI in newspapers and professional journals. Addressed meetings of professionals and
successfully pleaded petitions at State and Central levels.
Arbitration:
Successfully pleaded arbitration proceedings at appellate levels in respect of share market transactions.
Forensic Accounting:
Member of the India Forensic Research Foundation.
Well read on
Construction laws, property laws, BMC laws, rent control laws, co-operative laws, stamp duty and
registration laws, RTI law and is conversant with reading of building plans related approvals and their
respective relevance and significance under the general laws and under direct and indirect tax laws.
Lecturer:
Formerly, lecturer in senior colleges affiliated to Mumbai University in the subjects of accountancy
and Income tax. Was a visiting faculty for the subject of Income Tax in the intensive Coaching Classes
conducted by ICAI for Inter C.A. students. Am a a visiting faculty for the subject of Income Tax in the
intensive Coaching Classes conducted by the Bombay Chartered Accountants Society.
Always available :
To members in res pect of any is s ue pertaining to the fraternity at large or even individual is s ues
pertaining to the ICAI.
4
National Conference on Co-operative
Societies, Trusts, Redevelopment of
Properties, Legal and Taxation Aspects
CA. Tarun J amnadas Ghia
PART I : KEY ISSUES IN REDEVELOPMENT OF PROPERTIES
Co-operative hous ing and premis es s ocieties having old and dilapidated s tructures contemplate
redevelopment as the only viable alternative. In some cases even when the buildings are not old or
dilapidated, they contemplate redevelopment to avail advantage of incentive schemes of higher Floor
Space Index (FSI) including Transferable Developments Rights (TDR).
Upon such contemplations, the first step is generally appointment of a project management consultant
(PMC). The Notification of the Department of Co-operation in the context of redevelopments issued under
the provisions of Section 79A of the Maharashtra Co-operative Societies Act, 1960 requires a co-operative
society to appoint a project management consultant in the initial stage of the process of redevelopment.
This requirement would also apply to a co-operative society undertaking self development or contract
development. The spirit of the Notification inter alia is that the process of redevelopment should be
carried out transparently, objectively and in accordance with and within the framework of applicable laws.
Therefore, the process of inviting proposals should be such that, whether the developers are invited by
tendering system or by invitation for expression of interest, all interested developers get an opportunity
to submit their offers. Many a times it is observed that a developer is selected on the basis of highest
offer. However, when it comes to drafting documents, differences arise about the details of the offer and
the legal aspects to be incorporated in the documents. To avoid such scenario and to ensure that offers
are not vague and are comparable, it is desirable that the tenders or the invitations are comprehensive
and the legal aspects from the points of views of the society and the members are incorporated therein
so that the commercial terms offered by the developers become really comparable. This will also lead to
selection of the developer on objective criteria.
It is desirable that the documents of redevelopment are drafted by the consultants of the society in an
iron clad manner. People sometimes get attracted by good designs of the plans of the new buildings.
However, they should realize that the hew plahs will materialize with the help of good documehtatioh. lh
the interest of the society and its members, the redevelopment agreement, power of attorney, individual
agreements and the bank guarantee should be as specific and elaborate as much possible leaving no
vagueness for possible defalcation or disputes.
The documentation process will not be complete in one stroke. The draft will be modified and remodified
by the society and the developer to take care of their respective interests. The consultant of the society
is required to ensure that the draft safeguards the interests of the society and its individual members and
at the same time he should be able to accommodate the practical and reasonable requirements of the
developer without prejudicing the interests of the society and its members. In such a scenario to maintain
transparency in drafting, it is desirable and more convenient that the drafts get exchanged in the email
track mode so that only the changes and the modifications are attended.
Notification dated 24 10 2011 the Government of Maharashtra relaxed provisions of Development Control
Regulations by granting option of additional floor space index of 0.33 by payment of premium. In this
context, first aspect which needs clarity is that due to grant of such additional FSI aggregate of FSI
5
has not increased. Thus if a co-operative housing society is presently entitled to aggregate FSI at 2
including TDR-FSI, then the same remains capped at 2 only and does not increase to 2.33 . In such an
example, the original land FSI remains at 1 and in respect of TDR- FSI of additional 1, there is now an
option that either one may buy entire TDR FSI from the open market or alternately one may buy newly
introduced 0.33 FSI from municipal corporation and buy only 0.67 from the open market. One will be
inclined to buy 0.33 FSI from the municipality for the reason that the premium for such additional FSI
payable to the municipal corporation is far lesser than the prevailing market price of TDR- FSI. In the
cases of redevelopments, the society/flat owners/occupants/tenants may expect that such benefit would
be passed on by the developers to them. As an offshoot of such additional FSI upto 0.33 available at
a premium from the municipality, the need and consequently the demand for TDR FSI would reduce
to that extent and correspondingly the market price of TDR-FSI has started coming down. The salient
features of the additional FSI being offered in place of TDR FSI to the extent upto 0.33 so far as relevant
to redevelopments of co-operative housing societies are summarised below:
i. Additional 0.33 FSI is optional and non-transferable. It is to be granted as on application and to be
used on the same plot.
ii. The total maximum permissible FSI, with 1.33 FSI, Road FSI and TDR shall be restricted to 2.00.
iii. As per concept of TDR, additional FSI shall be permissible on gross plot area.
iv. Additional FSI available as per Regulation 33, shall be related to basic FSI of 1.00 only.
v. In Mumbai Suburban District, construction upto 1.00 additional FSI is permissible through use of
TDR. 0.33 FSI being optional and part of overall ceiling of use of 1.00 TDR, any disclosure made for
use of TDR / FSI, while making agreements with purchasers under MOFA Act, shall be held valid
for use of 0.33 FSI.
vi. No vertical extehsioh of existihg buildihg by utilizihg 0.33 FSl shall be permitted with erectioh of
columns in the required marginal open space.
vii. The rel axati on of premi um i .e.10% of normal premi um s hal l be charged whi l e condoni ng
deficiencies in open spaces ( as applicable for use of slum TDR).
Many a times, societies first enter into Memorandum of Understanding with the interested developer and
development agreement is relegated to a subsequent stage. As far as entering into MOU is concerned, the
recourse to MOU should be taken only when it is very much necessary and in general, entering into MOU
should be avoided because MOU is generally drafted on broad terms and is many times dependent on
happening or non-happening of a particular contingency. Thereafter, development agreement is drafted.
Development agreement is drafted elaborately including even the minute and procedural aspects. The
problems would arise if in such detailed draft, differences arise on some aspects between the society and
the developer. In the ongoing competition amongst the developers to procure the re-development project,
they are also ready and willing to take over the responsibility of obtaining conveyance and such other
documents and that too within the specified time period. While drafting such MOU, the basic principle
would apply that substance of the document and not the nomenclature of the document would decide
its true nature and therefore the substance of the terms of MOU should be such that it does not create
a development contract. The substance would also decide income tax implications. The society needs to
be quite cautious as on substance even MOU may become an enforceable contract. The society should
provide for expiry of the MOU at the end of an agreed period.
That the society must get conveyance is not a new law. Law has always been the same since 1963
onwards that the housing entity is entitled to conveyance of the land underneath and appurtenant to
the building(s) within the prescribed time period. However, as pre amended law was not effective at the
implementation stage, therefore, amended provisions provide easy procedure for deemed conveyance
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and the time limits have been cast upon the competent authority to decide the application for deemed
conveyance.
Law will have to settle ih a mahher that ohce a society or other kihd of housihg orgahizatioh has beeh
formed, then simply because a few agreements have not been stamped or registered cannot disentitle
the housihg orgahizatioh from the behefit of deemed cohveyahce. This is for the reasoh that provisiohs
continue that a housing entity can be formed under an application by only 60% is of the flats. Once the
housing entity is formed, under the pre amended provisions also, there are numerous decisions of civil
courts and consumer courts wherein while directing the promoters to convey property in favour of a
housing entity, the courts have not, and very rightly so, looked into the aspect as to whether all the flat
purchase documents were subjected to stamp duty payment and registration requirements.
The provisions have been amended to be more beneficial in nature to provide for expeditions formation
of society and deemed conveyance against the failure by promoters to do so within prescribed time
period. Therefore, the amended provisions cannot deny the benefit which was available in the pre
amended provisions as the amendments have been brought to make the law more beneficial to the flat
purchasers.
By the competent authority as well as by some other quarters a view is propagated that for obtaining
deemed conveyance certificate, documents like building plans, commencement certificate, occupation
certificate, completion certificate, property cards, would be required to be furnished by the society. Such
a view appears to be beyond logic and not supported by the provisions of the law. Rules cannot travel
beyond the specific provisions of the law.
The matter of income tax on development agreements by transferable development rights has reached to
the Bombay High Court. If the High Court rules that such development agreement is not taxable, no cause
of concern arises. But in a possible adverse decision that such transaction per se is a taxable transaction,
then the question would arise in whose hands the same is taxable. If the society is the taxable entity, tax
burden would run into lacs or crores of rupees whereas the tax benefits available to individual assesses
can reduce the tax liability to nil or negligible level and keep the society and its members safe. Here it
may be noted that in the case of Aurovilla Co-operative Housing Society, argued by this writer, Income
Tax Tribunal held that the society is not taxable entity in such a transaction. From legal as well as tax
points of view, concept that the beneficial and de facto and therefore true ownership of the property are
with the members and not the society is more appropriate view. Redevelopment transaction needs to be
structured ahd documehted accordihgly. Such cohcept would recoghize ahd protect ihdividual property
rights of the members in a better way and would make the document more tax friendly.
Many legal, tax and stamp duty issues need to be discussed in the context of redevelopments so that the
professional colleagues play meaningful roles in this field and particularly in the matters in which they are
concerned either as stakeholders or as consultants. New concept of fungible FSI has been introduced
very recently and is likely to have much impact on the entitlements of the flat owners and tenants even
in cases where development agreements have been executed.
Many societies in suburban areas are either contemplating or are in the process of redevelopments
of their properties. The recent amendments in the Development Control Regulations would affect all
such societies. The benefit of new fungible FSI is maximum being 35% for residential buildings. For the
commercial and industrial buildings the same is quite moderate being only 20%.
The Development Control Regulations have been recently amended under which inter alia for a residential
building additional fungible FSI has been created to the extent of 35% including in respect of amenity
areas including dry balconies, porches, flower beds, pocket terraces etc. Such additional compensatory
FSl has beeh freezed at 35 of the hormal FSl ihcludihg TDF-FSl implyihg that if the aggregate FSl
including TDR FSI is at 2 in respect of a plot of land, now in the proposed new residential building,
such additional FSI can be available to the extent of .70. Such FSI of .70 has been named fungible FSI
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which for all practicle purposes mean indirect increase in the FSI. Such FSI, except as available and to
be utilized upoh the existihg rehab portioh, is to be purchased by paymeht of premium calculated as
a percentage of the ready reckoner rates. However, to protect the interests of the existing owners and
occupiers so as to avoid the transfer of fungible FSI in respect of existing building to the free sale portion
by the developers, it has also been further clarified that the fungible FSI in respect of rehab portion would
not be transferable to the free sale area of the developer.
The Municipal Commissioner was quite aware about the uses and misuses of the flexible amenity areas
being created by the developers. In very few cases, hitherto the members of the societies were given the
benefit of amenity area exceeding 25%, although much more was created as amenity area. To ensure that
the benefits of redevelopment go to the members and tenants and is not unscrupulously transferred to sale
portions of the developers, the Municipal Commissioner has categorically provided that firstly the fungible
FSI emerging in respect of the rehab portion is to be used for rehab portion only and secondly that the
same would have to be utilized proportiohately for the members ahd tehahts with referehce to their existihg
premises. This has been done to ensure that the more influential members and tenants are not able to
corner the same in higher proportions for their premises to the disadvantage of less influential ones.
More importantly, the fungible FSI need not be distinguished from the normal FSI as far as design of
the premises is concerned with the result that overnight the possible enhanced area would increase by
35%. This 35% may be used for creating dry balcony, niche, flowerbeds and alternatively may be used
to create one more room. In most cases, a person having the choice now to have 35% for flower beds,
dry balcony etc. or to have one more room, is likely to decide that instead of new flat comprising one
bed room hall kitchen and flower bed, dry balcony, niche areas he would prefer to have outright a new
flat comprising two bed room hall kitchen.
Amended D. C. Rules will have overall positive effect as it would remove disparity between developers
who were capable to manage higher usable FSI vis a vis those who were not either capable or were
not willing to . Amended D. C. Rules will have more benefits for the members of the societies and the
tenants. Upright professionals with sound legal technical knowledge and strong leanings towards the
benefits and safety of the members and tenants only can enable them to reap the benefits created for
them.
Prevalent practice in respect of redevelopment of immoveable properties is that after obtaining Intimation
of Disapproval (IOD) from the municipal authorities, the developer gives a notice to the occupants in the
existing premises for the reasons inter alia that the terms of IOD require that only after the demolition of
the existing premises/structures, the developer would be entitled to apply for and obtain Commencement
Certificate(CC). This practice is fallacious in law as well as in logic. This practice is disadvantageous and
risky to the developers as well as to the flat owners/tenants/occupants. However, once enlightened, the
members of the society should be firm to get the same implemented.
IOD is issued under the provisions contained in the Mumbai Municipal Corporation Act, 1888. Thereafter,
the Maharashtra Regional Town Planning Act, 1966 got enacted. Section 2(7) of the MRTP Act contains
definition of the term development . According to this definition, the term development includes
inter alia demolition of any existing building, structure or erection or part of such building, structure
or erection. Provisions of section 43, 44 and 45 of the said MRTP Act require that no development can
commence without obtaining CC. Combined reading of the provisions of the MRTP Act would mean that
demolition is also a development or is a part of the development process, and development process
cannot commence without a CC from the concerned authority.
Legally speaking, IOD contains various conditions, fulfillment whereof only leads to obtainance of CC
implying that if any of the conditions of the IOD are not fulfilled, CC may not be granted.
In such a view of the matter, imagine the situation, wherein, the existing building has been demolished
on the basis of IOD and because of non-fulfillment of the conditions like aviation clearance, environmental
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clearahce, permissioh by tree authority or ahy of them hot materializihg. lh such a situatioh, the project
would get halted and the dwellers may become homeless. Early vacating of the existing premises is not
advantageous even for a developer because, amongst other things, the developer has to start paying
rental compensation from the date of vacating the premises.
The above ris k factors to the occupants and dis advantage to the developer are the res ult of non
implementation of the correct position of the relevant law. Even if the developer is ready and willing to
go for demolition of the building on the basis of the IOD, the members of the society can point out the
correct law and dissent to such premature demolition.
The law has been consistently and logically interpreted by the Supreme Court that if there are two
statutes operating upon the subject matter and the provisions are contradictory then in that case, the
provisions, to the extent they are contradictory, of the later statute will prevail.
It is therefore very much necessary that the existing building is not allowed to be demolished before
a Commencement Certificate is obtained or in any case all other compliances necessary to obtain
Commencement Certificate are met.
PART II. ROLE OF PROJ ECT MANAGEMENT CONSULTANT IN REDEVELOPMENT OF A PROPERTY IN
A CO-OPERATIVE SOCIETY :
Model of Redevelopment Services by a Project Management Consultant
As a co-operative housing or premises society initiates process of redevelopment of its property, the
first legal requirement it needs to fulfill in terms of relevant circular the department of co-operation is
appointment of a project management consultant ( pmc ).
Appointment of pmc lays down foundation of entire redevelopment as s ucces s ful completion of
redevelopment largely depends upon ability, integrity, uprightnes s and trans parent and reas oned
approach of pmc. PMC s houl d be knowl e dge abl e on al l l e gal and cons tructi on as pe cts of the
redevelopment and should be aware of the redevelopment business so that he applies his knowledge
and imagination to various stages of redevelopment in a manner that the society gets the best of the
terms without compromising at all with safety aspects.
Although nature and quantum of redevelopment services to be provided by a pmc would differ from case
to case but a geheralized model list is presehted below as prepared oh the basis of experiehce of pgv
project management consultants. A society may select all or any of the services depending upon facts
of its case and after interaction with the pmc.
1. Preparation of the feasibility report in respect of the subject property.
2. Taking steps for conveyance in favour of the society.
3. Invite and receive offers from interested developers and present the same before the managing
committee with recommendation about selection. The recommendation report to be speaking and
reasoned one.
4. Draft of tender document or offer form in consultation with the society. Such draft should also be
given to interested members of the society who may like to invite the developers in their respective
contacts. News paper advertisement, if considered necessary should be drafted in consultation with
the managing committee. PMC to analyse the tenders analysed and to apprise managing committee
about such analysis. Interested developers may seek clarifications from pmc.
5. To e ach i nte ndi ng de v e l ope r s ubmi tti ng the te nde r or offe r form, pmc s houl d i s s ue an
acknowledgement receipt.
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6. Best of the financial terms including corpus fund, larger area flats for each member, hardship
compensation, rental compensation at prevailing market rate with due increment in case of rental
market going up, best of amenities, strict legal terms in documentation, flexibility on the part of the
developer to meet peculiar needs of society and its members should be some of the prominent
criteria for selection of the developer.
7. Managing committee should tentatively select developer on consideration of recommendation by
pmc and general body meeting should take final decision on selection of developer.
8. Offers s hould be s ubmitted by all the developers in s tandard tender or offer format to allow
comparision.
9. PMC should draft Letter of Intent/Appointment on consideration of legal implications thereof.
10. PMC s houl d co-ordi nate wi th the offi ce of regi s trar of co-operati ve s oci eti es i n res pect of
redevelopment process and should draft correspondence, papers and documents to be submitted
to the office of the registrar in connection with redevelopment process.
11. Drafting of redevelopment documents as per society instructions and in consideration of applicable
laws including MOFA, 1963, MCS Act, 1960, Transfer of Property Act, 1882 and other property laws,
laws and regulations concerning developments and constructions, bye laws of the society.
12. Drafting documents on consideration of income tax, VAT, service tax laws.
13. Drafting/amending bank guarantee.
14. Drafting power of attorney.
15. Drafting individual agreement for each member.
16. Vetting TDR documentation from legal and taxes point of view.
17. Provision of services of the architect, engineer, chartered accountant, advocate in the matters
connected with the process of redevelopment.
18. As may be needed, attending meetings of members to explain and/or to interact with members.
19. Filing of income tax returns of the society for the years during which redevelopment project
continues.
20. Manner of disclosure of benefits of redevelopment in individual income tax returns of the members
in the relevant years, at the request of the member.
21. Drafting correspondence on behalf of the society with architect, municipal authorities and others in
relation to redevelopment project.
22. Drafting various circulars and letters and resolutions for the society in relation to matters connected
with redevelopment project.
23. Drafting documents should be in absolutely transparent manner.
24. PMC s ervices s hould primarily be in the nature of cons ultation and s ugges tions . Drafting of
documents should also done after thorough discussion of the issues at stake and after considering
views of the society and after explaining pmcs views. Ultimate decisions should be left upon
the society. PMC should help society in decisions making process but should not insist that the
decisions must be taken only in the manner it wants.
Redevelopment is a subject wherein lot of misconceptions lie; wherein lot of public concern lies. Drafting
of iron clad documents is the single most important aspect in any redevelopment and the pmc should be
10
able to assure that as far as redevelopment documentation is concerned, any member can compare the
same with that of any other society and the member will himself be able to satisfy that documentation is
the safest and takes care of every interest of the individual member as well as the interests of the society
as well as takes care of the safety of the committee members.
Drafti ng of tender form or offer form s houl d be s uch that onl y the devel opers wi th meri ts and
commitment would come forward as the drafting would clearly convey message that draftsman knows
construction laws, property laws, stamp duty, registration laws, revenue laws, regulatory provisions
and more importantly the draftsman knows the possible wrongs in the redevelopment projects and the
necessary plugs to prevent such possible wrongs. Before accepting assignment, pmc should understand
expectations of society and should explain the exact role that the pmc would perform in a particular
project. PMC appointment should be under proper documentation.
Nothing speaks better than actual work.
PART III. DEEMED CONVEYANCE IN FAVOUR OF A CO-OPERATIVE HOUSING SOCIETY OR OTHER
HOUSING ENTITY:
1. MOFA, the regulatory territorial law in the State of Maharashtra :
Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management
and transfer Act, 1963 (in this article referred to as the Act ) popularly known as MOFA was
enacted initially for a temporary period of five years to regulate the promotion of construction, sale,
management and transfer of flats in the State of Maharasthtra. The duration of the Act was extended,
from time to time till 31st March, 2005. Thereafter, probably inadvertently, the Act was not extended
for some time. lt was realized that the acute shortage of housihg ih several areas of the State of
Maharashtra, especially in metropolitan cities like Mumbai, Pune, Nagpur, etc., was increasing day by
day due to continuous flow of population from rural areas to urban areas and in order to prevent the
mal-practices it was expedient to have this Act as perpetuity. Therefore, an Ordiance was promulgated
extending the Act perpetually with a retrospective effect from 1st April, 2005.
2. Time bound provisions for formation of housing entity and execution of conveyance :
Provisions contained in the Act since its enactment in 1963 did require a promoter including a
builder, developer, a cooperative housing society constructing flats for sale to take steps to form
a housing entity i.e. either a co-operative society, company or apartment ownership association,
by submitting application for formation of a co-operative society or a company or taking steps
for constitution of apartment ownership association, as the case may be, within 4 months from
the date on which 60% of the total number of the flats are sold. The original Act also provided
for mandatory conveyance of the subject land and building in favour of the housing entity either
within the agreed time period, and in the absence of any agreed time period, within 4 months from
the date of registration of cooperative society or a company or constitution of the association of
apartment owners, as the case may be.
3. MOFA in its original form did not have required teeth :
However, the Act did not have required teeth and as a consequence hardly any promoter must have
formed housing entity within the prescribed time period and in majority of the cases conveyances
have not been executed by the promoters for years. Although, it is possible to form a housing
entity of the flat purchasers without co-operation of the promoter but legal remedies available for
enforcing conveyance at the civil court for specific performance or at consumer court for deficiency
in s ervice and/or at criminal court for violation of MOFA have been time cons uming and the
problems are more compounded in the cases wherein landlord has expired and the legal heirs are
scattered.
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4. Implementation of MOFA has not been effective so far :
The very objective of MOFA since its enactment is to effectively prevent abuses and malpractices
due to acute shortage of housihg ih the several areas of the State. Goverhmeht has realized that
the implementation of the Act has not been effective enough particularly with reference to some
of its provisions with the result that the objective behind enactment of the Act has not been fully
achieved. Therefore, in the year 2005 Government initiated steps in an effort to remedy the situation.
5. Amendments carried out to MOFA and Rules :
It is in this background that effort of the Government in the form of amendments carried out by the
Amendment Act 2005 passed in the year 2008 and followed by amendment in rules as notified on
27 09 2010 is to be appreciation.
The amendments carried out by the Amendment Act 2005 and the MOFA Rules include provisions
for formation of a co-operative society within the prescribed time period and more importantly
provision for execution of conveyance in favour of the housing entity to be formed of flat purchasers
within the prescribed time period.
6. Amendments to the Act and Rules strengthen provisions for formation of housing entity and for
mandatory conveyance :
Amendments carried out to the Act and the Rules do s trengthen provis ions for formation of
a co-operative society, in case the promoter fails to do so within the prescribed time period.
Predominantly, the Act has been amended to strengthen the provision of execution of convenience
in favour of the housing entity within the prescribed time period by providing for issuance of
unilateral deemed conveyance in favour of the housing entity.
7. Flat agreements must be duly stamped and registered :
For registration of a co-operative society, the flat purchasers should elect a chief promoter at their
meeting. For enforcing formation of a co-operative society and for enforcing unilateral deemed
conveyance under amended MOFA and amended rules, it is necessary that agreements between the
promoter and the flat purchasers are duly stamped and registered as required under the provisions
of under Bombay Stamp Act 1958 and Registration Act 1908 respectively.
8. Competent Authority :
Task of implementation of amended provisions concerning mandatory formation of cooperative
society and granting unilateral deemed conveyance has been entrusted to a Competent Authority
being an officer not below that rank of District Deputy Registrar of Co-operative Societies to be
appointed by the State Government.
9. Provisions for mandatory formation of a co-operative society :
It is provided that if the promoter fails within the prescribed time period to submit an application
to the Registrar for registration of society in the manner provided in the Maharashtra Co-operative
Societies Act, 1960, the Competent Authority may, upon receiving an application, in the prescribed
form, affixed with court fee stamps of Rs. 1,000/-, from the persons who have taken flats from
the promoter, after verifying authenticity of the applicants request and after giving the concerned
promoter a reasonable opportunity of being heard, direct the District Deputy Registrar, Deputy
Registrar or, as the case may be, Assistant Registrar concerned, to register the society. Such
application may be presented either by the Chief Promoter or an authorised agent accompanying
an authority letter duly signed by the applicant and accepted by the authorised representative. An
authorised agent may be an advocate or any other person.
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10. Provisions for unilateral deemed conveyance :
10.1. Submission of Application :
If the promoter fails to execute conveyance in favour of the housing entity, within the prescribed
period, the members of such housing entity may make an application in prescribed form affixed
with court fee stamps of Rs. 2,000/- to the concerned Competent Authority accompanied by the
true copies of the registered agreements for sale, executed with the promoter by each of the
individual members of the housing entity who have purchased flats and all other relevant documents
(including the occupation certificate, if any ), for issuance of unilateral deemed conveyance in its
favour and to have it registered. Such application may be presented either by the housing entity or
its authorised agent accompanying an authority letter duly signed by the applicant and accepted by
the authorised representative. An authorised agent may be an advocate or any other person.
10.2. Scrutiny and admission of application :
On receipt of an application, office of the Competent Authority s hall endors e date of receipt
thereupon and shall as soon as possible, examine it and satisfy itself that the person presenting it
has authority to do so and that it conforms with all the provisions of the Act and the Rules made
thereunder.
If the Competent Authority is satisfied that the application is complete in all respect, it shall cause
the application to be registered, as admitted, in the appropriate register to be maintained in the
prescribed form.
However, if the application is not complete, the Competent Authority may send a notice in the
prescribed form to the applicant/s to rectify the defects or comply with such requirements, as it
may deem fit to conform with all the provisions of the Act, and the Rules, within a period of fifteen
days of the receipt of such notice, which for sufficient cause may be extended for a further period
of not more than 15 days.
If the stated defect in an application is rectified, the Competent Authority shall cause it to be
admitted and register the application in the appropriate register to be maintained in prescribed form.
10.3. Written statement by the Opponent:
On admitting the application, the Competent Authority s hall, within a period of fifteen days
thereof, issue a notice in prescribed form to the opponent/s requiring him/them to file the written
statement on the day, date and place as may be specified therein. Such notice shall be served on
the opponents by registered post acknowledgment due or under certificate of posting on the last
known address.
On the date fixed as aforesaid, the opponent shall appear either in person or through his advocate
or his authorized represehtative before the Competeht Authority ahd shall file a writteh statemeht.
10.4. Hearing of application :
The Competent Authority shall issue necessary notice to all the parties regarding the date fixed for
hearing the application and publish or display the date fixed for the hearing thereof on its office
notice board sufficiently in advance.
On the date of hearing, if the applicant appears and the opponent or any of the opponents, does
not or do not appear, as the case may be, the Competent Authority shall decide the application
ex-parte. However, if before deciding the application, the Opponent appears and shows a sufficient
cause for his non-appearance on the earlier occasion(s), he shall be heard in the matter as if he had
appeared before the Competent Authority on the earlier day.
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If on the date fixed for hearing or on any other day to which the hearing may be adjourned, the
applicant does not appear either in person or by his authorised representative, when application is
called for hearing, the Competent Authority may dismiss the application.
If, on the date fixed for hearing or any other day to which the hearing may be adjourned, the
Opponent/s does/do not appear either in person or through his/their authorised representative, when
the application is called for hearing, the Competent Authority may decide the same on merits after
hearing the applicant or his authorised representative, if present.
10.5. Production and inspection of documents:
The parties shall file the documents referred to in the pleadings at the time of filing application
and written statement, as the case may be. If either party satisfies the Competent Authority that
any document is relevant and the same is in the custody of the opposite party, the Competent
Authority may, by an order in writing, direct such party to produce such document on the next date
of hearing. If the party so ordered, fails to produce such documents on the next date of hearing,
the Competent Authority may draw adverse inference against such party and hearing of the original
application shall not be postponed till filing of such documents or for the reasons of such non
compliance of the order.
If the Competent Authority is satisfied that the documents required to be produced, cannot be
brought before the Competent Authority for sufficient reasons like its volume or otherwise, the
Competent Authority may allow the opposite part to take inspection of the documents within seven
days from the date of order of such inspection.
If the Competent Authority is satisfied that the opponent had no access to the documents earlier and
the filing of additional statement is necessary, it may allow the filing of such additional statement.
10.6. Procedure for hearing the application:
On receipt of the statement of the opponent, the applicant shall prove contents of the application
and also deal with the contention of defences. The opponent likewise may file reply in support of
the defence on the next date, if he so desires. No cross-examination of any of the parties shall be
permitted.
On receipt of the replies, the Competent Authority shall proceed to hear oral arguments of the
parties and after hearing, shall close the proceedings for the order.
10.7. Decision on application within 6 months :
The Competent Authority shall, within reasonable time and in any case not later than six months
from the date of recei pt of the appl i cati on, after maki ng s uch enqui ry as may be deemed
necessary it and after verifying the authenticity of the documents submitted by the parties and
after hearing them and giving the parties sufficient opportunities as required under the Act and
the principles of natural justice, pass such appropriate order as it deems fit, as provided under
the Act.
10.8. Issuance of unilateral deemed conveyance by the Competent Authority :
On being satisfied that it is a fit case for issuing such certificate, the Competent Authority shall
issue a certificate to the Sub-Registrar or any other appropriate Registration Officer under the
Registrar or any other appropriate Registration Officer under the Registration Act, 1908, certifying
that it is a fit case for enforcing unilateral execution of conveyance deed conveying the right,
title and interest of the promoter in the land and building in favour of the applicant, as deemed
conveyance.
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10.9. Registration of unilateral deemed conveyance :
Along with the unilateral instrument of conveyance, the Sub-Registrar or the concerned appropriate
registration Officer shall, notwithstanding anything contained in the Registration Act, 1908, issue summons
to the promoter to show cause why such unilateral instrument should not be registered as deemed
conveyance and after giving the promoter and the applicant(s) a reasonable opportunity of being heard,
may, on being satisfied that it was fit case for unilateral conveyance, register that instrument as deemed
conveyance. .
PART IV : ISSUES IN DEEMED CONVEYANCE
Maharas htra Owners hip Flats (Regulation of the promotion of cons truction, s ale, management
and transfer Act,1963 (in this article referred to as the Act ) popularly known as MOFA regulating
promotion of construction, sale, management and transfer of flats in the State of Maharashtra did
have onerous provisions inter alia for formation of a housing entity and execution of conveyance in
a time bound frame.
However, the Act did not have required teeth. Provisions of deemed conveyance have recently
become operative. However, law and the procedure are yet to be digested. Here is an attempt to
address some of the issues involved.
First of all the provisions of deemed conveyance can be activated only when the promoter (including
builder/developer ) has failed to execute conveyance within the prescribed time period. MOFA
continues to provide that only when no time period for conveyance has been agreed upon between
the flat purchasers and the promoter then the prescribed time period of four months from the date
of formation of the housing entity i.e. a co-operative society, an association of apartment owners or
a limited company. In all likelihood, the promoter will mention a longer time period for conveyance in
new agreements thereby making the deemed conveyance provisions inoperative during such agreed
time period.
Buyers have little or no choice but to sign the flat purchase agreements with the promoters on dotted
the lines.
Although, the law continues to provide an option to form a society, an association or a company and
duty has been cast upon promoter to form such housing entity within four months from the date of
sale of minimum 60% of the flats, amended provisions provide expeditious process for formation only
society type of entity. Formation of a company would not require a promoters involvement. Vaguely
worded amended provisions providing that if a promoter fails to form a society within prescribed time
period, then the Competent Authority may, upon receiving an application from the persons who have
taken flats from the promoter, direct the concerned co-operative registrar to register a society, cannot
mean that the amended provisions require that all the flat purchasers must apply for registration of
society as only 60% or above would suffice. This is because the Circular requiring that minimum 60%
of flat purchasers can file application for registration of society continues to be operative. Amended
provisions are only for facilitating expeditious registration of a society on default by promoter. If a
view is taken that all the flat purchasers would have to apply for registration of a society then the
very provisions enabling expeditious registration of a society would get defeated as there may be a
flat purchaser being a relative of the promoter or a flat purchaser interested in acting for the benefit
of the developer for some reasons who may decline to join in formation of the society. In the matter
of registration of society, Court has, even in the pre-amended provisions, taken a logical and upright
view that a builder/developer has no locus standi to oppose such registration as his rights to sell his
flats do not in any manner get prejudiced by society registration. The most important issue arises
with regard to requirement of stamping and registration of individual flat agreements. Amended
provisions require that application for deemed conveyance will be accompanied by the true copies
15
of the registered agreements for sale, executed with the promoter by each individual member of the
housing entity. Such wordings have led to a view that the purchase agreements in respect of all the
flats have to be stamped and registered. Such a view appears to be incorrect for reasons including
that provisions enabling formation of a society under an application by only 60% of the flats continue;
amended provisions are beneficial intending for expeditious formation of society; wordings of the
amended provisions refer to the members and not to flat purchasers. What will happen in a case
when all the agreements including, chain of agreements in cases of resales of flats, are either not
fully stamped or not registered Pre-amended provisions enabled societies to get conveyance without
reference to stamp duty payment and registration aspects of the individual flat purchase agreements.
Even if some of the flat purchase documents are not stamped, the government does not lose revenue,
because government in any case collects stamp duty on present market value of the entire property
minus stamp duty paid on flat purchase agreements with the promoter. Further, the government can
always enforce payment of stamp duty on unstamped or deficiently stamped documents. The society
can recover the loss due to defective documents of members billing the members. If non-payment
of stamp duty by a few flat purchasers results into non conveyance, it would mean an advantage
to delinquent promoter. Once a housing entity has been legally formed, conveyance should be an
automatic process as otherwise requirement of stamp duty and registration by all the flat purchasers
would tantamount loop holes against the spirit of the amended beneficial provisions.
Under the pre-amended provisions we have court decisions directing promoters to convey property in
favour of a housing entity without going into details, and very rightly and logically so, as to whether
stamp duty and registration requirements were complied with in respect of all flat transactions or not.
Under the law, if some flat agreements with promoter are unstamped or unregistered, the promoter
is more responsible if he has collected more than 20% of the price of the flat.
A view is being propagated that for obtaining deemed conveyance certificate, documents like building
plans, commencement certificate, occupation certificate, completion certificate, property cards,
would be required to be furnished by the society. Such a view seems grossly misplaced as such
requirements would be directly in contradiction to letter and spirit of amended provisions relating
to deemed conveyance which even otherwise have not specified such requirements. Providing
such documents are the duty and obligations of the promoter unless he has given the same to the
housing entity. It seems, such additional requirements are propagated so that non availability of such
documents can lead to unreasonable demands.
Competent Authority would only issue a certificate to Registration Authority that it is a fit case for
granting unilateral deemed conveyance in favour of the housing entity.
Thereafter, the Registration Authority would serve summons to promoter to show cause as to why
unilateral instrument of conveyance should not be registered as deemed conveyance. Apprehensions
are being expressed as to what kind of hearing will once again take place. It is submitted that the
Registration Authority cannot in any case review the decision already taken by the Competent
Authority that it is a fit case to grant unilateral deemed conveyance. Powers of Registering Authority
will have to be confined to as provided in the Registration Act,1908 in respect of verification of
documents and identity of persons appearing before it. No time limit has been specified within which
Registration Authority would have to act but in the absence of substantial powers and duties on its
part, unreasonable delay may not be possible.
16
Dr. Sanjay Chaturvedi a Commerce Graduate from University of Mumbai and was
conferred PhD degree in Real Estate Finance from University of Mumbai. He has
presented many papers in National and International conferences and published.
He authored eight books on various aspects of Real Estate and allied subject. He
is visiting faculty at Department of Commerce, University of Mumbai, NMIMS
University and other reputed institutions.
At present he is Executive Editor of Accommodation Times and Maharashra Co-
operative Housing Society Times. He is also Director at Accommodation Times
Institute of Real Estate Management and Research Foundation. In the past he had
freelanced for Reuters and other international news agencies
17
Laws governing co- operative societies,
trusts, real estate transactions
Dr. Sanjay Chaturvedi
18
19
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NAME : Shri. Manoj V. Daisaria
ADDRESS : 801, Skyline Epitome, Kirol Road, Nr.Jolly Gymkhana,
Vidyavihar (West),
Mumbai 400 086.
DATE OF BIRTH : 29th November, 1959
QUALIFICATION : H.S.C. K.J.Somaiya College, Mumbai.
GD ARCH. 1982 From Rachna, Sans ad Academy of
Architecture, Mumbai.
B. ARCH. 1982 From Academy of Architecture, Mumbai.
EXPERIENCE : - Joined Fathers Firm in 1982
- Handled Project From Major, Developers in and around
Mumbai, Goa, Ahmedabad
- At p re s e nt i nv ol v e d i n d e v e l op me nt of I.T. Parks ,
Multiplexes , Malls Corporate Offices , Res idential Town
Ship, Slum Redevelopment etc.
- Also involved in Charitable works like Hospitals, Schools,
Cemetery etc
PROFESSIONAL EXPERIENCE AND ACHIEVEMENT
Our firm is appoihted as Froject Mahagemeht Cohsultaht ih Category 'A' by
Maharashtra Housing Area Development Authority.
Shri. Mahoj Daisaria was appoihted as a special ihvitee for District Flahhihg
Committee appointed by Government of Maharashtra in the year 2000.
Shri MahojDaisaria was Fresideht of FEATA (lNDlA) (Fracticihg Ehgiheers
Architect & Town Planners Association) (2007 2009)
21
y FACTS y FIGURES y FORMULAE
COMPILED BY:- MANOJ DAISARIA
22
DCR 35(4) Compensatory FSI (Floor
Space Index):
Percentage Premium
Residential 35% 60%
Industrial 20% 80%
Commercial 20% 100%
DCR 33(7), 33(9), 33(10)
y This FSI admissible for Rehab. component - without charging
premium.
DCR 33(5) & Re-development in suburbs (1.0 +TDR)
y Fungible fsi on consumed fsi of existing structure - without
charging premium.
y This fungible FSI for rehab. component to be used for over and
above eligible area for existing tenants and not for sale
components.
Applicability :-
1) Not applicable if I.O.D. is issued but building is not
completed and apply at the option of owner. New
rules can be availed.
2) If I.O.D. is issued for layouts / sub-divisions This
rule to be applicable to balance plot potential.
3) The fungible FSI is useable as regular FSI.
4) Not permissible in C.R.Z
23
y RESIDENTIAL BUILDING
y COMMERCIAL BUILDING
y 33(7) REDEVELOPMENT OF CESSED BUILDINGS
IN ISLAND CITY
y REDEVELOPMENT IN SUBURBS
IMPACT ON:-
PROVISIONS PRIOR TO AND AFTER
MODIFIED D.C. REGULATION
y OPEN SPACES
24
FREE OF FSI AREA AS PER EARLIER REGULATION.
FREE OF FSI AREA AS PER PRESENT POLICY
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y 33(7) REDEVELOPMENT ON CESSED BUILDING ON ISLAND
CITY
y 33(7) REDEVELOPMENT ON CESSED BUILDING ON ISLAND
CITY
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FREE OF FSI AREA AS PER EARLIER REGULATION
29
30
B. E. ClVlL Distihctioh passed ih the year 1976
Fetired as Chief Ehgiheer Devlopmeht Flah Of Muhicipal Corporatioh Of
Greater Mumbai
He is well cohversaht with Developmeht Cohtrol Fegulatiohs Of Greater
Mumbai h worked ih M C G M for 35 years
Shri S. Y. GHATE
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Dr. Girish Kumar received Ph.D. degree in Electrical Engineering from IIT Kanpur in
1983. From 1983 to 1985, he was a Research Associate in the Electrical Engineering
Department, Univ. of Manitoba, Winnipeg, Canada. From 1985 to 1991, he was
an Assistant Professor in the Electrical Engineering Department, Univ. of North
Dakota, Grand Forks, USA. Since 1991, he is at IIT Bombay, where he is currently
a Professor in the Electrical Engineering Department. His areas of interest are:
Microstrip Antennas and Arrays, Broadband Antennas, Microwave Integrated
Circuits and systems. He has written more than 200 papers in the international and
national journals and conference proceedings. He is an author of the book entitled
Broadband Microstrip Antennas published by Artech House, USA in 2003.
He has been working on hazards of microwave radiation for the last one decade.
He has written several reports and given presentations at various forums on the
topic related to Cell Phone and Tower Radiation Hazards and Solutions.
He is also chairman of the company Wilcom Technologies Pvt. Ltd. , which is an
IIT Bombay incubated company. Wilcom has developed more than 100 products,
such as, mobile phone jammers, signal enhancers, radiation shield, antennas,
power dividers, couplers, filters, amplifiers, etc.
48
Cell Towers - an income avenue or a menace ?
Dr. Girish Kumar
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Ms. Neha Kumar completed her B.Tech. in Industrial Biotechnology from Anna University, Chennai in May
2009. Immediately after graduation, she joined as Director of Wilcom Technologies Pvt. Ltd. , which is
an IIT Bombay incubated company. She specializes in the study of biological effects of electromagnetic
radiation emitted from devices such as, cell phones, cell towers, TV and FM towers, Wi-Fi, etc. on
the health of humans, birds, animals and the environment. She has studied several 100s of journal
publications and websites on this subject and has interacted with several experts, researchers, doctors
and patients around the world who have been affected with prolonged exposure to mobile tower/phone
radiation. Her report Biological effects of Electromagnetic Radiation co-authored with Prof. Girish
Kumar, IIT Bombay has received great appreciation and several media articles have appeared based on
the same. She has presented papers at international conferences and written articles for newspaper and
college magazines. She has also given talks at KEM Hospital, Mumbai, Xavier Institute of Engineering,
Rotary Clubs, Environmental Hazards Protection Forum - Penang, Malaysia and several other places.
She is involved with radiation measurements from cell tower antennas at several residential areas and
offices, and has found a strong correlation between high radiation levels and health effects like headaches,
fatigue, memory problems, joint pains, miscarriages and even cancer.
Recently she started her own company NESA (stands for Non- Ionizing Electromagnetic Radiation
Shi el di ng Al ternati v es ), whi ch carri es out radi ati on meas urement and has cel l tower radi ati on
measurement products as well as several radiation shielding products like Radiation Shield, Window
Shielding Films, Curtains, Wall Papers etc.
Ms. Neha Kumar
57
Cell Towers Radiation Hazards and Solutions
Neha Kumar
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Dr. K S Parthasarathy is formerly Secretary, Atomic Energy Regulatory Board (AERB) and formerly
Raja Ramanna Fellow, Department of Atomic Energy. A Ph.D in medical physics from the University
of Leeds, UK, he was a consultant to the International Atomic Energy Agency (IAEA) Vienna. He
was a Research Associate in the University of Virginia Medical Centre, Charlottesville, USA. He has
assisted AERB in developing radiation protection policies on radiation installations, equipment and
practices. He is a free lance science journalist registered with the EurekAlert news agency of the
American Association for the Advancement of Science, the British Medical Association, the American
Medical Association and the NucNet, The Communications Network for Nuclear Energy and Ionizing
Radiation
Dr. K S Parthasarathy
72
Do Not Fear The Tower
Shri K.S. Parthasarathy
Pos s ible ris ks from cell tower/phone radiation have been a topic of dis cus s ion in the media. With
breathtaking progress in mobile phone technology, there has been unbridled increase in the use of mobile
phones nationwide. Cell towers have sprung up everywhere. The agents selling protective accessories
have attributed all types of diseases and symptoms to these towers and encouraged the public to believe
in them.
Cell tower radiation has a million times less energy than that of x-rays or gamma rays. It cannot damage
the cells in the body to change some of them into rogue cells, which multiply uncontrollably to cause
cancer. It may just warm up the tissue. Since all the studies on this subject have been conducted for a
period of less than 20 years, we may still have to go a longer way before we get definitive proof. But the
results obtained thus far are reassuring.
After a comprehensive review of the relevant literature, the World Health Organization, in its factsheet
number 304, stated thus: Considering the very low exposure levels and research results collected to
date, there is no convincing scientific evidence that the weak RF [radio frequency] signals from base
stations and wireless networks cause adverse health effects...
The International Agency for Research on Cancer of the WHO has the remit to decide whether an agent
or an activity is a carcinogen or possibly carcinogenic to humans. In The Lancet Oncology of July 1,
2011, the IARC indicated that it mainly depended on the interphone study and the pooled analysis by a
Swedish group led by Lennart Hardell to arrive at a decision. The interphone study supported by WHO
is the largest case study of the possible relation between mobile phones and brain tumours conducted
till date.
Patently absurd
The researchers of the interphone study did not observe any increase in the risk of brain cancer with the
use of mobile phones. There were suggestions of an increased risk of glioma at the highest exposure
levels, but biases and error prevent a causal interpretation , they concluded.
The IARCs list of possibly carcinogenic agents has 275 items; it includes coffee, pickled vegetables,
certain fatty acids in coconut oil used to make soaps, talcum powder and so on. None of them received
as much media publicity as cell phone radiation.
The International Commission on Non-Ionizing Radiation Protection is the standard body which sets
up guidelines for matters pertaining to radiation. Most countries enforce the ICNIRP guidelines. On a
recommendation from an Inter Ministerial Committee, India enforced a radiation limit of one tenth of the
ICNIRP guidelines nationwide. Indias guidelines have a safety factor of 500. Lowering the guidelines for
cell tower/phone radiation was a symbolic gesture because people wanted it.
It appears to have set a bad precedent; specialists must decide such matters on the basis of scientific
merit and not on popular sentiments. The IMC did a great disservice by selectively listing a number of
reports which showed adverse effects while ignoring many reports which did not show any adverse
impact. The IMC did s ay that there is no conclus ive proof of harm from cell tower radiation. But
scaremongers demand lower levels quoting the IMCs report. The IMC unwittingly gave them leeway.
A ce l l phone may caus e a s mal l i ncre as e i n body te mpe rature i n are as cl os e to the phone .
Thermoregulatory mechanisms such as blood flow reduce the heat, establishing equilibrium, in about
six minutes. Thereafter, there will not be any increase in temperature. So it is patently absurd to say that
using a phone longer multiplies the risk.
73
Shri Sushil Solanki, IRS is presently posted as Commissioner of Service Tax,
Mumbai . He joi ned Indi an Revenue s ervi ce i n the year 1985. He i s al s o a
Chartered Accountant. He completed MSc in Fiscal Studies from University of
Bath, England in 1995 where he secured first rank in the university. He has worked
at many places like Mumbai, Delhi, Pune, Bangalore and Surat. In Delhi, he was
working in the Minis try of Finance where he was involved in Budget making
for Govt of India. During 1994, he was associated with introduction of Service
Tax in India. He is also closely associated with formulation of GST (Goods and
Service Tax ) in India. He has been part of number of committees set up by Govt
on issues relating indirect taxes. He has authored books on Excise Audit and
other subjects. He was conferred with prestigious Presidential Award in 2001 for
meritorious service. He was one of the member of Expert Group, which formulated
and introduced a professional system of Audit, known as EA 2000, in the Central
Excise department. He also introduced Computer Assisted Audit Technique tool
for audit in Excise and Service Tax.
74
Shri A. R. Krishnan is B.Com. (Hons.), Grad. C.W.A., F.C.A. (22nd rank in Inter CA) practicing as a
Chartered Accountant since 1981.
His present areas of expertise and practice are Service Tax. He has authored a Publication Guide to
Service Tax published by Western India Regional Council (WIRC) of Institute of Chartered Accountants
of India (ICAI) and the Continuing Profes s ional Education Committee of the Ins titute of Chartered
Accountants of India, New Delhi in 2002. He has contributed to the study material on service tax when
it was first introduced in CA final as a subject. He has also written a detailed paper on Service Tax
on Cross Border Transactions for International Tax & Finance Conference organized by Bombay
Chartered Accountants Society (BCAS) in 2006 and 2012. He has been contributing to BCAS Referencer
Diary in the area of Service Tax for the past 11 years. He has been writing a regular column on service
tax for the newsletter published by the Western India Regional Council of the Institute of Chartered
Accountants of India for the past 12 years readership of over 50000 professionals. He lectures on
Service tax at various Forums, Seminars and Conferences and also contributes articles on service tax
in various periodicals. As of now he has spoken over 1000 places all over India in various forums
including at National Academy of Customs, Excise and Narcotics, Bhandup, Mumbai [a training forum
for Government Officers].
He is regularly providing inputs to the ICAI, Bombay Chartered Accountants Society, Chamber of Tax
Consultants and the Government of India in the area of service tax by way of pre-budget and post-
budget memorandum.
He is/has been a member of various committees of ICAI, WIRC, Bombay Chartered Accountants Society
and Chamber of Tax Consultants.
He has been featured as one of the top 10 indirect tax advisors in India based on a survey conducted
by International Tax Review an International journal published from London in April, 2011.
Shri A. R. Krishnan
75
Service tax Issues
Shri A. R. Krishnan
(w.r.t. Redevelopments, Ordinary Maintenance of Co-operative Societies, repairs to properties, renting of
properties, cell tower spaces, trusts etc.)
1. Taxability of revenue streams of a Co-operative Society:
S l .
No.
Nature of Revenue Streams Taxability
(a) Members contribution towards repairs, muncipal taxes,
water charges, security, lift maintenance, sinking fund etc.
(b) Transfer premium paid by outgoing members
(c) (i) Space given to
(a) erect hoarding
(b) cell towers etc.
(ii) Space given to exhibit advertisement in societys
hoarding
2. Renting of flats/residential dwellings by flat owners
Service by way of renting of residential dwelling for use as residence is covered under the negative
list.
Would renting of residential dwellings be liable for service tax under the following scenario?
Sl.
No.
Scenario Departments view in
Education Guide
ARKs Views to be
discussed
(i) res i denti al hous e taken on
rent is used pre-dominantly
for comme rci al or non-
residential use
Not covered in the negative
list entry
(ii) If a hous e i s gi ven on rent
and the s ame i s us ed as a
hotel or a lodge
Trans acti on not cov e re d
i n the ne gati v e l i s t e ntry
be caus e the pe rs on taki ng
i t on re nt i s us i ng i t for
commercial purpose
(iii) Furnished flats given on rent
for temporary s tay ( a few
days)
Such renti ng as res i denti al
dwelling for the bona fide use
of the pers on or hi s fami l y
for a reasonable period shall
be residential use; but if the
same is given for a short stay
for di ffe re nt pe rs ons ov e r
a pe ri od of ti me the s ame
would be liable to tax.
76
Sl.
No.
Scenario Departments view in
Education Guide
ARKs Views to be
discussed
(iv) House given on rent is used
partly as residence and partly
for non-res idential purpos e
like office of lawyer, doctor
etc.
Services not naturally bundled
i n the ordi nary cours e
of bus i ne s s he nce to be
treated as provision of service
which attracts highest amount
of service tax.
May be considered as renting
of commercial property [para
9.2.2. of EG]
Residential dwelling means any residential accommodation, but does not include hotel, motel, inn,
guest house, campsite, lodge, house boat, or like places meant for temporary stay. [ para 4.13.1of
CBEC Education Guide]
3. Partial reverse charge / Reverse Charge for a Co-operative Housing Society (CHS) [Payment
of Service tax as recipient of Service] Notification No. 30/2012-ST dated 20.6.2012.
Sl. No. Nature of Service Normal Scenario Co-operative Society
Scenario
Service
Provider
liability
Service
recipient
liability
Service
Provider
liability
Co-
operative
Society
Liability
(i) Goods Trans port age ncy
service
Nil 100% - 100%
(see note 1)
(ii) Le gal Se rv i ce s to bus i ne s s
entity
Nil 100% Exempt
(See note 2)
-
(iii) Renting of motor vehicles, by
non-corporate s to corporate
business entity
100% -
(see note 2)
Abatement claimed Nil 100%
(see note 3)
Abatement not claimed 60% 40%
(iv) supply of manpower or security
s ervi ces by non-corporate to
corporate business entity
25% 75% 100% -
(see note 2)
(v) works contract (e.g. repairs etc.)
by non-corporates to corporate
business entity
50% 50% 100% -
(see note 2)
Note: 1. In the case mentioned in Sl. No. (i) above co-operative societies would be liable if it pays
the freight.
77
2. in other cases co-operative society is not liable to pay service tax as a recipient of service
since it is possible to argue that it is not a business entity . Business entity means any
person ordinarily carrying out any activity relating to industry, commerce or any other
business or profession [Section 65B(17)]
3. 100% of the abatement amount which is 40%.
4. Tax implications of redevelopment agreements between builders and society
Fortune CHS Limited ( Fortune ) has a 2 storey building, consists of 12 members, each member
owning one residential unit and an undivided interest in the land. Being constructed in 1960, the
society has entered into a re-development agreement with M/s. Aggressive Limited ( Aggressive ),
the salient aspects of which are as under:
(i) Fortune has granted to Aggressive the entire development rights pertaining to the said land
whose FSI is 1.0 (almost 80% consumed) and on which under the TDR Scheme an additional
FSI of 1.0 is permissible.
(ii) In consideration for the grant of the development rights, Aggressive would construct a new
building consisting of 6 storeys and 24 members, at its own cost (by utilizing the entire FSI
including loading TDR purchased from open market) by demolishing the existing structure
within 18 months.
(iii) The existing 12 members would occupy 12 units in the new building, each unit of the existing
member having about additional 30% carpet area.
(iv) The existing members would also be entitled to a rent compensation of Rs. 40,000/- per month
till the time the new structure is developed.
(v) Aggressive will also contribute an amount of Rs. 3 crore to the corpus of Fortune.
(vi) The balance 12 units would be marketed by Aggressive to prospective buyers.
(vii) The agreement clearly provides that the ownership of the land shall remain with Fortune until
the construction is complete. However, Fortune is obliged to convey an undivided interest in
the land on which the residential complex is constructed by being a party to the agreement
which Aggressive will have with each new member.
(viii) Stamp duty has been paid on the said redevelopment agreement.
(ix) Aggressive has by an irrevocable licence from Fortune to enter the land for the performance
of its obligations.
What are the service tax implications as between Fortune and Aggressive?
78
RELEVANT TEXT OF THE LEGAL PROVISIONS/DEPARTMENTS EDUCATION GUIDE
I. Relevant Provisions of the Finance Act, 1994.
a. Definition of Service
(44) service means any activity carried out by a person for another for consideration, and
includes a declared service, but shall not include-
(a) an activity which constitutes merely,-
(i) a transfer of title in goods or immovable property, by way of sale, gift
or in any other manner; or
(ii) such transfer, delivery or supply of any goods which is deemed to
be sale within the meaning of clause (29A) of article 366 of the
Constitution; or
(iii) a transaction in money or actionable claim;
(b) ;
(c) ...
Explanation 1. -.,-
Explanation 2.-.
Explanation 3.- For the purposes of this Chapter,-
(a) an unincorporated association or a body of persons, as the case may be,
and a member thereof shall be treated as distinct persons;
(b) ..
Explanation 4.-;
(54) works contract means a contract wherein transfer of property in goods involved in the
execution of such contract is leviable to tax as sale of goods and such contract is for the
purpose of carrying out construction, erection, commissioning, installation, completion,
fitting out, repair, maintenance, renovation, alteration of any movable or immovable
property or for carrying out any other similar activity or a part thereof in relation to such
property;
b. Negative list of services
66D. The negative list shall comprise of the following services, namely:-
(a) .... to (f)....
(g) selling of space or time slots for advertisements other than advertisements broadcast by
radio or television;
(h) ...... to (l)....
(m) services by way of renting of residential dwelling for use as residence;
(n) .... to (q).....
79
c. Declared services
66E. The following shall constitute declared services, namely:-
(a) renting of immovable property;
(b) construction of a complex, building, civil structure or a part thereof,
including a complex or building intended for sale to a buyer, wholly or
partly, except where the entire consideration is received after issuance of
completion certihcate by the competent authority.
Explanation.- For the purposes of this clause,-
(I) the expression competent authority means the Government or any
authority authorised to issue completion certihcate under any law
for the time being in force and in case of non-requirement of such
certihcate from such authority, from any of the following, namely:-
(A) architect registered with the Council of Architecture constituted under
the Architects Act, 1972; or (20 of 1972.)
(B) chartered engineer registered with the Institution of Engineers (India);
or
(C) licensed surveyor of the respective local body of the city or town or
village or development or planning authority;
(II) the expression construction includes additions, alterations,
replacements or remodelling of any existing civil structure;
(c).... to (g)....
(h) service portion in execution of works contract;
(i).....
d. Valuation of taxable services for charging service tax
67. (1) Subject to the provisions of this Chapter, where service tax is chargeable on any
taxable service with reference to its value, then such value shall -
(i) in a case where the provision of service is for a consideration in
money, be the gross amount charged by the service provider for such
service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not
wholly or partly consisting of money, be such amount in money
as, with the addition of service tax charged, is equivalent to the
consideration;
(iii) in a case where the provision of service is for a consideration which
is not ascertainable, be the amount as may be determined in the
prescribed manner.
(2) Where the gross amount charged by a service provider, for the service
provided or to be provided is inclusive of service tax payable, the value
of such taxable service shall be such amount as, with the addition of tax
payable, is equal to the gross amount charged.
80
II. Relevant Provisions of the Mega Exemption Notification No. 25/2012 dated 20.6.2012
1. .. to 5.
6. Services provided by-
(a) an arbitral tribunal to
(b) an individual as an advocate or a partnership firm of advocates by way of legal services

to,-
(i) an advocate or partnership hrm of advocates providing legal services;
(ii) any person other than a business entity; or
(iii) a business entity with a turnover up to rupees ten lakh in the preceding
hnancial year; or
(c) a person represented on an arbitral tribunal to an arbitral tribunal;
7. .. to 27..
28. Service by an unincorporated body or a non- profit entity registered under any law for the
time being in force, to its own members by way of reimbursement of charges or share of
contribution -
(a) ..;
(b) .; or
(c) up to an amount of five thousand rupees per month per member for sourcing of goods
or services from a third person for the common use of its members in a housing society
or a residential complex;

III. Relevant Provisions of the Abatement Notification No. 26/2012 dated 20.6.2012
In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of
1994) (hereinafter referred to as the said Act), and in supersession of notification number 13/2012-
Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i) vide number G.S.R. 211 (E), dated the 17th March, 2012, the Central
Government, being satisfied that it is necessary in the public interest so to do, hereby exempts
the taxable service of the description specified in column (2) of the Table below, from so much of
the service tax leviable thereon under section 66B of the said Act, as is in excess of the service
tax calculated on a value which is equivalent to a percentage specified in the corresponding entry
in column (3) of the said Table, of the amount charged by such service provider for providing the
said taxable service, unless specified otherwise, subject to the relevant conditions specified in the
corresponding entry in column (4) of the said Table, namely;-
81
Sl.
No.
Description of taxable service Percentage Conditions
12. Construction of a complex, building, civil
structure or a part thereof, intended for a
s ale to a buyer, wholly or partly, except
where entire consideration is received after
is s uance of completion certificate by the
competent authority,-
(i ) CENVAT cre di t on i nputs
used for providing the taxable
s e rv i ce has not be e n take n
unde r the prov i s i ons of the
CENVAT Credit Rules, 2004;
(i i ) The v al ue of l and i s
included in the amount charged
from the service receiver.
(a) for a residential unit satisfying both the
following conditions, namely:
25
(i) the carpet area of the unit is less than
2000 square feet; and
(ii) the amount charged for the unit is less
than rupees one crore;
(b) for other than the (a) above. 30

C. For the purposes of exemption at Serial number 12
The amount charged shall be the sum total of the amount charged for the service including
the fair market value of all goods and services supplied by the recipient(s) in or in relation
to the service, whether or not supplied under the same contract or any other contract, after
deducting-
(i) the amount charged for such goods or services supplied to the service provider, if any;
and
(ii) the value added tax or sales tax, if any, levied thereon:
Provided that the fair market value of goods and services so supplied may be determined in
accordance with the generally accepted accounting principles.
IV. Relevant Provisions of Notification No. 30/2012 dated 20.6.2012
In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of
1994), and in supersession of (i) notification of the Government of India in the Ministry of Finance
(Department of Revenue), No. 15/2012 Service Tax, dated the 17th March, 2012, published in the
Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 213(E), dated
the 17th March, 2012, and (ii) notification of the Government of India in the Ministry of Finance
(Department of Revenue), No. 36/2004 Service Tax, dated the 31st December, 2004, published in
the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 849 (E),
dated the 31st December, 2004, except as respects things done or omitted to be done before such
supersession, the Central Government hereby notifies the following taxable services and the extent
of service tax payable thereon by the person liable to pay service tax for the purposes of the said
sub-section, namely:-
I. The taxable services,-
(A) (i) .;
(ii) prov i de d or agre e d to be prov i de d by a goods trans port age ncy i n re s pe ct of
transportation of goods by road, where the person liable to pay freight is,-
82
(a) any factory registered under or governed by the Factories Act, 1948 (63 of
1948);
(b) any society registered under the Societies Registration Act, 1860 (21 of
1860) or under any other law for the time being in force in any part of
India;
(c) any co-operative society established by or under any law;
(d) any dealer of excisable goods, who is registered under the Central Excise
Act, 1944 (1 of 1944) or the rules made thereunder;
(e) any body corporate established, by or under any law; or
(f) any partnership hrm whether registered or not under any law including
association of persons;
(iii) ..;
(iv) provided or agreed to be provided by,-
(A) .., or
(B) an individual advocate or a hrm of advocates by way of legal services, or
(C)..
to any business entity located in the taxable territory;
(v) provided or agreed to be provided by way of renting of a motor vehicle designed to
carry passengers to any person who is not in the similar line of business or supply
of manpower for any purpose or service portion in execution of works contract by
any individual, Hindu Undivided Family or partnership firm, whether registered or not,
including association of persons, located in the taxable territory to a business entity
registered as body corporate, located in the taxable territory;
(B) .;
(II) The extent of service tax payable thereon by the person who provides the service and the
person who receives the service for the taxable services specified in (I) shall be as specified
in the following Table, namely:-
Table
Sl.
No.
Description of a service Percentage of service
tax payable by the
person providing
service
Percentage of service
tax payable by the
person receiving the
service
2 i n res pect of s ervi ces provi ded or
agreed to be provi ded by a goods
trans port age ncy i n re s pe ct of
transportation of goods by road
Nil 100%
5 i n res pect of s ervi ces provi ded or
agreed to be provided by individual
advocate or a firm of advocates by
way of legal services
Nil 100%
83
Sl.
No.
Description of a service Percentage of service
tax payable by the
person providing
service
Percentage of service
tax payable by the
person receiving the
service
7 (a) i n res pect of s ervi ces provi ded
or agreed to be provided by way of
renting of a motor vehicle designed
to carry passengers on abated value
to any person who is not engaged in
the similar line of business
Nil 100 %
(b) in res pect of s ervices provided
or agre e d to be prov i de d by way
of re nti ng of a motor v e hi cl e
de s i gne d to carry pas s e nge rs on
non abated value to any person who
is not engaged in the similar line of
business
60% 40%
8. i n res pect of s ervi ces provi ded or
agre e d to be prov i de d by way of
supply of manpower for any purpose
or security services
25% 75 %
9. i n res pect of s ervi ces provi ded or
agre e d to be prov i de d i n s e rv i ce
portion in execution of works contract
50% 50%
Explanation-I.- The person who pays or is liable to pay freight for the transportation of goods by
road in goods carriage, located in the taxable territory shall be treated as the person who receives
the service for the purpose of this notification.
Explanation-II.- In works contract services, where both service provider and service recipient is the
persons liable to pay tax, the service recipient has the option of choosing the valuation method as
per choice, independent of valuation method adopted by the provider of service.
2. This notification shall come into force on the 1st day of July, 2012.
V. Relevant Questions of Education Guide on development /re-development agreements
6.2.1 What would be the liability to pay service tax on flats/houses agreed to be given by builder/
developer to the land owner towards the land /development rights and to other buyers. If
payable, how would the services be valued?
Here two important transactions are identifiable: (a) sale of land by the landowner which is not
a taxable service; and (b) construction service provided by the builder/developer. The builder/
developer receives consideration for the construction service provided by him, from two
categories of service receivers: (a) from landowner: in the form of land/development rights;
and (b) from other buyers: normally in cash.
Construction service provided by the builder/developer is taxable in case any part of the
payment/development rights of the land was received by the builder/ developer before the
issuance of completion certificate and the service tax would be required to be paid by builder/
developers even for the flats given to the land owner.
84
It may be pointed out that in a recent judgement passed by the Mumbai High Court in the case
of Maharashtra Chamber of Housing Industry and Others vs. Union of India [012-TIOL-78- HC-
Mum-ST] has upheld the Constitutional validity of levy of service tax, under clauses (zzzh) and
(zzzzu) of section 65, on similar construction services provided by a builder. A relevant portion
of the judgement is reproduced below-
29. The charge of tax under Section 66 of the Finance Act is on the taxable services defined
in clause (105) of Section 65. The charge of tax is on the rendering of a taxable service.
The taxable event is the rendering of a service which falls within the description set out
in sub-clauses (zzq), (zzzh) and (zzzzu). The object of the tax is a levy on services which
are made taxable. The fact that a taxable service is rendered in relation to an activity
which occurs on land does not render the charging provision as imposing a tax on land
and buildings. The charge continues to be a charge on taxable services. The charge is
not acharge on land or buildings as a unit. The tax is not on the general ownership of
land. The tax is not a tax which is directly imposed on land and buildings. The fact that
land is subject to an activity involving construction of a building or a complex does not
determine the legislative competence of Parliament. The fact that the activity in question
is an activity which is rendered on land does not make the tax a taxon land. The charge
is on rendering a taxable service and the fact that the service is rendered in relation to
land does not alter the nature or character of the levy. The legislature has expanded the
notion of taxable service by incorporating within the ambit of clause (zzq) and clause
(zzzh) services rendered by a builder to the buyer in the course of an intended sale
whether before, during or after construction. There is a legislative assessment underlying
the impos ition of the tax which is that during the cours e of a cons truction related
activity, a service is rendered by the builder to the buyer. Whether that assessment
can be challenged in assailing constitutional validity is a separate issue which would be
considered a little later. At this stage, what merits emphasis is that the charge which has
been imposed by the legislature is on the activity involving the provision of a service by
a builder to the buyer in the course of the execution of a contract involving the intended
sale of immovable property.
30. Parl i ament, i n bri ngi ng about the amendment i n ques ti on has made a l egi s l ati ve
assessment to the effect that a service is rendered by builders to buyers during the
cours e of cons truction activities . In our view, that legis lative as s es s ment does not
impinge upon the constitutional validity of the tax once, the true nature and character
of the tax is held not to fall within the scope of Entry 49 of List II. So long as the tax
does not fall within any head of legislative power reserved to the States, the tax must of
necessity fall within the legislative competence of Parliament. This is a settled principle
of law, since the residuary power to legislate on a field of legislation which does not fall
within the exclusive domain of the States is vested in Parliament under Article 248 read
with Entry 97 of List I.
Value, in the case of flats given to first category of service receiver will be the value of
the land when the same is transferred and the point of taxation will also be determined
accordingly.
6.2.2 What would be the service tax liability in the following model - land is owned by a society,
comprising members of the society with each member entitled to his share by way of an
apartment. Society /individual flat owners give No Objection Certificate (NOC) or permission
to the builder/developer, for re-construction. The builder/developer makes new flats with same
or different carpet area for original owners of flats and additionally may also be involved in one
or more of the following: (i) construct some additional flats for sale to others; (ii) arrange for
85
rental accommodation or rent payments for society members/original owners for stay during
the period of reconstruction; (iii) pay an additional amount to the original owners of flats in
the society.
Under this model, the builder/developer receives consideration for the construction service
provided by him, from two categories of service receivers. First category is the society/
members of the s ociety, who trans fer development rights over the land (including the
permission for additional number of flats), to the builder/developer. The second category of
service receivers consist of buyers of flats other than the society/members. Generally, they
pay by cash.
Re-construction undertaken by a building society by directly engaging a builder/developer will
be chargeable to service tax as works contract service for all the flats built now.
86
Advocate Kishor Lulla is B.Com, L.L.B. & by profession, he is Sales Tax Consultant since 1980. He is
practicing in the firm T.B.Lulla & Company at Sangli, which is established in 1959. He is having two
Partners, Adv.Amol Mane who looks after Sales Tax matters & C.A. D.S.Palkar who takes care of Income
Tax & Audit work. His son Amit has also joined him as Sales Tax Consultant.
He is partner in the firm of Shah Lulla Estate Developers since 1993, which is in land development
business in Sangli district. He is Managing Committee Member of Builders Associations of India, Sangli.
He is also member of Promoters and Builders Association, Sangli.
He was Managing Committee Member of STPAM from 2005-06 to 2008-2009 and he was Hon. Joint
secretary of The Sales Tax Practitioners Association of Maharashtra for the years 2010-11 and 2011-
12. He was Vice President of STPAM for the year 2011-12. He was the President of STPAM in the year
2012-13. At present he is Immediate Past President of this Association. He was the First President
unoppos ed elected out of Mumbai during las t 60 years . He got the bes t convener award of this
Association for conducting 21 seminars on taxation throughout the State of Maharashtra during the
year 2007-2008. He presented paper on Backward Area of Incentives at R.R.C. in Mahabaleshwar in the
year 1996. As a paper writer in seminars, study circles & coaching classes, he spoke on various topics
of VAT & also on Right to Information Act. In the residential refresher course at Udaypur in Jan 2010,
he received the best paper writer award by STPAM on the subject Goods & Services Tax, which was
presented for the 1st time in STPAM. He also presented 1st time in STPAM a paper on Local Body
Tax in seminar held at Mumbai on 4th June 2013. A book Fun Tax Stic is released on 26th July
2013 consisting of 62 cartoons drawn by him relating to taxation field were published in the Sales Tax
Review from June 2008 to July 2013.
Mr. Lulla is past president of Taxation Consultants Association, Sangli. Other than taxation field, he does
a lot of social work of Consumer Awareness since 1986. He has collected confidential or concealed
information of various Government & Semi-government departments under R.T.I. He is activist of Akhil
Bharatiya Grahak Panchayat and President of Grahak Panchayat Sangli. He is treasurer of Jankalyan
Samittee, Sangli which works for students from North East. He is past president of Bharat Vikas
Paris had, Sangli. He is Chairman of Lulla Charitable Trus t through which donations are given for
educational and charitable purposes.
He continuously writes articles on taxation, consumer awareness, Right to Information in newspapers
& magazines. A number of talks on these subjects were delivered in Radio & T.V.
Adv. Kishor Lulla
87
VAT Issues (in redevelopments, in
repairing properties)
Adv. Kishore Lulla
When C A. Tarun Ghia called me to present a paper on the subject, I accepted the challenge to myself
becaus e neither I have come acros s this topic in my practice nor there are co-operative s ocieties
having far old buildings which require redevelopment in my nearby district areas. Nothing is said about
redevelopment or SRA scheme under the MVAT Act. So I had to study various judgments and apply
my mind therein. This paper is legal based paper instead of Law book based paper. Hence there is
wide scope to form different opinion than expressed by me if you come across any other decision not
referred by me or some other type of agreement. I have divided my subject in three parts. First is about,
what is redevelopment and types of redevelopment, second, historical background of works contract as
applicable to land owners, contractors, builders and developers. Lastly VAT on redevelopment of property
by taking into consideration the concepts of sale, sale of goods, sale price, consideration, price, works
contract, barter and exchange. Entire concept of my paper may be changed after the pending decision
before the Apex Court in the cases of M.C. H.I., L. & T. and K. Raheja. Hence one may use this paper
only for reference purposes.
I. What is redevelopment and why it is needed?
1. Housing redevelopment refers to the process of reconstruction of residential/commercial
premises by demolishing the existing structure and construction of a new building as per
approvals from the Municipal Corporation. It ideally works best when a society is in dire need
of extension but is starved of the necessary funds for it. Developers, on their part, are also on
the lookout for properties with unused development rights where they can build a new and
higher structure where the additional storey can be sold for a tidy profit. Existing members of
the society receive new flats in the reconstructed building of an area equal to or more than
the area of their existing flats, as per the terms of the agreement between the developer
and the society in question. With redevelopment, the members get a new building, more
space and monitory benefits without spending any penny from their own pocket. Developer
can offer extra amenities like a gymnasium, car parking, gardens and security system.
2. Transfer of ownership under redevelopment agreements
An important feature of a typical redevelopment agreement is that the land owner allows using
development rights to the developer in consideration of the developer providing a specified
agreed portion of the constructed area to the land owner free of cost. The land belongs and
remains always with the owner. The developer constructs building on owners land and incurs
cost by using material in relation to the portion to be handed over to the owner. The issue
arises as to whether such a transaction will amount to taxable works contract and liable to
tax? Whether it will be a Sale or Works Contract under MVAT Act? Or it will be a Works
Contract or exchange or combination of both?
3. Some types of redevelopment agreements are presumed as under -
i. A case where the society gives its building/premises to the builder or contractor for re-
development. In this case the builder/contractor constructs the building and allots the
flats to the members with same sq.ft of area or higher sq.ft of area of the society and
sells the remaining FSI/flats.
88
ii. A case where the land lord/house owner/ SRA (Slum Redevelopment Authority) scheme
in which the owner gives the old structure to the builder/contractor and the contractor
re-construct the building on the same plot and gives the Flat/s with same sq.ft or higher
sq.ft, or cash/cheque to the owner.
iii. A case where the society approves the contractor for the re-development of the society.
In this case society gives the contract of re-development to the contractor/builder for
re-development, allots the flats to its members and the society sells the other flats.
4. Some related definitions/ terms/ explanations under various Acts for ready reference
Before giving above mentioned details let me put before you s ome background his tory
for warming up. Sale of Goods Act, 1930 is the base of every Sales Tax Act. Prior to the
enactment, relevant sections were part and parcel of Indian Contract Act, 1872. The Sale of
Goods Act was enacted by adopting some of the sections of Indian Contract Act. The major
changes are in respect of consideration . In Contract Act, it may be either cash or kind
for doing or for not doing something. But in the Sale of Goods Act, there is only money
consideration and for delivery of goods and passing of property there in. Both Acts operate
independently. Transactions which is subject to governance of Indian Contract is outside the
provision of Sale of Goods Act and vice versa.
There was a Government of India Act, 1935 which empowered Provincial Government of levy
tax on sale of goods. Immediately after independence, we, people of India, offered to our-self
Constitution of India. We also adopted all the Laws then in force including Indian Contract Act
and Sale of Goods Act.
i. Sale u/s 2(24) of MVAT Act . w.e.f 20.06.2006
Sale means a sale of goods made within the State for cash or deferred payment or
other valuable consideration but does not include a mortgage, hypothecation , charge or
pledge and the words sell , buy and purchase , with all their grammatical variations
and cognate expression, shall be construed accordingly .
Explanation For the purpose of this clause,-
a) -----
b) i)-----
ii) the transfer of property in goods (whether as goods or in some
other form) involved in the execution of a [works contract including],
an agreement for carrying out for cash, deferred payment or other
valuable consideration, the building, construction, manufacture,
processing, fabrication, erection, installation, htting out, improvement,
modihcation, repair or commissioning of any movable or immovable
property.
iii) -------
iv) -------
v) ---------
vi) --------
shall be deemed to be a sale.
89
ii. Sale Price u/s. 2(25)of MVAT Act
Sale Price means the amount of valuable consideration paid or payable to a dealer for
any sale made including any sum charged for anything done by the seller in respect of
the goods at the time of or before delivery thereof, other than the cost of insurance for
transit or of installation, when such cost is separately charged.
iii. Dealer u/s. 2(8) of the MVAT Act
Dealer means any person who, for the purposes of or consequential to his engagement
in or, in connection with or incidental to or in the course of, his business buys or sells,
goods in the State whether for commission, remuneration or otherwise and includes
a. ------
b. ----
c. ------
d. any society, club or other association of persons which buys goods from, or
sells goods to, its members.
Hence, a co-operative society or owner of slum area under SRA gives for
redevelopment the land of their ownership, to a builder free of cost, in
exchange of built up premises for them or for their members will not be
liable to pay tax under MVAT Act, as there is no buying and selling activity
amongst the society, members and builder.
iv. Goods u/s. 2(12) of MVAT Act
goods means every kind of movable property not being newspapers, actionable claims,
money, stocks, shares, securities or lottery tickets and includes live stocks, growing crop,
grass and trees and trees plants including the produce thereof including property in such
goods attached to or forming part of the land which agreed to be severed before sale or
under the contract of sale.
v. Sale u/s. 54 of Transfer of Property Act, 1882
Sale is a transfer of ownership in exchange for a price paid or promised or part-paid
and part-promised.
Contract for sale: A contract for the sale of immovable property is a contract that a sale
of such property shall take place on terms settled between the parties.
It does not, of itself, create any interest in or charge on such property.
vi. Price u/s. 2(10) of Sale of Goods Act
Price means the money consideration for a sale of goods.
If goods are given without any consideration, the transaction amounts to a gift but not
a sale of goods. Similarly, exchange of goods for others without any consideration
amounts to a barter or exchange. Thus money is the only consideration for sale of
goods.
vii. Contract of Sale & Agreement to sell
Contract of sale u/s 4 of Sale of Goods Act
90
A contract of sale is a contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for a price.
Essential elements of a contract of sale are -
a) The parties must be competent to contract.
b) There must be mutual consent
c) There must be transfer of property i.e. there must be transfer of general
property in goods and not merely specihc property
d) The buyer must pay or promise to pay, a price in money.
Agreement to sell:
The transfer of property in the goods that is to take place at a future time, or subject to
some conditions, thereafter to be fulfilled, it is called an agreement to sell. An agreement
to sell becomes a sale when the time elapses or the conditions are fulfilled subject to
which the property in the goods is to be transferred.
viii. Distinguish between Sale and Works Contract (Contract for work & labour)
i) Sale of goods does not include labour - Works Contract includes labour.
ii) Sale of goods involves only movable properties- Works contract involves
movable and immovable properties.
iii) Tax is levied upon sale of goods - Tax is levied upon the goods excluding
the labour.
Usually, in our study for works contract we go through the above definitions. But for
our subject proper, i.e. Redevelopment of Property we have to study the concept of
exchange and compare it with sale and works contract
ix. Exchange - Section 118 of the Transfer of Property Act
When two persons, mutually transfer the ownership of one thing in exchange for the
ownership of another, neither thing or, both things being money only, such a transaction
is called an exchange .
The definition of exchange is not limited to immovable property. Exchange is, therefore,
not only the exchange of lands, but also the barter of goods. If one of the items that
are transferred is money, the transaction is not an exchange but a sale because the
price is money, only. However, money, in one form, may be exchanged for money
in another form. A sale should, always, be for a price. On the other hand, in the case
of an exchange, the transfer of ownership of one thing is not completed by paying a
price or a promise thereof, but, only by a transfer of another thing, in return. So, a
transaction, where the consideration for the transfer of certain properties is shares in a
limited company, is considered to be an exchange. [Commissioner of I-Tax vs. Motor
and General Stores (P) Ltd AIR 1968 SC 200]
x. Exchange & Sale
The difference between exchange and sale is that in the former no fixed money price
is placed upon, either of the properties exchanged, while in the later there is either a
money consideration or equivalent thereof in property at fixed valuation.
91
xi. Sale and Barter
a) Under this the property or ownership is of goods is transferred immediately
to the buyer - Barter involves exchange of goods.
b) Sale involves price or money as consideration for sale of goods - Barter
does not involve money as consideration.
c) A sale is an executed contract - This may or may not require a contract.
xii. Accretion
In property law, the gradual increase in land through natural processes; for example, the
creation of land caused by the deposit of sediment on a shoreline of a river or ocean.
The new land becomes the property of the owner of the property to which it is attached.
In Gannon Dunkerley (9 STC 353) their Lordships of the Supreme Court were dealing
with a building contract, which they held was one and indivisible and did not involve a
sale of the material used by the contractors in the execution of the said contract as a
sale of a chattel. Apart from the consideration that the contract was one and indivisible,
their Lordships also pointed out another difficulty in taking the view that it involved a
sale of goods and that was that the material which passed from the contractor to the
owner of the building in the execution of the contract did not pass to the other party to
the contract as movable property since it formed a part of the building and an accretion
to the building and, therefore, immovable property. Their Lordships did not take the view
in that case that every service contract was necessarily one and indivisible.
II. Historical background of works contract as applicable to land owners, contractors, builders and
developers-
1. Position before 46th Constitution amendment
Prior to 46th Constitutional Amendment, the deemed sale in the nature of works contract was
considered to be outside the scope of taxation of sale of goods. It does not mean there were
no works contracts. Entry 54 of State list prior to 46th amendment reads as under
54 Taxes on sale and purchase of goods other than newspapers, subject to the provisions
of entry 92A of List I
i. M/s Gannon Dunkerley & Co (SC)(9STC 353)(1st Apr 1958)
Supreme Court observed the ingredient of Sale at page 365:
Thus, according to the law both of England & of India, in order to
constitute a sale it is necessary that there should be an agreement between
the parties for the purpose of transferring title of goods, which of course
presupposes capacity to contract, that it must be supported by money
consideration, and that as result of the transaction property must actually
pass in the goods..So also if the consideration for the transfer was not
money, but other valuable consideration, it may then be exchange or barter
but not a sale. And if under the contract of sale, title to the goods has not
passed, then there is an agreement to sell & not a completed sale.
Each word of this para, has to be read very minutely which gives entire idea of
this subject. Due to above judgment, the works contract remained out of levy
92
till Constitution inserted sub clause 29A in article 366 by 46th amendment (2nd
February 1983).
ii. Contract of sale vis a vis contract of work.
Following two decisions are against our subject proper, means in these cases the
transaction is treated as Sale . But these decisions are given to understand the
stretched meaning of Sale inspite of there being exchange of some part out of
the total goods sold.
a) Hyderabad Chemicals and Fertilizers Ltd (13STC 812) (
A.P.H.C.)(12 June 1962)
The assessee-company manufacturing fertilizer mixtures agreed to supply
to a s ugar factory fertilizer mixture cons is ting of certain chemicals at a
fixed price and groundnut oil-cake. It was agreed between the parties that
the sugar factory should supply the assessee ground nut oil-cake at a fixed
price to be used in the mixture. The question was whether the assessee was
entitled to deduct from the turnover, which was the price of the mixture the
sum representing the value of the groundnut oil-cake supplied by the sugar
factory.
Held (I) that the contract between the parties was not for work and labour,
or a mixed contract of labour and materials called works contract in the
Act, but a contract for the sale of the furnished fertilizer mixture de hors its
ingredients.
(II) that the fact that i ns tead of recei vi ng cas h, the as s es s ee recei ved
groundnut oil-cake of that value towards part-price of the fertilizer mixture
could not make the transaction anything but a sale of the entire fertilizer
mixture and therefore the assessee was not entitled to deduct from the
turnover the value of the ground nut oil-cake.
b) Chandra Bhan Gosain (14STC 766) (S.C.)(Orissa)(5th April 1963)
The appellant manufacturing and supplying large quantities of bricks to a
company under a contract and was received payment. There was a clause
in the contract providing that land will be given free by the company. The
appellant contended that the contract was only for labour or for work done
and material found, and that there was really no sale of any goods on which
the tax could be levied.
Held, (I) that under the contract there was a transfer of property in the earth
to the appellant by the company.
(II) that although the contract did not use the word sale there was also
a transfer of property in the bricks from the appellant to the company for
consideration and, therefore, there was a sale liable to sales tax.
(III)the fact that under the contract the bri cks had to be manufactured
according to certain specifications, and , therefore, the appellant had to
bestow a certain amount of skill and labour in the manufacture of the bricks
did not affect the question. The essence of the contract was the delivery of
the bricks and it was a contract for the transfer of chattels qua chattels.
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c) Article 265 of the Constitution
Article 265 of Constitution of India specifically provides that No tax shall be
levied or collected without the Authority of law .
Thus any fee or tax levied by the State cannot be enforced unless State has
authority under the Act to collect. For this purpose, the state has to issue
notification under the provisions of the specific Act. In absence of such
notification levy of tax or fee is illegal
2. Position after 46th Constitution amendment
The 46th amendment to the Constitution of India resolved the above judicial embargo by
widening the scope of expression sale by amending definition of sale under Article 366(29A)
to include in its scope the deemed sale in the nature of works contract.
Article 366 (29A) tax on the sale or purchase of goods includes-
a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods
for cash, deferred payment or other valuable consideration;
b) a tax on transfer of property in goods (whether as goods or in some other form) involved
in the execution of a works contract;
c) ----------
d) ----------
e) ----------
f) ----------;
and such transfer, delivery or supply of any goods shall be deemed to be a sale of those
goods by the person making the transfer, delivery or supply and a purchase of those goods
by the person to whom such transfer, delivery or supply is made.
i. Purshottam Premji (26 STC 38)(S.C.)(M.P.) (13 April 1970)
In this case, Hon. Apex Court held that from the definition of sale of M.P. Sales Tax Act,
it is clear that before a transaction can be considered as a sale; there must be a transfer
of property in goods. Without such transfer, there cannot be any sale. If the property
at all relevant time remains with the employer and not with the contractor, there is no
question of contractor transfer in any property in it to the employer. The Apex Court also
held that the primary difference between a contract for work or service and a contract
sale of goods is that in the former there is in the person performing work or rendering
service no property in the thing produced as a whole notwithstanding that a part or
even the whole of the materials used by him may have been his property. In the case of
a contract for sale, the thing produced as a whole has individual existence as the sole
property of the party who produced it, at some time before delivery, and the property
therein passes only under the contract relating thereto to the other party for price. Mere
transfer of property in goods used in the performance of a contract is not sufficient; to
constitute a sale. There must be an agreement express or implied relating to the sale of
goods and completion of the agreement by passing of title in the very goods contracted
to be sold. Ultimately the true effect of an accretion made pursuant to a contract has to
be judged, not by an artificial rule that the accretion may be presumed to have become
94
by virtue of affixing to a chattel, part of that chattel, but from the intention of the parties
to the contract.
ii. Builders Association of India (73 STC 370 dt. 31.03.1989)
State Government tried to levy works contract tax on all receipts in 1986 which was
challenged by Builders Association of India. Thereafter in Amended Act 1989, tax was
levied on material used in the execution of works contract. It was held that It is not
correct to say that the properties that are transferred to the owner in the execution of
a works contract are not the goods involved in the execution of the works contract,
but a conglomerate, that is the entire building that is actually constructed. The 46th
amendment does no more than making it possible for the States to levy sales tax on
the price of goods and materials used in works contracts as if there was a sale of such
goods or materials.
Hon. Court at page 386 stated that
Ultimately the question whether the cost of the goods supplied by a building contractor
in the course of the construction of building could be subjected to payment of sales tax
was finally resolved by this Court in State of Madras v. Gannon Dunkerley. (Madras) Ltd
[1958] 9 STC 353.
In this case Court held that on a true interpretation the expression sale of goods meant
an agreement between the parties for the sale of the very goods in which eventually
property passed. In a building contract where the agreement between the parties was
that the contractor should construct the building according to the specifications contained
in the agreement and in consideration therefore received payment as provided therein,
there was neither a contract to s ell the materials us ed in the cons truction nor the
property passed therein as movables. The court further held that the expression sale of
goods was at the time when the Government of India Act, 1935, was enacted, a term
of well-recognized legal import in the general law relating to sale of goods and in the
legislative practice relating to that topic and should be interpreted in entry 48 in List II
in schedule VII of the Government of India Act, 1935, as having the same meaning as
in the Sale of Goods Act, 1930. The Court further held that in a building contract which
was one, entire and indivisible, there was no sale of goods and it was not within the
competence of the Provincial Legislature under entry 48 in the List II in schedule VII of
the Government of India Act, 1935, to impose a tax on the supply of the materials used
in such a contract treating it as a sale. The above decision though it was rendered on
the basis of the provision in the Government of India Act, 1935, is equally applicable to
the provisions found in entry 54 of List II of the Seventh Schedule of the Constitution.
Hon. Court at page 396 of BAI stated that
It was in order to overcome the effect of the Gannon Dunkerley decision Parliament
amended article 366 by introducing sub clause (b) of clause (29-A). Sub-clause (b) of
clause (29-A) states that tax on the sale or purchase of goods includes among other
things a tax on the transfer of property in the goods (whether as goods or in some
other form) involved in the execution of a works contract. It does not say that a tax on
the sale or purchase of goods included a tax on the amount paid for the execution of a
works contract. It refers to a tax on the transfer of property in goods (whether as goods
or in some other form) involved in the execution of a works contract. The emphasis is
on the transfer of property in goods (whether as goods or in some other form). The
latter part of clauses (29-A) of article 366 of the Constitution makes the position very
clear. While referring to the transfer, delivery or supply of any goods that takes place as
95
per sub-clauses (a) to (f) of clause (29-A), the latter part of clause (29-A) says that such
transfer, delivery or supply of any goods shall be deemed to be a sale of those goods
be the person making the transfer, delivery or supply and a purchase of those goods
by the person to whom such transfer, delivery or supply is made. Hence, a transfer of
property in goods under sub-clause (b) of clause (29-A) is deemed to be a sale of the
goods involved in the execution of works contract by the person making the transfer and
a purchase of those by the person to whom such transfer is made.
This was again reconfirmed by Hon. Apex court in Gannon Dunkerly and in Larsen and
Toubro Ltd. (88 STC 204)(17th Nov 1992)
Hon. Court at page 403 of B.A.I. stated that
The Constitutional amendment in article 366(29-A) read with the relevant taxation-entries
has enabled the State to exert its taxing-power in an important area of s ocial and
economic life of the community. In exerting this power particularly in relation to transfer
of property in goods involved in the execution of works contracts in building activity,
in so far as it affects the housing-projects of the under-privileged and weaker sections
of society, the State might perhaps, be pushing its taxation-power to the peripheries
of the social limits of that power and perhaps, even of the constitutional limits of that
power in dealing with unequals. In such class of cases building activity really relates to
a basic subsistential necessity. It would be wise and appropriate for the State to consider
whether the requis ite and appropriate clas s ifications s hould not be made of s uch
building-activity attendant with such social purposes for appropriate separate treatment.
These of course are matters for legislative concern and wisdom.
- Once this type of levy is accepted then, it is treated as normal sale. So
for levy of tax they must be two parties to the contract, there must be
contract, there must be consideration and also delivery of the goods. Same
principles are applicable to sec. 3, 4 & 5 of CST Act.
- In the dehnition of works contract the words `whether goods or in some
other form means movable or immovable. It is not appearance of goods
as in the concept of resale.
iii. K. Raheja Development Corporation(SC)(KAR)(141STC298)(5th May 2005)
Battle started amongst Builders & Developers due to this judgment.
FACTS:
The appellant a real estate developer entered into a development agreement with the
land owner and got the plan sanction and constructed residential apartment and before
construction, entered into a tripartite agreement with the intending purchaser with terms
that apartment will be handed over after completion and would get undivided interest in
the land also. The landowner will transfer the land directly to the society. The question
by appellant developer was whether a dealer liable to pay tax in respect of construction
contract as a works contractor?
HELD:
Works Contract defined under Karnataka Act is very wide not restricted to works contract
as commonly understood. The definition took in its ambit, any types of agreement
wherein the construction of building took place. So long as the agreement was entered
before the construction was complete it would be a works contract even if the developer
96
is not the owner, but however if the agreement was entered into after the flat or unit was
already constructed, there would be no Works contract.
Ratio of K. Raheja for Maharashtra
The situation, according to the Sales Tax authorities, has changed w.e.f. 20.06.2006 when
works contracts was defined under the Maharashtra Value Added Tax Act 2002. Clause
b (ii) of Explanation of Section 2(24) of the Act as mentioned above.
It will be seen that the definition relating to deemed sale as works contract is similar to
one under the Karnataka Act which formed the basis for the decision in K. Raheja case so
that, the ratio of that case may squarely apply to cases in Maharashtra. The explanation
makes it explicitly clear that transfer of property in goods involved in the execution
of works contract including an agreement for carrying out the building construction is
sale and accordingly liable to VAT. However, another view that can be taken is that the
amended definition merely provides instances of various types of works contracts and
whether a particular contract is for construction per se or for sale of flats, etc after they
are duly constructed is a matter to be decided on the facts of each case.
iv. Magus Construction P. Ltd., vs. Union of India(15VST17)(Gauhati)(15 May 2008)
K. Raheja decision had application where the land or interest in land is sold upfront and
thereafter construction is undertaken on the land, possession whereof is retained by the
Builder by way of lien on the land till construction is going on. This view gets support
from the judgment of Gauhati High Court in the case of Magus Construction Pvt. Ltd
wherein the judgment of K. Raheja was considered and distinguished. In large number
of cases of redevelopment in Maharashtra the value shown is composite.
v. Circular No. 12T of 2007 dt. 07.02.2007
All though meaning of works contract is provided in sec. 2(24) under MVAT Act, still
the transactions involving immovable property were not brought within this definition.
Hence the CST issued above mentioned circular in which the effect of amended position
is clarified. The effect of M/s. Rehab Housing Pvt. Ltd, DDQ dt 28.06.2004 wherein the
contract for cons truction of tenements along with the land is not treated as works
contract, was tried to be nullified vide this circular on or after 20.06.2006.
According to department, even if the price is composite price including land, still it can
be subjected to Sales Tax in view of K. Raheja and amended definition. Government has
granted deduction of land value as per Rule 58 (1A).
vi. MCHI & others vs. State of Maharashtra (51 VST 168) (10.04.2012)
The above position created by change in definition of sale as well as cir.12T of 2007
and R. 58(1A) is challenged before Hon. B.H.C. The Court upheld levy of VAT on under
construction contracts evidenced by agreements as per provisions of Maharashtra
Ownership Flats Act, 1963. The main thrust of judgment is the Act by making agreement
under MOFA, buyer gets some interests in the said flat/premises. The construction
thereafter will therefore amount to works contract.
vii. Decision by Apex Court awaited
The Law as pronounced by the Supreme Court in K. Rahejas case which has been given
legislative shape by defining works contract from 20.06.2006 and also by enacting the
Rule 58(1A) is however, still subject to further consideration by the Apex Court as the
matter now stands referred to the Larger Bench of Supreme Court in the case of Larsen
97
and Toubro Limited & another vs. State of Karnataka and another (17 VST 460). While
referring the matter to the Larger Bench, the Apex Court has called for reconsideration
of the ratio in the case of K. Raheja on the ground that it blurs the distinction between
works contract and a contract for sale of chattel as a chattel. It is hoped that the decision
of the Larger Bench would clarify whether the ratio in the case of K. Raheja would have
universal application or was restricted to the facts of the case. In this connection, it
is important to note that when the reference to the Larger Bench was brought to the
attention of the Bombay High Court in the case of MCHI, the Court observed that in K.
Rahejas case constitutional validity of the act was not in question but had arisen from
assessment proceedings and consequently, based on the facts of that particular case and
hence, giving hope that the principle need not be applied universally merely because
the Agreement for Sale is entered into while the construction is being carried on by the
Builder whether the construction activity is being carried on for and on behalf of the
prospective Flat buyer or in the Builders individual capacity are matters to be decided
on the facts of each case.
III. VAT on redevelopment of property
i. M/s. Davi Dass Gopal Krishnan and Others (20 STC 430)(SC)(10 Apr 1967)
In thi s cas e the i s s ue aros e as to whether other val uabl e cons i derati on wi l l i ncl ude
consideration other then money. Hon. Supreme Court has observed as under on page 444/445:
Bearing that in mind let us look at clause (ff) in section 2 of the principal Act in which the
said clause was inserted. The ingredients of the definition of purchase are as follows: (i) there
shall be acquisitions of goods; (ii) the acquisition shall be for cash or deferred payment or
other valuable consideration; (iii) the said valuable consideration shall not be other than under
a mortgage, hypothecation, charge or pledge. Clause (h) of section 2 defines sale thus:
sale means any transfer of property in goods other than goods specified in Schedule C for
cash or deferred payment or other valuable consideration but does not include a mortgage,
hypothecation, charge or pledge.
If we turn to the Sale of Goods Act, section 4 thereof defines a contract of sale of goods. It
reads:
A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for a price.
The essential requisites of sale are (i) there shall be a transfer of property or agreement to
transfer property by one party to another; and (ii) it shall be for consideration of money
payment or promise thereof by the buyer.
Now, coming to the expression price, it is no doubt defined in the Sale of Goods as money
consideration. Cash or deferred payment in clause (ff) of section 2 of the Act satisfies the
said definition. The expression valuable consideration has a wider connotation, but they
said expression is also used in the same collocation in the definition of sale in section 2(h)
of the Act. The said expression must bear the same meaning in clause (ff) and clause (h) of
section 2 of the Act. It may also be noticed that in most of the sales tax acts the same three
expressions are used. It has never be argued or decided that the said expression means
other than monetary consideration. These consistent legislative practices cannot be ignored.
The expression valuable consideration takes colour from the preceding expression cash or
deferred payment. If so, it can only mean some other monetary payment in the nature of cash
98
or deferred payment. We, therefore, hold that clause (ff) of section 2 of the Act is not void for
legislative incompetence. (Underlining ours)
Thus other valuable consideration used in definition reproduced above will have the meaning
as consideration in money terms only and not any other consideration.
ii. M/s. Radhas Printers v. State of Kerala (90 STC 201) (Kerala)(27th Aug 1992)
In this judgment also applying the law laid down by Hon. Supreme Court in Devi Dass Gopal
Krishnan, the Kerala High Court has held as under on page 205/206:
These decisions therefore cannot be treated to hold that other valuable consideration could
be goods or other property and that consideration need not be money consideration. In the
decisions in Sales Tax Commissioner v. Ram Kumar Agarwal (1967) 19 STC 400, the Allahabad
High Court held that other valuable consideration which occurs in section 2(h) of the U.P.
Sales Tax Act, 1948, must be interpreted on the basis of the rule of ejusdem generis to mean
cheques, bills of exchange or such other negotiable instruments and that they cannot cover a
case where no price is paid. The Supreme Court in the decision in Devi Dass Gopal Krishnan
v. State of Punjab (1967) 20 STC 430 held that the expression valuable consideration takes
colour from the preceding expression cash or deferred payment. Thus to constitute sale
within the meaning of the KDST Act, the same should be for consideration either in cash or
deferred payment, or other valuable consideration; and other valuable consideration in the
context must be interpreted to mean cheques, bills of exchanges or any such negotiable
instruments. (Underlining ours)
iii. State of Andhra Pradesh v. Hotel Sri Lakshmi Bhavan, Visakhapatnam (33 STC 444)(30th J an
1973)
Other valuable consideration is elaborated in this case, their Lordship observed as under:
The expression any other valuable consideration in section 2(n) must mean any monetary
payment other than payment in the nature of cash or deferred payment. Payment of money by
way of bank cheque, draft insurance, promissory note or any other monetary payment in the
nature of cash or deferred payment, must be construed as any other valuable consideration.
iv. Kansari Udyog Sahkari Samiti H.C.M.P. (43 STC 176)(30th Aug 1978)
The assessee, a co-operative society and a registered dealer under the M.P. General Sales
Tax Act, 1958, manufactured utensils made of kansa (an alloy) and supplied ready-made
kansa utensils to the customers for a consideration which was an equal weight of kansa in
the shape of old goods and some money considered as labour charges including profit. The
question was whether the transaction amounted to a sale within the meaning of section 2(n)
of the Act and was, therefore, liable to sales tax?
Held, that the words, other valuable consideration in section 2(n) have to be constructed
as equated with money, the word money being wider than cash. Therefore, in order
that a transaction may amount to a sale, the consideration has to be money. A transaction
wherein the substantial consideration is the supply of an equal amount of raw material and
the money part represents only the labour charges cannot be treated as amounting to a sale.
The transaction in the present case was, therefore, not liable to sales tax.
Unless a transaction amounts to a sale, it is not taxable under the Act, whether it be a works
contract or a transaction of barter or exchange.
99
v. Ram Kumar Agarwal (19 STC 400) (All. H.C.) (6th Sept 1966)
We, are however, not concerned here with any enactment where the term sale may have
a peculiar meaning for the purposes of that particular enactment. We are concerned with a
rather general taxing statute which purports to deal with sales in their ordinary legal sense
and which does not seem to go beyond that. The general legal conception of a sale is that of
a transmutation of a property of a right from one man to another in consideration of a sum
of money as opposed to barters, exchanges & gifts. (see Gill v Eagleston quoted that at page
58 in words and Phrases, vol. 38, West Publishing Company)
The term money has also a legal meaning as well as a popular sense both of which bar the
inclusion of bullion or metal of any kind as such in the concept of money . After all, we are
not concerned with that may pass for money in exceptional conditions or under the special
usages and customs of a peculiar or commercially backward or primitive society. Legally
speaking, money is just what is legal tender is, or what a tradesman is legally bound to
accept under the law of the country. The term money is explained in the Shorter Oxford
English Dictionary as follows:-
In modern use applies indifferently to coin and to such promissory documents representing
coin (esp. bank notes) as are currently accepted as a medium of exchange. .
The term cash is narrower than money . The words deferred payment or other valuable
consideration used in section 2(h) of the Act, merely enlarge the ambit of the consideration
beyond cash , but they do not, in my opinion, carry it outside the scope of the term money .
The words other valuable consideration are general as compared with the two preceding
more specific terms cash and deferred payment . Cash and deferred payment are also
considerations. Hence, all the conditions for the applicability of the ejusdem generis rule
are satisfied and the expression other valuable consideration can and must be interpreted
restrictively here. It seems intended to cover cheques and promissory notes or negotiable
instruments which serve the purpose of money in modern commercial practice and usage
and which can be included in the concept of money .
For the reasons given above, I concur with the interpretation of the definition of sale in
section 2(h) of the Act given by my learned brother.
vi. Hindustan Aeronautics Ltd. (55 STC 314) (S.C.)(Kar)(16th Dec. 1983)
A contract of sale of goods must be distinguished from a contract for work and labour. The
distinction is often a fine one. A contract of sale is a contract whose main object is the transfer
of the property in, and the delivery of the possession of, a chattel as a chattel to the buyer.
Where however the main object of work undertaken by the payee of the price was not the
transfer of chattel qua chattel, the contract is one of work and labour. The test is whether or
not the work and labour bestowed end in anything that can properly become the subject of
sale; neither the ownership of the materials, nor the value of the skill and labour as compared
with the value of the materials , is conclus ive, although s uch matters may be taken into
consideration in determining, in the circumstances of a particular case, whether the contract
was a substance one for work and labour or one for the sale of a chattel.
J udgments on exchange
vii. CIT v. Motors & General Stores P Ltd. (66 ITR 692) [SC]
The question for consideration was whether the transaction of sale or exchange?
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The Respondent Co. transferred to the Zamindar and Zamindarini all the assets of cinema
house for a consideration of Rs. 1.20 Lakhs in the shape of preference share in a sugar co. of
face value of Rs. 1.20 lakhs. The Supreme Court held that sale is transfer of property of goods
or of the ownership in immovable property for money consideration but in exchange there
is reciprocal transfer of interest in immovable property. A corresponding transfer of interest
being denoted by the word barter. The difference between sale and exchange is this that
in former the price is paid in money whilst in the latter it is paid in goods by way of barter.
The presence of money consideration is an essential element in a transaction of sale. If the
consideration is not money but some other valuable consideration it may be exchange or
barter but not a sale.
viii. Ozone Properties P Ltd. v. Addl. CCT, Bangalore (K.H.C.) (52 VST 370)(9th Nov. 2010)
Facts: Appellant a developer entered into a joint development agreement with owner of certain
land and in furtherance of the agreement after completion of the project 26.45% of the built
of area was to be transferred to the owners of the land in lieu of transfer of 73.55% of their
undivided interest in the land to the appellant. Most of the construction work was handed
over to the registered sub-contractors. Assessing authority held that 26.45% of built area
handed over to the owner and an amount of 45 crores paid to the sub-contractor. In the light
of the said 26.45%, it was considered as deemed sales as property of goods has passed to
the owner of the land. In appeal against the assessment order, Joint Commissioner held that
it was not a deemed sale. The revision authority proposed to reverse the order of appellate
authority and rejected the defense raised by the appellant that there was no element of sale in
the entire transactions. Hence remanded back to A.O for scrutiny of the exchange deed dated
18.12.2009 between the developer and land owner.
Held: Looking to the terms of exchange deed and also other material including the large
payment made to registered sub-contractor whether it amounts to sale under Article 366(29A)
of the Constitution or it remains only exchange of built up area in the undivided interest in the
land handed over to the developers. It is to be looked in the light of whether the construction
was taken up by himself. Hence the order revision authority remanding for examination of
documents to the A.O is affirmed.
An alternate argument that can be made that whether VAT would be applicable or not would
depend on whether there is a transfer of property in the goods (building material) while the
building is being redeveloped or whether there is a clause/ contract to the contrary in the
Development / Redevelopment Agreement. Although the reconstruction is undertaken by
the Builder - Redeveloper after entering into the Development / Redevelopment agreement,
taxability would depend on whether there is transfer of risk of ownership in the building
material during the reconstruction phase/ period. If the subject matter of the agreement is for
getting a fully redeveloped Flat at the end of the construction, and the risk of ownership of the
building material/ semi finished construction vests with the Builder till the Flat is handed over
on the agreed date of possession/repossession, there being no concurrent transfer of property
in favour of the existing flat owners, no VAT would be attracted. Arguably, reliance can still
be placed on DDQ in the case of Rehab Housing (No. WC2003/DDQ-11/B-276 dt. 28.06.2004)
although the Commissioner vide Trade Circular 12T of 2007 dt. February 7, 2007 has indicated
his intention not to follow the DDQ given earlier after the amendment made on 20.06.2006 on
the definition of Sale.
ix. M/s. Kirloskar Copeland Ltd. (S.A. No. 428 of 2009 dt. 18.04.2011)
In this recent case our own Tribunal, after discussing eleven judgments cited by appellant
and six judgments cited by Revenue, came to the conclusion that In a transaction of cross
101
transfer of property in defective compressor and repaired compressor off the shelf from the
sales office of the company, there is no consensual agreement of sale supported by price or
money consideration. As such, there is no sale of repaired compressor. So there is no sale of
taxable event for levy of sales tax, on specified amount, which is a price of labour charges or
repair charges.
J udgment cited by appellant
a. Gannon Dunkerley & Co (Madras) Ltd (9 STC 353) (S.C.)
b. Devi Dass Gopal Krishnan and others (20 STC 430)(S.C.)
c. Hotel Shri Laxmi Bhavan, Visakhapatnam (33 STC 444)
d. Vishnu Agencies (Pvt) Ltd (42 STC 31) (S.C.)
e. Premier Electro Mechanical Fabricators (SS STC 371)
f. Kansari Udyag Shakari Samiti (43 STC 176)
g. Ram Kumar Agarwal (19 STC 40)
h. Vijaya Aluminium Industries (103 STC 508)
i. M. Jai Hind (111 STC 374)
j. PA Raju Chettiyar (6 STC 131)
k. Vishweshwardass Gokuldass (13 STC 113)
J udgments relied upon by revenue
a. Dhampur Sugar Mills (147 STC 57)(S.C.)
b. Chandra Bhan Gosai (14 STC 766) (S.C.)
c. Sabarmati Reti Udyog Sahakari Mandali Ltd (38 STC 203) (S.C.)
d. V.p. Vadivel Achari (23 STC273) (Mad)
e. C. Mohammedali (31 VST 427) (Ker)
f. Mohd. Ekram Khan and Sons (136 STC 515) (S.C.)
x. Trade Circular for ADM Relief 14T of 2012 dated 6.08.2012
The circular really intends not to give any relief on account of time schedule fix. It is only
a matter of formal i ty. It i s i mpos s i bl e to compl y the condi ti ons . The FAQs i s wi thout
application of mind and without supporting of judgments and also unsigned hence no legal
effect. Therefore, one can take benefit by showing the same to the authorities. It would be of
interesting to note the answer to FAQ 25 pursuant to issuance of Trade Circular 14T of 2012
dt. 06.08.2012:
Q25 If Builder constructs the flat on the land which is owned by the land owner and out of the
constructed flats some flats are given to the landowner and other flats is sold by Builder
to prospective buyer. Land owner sells the flats afterwards to buyers. In such instances,
what would be the point of taxation? Whether land owner is liable to pay VAT n sales of
flats which were handed over to him by the builder?
102
Ans. Builder is liable to pay tax only in respect of sale of flats to prospective buyers. The flats
which are given to landowners will not be taxable. The landowner when subsequently
sales the flats will not be liable to pay tax as he is not a dealer .
IV. Conclusion :
In some types of presumed development agreements at serial no. 3 above conclusions can be
drawn as under.
i. When the society gives its building/premises to the builder or contractor for re-development,
and the builder/contractor constructs the society and allots the flats to the members with same
sq.ft of area or higher sq.ft of area of the society, nobody is liable under MVAT Act but when
builder sells the other FSI/flats, to that extent it will be his works contract.
ii. Where the land lord/house owner/ SRA scheme in which the owner gives the old structure
to the builder/contractor and the contractor re-constructs the building on the same plot and
gives the Flat/s with same sq.ft or higher sq.ft, or cash/cheque to the owner, nobody is liable
under MVAT Act.
iii. Where the society approves the contractor for the re-development of the society, and the
society gives the contract of re-development to the contractor/builder and allots the flats to
its members and the society sells the other flats, contractor/builder will be liable as a regular
works contractor but society cannot be covered under MVAT Act.
But any other view is quite possible depending on changing situations and terms on agreement. I
thank The I.C.A.I. for giving me the opportunity to study the topic in depth.
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Shri Aditya Prakash Rao joined Amarchand Mangaldas in June 2008 and works with the Public Policy
& Governmental Affairs team. At the Firm he advises the clients on corporate affairs strategy and public
policy matters in India, primarily pertaining to legal issues in defense sector, nuclear energy, education,
information communications technology, media & entertainment law, data protection, apart from general
corporate & investment advice in various sectors.
Shri Rao has been part of the Firms advisory groups to government ministries and departments at
the Federal level and has drafted legislations for such government agencies. These include Ministry
of Information Technology, Ministry of Science and Technology, Ministry of Industry and Commerce,
Ministry of Finance, Government of India.
Shri Rao is a part of the charities advis ory group at the Firm and has been intricately involved in
imparting advice to high-impact, livelihood generation based, national and international level social welfare
organizations. He is also currently serving on the India board of Sesame Workshop and the Wadhwani
Foundation.
Select Experience
Lead cohtact Lex Muhdi Fro-Boho Fouhdatioh.
Lead cohtact ahd advisor Ashoka Advocates Mr. Fao is respohsible ih assistihg variety of Ashoka
fellows over the years and has also conducted legal roundtables in various cities for Ashoka
fellows as an outreach and advocacy mechanism covering a broad spectrum of issues such as
Organizational Structuring, Foreign Contribution Regulation, General Contracting, Intellectual
Property, Taxation and the like.
Fehdered structural advisory to Sustaihable lhhovatiohs MlT Lemelsoh Award wihher for 2010.
Mr. Mukerji led the team which catered to the unique requirements of the project that mandated
the drawing up of a structure with the ability to raise equity/debt investments from social investors
as well as donations/grants for its operations, with overall compliance of the existing legal strictures
applicable to not-for profit space in India.
Advisor to Grameeh Fouhdatioh, USA for their 'Growth Guarahtees' program.
Assisted humerous domestic/multihatiohal cliehts ih their Corporate Social Fespohsibility deploymeht
programs in India.
Advisor to Latitude Global Voluhteerihg for their lhdia operatiohs.
Advised to Ehdeavor Global oh their compliahce ahd restructurihg of ehtities ih lhdia.
Advisor to the Uhited States - lhdia Busihess Couhcil oh various legal, policy ahd political issues
on doing business in India. Member of the working groups on Finance, Media & Entertainment,
Infrastructure and aviation, Information Communications Technology.
Shri Aditya Prakash Rao
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Property transactions by trusts (Acquisition of
properties, transfer of properties, development of
properties, permission of charity commissioner,
change reports, documentation, auditors
responsibility, stamp duty n registration wrt trust
properties)
Shri Aditya Prakash Rao
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Shri Santosh Kumar is an architect and valuer having 46 years of his practice.
He is a fellow member of the Indian Ins titute of Architects and Ins titution of
Valuers (India). He is member of the Property Advis ory Committee to advis e
Administrator of Specified Undertaking of the Unit Trust of India. He is on the
Panel of Valuers of Bombay High Court and Mumbai Debts Recovery Tribunal.
Mr. Santosh Kumar has contributed substantially to the proposal of Property
Tax on Capital Value Sys tem, which Is recently implemented by the Mumbai
Municipal Corporation.
Shri Santosh Kumar was Hon. executive editor of the Journal of the Indian
Ins ti tute of Archi tects from 1969 to 1986. He was al s o edi tor of Archi tects
India Journal from 1980 to 1996. He was actively associated with the drafting
of Architects Bill which became the Architects Act in 1972. He has contributed
s everal articles on valuation and Stamp duty which is publis hed in various
Journals and news papers of India. Mr. Santosh Kumar jointly with Mr. Sunit
Gupta has written Stamp Duty Ready Reckoner and Market Value of Flats /
Properties in Mumbai and Thane, for more than 15 years, which is useful not
only for stamp duty payment but also for valuation in court and bank mortgage.
His book on valuation as on 1-4-81 is referred for valuation under Section 50C
for the capital gains tax.
Shri Santosh Kumar has l ectured i n vari ous publ i c forums l i ke WIRC-ICAI,
MCHI, Bombay First etc, and his prestigious clients for valuation are Reserve
Bank of India, UTI, NABARD, IDBI, RCF, National Fertilizers Ltd. and Indian Oil
Corporation etc.
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Stamp Duty and Registration Aspects in
Co-operative Housing Society
Shri Santosh Kumar
Co-author of the Stamp Duty Ready Reckoner and Market Value of Properties in Mumbai
In early days virtually there was no stamp duty on purchase of flat in a Co-operative housing society.
Sale and purchase was as simple as purchasing home appliances. With the result many people invested
in flats even before the foundation was laid and sold the same as and when desired profit was offered.
Due to this builders were selling all their flats even before the starting of their projects. They required no
finance to complete the building because it was a self financing enterprise. They had to arrange only the
land component. This invited the attention of Hon. revenue minister of the Government of Maharashtra
and slowly and steadily it became the second highest source of revenue today, next only to VAT.
Today I will share with you my experience, as how the stamp duty is charged on some of the documents
which are of vital importance to you.
Stamp Duty and registration fees on conveyance in favour of a Co-operative Housing Society.
Stamp Duty and registration fees on deemed conveyance in favour of a Co-operative Housing Society.
Difference between conveyance and deemed conveyance.
Stamp Duty on re-development agreement with builder.
Stamp Duty on re-development agreement with individual members.
Stamp Duty on self development projects.
Stamp Duty on company owned property.
Stamp Duty on tenanted properties.
Stamp Duty on Leave and License agreement.
Stamp Duty on exchange of flats.
Stamp Duty on gift deed.
Stamp Duty on family settlement.
Stamp Duty on release deed.
Stamp Duty on power of attorney.
Rate of Registration fees.
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Name : DILIP J AGDISH PENDSE
Designation : Dy. General Manager (Legal & Recovery)
Worked as Asst. Gen. Manager (Branch Banking) from June 2010 to March 2013
and looked after 43 Branches, with The Shamrao Vithal Co-op. Bank Ltd. (Multi
State scheduled Co-op. Bank, having 142 Branches, Deposits around Rs. 9,,000 cr.,
Advances around Rs. 6,000 crs., Gross NPA @ around 3% & Net NPA @ less than
1%). Before that, worked as Chief Financial Officer (CFO) from July 2007 to June
2010 with same Bank.
Address : 10 / 22, Shri Mohan CHS Ltd. Govind Nagar, Borivali (west), Mumbai 400 092.
Date of birth/Age : December 15, 1964 / Age 48.
Marital status : Married
Communications : 022 6699 9794 (Office) & 98690 61133 (Mobile)
Educational qualifications
Degree / Course Year of Passing Institution
C. A. 1992 Institute of Chartered Accountants of India
L. L. B. (Gen.) 1987 University Of Bombay
B. Com. 1985 University of Bombay
H. S. C. 1982 Pune Board
S. S. C. 1980 Pune Board
Previous 3 positions held
Employer Period Position Held
The Nasik Merchants Co-op. Bank Ltd. Nov. 2005 to June 2007 Chief Exec. Officer
Maharashtra State Financial Corporation
(MSFC, a Financial Institution)
June 2000 to Oct. 2005 General Manager
20th Century Finance Corporation Ltd.
& TCFC Finance Ltd., a BSE Listed Co.)
Dec. 1994 to May 2000 Manager - Compliance, Finance
& Accounts
CA Dilip Pendse is regular faculty & is delivering lectures at various platforms including at WIRC, ICAI. He
is frequently invited by various Urban Co-op. Banks for lectures.
He is member of Risk Management Committee formed by Reserve Bank of India, formed for Urban Co-
op. Banks.
Training
Attended various Training Courses organised by College of RBI, Pune & SIDBI with respect to topics
relating to OSS, Operations, Business Development, & proposed Basel II Norms pertaining to Risk
Management etc.
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Shri Shailesh Gandhi is a firs t generation entrepreneur and a Dis tinguis hed
Alumnus awardee of IIT Bombay. He sold his business to become a RTI activist.
Shailesh was part of the RTI movement which was involved in drafting the RTI
Act. He used RTI and also trained many citizens to use it. The only RTI activist
to have been chos en as a Central Information Commis s ioner, he dis pos ed a
record of over 20000 cas es in 3 years and 9 months , and ens ured that mos t
cases were decided in less than 90 days. He gave many landmark decisions on
RTI, apart from organizing the first digital file less Commission. He is now at
his his home in Mumbai to further and deepen RTI to empower citizens to take
effective participatory charge of their democracy. He has been awarded the Nani
Palkhiwala Civil Liberties award.
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Right to Information w.r.t. governance of
co-op. societies and charitable trusts and in
the process of redevelopment ( Legal and
procedural aspects)
Shri Shailesh Gandhi
COOPERATIVES
A cooperative is an autonomous as s ociation of pers ons united voluntarily to meet their common
economic, social and cultural needs and aspirations through a jointly owned and democratically controlled
enterprise . Cooperatives as business enterprise possess some basic interests such as ownership and
control but these interests are directly vested in the hands of the user. Therefore, they follow certain
broad values other than those associated purely with profit making. Need for profitability is balanced by
the needs of the members and the wider interest of the community. The values universally recognized as
cornerstones of cooperative behaviour are self-help, democracy, equality, equity and solidarity. Voluntary
and open membership, democratic control, economic participation, autonomy, training And information
and concern for community are the overarching features by which the Cooperatives put their values into
practice.
Government of India announced a National Policy on Co-operatives in 2002. The ultimate objective
of the Nati onal Pol i cy i s to provi de s upport for promoti on and devel opment of cooperati ves as
autonomous, independent and democratic organisations so that they can play their due role in the socio-
economic development of the country. The Policy further aims at reduction of regional imbalances and
strengthening of cooperative education, training and human resource development for professionalisation
of cooperative management. It recognizes the distinct identity of cooperatives and seeks to support their
values and principles by catalysing States to provide them an appropriate administrative and legislative
environment.
RIGHT TO INFORMATION ACT AND COOPERATIVES
Information plays an important role in shaping the life of every individual. We need one or the other
information in every aspect of our life. In a democratic set-up it assumes greater importance as elected
representatives govern the country and citizens who elect them and also pay taxes have every right to
know how they are governed and how their money is spent. Information, therefore, is the life-blood that
sustains political, social and business decisions.
Earlier, the Government and public authorities use to control the information and it was not shared with
people. But today with globalization, achievements in information technology and the important role
played by media and social activists people have become more enlightened and want transparency in
the functioning of public authorities. Article 19(a) of the Indian Constitution includes the right to freedom
of speech and expression which indirectly increases the participation of Indian citizens in the functioning
of the Government and simultaneously allows them to seek information from the Government and the
concerned public authorities. Similarly, it is stated that in the introduction of the Right to Information Act,
2005 (RTA) that democracy requires an informed citizenry and there shall be transparency of functioning
so as to withhold corruption and to hold the Government and their instrumentalities accountable to the
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governed.
Definition of information Information is derived from a Latin word formation and forma which means
giving shape to something. The Encyclopedia Britannica defines information as facts and opinion
provided and received during the course of daily life; one obtains information directly from other living
beings; from mass media, from electronic data banks, and from all sorts of observable phenomena in
the surrounding environment . It further states that information organized according to some logical
relationships is referred to as a body of knowledge, to be acquired by systematic exposure or study.
As per RTA-2005 information means any material in any form, including records, documents, memos,
e-mails, opinions, advices, press releases, circulars, orders, logbooks, contracts, reports, papers, samples,
models, data material held in any electronic form and information relating to any private body which can
be accessed by a public authority under any other law for the time being in force.
The Assam Right to Information Act, 2001 states that information means and includes information
relating to any matter in respect of the affairs of the administration or decisions of the State Government
or a Public Authority but does not include any such information the publication of which has been
prohibited by any law for the time being in force or by any notification issued by the State Government
from time to time under this Act. The Goa Right to Information Act, 1997 states that information means
any material or information relating to affairs of the State or any local or other authorities constituted
under any enactment passed by the Legislative Assembly or a Company, Corporation, Trust, firm, Society
or a Cooperative Society, or any organization funded or controlled by the Government or executing any
public work or service on behalf of or as authorized by the Government. The J&K Right to Information
Act, 2004 defines it as any document or information relating to the affairs of the State or a public body.
The Karnataka Right to Information Act, 2000 defines it as information relating to any matter in respect
of the affairs of the administration or decisions of a public authority.
The Rajasthan Right to Information Act, 2000 defines information as any material or information relating
to the affairs of the State or a public body. In simple words information means the knowledge about
the affairs relating to the State or its authorities.
Right to information means to have access to knowledge or facts which is held by or is under the control
of any public authority and includes the right to:
(i) Inspect works, documents and records,
(ii) Take notes, extracts or certified copies of documents or records,
(iii) Take certified samples of material
(iv) Obtain information in the form of diskettes, floppies, tapes, video cassettes or in any other electronic
mode or through printouts.
Importance of RTA The right to information is a fundamental right flowing from freedom of speech and
expression guaranteed under Article 19(a) of the Constitution. The RTA has, therefore, set-out a practical
regime to right to information for citizens to have access to information under the control of public
authorities. This has been done to promote transparency and accountability in the working of every public
authority. The Right to Information Act is, therefore, very important for strengthening democracy ensuring
transparency and accountability in the actions of public authorities and it enhances the quality of life of
people and their participation in governance.
Enactment of RTA-2005 In order to promote opennes s , trans parency and accountabi l i ty i n the
administration of the public authorities and enhance the quality of life of citizens and their participation
in the governance and strengthened their involvement in the decision making, the Government of India
enacted the Freedom of Information Act, 2002. The Act could not be brought into force because of
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various reasons. The National Common Minimum Programme of the present Government committed
to make the Information Act more progressive, participatory and meaningful repealed the Freedom of
Information Act, 2002 and replaced it by a new legislation Right to Information Act, 2005 by including
various suggestions of the National Advisory Council. The emphasis on enacting the new legislation was
to provide an effective framework for effectuating the right to information recognized and implied under
Article 19 of the Constitution of India.
The Right to Information Bill, 2005 was passed by the Lok Sabha on 11th May, 2005 and by the Rajya
Sabha on 12th May, 2005 and it received the Presidential assent on 15th June, 2005 following which it
came on the statute Book as Right to Information Act, 2005 (22 of 2005). The main aim of the Act is to
introduce discipline in various functionaries in the Government administration. The Act provides practical
regime to right to information to citizens to secure and access to information under the control of public
authorities, in order to promote transparency and accountability in the working of every public authority.
Before Central Right to Information Act, some of the States like Assam (2002), Delhi (2001), Goa (1997),
J&K (2004), Karnataka (2002), Madhya Pradesh (2003), Maharashtra (2002), Rajasthan (2002), Tamil Nadu
(1997) and U.P. (Code of Practice on Access to Information, Government of U.P. 2002) had enacted their
own right to information Act.
Right to Information Act and Cooperatives In India
Cooperation is a State subject and cooperatives are registered under their respective State Cooperative
Societies Acts except the multi-state cooperative societies and national cooperative federations which are
registered under the Multi-State Cooperative Societies Act, 2002. The question that arises is whether the
cooperatives are covered under the RTA of the concerned State in which they are registered or not. This
is important and pertinent to know as it will substantially affect the working of cooperatives.
Only the Madhya Pradesh Jankari Ki Swatantrata Adhiniyam 2002 (No. 3 of 2003) defines public body
means all officers of the State Government (ii) all local authorities and statutory authorities constituted
under any Act of the State Legislature for the time being in force and all companies, corporations and
cooperative societies in which not less than fifty one percent of the paid-up share capital is held by
the State Government.......... 2(b) This means only the cooperative societies which have 51% of the
share capital contributed by the State Government are covered under the above Act. Let us see what
Information Acts of different States say in this regard.
The Assam Right to Information Act says that a cooperative society or any other society or a trust
or any other organization or institution established under any law for the time being in force by the
State Government and directly controlled or funded by it. The Goa Right to Information Act, 1997
says information means any material or information relating to affairs of the state or any local or other
authorities constituted under any enactment passed by the Legislative Assembly of Goa for the time
being in force or a Statutory Authority or a Company, Corporation, Trust, Firm, Society or a cooperative
society, or any other organization funded or controlled by the Governmentor executing any public work
or service on behalf of or as authorized by the Government. The J&K Right to Information Act says a
public body shall include a society or a cooperative society or any other organization established
under any law for the time being in force, by the Government and directly controlled or funded by it;
2(f)(iv). The Karnataka Right to Information Act, 2000 defines publicauthority as all local authorities,
all authorities constituted by or under any Act of the State Legislature for the time being in force, a
company, Corporation, trust, society, any statutory or other authority, Cooperative Society or any other
organization or body funded, owned or controlled by the State Government 2(c)(iii). The Maharashtra
Right to Information Act, 2000 says informationincludes a copy of any document relating to the affairs
of the State or any local or other authorities constituted under any Act for the time being in force or a
statutory authority or a company, corporation or a cooperative society or any organization, owned, or
controlled by the Government. 2(3). The Rajasthan Right to Information Act, 2000 says public body shall
include a society or a cooperative society or any other organization established under any law for the
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time being in force, by the State Government and directly controlled or funded by it . 2(v)(d). The Tamil
Nadu Right to Information Act, 1997 says information includes copy of any document relating to the
affairs of the State or any local or other authorities constituted under any Act for the time being in force
or a statutory authority or a company, corporation or a cooperative society or any organization owned
or controlled by the Government . 2(3).
The Central RTA, 2005 defines public authority as any authority of body or institution of self-government
established or constituted-
(a) by or under the Constitution
(b) by any other law made by Parliament
(c) by any other law made by State Legislature
(d) by notification issued or order made by the appropriate Government, and includes any 5
(i) body owned, controlled or substantially financed;
(ii) non-Government organization substantially financed, directly or indirectly by funds provided
by the appropriate Government; 2(h) As cooperatives are democratic, self-help organizations
controlled by their members, members contribute equally to the society and democratically
control the capital and actively participate in setting the policies and decision making in the
cooperative, there is an in-built mechanism under the provisions of Cooperative Laws to
protect the rights of its members. Therefore, the cooperatives in which there is less than 51%
equity participation of the Government or which are not receiving substantial Government
grant should not come under the purview of Right to Information Act of State or Centre. Shri
Suresh Pachouri, Honble Minister of State for Personnel, Public Grievances and Pension,
Government of India in moving the motion for consideration of the Bill said ..................the
scope of this Bill extends to all the authorities and bodies under the constitution or any other
law and inter alia includes all authorities under the Central Government, State Governments
and local bodies . The non-Governmental organizations s ubs tantially funded directly or
indirectly, by the public funds also come within the ambit of this Bill.
Secondly, the 5th Principle of Cooperation which says cooperatives provide education, training and
information for their members, elected representatives, managers, and employees so that they contribute
effectively to the development of their cooperatives. They inform the general public particularly young
people and opinion leaders about the nature and benefits of cooperation. Each and every cooperative
follows cooperative principles in its true spirits and shares the information about its functioning to their
members. The Government of India is also considering constitutional amendments to ensure democratic,
autonomous and professional functioning of the cooperatives.
Thirdly, most of the Cooperative Societies Acts cover right to information where members or creditors
can seek any information from their cooperatives by depositing a small amount fixed under the Act. For
example, according to the Section 32 and Rule 30 of Maharashtra Cooperative Societies Act 1960 and
Rules 1961 some rights have been given to members of cooperative societies to get some information.
They are as follows:- every member of a society shall be entitled to inspect free of cost at the Societys
office during office hours, or any time fixed for the purpose by the society, a copy of the Act, the Rules
and bye-laws, the last audited annual balance sheet, the profit and loss account, a list of the members of
the Committee, a register of members, the minutes of general meetings, minutes of committee meetings
and those portions of the books and records in which his transactions with the society have been
recorded. A society can furnish to a member on request in writing and on payment of such fees as may
be prescribed therefore, a copy of any of the documents mentioned in the foregoing sub-section within
one month from the date of payment of such fees. Similarly under the newly enacted Delhi Cooperative
Societies Act, 2003 members or creditors can seek any information from the societies.
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ART-100
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However, it is being observed that some elements are coming forward to seek information from the
Cooperative Department regarding cooperative societies without establishing any cause of action by
depositing small amount fixed under the Act. As an example, a member seeks information i.e. copies
of all resolutions of General Body and Managing Committee for the last 10 years or audit report since
the society is registered. He has no cause of action for seeking this information but only to harass the
management of the societies. Defeated members in the election or their supporters adopt this technique
and thus misuse the Information Act. Under the provisions of the Income Tax Rules, 1962 as well as the
Companies Act, 1956, Books of Account are required to be maintained/preserved for a period of 6 years
and 8 years respectively.
SUGGESTIONS FOR CONSIDERATION
(i) In the above background, there is a need to modify the present States and Central Information Acts
in order to regulate the public as well as Government Departments and public institutions by making
provisions that person seeking information must establish cause of action before Public Grievances
Commission only after which the information would be supplied to such person.
(ii) Moreover, information for not more than three years old s hould be s upplied under the Act.
Cooperative societies are managed by honorary elected persons and they are short of staff due to
financial restraints. Hence it is necessary to protect cooperative institutions from the vested interest
of some individuals.
(iii) Cooperatives being member controlled democratic organizations have laws protecting the rights
of its members . The cooperatives in which there is les s than 51% equity participation of the
Government or which are not receiving substantial Government grant should not come under the
purview of Right to Information Act.
(iv) The National Cooperative Union of India should convene a National Seminar on the subject to
discuss various provisions of different States and Federal Acts which adversely affects the working
of cooperatives.
The success of the RTA movement depends on the will of the politicians, positive attitude of bureaucrats
and enlightened masses to use it only for good governance and not to mould the Act and misuse it for
their vested interests or to harass somebody.
There are certain grey areas which need to be looked for, especially regarding cooperatives and rights
and duties of their members.
Co-operatives make up for one-sixth of Maharashtras economy; they are also abodes of chronic
corruption. No wonder, many are yet to digest the fact that co-operatives have now come under the
RTI Act and so public disclosures of their functioning is mandatory
Vijay Kumbhar, a leading RTI (Right to Information) activist from Pune, has been researching on the
aspect of co-operatives coming under the RTI Act after the enactment of the 97th amendment to the
Constitution of India in March 2012. Now, co-operative societies have not only become a part of Article
19 of the Constitution of India making them one of the fundamental rights of a citizen, but have now also
been given the status of local self-government in Part IX of the Constitution. This makes them accountable
under the RTI Act. However, many a vested interest is trying to hoodwink this fact. A tete-a-tete with
Kumbhar.
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With the enactment of the 97th amendment to the Constitution of India and its inclusion in Article 19
of the Constitution, formation of cooperative societies has become one of the fundamental rights of an
Indian citizen. Besides, they have been given the status of local self-government like rural and urban
municipal bodies in Part 9 of the Constitution. Cooperative societies have thus come under the ambit of
the Right to Information Act.
As per Section 2 (h) of the RTI Act, public authority means any authority or body or institution of self-
government established or constituted
(a) by or under the Constitution;
(b) by any other law made by Parliament;
(c) by any other law made by the State Legislature;
(d) by notification issued or order made by the appropriate government, and now as per Section 2
(h) (a) of RTI Act, any cooperative society has become an authority or body or institution of self-
government established or constituted by or under the Constitution and hence it comes under the
ambit of the RTI Act.
Article 19 of the Constitution of India protects certain fundamental rights of the citizens. All citizens
have the right to freedom of speech and expression; to assemble peacefully and without arms; to form
associations or unions; to move freely throughout the territory of India; to reside and settle in any part
of the territory of India; and to practice any profession, or to carry on any occupation, trade or business.
Now forming a cooperative society is also a fundamental right. (Moreover, as per Article 43B of Part IV it
is now the duty of the states to promote voluntary formation, autonomous functioning, democratic control
and professional management of cooperative societies to encourage economic activities of cooperatives
which in turn would facilitate progress of rural India.)
Part IX of the Constitution comprise local self-governments; Part IX pertains to Panchayats; Part IX B is
about municipalities and now with the insertion of Part IX C, co-operative societies have acquired the
status of local self-governments. Correspondingly, cooperative societies have come under the RTI Act.
Cooperative societies normally include co-operative banks, credit societies, sugar factories, handloom-
power loom factories, distilleries, milk producing societies, water supply societies and so on. Henceforth,
all such institutions will have to appoint Public Information Officers, Appellate Authorities and comply
with all the provisions of the RTI Act. This is the most revolutionary event in the history of our country
in the recent past.
Normally there are three sectors of industries; public, private and cooperative. The first one is wholly
owned by a s tate or the central government and the governments have complete control over its
investments and management and it is accountable to the governments as well as to the public. Although
the private sector abides by the laws, rules and regulations of the governments it is not answerable or
accountable to the governments or the public for the losses/profits or management. It is accountable only
to its owners or shareholders as per the law of the land. The cooperative sector was a blend of the public
and private sectors. So far, it was enjoying the facilities available to the public sector such as loans, share
capital from the state, etc but was not accountable to the state or the public. With the Part IX inclusion
in the 97th amendment, the scenario has changed and the cooperative sector is now accountable to the
state and the public.
Several information commissions and courts had given contradictory verdicts on this matter. Cooperative
societies were out of the ambit of the RTI Act because it was not an authority or body or an institution
of self-government established or constituted by or under the Constitution. Hence, attempts to bring
a cooperative society under the RTI Act, claiming it to be an institute, a body owned, controlled or
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substantially financed by notification issued or order made by the appropriate government failed. In
addition, authorities of these institutes always took the stand that they did not come under the RTI act.
Now, they cannot escape as it has become the fundamental right of a citizen.
In reality, considerable part of the countrys economy is occupied by the cooperative sector. It is said that
about 1/6th of Maharashtras economy comprises co-operative societies. A major part of Maharashtra
politics is also influenced by the cooperative sector. The scale of illegalities, scams and corruption in this
sector is also high. The cooperative sector including co-operative banks and credit co-operative societies
block substantial government funds running into hundreds of crores. As of 2012, the unaccounted for
amount is close to Rs 15,000 crore.
The statistics of the department of cooperative societies of Maharashtra in 2009-10 show that there were
2,18,320 cooperative societies in Maharashtra and the total membership of these societies was 5.52 crore.
One estimate of the number of societies is at about 2,30,000 with a membership of about 6.5 crore. For
the entire country, this number could go up to 6.5 lakh societies with 30 crore members.
A giant sector such as this was uncontrolled and unaccountable till now. One can hope that this sector
will move in a positive direction after the 97th amendment to the constitution.
The highlights of the Maharashtra Cooperative Societies Act and Rules after amendments are:
(i) Incorporation of cooperative societies on the principles of voluntary formation, democratic member
control, member economic participation and autonomous functions;
(ii) Conduct of election of a cooperative society by an independent electoral authority;
(iii) A fixed term of five years for the office bearers of the cooperative society;
(iv) Supersession of the board of a cooperative society for a period of not exceeding six months;
(v) Independent professional audit of the cooperative societies;
(vi) Convening of the general body meeting of every cooperative society within a period of six months
of the close of the financial year;
(vii) Acces s to every member of the s oci ety to the books , i nformati on and the accounts of the
cooperative society;
(viii) Filing of the returns by every cooperative society within six months of the close of every financial
year;
(ix) Free, fair, impartial and timely elections of cooperative societies by independent body;
(x) Audit of the cooperative societies to be carried by the auditors from the government approved panel
of auditors or firms;
(xi) Maximum number of 21 directors to be applicable to all cooperative societies irrespective of their
size with two seats reserved for women; and
(xii) Co-opted members not to be eligible to be elected as office-bearers of the board.
Also there are provisions of penalty for consistent defaults, acting against the interest of the institution,
deadlock in the board of directors, not ordering elections within specified time, corruption, irregularities
in duty, deliberately giving false information, disobeying orders of authorities, etc.
134
The recent news about co-operatives coming under the Right To Information (RTI) Act saw many excited
activist and individuals. Till now, Maharashtra is the only state to have ratified the 97th Constitutional
Amendment that came about in March 2012. Orissa is learnt to have notified the amendment while
Gujarat has rejected it. After the amendment, a one-year period was given to states to amend as well as
repeal existing law in line with the new Constitutional provisions.
Co-operative societies include co-operative banks, credit societies, sugar factories, handloom-power loom
factories, distilleries, milk producing societies (like Amul), water supply societies and so on..
Till last year co-operative societies did not fall under RTI. But, the latest amendment, many say, brings it
under the purview of the same. How? As per Section 2(h) of the RTI Act, any public body or institution
established under the Constitution (Article 19) becomes the fundamental right of any citizen and hence
comes under the RTI. So do co-operatives, says Mumbai-based RTI activist Shailesh Gandhi.
However, it is not as simple as it comes across to be. Pune-based non-government organisation Sajag
Nagrik Manchs president and RTI activist, Vivek Velankar says that this matter is laced with controversy.
There is no clarity on who this amendment, and hence RTI, applies to and who it does not apply to.
Therefore, a citizen may or may not get response to his RTI application from co-operatives. Either the
body will not respond at all or it can deny saying it does not fall under RTIs purview. You cannot pull
up a co-operative under RTI as on today, he warns.
Velankar says Maharashtra state has accepted only the Constitutional Amendment, which if extended
can get co-operatives under RTI. This is not written in as many words. As a result, many can refute it.
However, co-operatives say that societies can be formed with 10-20 people. In that case, even under the
RTI, who should be fined, all 20 of them? Examples of private companies are given as these are formed
under Companies Act but that does not necessarily come under RTI.
Given that the amendment was done and accepted only over the past year, many opine that only new
co-operatives should come under RTI and not the existing ones. Though, this is not a new Co-operative
Act but an amendment to it as per that of the Constitution. Hence, every co-operative society no matter
how old or new can come under the RTI Act.
The Gujarat High Court has struck down allowing co-operative societies to come under the RTI. And if
this matter goes to the Supreme Court, which many feel it will, there could be some clarity. And the
decision taken there of including or not including co-operative under RTI may be final for all states. Till
more clarity emerges there is no binding for such authorities. Thats why Gandhi says if this comes, it
would be beneficial for citizens.
Such societies are also known to be abodes of chronic corruption. Surendera M. Bhanot coordinator
of Chandigarh-based RTI Federation says it will become easy for co-operatives members once RTI is
applicable as many management is known to siphon money or misappropriate funds. Till now, members
cannot get information about co-operatives, their accounts, functioning, very easily. Then, you cannot
even know if these bodies are working right. After this, you can question your housing society if you have
any kind of doubt, any co-operative bank and even companies like Amul. And if you are proved right
then you can drag the co-operative to court on the basis of response to your RTI application, he said.
The 97th amendment to the Constitution is intended to rejuvenate co-operative societies through more
autonomy, professional management, prevention of interference and transparency in functioning. It also
makes floating of a cooperative society a fundamental right of citizens.
135
A year after the amendment, there is a debate in Maharashtra where the cooperative movement is very
strong, about applicability of RTI to make cooperatives more transparent. The office of the Cooperative
Commissioner is yet to receive any clear guidelines on applicability of RTI to cooperative societies.
There is a clamour from various sections of society for speedy inclusion of the sector under RTI.
Roughly 1/6th of the countrys economy is controlled by the cooperative sector, including cooperative
banks, credit societies and farmers cooperatives. For want of proper record-keeping, the current status
of the cooperative sectors is hazy, with figures from Maharashtra showing 2,18,320 cooperative societies
with a total membership of 5.42 crore. Activists said cooperatives in the state have always been a hotbed
of political control and politicking.
Making a strong case for bringing cooperative bodies under the RTI, activist Vijay Kumbhar said as per
the RTI Act, a body constituted by or under the Constitution can be called a public authority. With the
amendment, the right to form cooperatives has come under fundamental rights and thus it qualifies as a
body constituted under the Constitution and the RTI would be applicable to them, he argued.
Kumbhar s aid cooperatives have the s tatus of local s elf governments , lis ted under Part IX of the
Constitution. (Cooperatives are listed under Part IX B). So, these societies would come under RTI as all
local self government bodies are within the ambit of RTI, he said.
Prahlad Kachre, director of Yashwantrao Chavan Academy of Development Administrations RTI cell,
however, said inclusion of cooperative bodies under RTI should be decided on merit. Cooperative
societies are not technically formed by the government. They are registered by respective authorities and
I do not know if they qualify for RTI, he said.
HC: Co-operative societies are public authorities, bound to give info under RTI
A divis ion bench of the Punjab and Haryana High Court on Friday dis mis s ed an appeal filed by a
sugar mill co-operative society, which had refused to furnish information demanded under the Right to
Information (RTI) Act.
A division bench comprising Chief Justice Mukul Mudgal and Justice Ajay Tewari dismissed the appeal
filed by the mill holding that co-operative societies are public authorities and are bound to furnish
information under the RTI Act.
The mill, Karnal Co-operative Sugar Mills Limited, had refused to give certain information under the RTI
as demanded by a resident of Haryana. Following this a petition was filed before the State Information
Commission, Haryana, which directed the mill to furnish information holding that it was a public authority
under the RTI Act, 2005.
The co-operative moved the High Court, but its appeal was dis mis s ed by Jus tice Kanwaljit Singh
Ahluwalia in May. It then moved an appeal against an order of the single judge.
Arguing before a division bench, counsel for the co-operative took the stand that the mill is neither a body
owned, controlled or substantially financed by the government nor it is a non-government organisation
substantially financed, directly or indirectly by funds provided by the appropriate government.
Regarding funding, Justice Ahluwalia had held the mill had not divulged any details about share-holding
of the government or any other finances which may have been provided by the government. The bench
also noticed that having itself appointed a public information officer, the mill admitted it was a public
authority.
136
Holding that this case is distinguishable for the reason that the mill is managed by a managing director
who is a civil service officer, the Bench dismissed its appeal.
The mill has divulged no information regarding the extent of financial help/investment/equity participation
made by the government in the mill. It is evident that this information if furnished may have gone against
the stand taken by the mill. In the circumstances, no fault can be found with the judgment of the single
judge and consequently it is dismissed, the order reads.
137
Shri Manohar Bhalchandra Gajare
Educational Qualification: B.A.(Hons), Pune University 1971 & Master of Labour
Welfare, (M.L.W.), Bombay University 1973
Experience:
Fosts Held ih the Office of Commissioher of Labour, Maharashtra
o Assistaht Commissioher of Labour from 21 August 1974 to 1 Jahuary
1984
o Deputy Commissioher of Labour from 2 Jahuary 1984 to 2 April 1993
o Additiohal Commissioher of Labour from 3 April 1993 to 28 Jahuary
2001
o Joiht Labour Commissioher from 29 Jahuary 2001 to 30 April 2007
o Fetired from Goverhmeht Service from 30 April 2007
o Deputed by Gov ernment of Indi a i n 1983 to repres ent Indi a and
participate ih a traihihg programme oh lhdustrial Felatiohs" held at the
lhterhatiohal Traihihg lhstitute, Sydhey, Australia for 12 weeks.
Hahdled humerous lhdustrial Felatiohs situatiohs situatiohs.
Guest Lecturer/ Visitihg Faculty:
o Maharashtra lhstitute of Labour Studies. Bombay Uhiversity.
o Jahakidevi Bajaj lhstitute of Mahagemeht, S.N.D.T. Uhiversity, Mumbai
o Tata Institute of Social Sciences Mumbai
Farticipated ih various Semihars/ Workshops oh various topics oh lhdustrial
Felatiohs, Ehforcemeht of Labour Laws.
Fepresehted Govt. of Maharashtra ih Natiohal Cohferehces i.e. Stahdihg
Labour Committee, lhdiah Labour Cohferehce etc.
Arrahged ahd participated ih lh House Traihihg for Officers of the Labour
Commissioharate.
Active Farticipatioh ahd cohtributioh to Study Circleof the Labour
Commissioharate.
Cohducted various sessiohs of Educatioh, Cohfidehce Buildihg ahd Guidahce
for the Officers of the Labour Commissioharate.
Special Reference:
Goverhmeht of Maharashtra lhtehded to Fepeal 'The Bombay lhdustrial
Felatiohs Act, 1946' ahd for this purpose also cohstituted a Committee
headed by the Labour Mihister.
138
Active participatioh ih the proceedihgs of this committee, ihcludihg
preparatioh of Draft Bill for presehtatioh ih the Maharashtra Legislative
Assembly.
Active participatioh ih the proceedihgs of the Joiht Select Committee of the
Members of Maharashtra Legislature wheh the Bill was referred to it.
Active participatioh ih the proceedihgs of the committee cohstituted by the
Maharashtra Goverhmeht, uhder the Chairmahship Of the Former Chief
Secretary Shri K.B. Shrihivasah for the Feview of Maharashtra Fecoghitioh
of Trade Unions and Prevention of Unfair Labour Practices Act, 1975
139
Labour Laws Each Employer Should
Know
Shri Manohar Gajare
LABOUR LAWS
EACH EMPLOYER SHOULD KNOW
Presentation
By
M. B. Gajare
Joint Commissioner of Labour
(Retired)
Laws regulating Industrial Relations:
1. Industrial Disputes Act - 1947.
2. Industrial Employment (Standing
Orders) Act, 1946.
3. Trade Unions Act, 1926.
4. Bombay Industrial Relation Act 1946.
5. MRTU & PULP Act, 1972.
140
Social Security Legislation
1. Employees Compensation Act, 1923.
2. E.S.I. Act, 1948.
3. Employees Provident Fund Act, 1948.
4. Maternity Benefit Act, 1961.
5. Payment of Gratuity Act 1971.
Laws regulating working conditions:
1. The Factories Act, 1948.
2. The Bombay Shops & Establishment Act, 1948.
3. The Beedi and Cigar Workers (Conditions of
Employment) Act, 1966.
4. The Buildings and other Construction Workers
(regulation of employment and conditions of
service) Act, 1996
141
5. The Cine-Workers and Cinema Theatre Workers
(Regulation of Employment) Act, 1981
6. The inter-state migrant workmen (regulation of
employment and conditions of service) act,
1979
7. The Motor Transport Workers Act 1961
8. The Sales Promotion Employees (Conditions of
Service) Act,1976
9. The dock workers (regulation of
employment) act, 1948
10.Working Journalists and Other
Newspaper Employees] (Conditions of
Service) and Miscellaneous Provisions
Act, 1955.
11.The Plantation Labour Act, 1951
12.The Mines Act, 1952
13.The Merchant Shipping Act 1958
142
Laws dealing with wages:
1. Payment of Wages Act, 1936.
2. Minimum Wages Act, 1948.
3. Payment of Bonus Act, 1965.
Laws related to Equality and
Empowerment of Women
1. The Maternity Benefit Act, 1961
2. The Equal Remuneration Act,1976
143
Laws related to Deprived and
Disadvantaged Sections of the Society
1. The Bonded Labour System
Abolition) Act,1976
2. The Child Labour (Prohibition &
Regulation) Act, 1986
Laws related to Employment & Training
1. The Employment Exchange
(Compulsory Notification of Vacancies)
Act, 1959
2. The Apprentices Act,1961
144
Miscellaneous
Labour Laws (Exemption from
Furnishing Returns and Maintaining
Registers by certain Establishments)
Act, 1988.
145
146
147
148
149
150
151
152
153
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
WRIT PETITION (PIL) NO. 166 of 2012
FOR APPROVAL AND SIGNATURE:

HONOURABLE THE CHIEF JUSTICE
MR. BHASKAR BHATTACHARYA
and
HONOURABLE MR.JUSTICE J.B.PARDIWALA
==================================================
==================
1
Whether Reporters of Loca Papers may be aowed to see
the |udgment ?
2 To be referred to the Reporter or not ?`
3
Whether ther Lordshps wsh to see the far copy of the
|udgment ?
4
Whether ths case nvoves a substanta queston of aw as
to the nterpretaton of the consttuton of Inda, 1950 or
any order made thereunder ?
5 Whether t s to be crcuated to the cv |udge ?
==========================================
===============
RAJ ENDRA N SHAH
Versus
UNION OF INDIA & ANR.
================================================================
Appearance:
MR KI SHAH with MR VISHWAS K SHAH with MR MASOOM K SHAH, ADVOCATE
for the Applicant.
MR PS CHAMPANERI, ASST SOLICITOR GENERAL for the Opponent No. 1
MR PK J ANI, GOVERNMENT PLEADER for the Opponent No. 2
================================================================
CORAM: HONOURABLE THE CHlEF ]USTlCE
154
MR. BHASKAR BHATTACHARYA
and
HONOURABLE MR.]USTlCE ].B.PARDlWALA
Date : 22/04/2013
CAV JUDGEMNT
(PER : HONOURABLE THE CHIEF JUSTICE
MR. BHASKAR BHATTACHARYA)
1. By ths Pubc Interest Ltgaton, the wrt-pettoner has prayed
for quashng of the Consttuton |97
th
amendment| Act, 2011
ntroducng part IXB, as ultra vires the Consttuton of Inda.
2. The case made out by the wrt-pettoner s that the
Consttuton |97
th
amendment| Act, 2011 was passed by the Lok
Sabha on 22
nd
December 2011 and the same was passed by the Ra|ya
Sabha on 28
th
December 2011. The Presdent of Inda bestowed
assent to that amendment on 12
th
|anuary 2012 and the sad
notfcaton was pubshed n the gazette of Inda of 13
th
|anuary 2012
and the amendment came nto force on 15
th
February 2012.
2.1 Accordng to the pettoner, the power under Artce 368 of the
Consttuton of Inda tsef s the basc structure of the Consttuton of
Inda and the fact that by the mpugned consttutona amendment,
the procedure prescrbed n the artce 368(2) of the Consttuton,
whch recognzes the federa structure of the Consttuton as one of
155
the basc structures, has not been foowed, s voatve of the
Consttuton. The pettoner contends that the sub|ect-matter "Co-
operatve Socetes" does not fa n the 7
th
Schedue Entry 45 of Lst I
of the Consttuton and those are specfcay excuded from entry no.
43 of Lst 1. Therefore, accordng to the pettoner, the State
egsature s the ony competent authorty n aw to enact the aws for
the co-operatve socetes and on that ground, the proposed
amendment shoud be set asde as voatve of the Consttuton of
Inda as the consent of the ma|orty of the State Legsatures was not
receved before presentng the B proposng the amendment to the
Presdent of Inda.
2.2 Accordng to the pettoner, t s setted aw that a consttutona
authorty cannot do somethng ndrecty whch t s not permtted to
do drecty and f there s a consttutona provson nhbtng the
consttutona authorty from dong an act, such provson cannot be
aowed to be defeated by adoptng a subterfuge. By the mpugned
consttutona amendment, accordng to the pettoner, the
Parament, a creature of the Consttuton, and not vce-a-versa, has
voated the basc structure of the Consttuton by not compyng wth
the requrements of Artce 368 (2) of the Consttuton.
3. Ths Court ssued notces upon the partes ncudng the earned
Attorney Genera of Inda, and n response to the notce, Mr.
Champaner, the earned Assstant Soctor Genera of Inda, has
156
appeared. The submssons of the Unon of Inda may be summarzed
thus:
(A). The ony mtaton on the Parament n exercse of the
consttuent power to amend the Consttuton n the matters
enumerated n causes (a), (b), (c), (d), and (e) of the provso to
sub-Artce (2) of Artce 368 s that, such amendment sha aso
requre to be ratfed by the Legsatures of not ess than one
haf of the States by the resouton to that effect passed by
those Legsatures before the b makng provson for such
amendment s presented to the Presdent for hs assent.

(B). Sub-Artce (1) of Artce 368 has been nserted by the
Consttuton (24
th
amendment) Act, 1971 and the orgna
Artce 368 has been re-numbered as cause (2) of Artce 368
whereas the words "specfed n parts A & B of the Frst
Schedue from the provso were omtted by the Consttuton
|97
th
Amendment| Act, 1956.
(C). Sub-Artce (3) provdes that nothng n Artce 13 sha appy to
any amendment made under ths Artce. Ths cause s nserted
by the Consttuton (24
th
amendment) Act, 1971. Sub-Artce (4)
and Sub-Artce (5) of Artce 368 whch had been nserted by
the Consttuton (42
nd
amendment) Act, 1976 have been
decared to be nvad by the Consttuton Bench of the
157
Supreme Court of Inda n the case of MlNERVA MlLLS V.
UNlON OF lNDlA, reported n AlR 1980 SC 1789 on the
ground that these causes whch remove a mtaton upon the
power of the Parament to amend the Consttuton and
precuded a |udca revew of the Consttuton Amendment Act,
on any ground, sought to destroy an "essenta feature" or
"basc structure" of the Consttuton.
(D). The Consttuton ays down dfferent modes of amendment of
ts varous provsons, whch are as under:
(). A very arge number of provsons are open to ateraton
by the Unon Parament, by smpe ma|orty ke the
matters referred to n Artces 2 - 4, 169 and 240.
(a). Creaton of new States or reconsttuton of exstng
States.
(b). Creaton or aboton of upper chambers n the
States.
(c). Admnstraton of schedued areas and Schedued
Trbes (Part VIII of the 5
th
Schedue and Part XXI of
the 6
th
Schedue.
(). If, however, a matter s not covered by ths Artce, ke
cessaton of terrtory to a foregn power, that can be
effected ony by enactng an Amendment Act under
Artce 368.
158
(). In the case of few matters reatng to the federa structure
of the Consttuton, a speca mode s prescrbed, vz. that
the B for amendment must be passed by two-thrd
ma|orty of the members of each House present and
votng (such ma|orty beng more than 50% of the tota
membershp of each House) and then ratfed by the
Legsatures by one-haf of the States. Those matters are:
(a). The manner of eecton of Presdent,
(b). Extent of Executve Powers of the Unon and the
States,
(c ). The Supreme Court and the Hgh Courts,
(d). Dstrbuton of Legsatve powers between the
Unon and the States,
(e). Representaton of States n Parament, and,
(f). The provsons of Artces 368 tsef.
(E). Artce 368 does not prescrbe the form n whch the
amendments may be made and the arrangement may,
therefore, add a provson to the Consttuton wthout aterng
ts exstng text n vew of the decson rendered by the
Supreme Court n the case of SHANKARlPRASAD vs. UNlON
OF lNDlA reported n AlR 1951 SC 458.
159
(F). In vew of the aforesad decson n the case of
Shankariprasad |supra|, the decson prevang was that "no
part of our Consttuton s unamendabe and that the Parament
may, by passng a Consttuton Amendment Act, n compance
wth the requrement of Artce 368, amend any provson of the
Consttuton ncudng the fundamenta rghts of Artce 368
tsef. However, n the case of Golaknath reported n AlR
1967 SC 1643, the ma|orty of sx |udges of a Speca Bench of
11 |udges overrued the prevous decson of the Supreme Court
n the case of Shankariprasad and took a vew that though
there s no express provson from the ambt of the Artce 368,
the fundamenta rghts ncuded n Part-III of the Consttuton
cannot, by ther very nature, be sub|ect to the process of
amendment provded for n Artce 368 and that f any of such
rghts s to be amended, a new Consttuent Assemby must be
convened for makng a new Consttuton or radcay changng
t.
(G). The ma|orty decson on Goaknaths case was superseded by
the Consttuton (24
th
amendment) Act, 1971, by nsertng
cause (4) n Artce 13 and cause (1) n Artce 368 as a resut
of whch an amendment of the Consttuton, based n
accordance wth the Artce 368, may not be a "aw" wthn the
meanng of Artce 13 and the vadty of the Consttuton
Amendment Act sha not be open to queston on the ground
160
that t takes away or affects a fundamenta rght. Ths
amendment has been hed to be vad.
(H). The decson of Goaknaths case has been overrued by the
atter Fu Bench of the Supreme Court n the case of
Keshavnanad v. State of Kerala reported n AlR 1973 SC
1461.
(I). Causes (4) and (5) are nserted n Artce 368 by the 42
nd
Amendment Act, 1976 and the nserton of the sad causes by
42
nd
Amendment Act, 1976 provdes that:
(a). There s no mtaton express or mped, upon the
amendment power under Artce 368 (1) whch s a
consttuent power, and,
(b). A Consttuton Amendng Act woud not, therefore, be
sub|ect to |udca revew on any ground.
The sad amendment, n turn, came to be superseded by the
decson of a Consttuton Bench of the Supreme Court n the
case of MlNERVA MlLLS |supra|. The sad causes (4) and (5)
of Artce 368 has been nvadated by the Supreme Court n the
sad case on the ground that "these provsons ntroduced by
the 42
nd
amendment Act, 1976, sought to excude |udca
revew, whch was one of the basc features of the Indan
161
Consttuton, as hed n the Kesavanands case and so ong as
ths decson stands, a the Consttuton Amendment Acts sha
be open to revew by the Supreme Court to see whether t
affected any of the basc features of the Consttuton
substantvey or the procedura safeguards ncuded n other
causes of Artce 368.
(|). Thus, the power to amend Consttuton s vested n the
Parament and whe exercsng the powers under Artce 368,
the Parament woud not be sub|ect to the mtatons whch
curb ts Legsatve powers to make aws under Artces 245-246
because the amendng power conferred by Artce 368 s
"consttuent" power as hed by the Apex Court n the case of
SASANK vs. UNlON OF lNDlA reported n AlR 1981 SC 522.
(K). By the amendment, by nserton of Chapter IXB, Artce 19(1) (c)
has been amended and now the co-operatve socetes have
aso been ncuded n Part-III of the Consttuton n Artce 19(1)
(c) and therefore, there s an addton n the fundamenta rghts
so far as addton of fundamenta rghts guaranteed under 19(1)
(c) has been extended to the Co-Operatve Socetes.
(L). Therefore, Artce 368 (2) provso has to be read n ts strct
sense and t s apparent that the amendment under chaenge s
not changng any of the matters enumerated n causes (a) to
162
(e) of the provson.
(M). The Parament has exercsed ts consttuent powers, whch s
dstnct from ts egsatve power and by the 97
th
amendment,
the Parament has not egsated on the sub|ect, but n ts
consttuent power has amended the Consttuton by addton of
guarantee of the fundamenta rghts n favour of the Co-
Operatve Socetes. By ths amendment, the Parament has not
attempted to change the basc features of the Consttuton. The
Prncpes of Federasm are aso not atered. Therefore, the
chaenge to the 97
th
amendment n Consttuton s
msconceved and has no merts, and therefore, the wrt-petton
deserves to be dsmssed.
4. The State Government, athough has not fed any affdavt, Mr.
|an, the earned Government Peader appearng on behaf of the
State, has supported the contentons of Mr. Champaner, and has
prayed for re|ecton of the wrt-appcaton.
5. Therefore, the queston that fas for determnaton before us s
whether the mpugned amendment voates any of the provsons of
the Consttuton of Inda.
6. In order to apprecate the aforesad contenton, t w be
proftabe to refer to part IXB of the Consttuton of Inda contanng
163
Artces 243ZH to 243ZT, whch are quoted beow:
Z43ZG. Bar to interference by courts in electoral
matters.Notwithstanding anything in this
Constitution,-
(a) the validity of any law relating to the delimitation of
constituencies or the allotment of seats to such
constituencies, made or purporting to be made under
article 243ZA shall not be called in question in any court;
(b) no election to any Municipality shall be called in
question except by an election petition presented to such
authority and in such manner as is provided for by or
under any law made by the Legislature of a 5tate.
Z43ZH. Definitions.--ln this Part, unless the context
otherwise requires,--
ja] authorised person" means a person referred to as
such in article 243ZO;
jb] board" means the board of directors or the
governing body of a co-operative society, by
whatever name called, to which the direction and
control of the management of the affairs of a
society is entrusted to;
jc] co-operative society" means a society registered
or deemed to be registered under under any law
relating to co-operative societies for the time being
in force in any 5tate;
jd] multi-5tate co-operative society" means a society
with objects not confined to one 5tate and
registered or deemed to be registered under any
law for the time being in force relating to such co-
operatives;
164
je] office bearer" means a President, Vice-President,
Chairperson, Vice-Chairperson, 5ecretary or
Treasurer of a co-operative society and includes
any other person to be elected by the board of any
co-operative society;
jf] Registrar" means the Central Registrar appointed
by the Central Covernment in relation to the multi-
5tate co-operative societies and the Registrar for
co-operative societies appointed by the 5tate
Covernment under the law made by the Legislature
of a 5tate in relation to co-operative societies;
jg] 5tate Act" means any law made by the Legislature
of a 5tate;
jh] 5tate level co-operative society" means a co-
operative society having its area of operation
extending to the whole of a 5tate and defined as
such in any law made by the Legislature of a 5tate.
Z43Zl. lncorporation of co-operative societies.--
5ubject to the provisions of this Part, the Legislature of a
5tate may, by law, make provisions with respect to the
incorporation, regulation and winding-up of co-operative
societies based on the principles of voluntary formation,
democratic member-control, member-economic
participation and autonomous functioning.
Z43Zj. Number and term of members of board and
its office bearers.-- jJ] The board shall consist of such
number of directors as may be provided by the
Legislature of a 5tate, by law:
Provided that the maximum number of directors of
a co-opeative society shall not exceed twenty-one:
165
Provided further that the Legislature of a 5tate
shall, by law, provide for the reservation of one seat for
the 5cheduled Castes or the 5cheduled Tribes and two
seats for women on board of every co-operative society
consisting of individuals as members and having
members from such class or category of persons.
j2] The term of office of elected members of the
board and its office bearers shall be five years from the
date of election and the term of office bearers shall be
coterminous with the term of the board:
Provided that the board may fill a casual vacancy
on the board by nomination out of the same class of
members in respect of which the casual vacancy has
arisen, if the term of office of the board is less than half
of its original term.
j3] The Legislature of a 5tate shall, by law, make
provisions for co-option of persons to be members of the
board having experience in the field of banking,
management, finance or specialisation in any other field
relating to the objects and activities undertaken by the
co-operative society, as members of the board of such
society:
Provided that the number of such co-opted
members shall not exceed two in addition to twenty-one
directors specified in the first proviso to clausejJ]:
Provided further that such co-opted members shall
not have the right to vote in any election of the co-
operative society in their capacity as such member or to
be eligible to be elected as office bearers of the board:
Provided also that the functional directors of a co-
operative society shall also be the members of the board
and such members shall be excluded for the purpose of
counting the total number of directors specified in the
166
first proviso to clausejJ].
Z43ZK. Election of members of board.--jJ]
Notwithstanding anything contained in any law made by
the Legislature of a 5tate, the election of a board shall be
conducted before the expiry of the term of the board so
as to ensure that the newly elected members of the
board assume office immediately on the expiry of the
term of the office of members of the outgoing board.
j2] The superintendence, direction and
control of the preparation of electoral rolls for, and the
conduct of, all elections to a co-operative society shall
vest in such an authority or body, as may be provided by
the Legislature of a 5tate, by law:
Provided that the Legislature of a 5tate may, by
law, provide for the procedure and guidelines for the
conduct of such election.
Z43ZL. Supersession and suspension of board
and interim management.-- jJ] Notwithstanding
anything contained in any law for the time being in force,
no board shall be superseded or kept under suspension
for a period exceeding six months:
Provided that the board may be superseded or kept
under suspension in case--
ji] of its persistent default;
jii] of negligence in the performance of its
duties; or
jiii] the board has committed any act prejudicial
to the interests of the co-operative society or
its members; or
jiv] there is a stalement in the constitution or
functions of the board; or
167
jv] the authority or body as provided by the
Legislature of a 5tate, by law, under
clausej2] of article 243Zl, has failed to
conduct elections in accordance with the
provisions of the 5tate Act.
Provided further that the board of any such co-
operative society shall not be superseded or kept under
suspension where there is no Covernment shareholding
or loan or financial assistance or any guarantee by the
Covernment:
Provided also that in case of a co-operative society
carrying on the business of banking, the provisions of the
8anking Regulation Act, J949 jJ0 of J949] shall also
apply:
Provided also that in case of a co-operative society,
other than a multi-5tate cooperative society, carrying on
the business of banking, the provisions of this clause
shall have the effect as if for the words six months", the
words one year" had been substituted.
j2] ln case of supersession of a board, the
administrator appointed to manage the affairs of such co-
operative society shall arrange for conduct of elections
within the period specified in clause jJ] and handover the
management to the elected board.
j3] The Legislature of a 5tate may, by law, make
provisions for the conditions of service of the
administrator.
Z43ZM. Audit of accounts of co-operative
societies.-- jJ] The Legislature of a 5tate may, by law,
make provisions with respect to the maintenance of
accounts by the co-operative societies and the auditing of
168
such accounts at least once in each financial year.
j2] The Legislature of a 5tate shall, by law, lay
down the minimum qualifications and experience of
auditors and auditing firms that shall be eligible for
auditing accounts of the co-operative societies.
j3] Every co-operative society shall cause to be
audited by an auditor or auditing firms referred to in
clause j2] appointed by the general body of the co-
operative society:
Provided that such auditors or auditing firms shall
be appointed from a panel approved by a 5tate
Covernment or any authority authorised by the 5tate
Covernment in this behalf.
j4] The accounts of every co-operative society
shall be audited within six months of the close of the
financial year to which such accounts relate.
j5] The audit report of the accounts of an apex
co-operative society, as may be defined by the 5tate Act,
shall be laid before the 5tate Legislature in the manner
as may be provided by the 5tate Legislature, by law.
Z43ZN. Convening of general body meetings.--
The Legislature of a 5tate may, by law, make provisions
that the annual general body meeting of every co-
operative society shall be convened within a period of six
months of close of the financial year to transact the
business as may be provided in such law.
Z43ZO. Right of a member to get information.--
jJ] The Legislature of a 5tate may, by law, provide for
access to every member of a co-operative society to the
books, information and accounts of the co-operative
society kept in regular transaction of its business with
169
such member.
j2] The Legislature of a 5tate may, by law, make
provisions to ensure the participation of members in the
management of the co-operative society providing
minimum requirement of attending meetings by the
members and utilising the minimum level of services as
may be provided in such law.
j3] The Legislature of a 5tate may, by law,
provide for co-operative education and training for its
members.
Z43ZP. Returns.-- Every co-operative society shall
file returns, within six months of the close of every
financial year, to the authority designated by the 5tate
Covernment including the following matters, namely:-
ja] annual report of its activities;
jb] its audited statements of accounts;
jc] plan for surplus disposal as approved by the
general body of the co-operative society;
jd] list of amendments to the bye-laws of the co-
operative society, if any;
je] declaration regarding date of holding of its
general body meeting and conduct of
elections when due; and
jf] any other information required by the
Registrar in pursuance of any of the
provisions of the 5tate Act.
Z43ZQ. Offences and penalties.--jJ] The
Legislature of a 5tate may, by law, make provisions for
the offences relating to the co-operative societies and
penalties for such offences.
170
j2] A law made by the Legislature of a 5tate
under clause jJ] shall include the commission of the
following act or omission as offences, namely:--
ja] a co-operative society or an officer or
member thereof wilfully makes a false return
or furnishes false information, or any person
willfully not furnishes any information
required from him by a person authorised in
this behalf under the provisions of the 5tate
Act;
jb] any person wilfully or without any reasonable
excuse disobeys any summons, requisition or
lawful written order issued under the
provisions of the 5tate Act;
jc] any employer who, without sufficient cause,
fails to pay to a co-operative society amount
deducted by him from its employee within a
period of fourteen days from the date on
which such deduction is made;
jd] any officer or custodian who wilfully fails to
handover custody of books, accounts,
documents, records, cash, security and other
property belonging to a co-operative society
of which he is an officer or custodian, to an
authorised person; and
je] whoever, before, during or after the election
of members of the board or office bearers,
adopts any corrupt practice.
Z43ZR. Application to multi-State co-operative
societies.--The provisions of this Part shall apply to the
multi-5tate co-operative societies subject to the
modification that any reference to Legislature of a
171
5tate", 5tate Act" or 5tate Covernment" shall be
construed as a reference to Parliament", Central Act"
or the Central Covernment" respectively.
Z43ZS. Application to Union territories.-- The
provisions of this Part shall apply to the Union territories
and shall, in their application to a Union territory, having
no Legislative Assembly as if the references to the
Legislature of a 5tate were a reference to the
administrator thereof appointed under article 239 and, in
relation to a Union territory having a Legislative
Assembly, to that Legislative Assembly:
Provided that the President may, by notification in
the Official Cazette, direct that the provisions of this Part
shall not apply to any Union territory or part thereof as he
may specify in the notification.
Z43ZT. Continuance of existing laws.--
Notwithstanding anything in this Part, any provision of
any law relating to co-operative societies in force in a
5tate immediately before the commencement of the
Constitution jNinety-seventh Amendment] Act, 20JJ,
which is inconsistent with the provisions of this Part, shall
continue to be in force until amended or repealed by a
competent Legislature or other competent authority or
until the expiration of one year from such
commencement, whichever is less."
xxx xxx xxx
6.1 The enabng provson for amendment of the Consttuton beng
Artce 368 s aso quoted beow:
172
368. Power of Parliament to amend the
Constitution and procedure therefor.-
(J). Notwithstanding anything in this Constitution,
Parliament may in exercise of its constituent power
amend by way of addition, variation or repeal any
provision of this Constitution in accordance with the
procedure laid down in this article.
(2). An amendment of this Constitution may be initiated
only by the introduction of a 8ill for the purpose in either
House of Parliament, and when the 8ill is passed in each
House by a majority of the total membership of that
House and by a majority of not less than two-thirds of the
members of that House present and voting, it shall be
presented to the President who shall give his assent to
the 8ill and thereupon the Constitution shall stand
amended in accordance with the terms of the 8ill:
Provided that if such amendment seeks to make any
change in-
(a) article 54, article 55, article 73, article J62 or
article 24J, or
(b) Chapter lV of Part V, Chapter V of Part Vl, or
Chapter l of Part Xl, or
(c) any of the Lists in the 5eventh 5chedule, or
(d) the representation of 5tates in Parliament, or
(e) the provisions of this article,
the amendment shall also require to be ratified by the
Legislatures of not less than one-half of the 5tates by
resolutions to that effect passed by those Legislatures
before the 8ill making provision for such amendment is
presented to the President for assent.
(3). Nothing in article J3 shall apply to any amendment
made under this article.
173
(4). No amendment of this Constitution (including the
provisions of Part lll) made or purporting to have been
made under this article whether before or after the
commencement of section 55 of the Constitution (Forty-
second Amendment) Act, J976 shall be called in question
in any court on any ground.
(5). For the removal of doubts, it is hereby declared
that there shall be no limitation whatever on the
constituent power of Parliament to amend by way of
addition, variation or repeal the provisions of this
Constitution under this article."
7. After hearng the earned counse for the partes and after gong
through the provsons quoted above and aso the other provsons of
the Consttuton of Inda, t appears that ony the State Legsature s
authorzed to enact aw reatng to "Co-Operatve Socetes" as woud
appear from the fact that t s paced at tem No. 32 n Lst II-STATE
LIST n the Seventh Schedue of the Consttuton.
8. We do not dspute for a moment that by amendng the
provsons of the Consttuton of Inda, the Parament can brng the
sad tem from Lst-II of the 7
th
Schedue to Lst I - UNION LIST or Lst
III - CONCURRENT LIST and n such crcumstances, the Parament
w aso have rght to egsate aw reatng to Co-Operatve Socetes.
However, n order to brng such amendment for shftng an tem from
Lst-II of the 7
th
Schedue to Lst I - UNION LIST or Lst III -
CONCURRENT LIST of the 7
th
Schedue, such amendment s requred
to be passed n each House by a ma|orty of the tota membershp of
174
that House and by a ma|orty of not ess than two-thrds of the
members of that House present and votng the amendment and such
amendment sha aso be requred to be ratfed by the Legsatures of
not ess than one-haf of the States by resoutons to that effect
passed by those Legsatures before the B makng provson for such
amendment s presented to the Presdent for assent.
9. In the case before us, admttedy the formaty ndcated n
Artce 368 (2) of the Consttuton for takng ratfcaton has not been
comped wth before presentng t to the Presdent for assent. The
Centra Government, n ts affdavt has stated that n the conference
of the Mnsters of the State, the Mnsters approved such amendment
and at the same tme, there beng no amendment of the Lst II of the
7
th
Schedue, Artce 368(2) cannot have any appcaton.
10. Mr. Champaner, the earned Assstant Soctor Genera of Inda,
and Mr. |an, the earned Government Peader appearng for the State
of Gu|arat, have aborousy contended before us that by the
amendment mpugned, the power of the State Legsature to enact
aw reatng to Co-Operatve Socetes has not been taken away, and
thus, the provsons of Artce 368(2) are not appcabe.
11. It appears from the provsons contaned n Artce 243.ZG to
Artce 243ZT ntroduced by way of the mpugned amendment that
though there s no amendment of Lst-II of the Consttuton by takng
175
ad of Artce 368(2) of the Consttuton, by ncorporatng Chapter IXB
startng from Artce 243.ZG and endng wth Artce 243ZT, varous
restrctons have been mposed upon the State Legsatures whe
enactng aw reatng to Co-Operatve Socetes whch was earer
unfettered pror to the ncorporaton of Chapter IXB. For nstance, n
Artce 243ZI, t s sad that the Legsature of a State may, by aw,
make provsons wth respect to the ncorporaton, reguaton and
wndng-up of co-operatve socetes based on the prncpes of
vountary formaton, democratc member-contro, member-economc
partcpaton and autonomous functonng but such law must be
subject to the provisions of Part lX8. In Artce 243Z|, a defnte
restrcton has been mposed upon the State Legsatures regardng
fxaton of maxmum number of Drectors of a Co-Operatve Socety
which shall not exceed twenty-one. Further, the State Legsatures
have been asked to provde for reservaton of one seat for the
Schedued Castes or the Schedued Trbes and two seats for women
on board of every co-operatve socety consstng of ndvduas as
members and havng members from such cass or category of
persons. Smary, n sub-Artce |2| of Artce 243Z|, the duraton of
the term of offce of the eected members of the board and ts offce
bearers has been fxed to be fve years and n sub-Artce (3) thereof,
a further drecton has been gven upon State Legsatures n the
matter of enactng aw reatng to Co-Operatve Socetes regardng
co-opton of the member n the board of drector and further
provsons regardng the rghts of such co-opted members have aso
176
been made. Smary n Artce 243ZK, a further condton has been
mposed that the eecton of a board sha be conducted before the
expry of the term of the board so as to ensure that the newy eected
members of the board assume offce mmedatey on the expry of the
term of the offce of members of the outgong board. In Artce
243ZL, a further condton has been mposed that no board sha be
suspended or kept under suspenson for a perod exceedng sx
months and has aso provded varous condtons under whch a Board
may be superseded or kept under suspenson. In Artce 243ZM, t s
mandatory prescrbed that the account of every socety shoud be
audted wthn sx months from the cose of the fnanca year to
whch the accounts reate. Artce 243ZP casts a duty upon the
socety to fe return wthn the perod fxed there n and there s no
scope of gnorng the same. Artce 243ZO prescrbes the acts whch
woud be the offences reatng to the co-operatve socetes and the
State Legsature cannot devate from those mandates.
12. If ths Part IXB was not ncorporated, the State Legsatures
woud have the absoute rght to enact aw on the above sub|ects
accordng to the decson of such Legsatures whereas after the
amendment, no opton s gven to the State Legsature to devate
from or gnore those provsons. Thus, by ncorporaton of Part IXB,
varous restrctons have been mposed reatng to aws of Co-
Operatve Socetes whch have constraned the |ursdcton of the
State Legsatures to enact any aw reatng to Co-operatve Socetes
177
on those aspects. In other words, n spte of the fact that the aw
reatng to Co-Operatve Socetes s st n the Lst II of the 7
th
Schedue, wthout brngng the sub|ect of Co-Operatve Socetes
ether nto Lst I or Lst III, by way of ths amendment, the Parament
has controed the sad power wthout compyng wth the provsons
of Artce 368 (2) of the Consttuton by takng ratfcaton of the
ma|orty of the State Legsatures. The ob|ect acheved by the
amendment by way of ncorporaton of Part IXB coud be easy
acheved by brngng the sub|ect of Co-Operatve Socetes n LIST 1 -
UNION LIST or LIST III-CONCURRENT LIST but n that case, there woud
have been the necessty of such amendment beng requred to be
passed n each House by a ma|orty of the tota membershp of that
House and by a ma|orty of not ess than two-thrds of the members of
that House present and votng the amendment and such amendment
being required to be ratified by the Legislatures of not less than one-
half of the 5tates by resolutions to that effect passed by those
Legislatures before the 8ill making provision for such amendment is
presented to the President for assent. By way of the mpugned
amendment, nstead of takng consent of the ma|orty of the State
Legsatures, by merey takng consent of the Mnsters of the State,
the purpose has been sought to be acheved.
13. In other words, what coud not be acheved except by
compyng wth the provsons of Artce 368 (2) of the Consttuton,
the sefsame purpose has been sought to be acheved by the
178
amendment mpugned n ths wrt-appcaton wthout compyng wth
the provsons of Artce 368 (2) of the Consttuton.
14. In the case of Builders Association of lndia & others
etc.etc. v. Union of lndia and others etc.etc., reported n AlR
1989 SC 1371, a Consttutona Bench |fve |udges| of the Supreme
Court was consderng whether the Consttuton |46
th
Amendment|
Act, 1982 was passed after proper ratfcaton as requred under
Artce 368|2| and whether the State was bound to foow Artce 286
and Centra Saes Tax Act whe evyng tax under Artce 366. In the
sad case, n Schedue VII Lst II Entry No. 54, the scope was
expanded. The penary power of the State government was
expanded by nterferng wth ts excusve power under Artce 246 by
the sad amendment. The Supreme Court, for the purpose of
consderng the queston nqured whether ratfcaton process of
Artce 368|2| was comped wth and thereafter, uphed the vadty.
In ths connecton, we may proftaby record the foowng observaton
of the Supreme Court appearng n para-29 at page 1386:
The Attorney-Ceneral has also produced before us the file
containing the resolutions passed by the Legislatures of the J2
5tates referred to in the Memorandum, set out above. We are
satisfied that there has been due compliance of the provisions
contained in the proviso to Article 368j2] of the Constitution.
We, therefore, reject the first contention. 8efore proceeding
further, we should observe that there would have been no
occasion for an argument of this type being urged in Court if at
179
the commencement of the Act it had been stated that the 8ill in
question had been presented to the President for his assent
after it had been duly ratified by the required number of
Legislatures of 5tates. We hope that this suggestion will be
followed by the Central 5ecretariat hereafter since we found
that even the Attorney-Ceneral was not quite sure till the case
was taken up for hearing that the 8ill which had become the
46
th
Amendment had been duly ratified by the required number
of 5tates."
14.1 By reyng upon the aforesad decson, Mr. Shah mpressed
upon us that whenever even the case of expanson of scope of a
partcuar entry n the st s taken up for consderaton, t s the duty
of the Consttuton Court to see that the consttutona procedures for
ratfcaton n Artce 368|2| are comped wth and accordng to hm,
n the case before us, the scope of Entry No. 32 of Lst II havng been
restrcted by nterferng wth ts excusve power under Artce 246
and ratfcaton procedure prescrbed n Artce 368|2| not havng
been comped wth, 97
th
Amendment s unconsttutona. We fnd that
Mr. Shah s substantay correct n hs submsson.
15. In the case of Kihoto Holohan v. Zachillhu and others,
reported in 1992 Supp ]2| Supreme Court Cases 651, a fve-
|udge-bench of the Supreme Court was consderng whether Schedue
X ntroduced by Consttuton |52
nd
Amendment| Act, 1985 was
consttutonay vad or not, nasmuch as para-7 of the Schedue X
took away the powers of |udca revew. It appears from the sad
180
|udgment that one of the questons rased before the Supreme Court
was, havng regard to the egsatve hstory and evouton of the
prncpes underyng the Tenth Schedue, Paragraph 7 thereof n
terms and n effect, brought about a change n the operaton and
effect of Artces 136, 226 and 227 of the Consttuton of Inda and,
therefore, the B ntroducng the amendment attracted the provso to
Artce 368|2| of the Consttuton and woud requre to be ratfed by
the Legsature of the States before the B s presented for
Presdenta assent. Utmatey, n para-62 of the |udgment the
Supreme Court made the foowng observatons:
6Z. ln the present case, though the amendment does not
bring in any change directly in the language of Articles J36,
226 and 227 of the Constitution, however, in effect paragraph 7
curtails the operation of those articles respecting matters
falling under the Tenth 5chedule. There is a change in the
effect in Articles J36, 226 and 227 within the meaning of clause
jb] of the proviso to Article 368j2]. Paragraph 7, therefore,
attracts the proviso and ratification was necessary. Accordingly,
on Point j8], we hold:
That having regard to the background and evolution of
the principles underlying the Constitution jFifty-second
Amendment] Act, J985, insofar as it seeks to introduce
the Tenth 5chedule in the Constitution of lndia, the
provisions of Paragraph 7 of the Tenth 5chedule of the
Constitution in terms and in effect bring about a change
in the operation and effect of Articles J36, 226 and 227
of the Constitution of lndia and, therefore, the
181
amendment would require to be ratified in accordance
with the proviso to sub-article j2] of Article 368 of the
Constitution of lndia."

15.1 By reyng upon the aforesad decson, Mr. Shah rghty
submtted before us that athough n the sad case, n effect, there
was no change n the anguage of the artces mentoned n Causes
|a| to |e|, even then, ratfcaton envsaged under Artce 368|2|
provso was requred to be comped wth.
16. In the case of S.R. Bommai and others v. Union of lndia
and others, reported n ]1994| 3 SCC 1, a nne-|udge-bench of the
Supreme Court was consderng whether the presdenta
procamaton under Artce 356 of the Consttuton was sub|ect to
|udca revew and f the answer was n affrmatve, then, to what
extent.
16.1 It appears that sx dfferent |udgments were devered. Pandan,
|. was of the vew that t s sub|ect to revew but n rare cases.
Ahmad, |. was of the vew that ony on the mted ground of mala
fide and vires, the same can be sub|ect to |udca revew. On the
other hand, Verma and Daya, || were of the vew that such
nterference shoud be very narrow. Sawant and Sngh, ||, however,
hed that the entre |udca revew was appcabe. Ramaswamy |, on
the other hand, restrcted Hs Lordshps observatons that on ega
mala fide and hgh rratonaty, t can be revewed and tradtona
182
parameters and proportonaty of |udca revew was not appcabe.
Reddy and Agarwa, || were of the vew that t s entrey sub|ect to
|udca revew.
16.2 By reyng upon the above decson, Mr. Shah, n our opnon,
was |ustfed n contendng that we shoud nterfere n these cases as
the basc structure of federasm whch was the sub|ect matter n the
case of S.R. Bommai (supra), was gnored.
17. In the case of M. Nagaraj and others, v. Union of lndia and
others, reported in ]2006| 8 SCC 212, chaenge was whether
Consttuton |85
th
Amendment| Act, 2011 nsertng Artce 16|4A| was
consttutonay vad. It appears that the Supreme Court uphed the
consttutona vadty on the ground that t comped wth Wdth Test
and the Test of Identty. By reyng upon the sad decson, Mr. Shah, n
our opnon, was rght n submttng that consttutona amendment s
to be tested on ts wdth and one has to examne the dentty.
18. In the case of l.R. Coelho ]dead| by L.Rs. v. State of T.N.,
reported in ]2007| 2 SCC 1, a nne-|udge-bench of the Supreme
Court, returned ts unanmous verdct through Sabharwa, C|I. In the
sad case, the queston was whether the Laws paced under Schedue
IX nserted by Artce 31B were mmuned from the |udca revew.
Sabharwa, C|I, answered the queston by hodng that t s not
mmuned and was sub|ect to |udca revew. The observatons made
183
n para-151 at page 111 are quoted beow:
J5J. ln conclusion, we hold that:
ji] A law that abrogates or abridges rights guaranteed by
Part lll of the Constitution may violate the basic structure
doctrine or it may not. lf former is the consequence of the law,
whether by amendment of any article of Part lll or by an
insertion in the Ninth 5chedule, such law will have to be
invalidated in exercise of judicial review power of the Court.
The validity or invalidity would be tested on the principles laid
down in this judgment.
jii] The majority judgment in lesavananda 8harati case read
with lndira Candhi case requires the validity of each new
constitutional amendment to be judged on its own merits. The
actual effect and impact of the law on the rights guaranteed
under Part lll has to be taken into account for determining
whether or not it destroys basic structure. The impact test
would determine the validity of the challenge.
jiii] All amendments to the Constitution made on or after 24-
4-J973 by which the Ninth 5chedule is amended by inclusion of
various laws therein shall have to be tested on the touchstone
of the basic or essential features of the Constitution as
reflected in Article 2J read with Article J4, Article J9, and the
principles underlying them. To put it differently even though an
Act is put in the Ninth 5chedule by a constitutional amendment,
its provisions would be open to attack on the ground that they
destroy or damage the basic structure if the fundamental right
or rights taken away or abrogated pertains or pertain to the
basic structure.
jiv] justification for conferring protection, not blanket
protection, on the laws included in the Ninth 5chedule by
constitutional amendments shall be a matter of constitutional
184
adjudication by examining the nature and extent of infraction
of a fundamental right by a statute, sought to be
constitutionally protected, and on the touchstone of the basic
structure doctrine as reflected in Article 2J read with Article J4
and Article J9 by application of the rights test" and the
essence of the right" test taking the synoptic view of the
articles in Part lll as held in lndira Candhi case. Applying the
above tests to the Ninth 5chedule laws, if the infraction affects
the basic structure then such lawjs] will not get the protection
of the Ninth 5chedule.
This is our answer to the question referred to us vide
order dated J4-9-J999 in l.R. Coelho v. 5tate of T.N.
jv] lf the validity of any Ninth 5chedule law was
already been upheld by this Court, it would not be open to
challenge such law again on the principles declared by this
judgment. However, if a law held to be violative of any rights in
Part lll is subsequently incorporated in the Ninth 5chedule after
24-4-J973, such a violation/infraction shall be open to
challenge on the ground that it destroys or damages the basic
structure as indicated in Article 2J read with Article J4, Article
J9 and the principles underlying thereunder.
jvi] Action taken and transaction finalized as a result of the
impugned Acts shall not be open to challenge."
18.1 By reyng upon the sad decson, Mr. Shah, n our vew, was
rght n submttng that the contenton of Mr. Champaner or Mr. |an
that we cannot ook nto the queston whether formates of
ratfcaton have been comped wth or not or whether basc structure
of the Consttuton has been ht s not tenabe.
19. Mr. Shah aso paced strong reance upon the decson of the
185
Supreme Court n the case of D.C. Wadhwa v. State of Bihar,
reported in ]1987| 1 SCC 625. In the sad decson, the queston
was whether by promugatng the ordnances from tme to tme on a
massve scae n a routne manner under Artce 213 by Governor and
wthout repacng them by Act of Legsature, the consttutona
provsons were nfrnged. In ths connecton, Mr. Shah strongy paced
reance upon para-7 at page 393 of the sad decson, wheren, t was
observed by Bhagawat, C|I that a consttutona authorty cannot do
ndrecty what t s not permtted to drecty. If there s a
consttutona provson nhbtng the consttutona authorty from
dong an act, Hs Lordshp proceeded, such provson cannot be
aowed to be defeated by adopton of any subterfuge and that t
woud be ceary a fraud on the consttutona provson.
19.1 By reyng upon the sad decson, Mr. Shah strenuousy
contended that the ob|ect of the amendment before us s to
overcome the provson contaned n Artce 368|2| by takng
ratfcaton of ma|orty of the State Legsatures and thus, we shoud
strke down the sad provson.
20. We aso fnd substance n the contentons of Mr. Shah that by
the amendment mpugned n ths wrt-appcaton, one of the basc
structures of the Consttuton, vz. the prncpes of federasm has
been affected. There s no dspute that federasm s one of the basc
structure of our Consttuton. Once the sub|ect of Co-Operatve
186
Socetes s n the Lst II of the 7
th
Schedue, by deprvng the State
Legsatures of ther free exercse of rght to enact on the sad sub|ect
and by curtament of ther rght over the sub|ect matter to abde by
the newy enacted provson of the Consttuton wthout foowng the
requrement of ratfcaton as provded n Artce 368(2), the doctrne
of federasm whch s one of the basc features of the Consttuton
has been nfrnged.
21. At ths stage, we may proftaby refer to the foowng
observatons of the nne-bench-decson of the Supreme Court n the
case of l.R. Coelho ]dead| by L.Rs. v. State of T.N. (supra):-
8y addition of the words 'constituent power' in Article
368, the amending body, namely, Parliament does not become
the original Constituent Assembly. lt remains a Parliament
under a controlled Constitution. Even after the words
'constituent power' are inserted in Article 368, the limitations of
doctrine of basic structure would continue to apply to the
Parliament. lt is on this premise that clauses 4 and 5 inserted in
Article 368 by 42nd Amendment were struck down in Minerva
Mills case."
22. Thus, the amendment s voatng the basc structure of the
Consttuton so ong as the sub|ect of "Co-Operatve Socetes" s n
the Lst II of the 7
th
Schedue and at the same tme, the provsons of
Artce 368(2) has not been comped wth. The Consttuton has not
permtted curtament of the power of the State Legsatures over the
187
sub|ect mentoned n Lst II wthout takng recourse to Artce 368 (2).
23. We now propose to dea wth the decsons cted by Mr.
Champaner, the earned Assstant Soctor Genera of Inda,
appearng for the Unon of Inda.
24. In the case of Sasanka vs. Union of lndia reported n AlR
1981 SC 522, the queston that had arsen before a fve-|udge-
bench of the Supreme Court was whether the provsons of Chapter
IIB of the West Benga Land Reforms -Act, 1955 (Act X of 1956)
nserted by the West Benga Land Reforms (Amendment) Act, 1971
(Presdent's Act III of 1971), and repaced by the West Benga Land
Reforms (Amendment) Act, 1972 (Act XII of 972) wth retrospectve
effect from February 12, 1971, whch provde for a fxaton of ceng
on agrcutura hodngs and for matters ancary thereto, were
voatve of the second provson to Art. 31A (1) of the Consttuton. In
that context, the Supreme Court n paragraph 35 of the |udgment
made the foowng observatons upon whch Mr. Champaner has
paced strong reance:
35. As regards the submission that Parliament cannot in
exercise of its constituent power under Art. 368 validate a
5tate law, it seems to us that the entire submission proceeds
on a misconception arising from failure to distinguish between
a law made in exercise of the legislative power and the law
made in exercise of the constituent power. When Art. 3J-8 was
188
introduced in the Constitution by the Constitution (First
Amendment) Act J95J, it validated retrospectively J3 Acts
specified in the Ninth 5chedule, which, but for this provision,
were liable to be impugned under Art. J3 (2).Article 3J-8
conferred constitutional immunity to such laws (all being
enactments of 5tate Legislatures) and Parliament alone could
have done so by inserting the said Article in the Constitution in
exercise of its constituent power under Art. 368. ln substance
and reality it was a constitutional device employed to protect
5tate laws from becoming void under Art. J3 (2). lt will appear
clear that the language in Art. 3J-8 is virtually lifted from Art.
J3 (J), and (2), while Art. J3 (2) invalidates legislation, which
takes away or abridges the rights conferred by Part lll, Art. 3J-
B extends protective umbrella to such legislation if it is
included in Ninth Schedule and, therefore, the Courts
will have no power to go into the constitutionality of the
enactment as included in the Ninth Schedule except on
the ground of want of legislative competence."
(Emphass supped by us).
24.1 As t appears from the porton hghghted by us, the queston
nvoved n that matter regardng the vadty of the State Laws
ncuded n the Nnth Schedue cannot have any appcaton to the
facts of the present case. Regardng consttuent power under Artce
368, we have aready reed upon the observatons of the nne-bench-
|udgment of the Supreme Court n the case of l.R. Coelho ]dead| by
L.Rs. v. State of T.N. (supra) hodng that by addition of the words
'constituent power' in Article 368, the amending body, namely,
Parliament does not become the original Constituent Assembly. We,
189
thus, fnd that the above decson reed upon by Mr. Champaner does
not hep hs cent n any way.
25. Mr. Champaner aso reed upon paragraphs 108 to 122
of the |udgment of the Supreme Court n the case of Ashoka Kumar
Thakur v. Union of lndia reported n (2008) 6 SCC 1. In those
paragraphs, the Supreme Court deat wth the queston whether the
93
rd
amendment of the Consttuton was aganst the basc structure of
the Consttuton or not. By the Consttuton |93
rd
amendment| Act,
2005, cause (5) was added to Artce 15 of the Consttuton whch s
an enabng provsons whch states that nothng n Artce 15 or n
sub-cause (g) of Cause (I) of Artce 19 sha prevent the State from
makng any speca provson, by aw, for the advancement of any
socay and educatonay backward casses of ctzens or for the
Schedued Castes or the Schedued Trbes nsofar as such speca
provsons reate to ther admsson to the educatona nsttutons
ncudng prvate educatona nsttutons, whether aded or unaded
by the State. In such a case t was hed by the Supreme Court that
the sad amendment does not voate the basc structure of the
Consttuton so far as t reates to aded educatona nsttutons. The
Supreme Court further hed that the queston whether reservaton
coud be made for SCs, STs or SEBCs n prvate educatona
nsttutons on the bass of the Consttuton |93
rd
amendment| or
whether reservaton coud be gven n such nsttutons or whether
any such egsaton woud be voatve of Artce 19(1)(g) or Artce 14
190
of the Consttuton or whether the sad amendment whch enabes the
State Legsatures or Parament to make such egsaton are a
questons to be decded n a propery consttuted s between the
affected partes and others who support such egsaton.
25.1 As ponted out above, n deang wth a case where the
Supreme Court was faced wth the queston of reservaton for SEBCs
n centra educatona nsttutons, the contenton that an amendment
that nserted a fundamenta rght s voatve of the basc structure of
the Consttuton was found to be untenabe. We fa to apprecate how
the decson s reevant for our purpose where the queston s wthout
takng recourse to the specfc provson of Artce 368(2) requrng
ratfcatons of the ma|orty State Legsatures whether the power of
the State Legsature n enactng aw reatng to Co-operatve
Socetes can be curtaed by the Parament. We have aready ponted
out that a consttutona authorty cannot do ndrecty what t s not
permtted to do drecty.
26. Thus, the decsons cted by Mr. Champaner do not hep hs
cent.
27. We, therefore, aow ths Pubc Interest Ltgaton by decarng
that the Consttuton |97
th
amendment| Act, 2011 nsertng part IXB
contanng Artces 243ZH to 243ZT s ultra vires the Consttuton of
Inda for not takng recourse to Artce 368(2) of the Consttuton
191
C/WPPIL/166/2012 CAV J UDGEMNT
provdng for ratfcaton by the ma|orty of the State Legsatures. Ths
order, however, w not affect other parts of the Consttuton |97
th
amendment| Act, 2011. In the facts and crcumstances, there w be
no order as to costs.
(BHASKAR BHATTACHARYA, CJ.)
(J.B.PARDIWALA, J.)
mathew
FURTHER ORDER:
After ths |udgment was pronounced, Mr. Champaner, the
earned Assstant Soctor Genera of Inda appearng on behaf of the
Unon of Inda prays for stay of operaton of our |udgment.
In vew of what has been stated above, we fnd no reason to
stay our |udgment. The prayer s refused. However, certfed copy be
gven by 24
th
Apr 2013, f apped for.
(BHASKAR BHATTACHARYA, CJ.)
(J.B.PARDIWALA, J.)
mathew
192
THE MULTI-STATE CO-OPERATIVE SOCIETIES
(AMENDMENT) BILL, 2010
A
BILL
to amend the Multi-State Co-operative Societies Act, 2002.
BE it enacted by Parliament in the Sixty-first Year of the Republic of India as follows:
1. (1) This Act may be called the Multi-State Co-operative Societies (Amendment)
Act, 2010.
(2) It shall come into force on such date as the Central Government may, by notification
in the Official Gazette, appoint and different dates may be appointed for different provisions
of this Act and any reference in any such provision to the commencement of this Act shall
be construed as a reference to the coming into force of that provision.
2. In the Multi-State Co-operative Societies Act, 2002 (hereinafter referred to as the
principal Act), in section 5, in sub-section (1),
(i) in clause (a), the word "and" occurring at the end shall be omitted;
(ii) in clause (b), for the words "co-operative principles", the words "co-operative
principles; and" shall be substituted;
Short title
and
commencement.
Amendment
of section 5.
39 of 2002.
Bill No. 123 of 2010
5
10
193
(iii) after clause (b), the following clause shall be inserted, namely:
"(c) it gives an undertaking that, after its registration as multi-State
co-operative society under this Act, it shall make available its products and
services to its members:
Provided that the multi-State co-operative societies which have
already been registered shall also comply with the provisions of this
clause. ".
3. In section 7 of the principal Act,
(a) in sub-section (2), the following proviso shall be inserted, namely:
"Provided that the Central Registrar may, for reasons to be recorded in
writing, extend the said period of four months to five months.";
(b) in sub-section (3),
(i) for the words "a period of four months from the date of receipt of
application for registration", the words, brackets and figure "a period specified
for disposal of application under sub-section (2)" shall be substituted;
(ii) in the second proviso, for the words "a period of four months" the
words "the period" shall be substituted.
4. In section 10 of the principal Act, in sub-section (2), in clause (a), for the word
"address", the words and brackets "address (including electronic-mail address)" shall be
substituted.
5. In section 11 of the principal Act, in sub-section (7), the following proviso shall be
inserted, namely:
"Provided that the Central Registrar may Register the amendments with such
modifications as may be necessary to bring them in conformity with the provisions of
this Act.".
(a) in sub-section (1), after clause (c), the following clause shall be inserted,
namely:
"(d) decide, with the approval of the Central Registrar, to wind up or
convert itself into any other legal entity and to transfer its assets and liabilities
in whole or in part to such legal entity.";
(b) in sub-section (3), after the word "amalgamation" the words " or winding up
or conversion" shall be inserted;
(c) in sub-section (7),
(a) after the words "formed by division", the words "or winding up or
conversion into any other legal entity" shall be inserted;
(b) after the words "and the bye-laws thereof", the words "or permit
winding up of the society or conversion of it into any other legal entity, as the
case may be" shall be inserted;
(d) after sub-section (9), the following sub-sections, shall be inserted, namely:
"(10) The provisions of this section and section 18 shall, as far as may
be, apply to a multi-State co-operative society which decides to wind up or
convert into any other legal entity as they apply in the case of amalgamation of
a co-operative bank with any other co-operative bank.
(11) The Central Government may for the reasons to be recorded in writing,
notwithstanding anything contained in this Act, issue such directions on such
matters relating to winding up or conversion into any other legal entity, as it
may deem fit.".
Amendment
of section 7.
Ame n d me n t
of section 10.
Amendment
of section 11.
Amendment
of section 17.
5
10
15
20
25
30
35
40
45
194
3
(a) in sub-section (1), after the words "or to a co-operative society", the words
"or to any other legal entity" shall be inserted;
(i) after the words "or two or more co-operative societies" the words "or
converts itself into any other legal entity" shall be inserted;
(ii) after the words "registration of the new societies", the words "or its
conversion into any new legal entity" shall be inserted;
(c) after sub-section (4), the following sub-section shall be inserted, namely:
"(5) The Central Registrar may cancel the registration of a multi-State
co-operative society, if he has reasons to believe that,
(a) the registration was obtained by misrepresentation of facts,
submission of false or misleading information, suppression of material
facts or fraud; or
(b) the number of members or the number of societies or the number
of persons as the case may be, have been, at any time reduced below the
number of members or societies or persons as specified in sub-section
(2) of section 6:
Provided that no registration shall be cancelled without providing an
opportunity of being heard to the multi-State co-operative society.".
8. In section 22 of the principal Act, in sub-section (5), for clause (c), the following
clause shall be substituted, namely:
"(c) The co-operative society shall cease to be as such under the law relating to
co-operative societies in force in the State, from the date of registration of amendment
of its bye-laws under sub-section (3) by the Central Registrar and the Registrar of
Co-operative Societies referred to in clause (b) shall make an order to this effect, within
a period of one month from the receipt of the copy of certificate under clause (b).".
9. In section 25 of the principal Act, in sub-section (4) ,
(a) for the words "four months" at both the places where they occur, the words
"six months" shall be substituted;
(b) for the words "refusing admission to the applicant" the words "accepting
admission to the applicant" shall be substituted;
(c) after the proviso, the following proviso shall be inserted, namely:
"Provided further that the administrator or administrators, as the case
may be, appointed under this Act to manage the affairs of a multi-State
co-operative society shall not admit any new member to such society without
the prior approval of the Central Registrar.".
10. In section 28 of the principal Act, for the words "unless he has made the payment
to the society in respect of membership, or" the words "unless he has made payment in
respect of all dues to the society including the payment in respect of membership or availed
such minimum level of services or" shall be substituted.
11. In section 29 of the principal Act,-
(a) in clause (d), for the words "such society", the words "such society; or"
shall be substituted;
(b) after clause (d), the following clause shall be inserted, namely:
Ame n d me n t
of section 21.
Amendment
of section 22.
Amendment
of section 25.
Amendment
of section 28.
Amendment
of section 29.
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10
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20
25
30
35
40
45
195
"(e) he fails to avail the products and services made available by such
multi-State co-operative society as specified in the bye-laws.".
12. In section 30 of the principal Act, in sub-section (2), for the words "for a period of
one year from the date of such expulsion", the words "for a period which shall not exceed
three years but shall not be less than one year, from the date of such expulsion, as may be
specified in the bye-laws" shall be substituted.
13. In section 32 of the principal Act, after the proviso the following proviso and
Explanation shall be inserted, namely:
Provided further that unless the bye-laws provide otherwise, a member may
exercise his vote at a meeting by electronic form in such manner as may be prescribed.
Explanation. For the purposes of this section, "electronic form" with reference
to information means any information generated, sent, received, or stored in media,
magnetic, optical, computer memory, micro film, computer generated micro fiche or
similar device.'.
"Provided that the multi-State co-operative society may refund full or
part of the share capital held by the Government who shall accept such
redemption.";
(b) in sub-section (2), for the words "on the face value of the shares" the
words " on the face value or book value of shares, whichever is higher" shall be
substituted;
(c) after sub-section (2), the following Explanation shall be inserted, namely:
'Explanation. For the purposes of this sub-section, "book value" means
the value of the shares as shown in the books of account taking into account
the total share capital, free reserves and surpluses.'.
15. In section 38 of the principal Act, in sub-section (3), after the proviso the
following proviso shall be inserted, namely:
"Provided further that such administrator shall not represent the co-operative
society or other multi-State co-operative society in such meetings beyond a period of
six months.".
(a) in sub-section (3), for the second and third provisos the following provisos
shall be substituted, namely:
"Provided further that the board may co-opt two directors, in addition to
twenty-one directors specified in the first proviso, having experience in the
field of banking, management and finance or having specialisation in any field
relating to the objects and activities undertaken by such multi-State co-operative
society:
Provided also that so co-opted directors shall not have power to vote in
the election of the office bearers or represent the multi-State co-operative society
in any other multi-State co-operative society:
Provided also that a person who has lost in election to the board shall not
be co-opted as director in the board on casual vacancy or otherwise:
Provided also that one seat shall be reserved for the Scheduled Castes or
the Scheduled Tribes and two seats for women in the board of a multi-State
co-operative society consisting of individuals as members and having members
from such class or category of persons:
Amendment
of section 30.
Amendment
of section 32.
Amendment
of section 35.
Amendment
of section 38.
Amendment
of section 41.
5
10
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20
25
30
35
40
45
196
Provided also that the functional directors in a national co-operative
society, who are officers of such society (other than the chief executive of the
rank of director or above), shall also be the members of the board in accordance
with its bye-laws and such members shall be excluded for the purpose of counting
the total number of directors in the first proviso.";
(b) after sub-section (3), the following sub-sections shall be inserted, namely:
(4) Every member of a board of multi-State co-operative society who,
whether directly or indirectly, is concerned or interested in a contract or
arrangement or proposed contract or arrangement, entered into or to be entered
into, by or on behalf of such society shall disclose the nature of his concern or
interest and that of his relatives at a meeting of the board.
Explanation. For the purposes of this clause, the term "relative" with
reference to an individual means the spouse, brother, sister and all lineal
ascendants and descendants of such individual related to him either by marriage
or adoption.
(5) No director of a multi-State co-operative society shall, as a director, be
present in the discussion of, or vote on, any contract or arrangement entered
into, or to be entered into, by or on behalf of such society, if he is directly or
indirectly concerned or interested in the contract or arrangement.
(6) The board of a multi-State co-operative society shall be collectively
responsible to the general body of the society..
17. After section 41 of the principal Act, the following section shall be inserted,
namely:
41A. (1) If the Central Registrar at any time, is of the opinion that a multi-State
co-operative society has become sick, it may, by order, declare such society as a sick
co-operative society.
(2) Where a multi-State co-operative society is declared sick under sub-section
(1), the Central Government may, on the recommendation of Central Registrar, constitute
an interim board for a maximum period of five years consisting of experts in the field
of co-operation, management, finance, accountancy and in other areas relating to
such multi-State co-operative society for the purpose of preparing and implementing
a scheme for rehabilitation or revival of such multi-State co-operative society.
(3) The board of directors of such multi-State co-operative society, after
constitution of interim board, shall not function and discharge its functions as such:
Provided that the board of directors shall cease to exist on the completion of its
term.
(4) The Central Registrar, if at any time during which the interim board has been
constituted, is of the opinion that the society has become viable, it may dissolve such
interim board and thereafter the board of directors existing before constitution of
interim board shall function as per provisions of this Act.
Explanation. For the purpose of this section "sick co-operative society"
means a multi-State co-operative society being a society registered under the
provisions of this Act which has at the end of any financial year accumulated losses
equal to or exceeding total of its paid-up capital, free reserves and surpluses and has
also suffered cash losses in such financial year and the financial year immediately
preceding such financial year..
Insertion of
new section
41A.
Constitution
of interim
board.
5
10
15
20
25
30
35
40
45
197
18. In section 43 of the principal Act, in sub-section (2),
(a) in clause (c), for the words "general meeting", the words "general meeting;
or" shall be substituted;
(b) after clause (c), the following clauses shall be inserted, namely:
"(d) to make contribution to the co-operative education fund referred to
in clause (b) of sub-section (1) of section 63 or Co-operative Rehabilitation and
Reconstruction Fund established under section 63A; or
(e) to file the statutory returns within the time specified under section
120.".
(a) for sub-section (1), the following sub-section shall be substituted, namely:
"(1) The Central Government may, by notification, appoint an Authority
to be known as the Co-operative Election Authority for conduct of elections for
such societies as may be prescribed and the superintendence, direction and
control of preparation of electoral rolls for, and the conduct of election of such
multi-State co-operative societies shall be vested in returning officer as may be
appointed by the Election Authority and the returning officer shall discharge
such function under the control of the Election Authority in such manner as
may be prescribed:
Provided that where such Authority has not been appointed in respect of
a multi-State co-operative society, the elections to the boards of such society
shall be conducted by the existing board of such society.;
(b) in sub-section (5), after the proviso the following provisos shall be inserted,
namely:
"Provided further that the term of office bearers shall be co-terminus with
the term of board of directors:
Provided also that only elected or nominated members of the board shall
be eligible to be elected as chairman or vice-chairman or president or vice-
president of the board:
Provided also that the board may fill a causal vacancy of the members of
the board by nomination out of the same class of members in respect of which
the casual vacancy has arisen, if the term of office of the board is less than half
of its original term.";
(c) in sub-section (6), the following proviso and Explanation shall be inserted,
namely:
"Provided that the Central Registrar may, for the reasons to be recorded
in writing, extend said period of ninety days up to one year.
Explanation. For the purpose of this proviso, the period of one year
specified therein shall be reckoned from the date on which the election became
due and any period for which such elections were stayed by any tribunal or
court shall be excluded.";
(d) for sub-section (7), the following sub-sections shall be substituted,
namely:
"(7) No person shall be eligible to be elected as a member of the board or
office bearer of a multi-State co-operative society unless he is an active member
of the general body of that society.
Amendment
of section 43.
Amendment
of section 45.
5
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35
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198
Explanation. For the purpose of this sub-section "active member"
shall mean any member availing such minimum level of services or products of
the society as may be specified in the bye-laws of the society.
(7A) A member of the board or office bearer of a multi-State co-operative
society shall cease to be such member or office bearer if he ceases to be a
member of general body of that society.";
(e) in sub-section (8), after the words "by the Central Registrar" the words "or
the Election Authority" shall be inserted.
20. In section 49 of the principal Act, in sub-section (2), for clause (m), the following
clauses shall be substituted, namely:
"(m) to elect president and vice-president of the multi-State co-operative society
from amongst the elected or nominated members of the board in accordance with the
bye-laws of the multi-State co-operative society; and
(n) to take such other measures or to do such other acts as may be prescribed
or required under this Act or the bye-laws or as may be delegated by the general
body.".
"Provided that where the chairperson or president of a multi-State co-
operative society fails to fix a date of the meeting of the board, the Chief Executive
shall, on receipt of requisition from one-fourth of the directors, convene the
meeting of the board.";
(b) in sub-section (3), after the words "meeting of the board", the words "the
vice-chairperson and in the absence of both," shall be inserted;
(c) after sub-section (3), the following sub-section shall be inserted, namely:
"(4) The quorum for a meeting of the board of directors of a multi-State
co-operative society shall be one-third of its total strength and the participation
of the directors by video-conferencing or by other electronic means shall also
be counted for the purpose of quorum under this sub-section.".
22. In section 52 of the principal Act, in clause (j), for the words "thirty days", the
words "forty-five days" shall be substituted.
23. In section 53 of the principal Act, for sub-section (1), the following sub-sections
"(1) The board may constitute an Executive Committee, and such other
committees or sub-committees as may be specified in the bye-laws of the multi-State
co-operative society.
(1A) The board shall constitute an audit and ethics committee in accordance
with bye-laws which shall meet once in three months.".
namely:
'63A. (1) The Central Government shall establish a fund to be called the Co-
operative Rehabilitation and Reconstruction Fund (hereafter in this section referred
to as the "Fund " .
Amendment
of section 49.
Amendment
of section 50.
Amendment
of section 52.
Amendment
of section 53.
Establishment
of Co-
operat i ve
Rehabilitation
and
Reconstruction
Fund.
Insertion of
new section
63A.
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(2) There shall be credited to the Fund the following amounts, namely:
(a) a multi-State co-operative society registered under this Act shall credit
0.005% to 0.1% of its turnover, subject to a maximum of Rs. 3.00 crores per year,
as may be prescribed;
(b) grants and donations given to the Fund by the Central Government,
State Government and other National and International agencies approved by
the Government from time to time for making contribution to this Fund;
(c) the interest or other income received out of the investment made from
the Fund.
(3) The Fund shall be utilised for rehabilitation and strengthening of sick co-
operative societies referred to in section 41A.
(4) The Central Government shall by notification in the Official Gazette, specify
an authority or committee, with such members as the Central Government may appoint,
to administer the Fund, and maintain separate accounts and other relevant records in
relation to the Fund in such form as may be prescribed in consultation with the
Comptroller and Auditor-General of India.
(5) It shall be competent for the authority or committee appointed under sub-
section (4) to spend moneys out of the Fund for carrying out the objects for which
the Fund has been established.
(a) in sub-section (1), after the second proviso, the following proviso shall be
inserted, namely:
"Provided also that the multi-State co-operative society doing the banking
business shall be governed by directions issued by Reserve Bank of India in
this behalf.";
(a) for the words twenty-five per cent. of its paid-up share capital the
words its paid-up share capital, free reserves and surpluses shall be
substituted;
(b) the following proviso shall be inserted, namely:
Provided that the multi-State co-operative society doing the
banking business shall be governed by directions issued by the Reserve
Bank of India or any other authority competent to do so under any law
for the time being in force in this behalf..
26. In section 70 of the principal Act, in sub-section (7), in clause (a), for the proviso
the following proviso shall be substituted, namely:
"Provided that where such vacancy is caused by the resignation or death of an
auditor, the vacancy shall be filled by the board out of the panel of auditors approved
by the Central Registrar.".
27. In section 73 of the principal Act, after sub-section (5), the following sub-section
shall be inserted, namely:
"(6) The Central Government may, by notification, lay down auditing and
accounting standards to be adopted by multi-State co-operative societies or class of
multi-State co-operative societies:
Provided that multi-State co-operative societies doing the banking business
shall adopt accounting and auditing standards if any laid down by Reserve Bank of
India in this behalf:
Amendment
of section 67.
Amendment
of section 70.
Amendment
of section 73.
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Provided further that until such auditing standards are laid down, auditing
standards specified by the Institute of Chartered Accountants of India shall be deemed
to be the auditing and accounting standards.".
28. In section 77 of the principal Act,-
(a) in sub-section (1), the proviso shall be omitted;
(b) after sub-section (1), the following sub-section shall be inserted, namely:
"(1A) The Central Government may order for a special audit of a multi-
State co-operative society where the Central Government or a State Government
holds any share capital or shares in such multi-State co-operative society.".
29. In section 78 of the principal Act, for sub-section (1), the following sub-sections
"(1) Where on a scrutiny of any document filed by a multi-State co-operative
society or otherwise, the Central Registrar is of the opinion that any further information
or explanation or any further documents relating to the multi-State co-operative society
is necessary, he may, by a written notice, require the multi-State co-operative society
(i) to furnish in writing such information or explanation; or
(ii) to produce such documents,
within such reasonable time, as may be specified in the notice.
(1A) If the Central Registrar is satisfied on the basis of information available
with or furnished to him or on a representation made to him by any person that the
business of a multi-State co-operative society is being carried on for a fraudulent or
unlawful purpose, he may, after informing the multi-State co-operative society of the
allegations made against it by a written order, call on the multi-State co-operative
society to furnish in writing any information or explanation on matters specified in the
order within such time as he may specify therein, and hold such inquiry as he deems
fit:
Provided that the Central Government may, if it is satisfied that circumstances
so warrant, direct, the Central Registrar or an inspector appointed by it for the purpose,
to hold an inquiry under this sub-section.
(1B) The Central Registrar may, on a request from a federal co-operative to
which a multi-State co-operative society is affiliated or a creditor or not less than one-
third of the members of the board or not less than one-fifth of the total number of
members of a multi-State co-operative society, hold an inquiry or direct some person
authorised by him by order in writing in this behalf to hold an inquiry into the
constitution, working and financial condition of a multi-State co-operative society:
Provided that no inquiry under this sub-section shall be held unless a notice of
not less than fifteen days has been given to the multi-State co-operative society.".
(a) in sub-section (1), for the words "such dispute shall be referred to
arbitration", the words "such dispute shall be referred to the Central Registrar" shall
be substituted;
(b) after sub-section (1), the following sub-section shall be inserted, namely:
"(1A) The Central Registrar may, on receipt of the reference of dispute
under sub-section (1),
(a) decide the dispute himself; or
(b) transfer it for decision to such person and upon such terms and
conditions as may be specified,
Amendment
of section 77.
Amendment
of section 78.
Amendment
of section 84.
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and the order passed under this sub-section shall be final and binding on the
multi-State co-operative societies and other concerned parties and shall not be
called in question in any court:
Provided that the Central Registrar may, at any time after transferring the
dispute under clause (b) and after recording the reason for doing so withdraw
the dispute so transferred and decide the dispute himself.
Explanation. For the removal of doubts, it is clarified that power to
decide dispute under this section includes the power to pass interim order;
(a) for the word "arbitration", the words "Central Registrar" shall be
substituted;
(b) for the word arbitrator, the words, brackets, letters and figures
"Central Registrar or person authorised by him under clause (b) of sub-section
(1A)" shall be substituted;
(d) sub- sections (4) and (5) shall be omitted.
(a) in the opening paragraph, after the words and figures "section 83 or" the
words and figures "section 84 or" shall be inserted;
(b) after clause (c), the following clause shall be inserted, namely:
"(d) where the decision or order provides for recovery on account of the
default in contribution to the co-operative education fund referred to in clause
(b) of sub-section (1) of section 63 or Co-operative Rehabilitation and
Reconstruction Fund established under section 63A, the Central Registrar shall
issue the certificate of recovery and forward it to any other authority for execution
according to the law for the time being in force for the recovery as arrears of
land revenue.".
32. In section 103 of the principal Act, after sub-section (1), the following provisos
shall be inserted, namely :
"Provided that the said multi-State co-operative society shall submit an
application for registration and such information to obtain the certificate of registration
from the Central Registrar as provided in this Act:
Provided further that in case all the successor States take necessary steps to
divide or reorganise the said multi-State co-operative society into State co-operative
Societies to confine their objects, services and the members to respective States
within such period as may be prescribed, such society shall not be deemed to be a
multi-State co-operative society under the provisions of this Act and the Central
Registrar may cancel the registration of such multi-State co-operative society by an
order in writing.".
(a) in sub-section (1),
(i) after the words "making a false return", the words "or failing to file
returns" shall be inserted;
(ii) for the words "two thousand rupees" the words "five thousand
rupees" shall be substituted;
(iii) for the words "extend to ten thousand rupees", the words "extend to
fifty thousand rupees" shall be substituted;
Amendment
of section 94.
Amendment
of section
103.
Amendment
of section
104.
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(b) in sub-section (2), for the words "five thousand rupees", the words "ten
thousand rupees" shall be substituted;
(i) after the word and figures "section 89", the words and figures "or to a
person required to file return under section 120" shall be inserted;
(ii) for the words "two thousand rupees", the words "five thousand
rupees" shall be substituted;
(iii) for the words "five thousand rupees", the words "ten thousand
rupees" shall be substituted.
34. Section 106 of the principal Act shall be numbered as sub-section (1) thereof and
after sub-section (1), so numbered the following sub-section shall be inserted, namely:
"(2) Every multi-State co-operative society shall appoint a Co-operative
Information Officer to provide, on application made to him and on payment of such
fee as may be prescribed, information about the affairs and management of the society,
within thirty days from the date of receipt of application.
(3) Every multi-State co-operative society shall also appoint a Chief Information
Officer who shall hear and dispose of any complaint regarding the non-supply of
information by the Co-operative Information Officer within the time specified in sub-
section (2).
(4) Any person, aggrieved by the order of the Chief Information Officer, may
file an appeal before the Central Registrar whose decision thereon shall be final:
Provided that the Central Registrar may impose penalty on the officers
responsible for non-furnishing of information to the amount of two hundred and fifty
rupees for each day of delay above the specified period.
(5) The manner of appeal, the time within which such appeal may be filed and
the procedure of appeal shall be such as may be prescribed..
35. In section 108 of the principal Act, in sub-section (1), in clause (i), after the words
"Central Registrar", the words "or any person authorised by him in this behalf" shall be
inserted.
namely:
"120A. (1) Notwithstanding anything to the contrary contained in this Act, and
without prejudice to the provisions contained in the Information Technology Act,
2000, the Central Government may, from such date as may be prescribed, require that-
(a) such applications, balance sheet, return, or any other particulars or
document as may be required to be filed or delivered under this Act or rules
made thereunder, shall be filed in the electronic form and authenticated in such
manner as may be prescribed;
(b) such document, notice, any communication or intimation, as may be
required to be served or delivered under this Act, shall be served or delivered
under this Act in the electronic form and authenticated in such manner as may
be prescribed;
(c) such applications, balance sheets, returns, registers, bye-laws or any
other particulars or documents and returns filed under this Act or rules made
thereunder shall be maintained by the Central Registrar in the electronic form
and registered or authenticated, as the case may be, in such manner as may be
prescribed;
Amendment
of section
106.
Amendment
of section
108.
21 of 2000
Filing of
applications,
documents,
inspections,
etc. in
electronic
form.
Insertion of
new section
120A.
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(d) such inspection of the bye-laws, balance sheets, returns or any other
particulars or documents maintained in the electronic form, as is otherwise
available for inspection under this Act or rules made thereunder, may be made
by any person through the electronic form in such manner as may be prescribed;
(e) such fees, charges or other sums payable under this Act or rules made
thereunder shall be paid through the electronic form and in such manner as may
be prescribed.
(2) The Central Registrar shall register change of registered office, amendment
of bye-laws, issue certificate of registration, register such document, issue such
certificate, record notice, receive such communication as may be required to be
registered or issued or recorded or received, as the case may be, under this Act or
rules made thereunder or perform duties or discharge functions or exercise powers
under this Act or rules made thereunder or do any act which is by this Act directed to
be performed or discharged or exercised or done by the Central Registrar in the
electronic form in such manner as may be prescribed.
(3) The Central Government may also provide that the electronic form for the
purpose in this section shall be exclusive or alternative or in addition to the physical
form in such manner as may be prescribed.
Explanation. For the removal of doubts, it is hereby clarified that the rules
made under this section shall not relate to imposition of fines or other pecuniary
penalties or demand or payment of fees or contravention of any of the provisions of
this Act or punishment therefor.
(4) The Central Government may, by notification, frame a scheme to carry out
the provisions of sub-section (1) through the electronic form..
37. In section 124 of the principal Act, in sub-section (2),
(a) after clause (g), the following clause shall be inserted, namely:
"(ga) the manner of exercising vote in electronic form under the proviso
to section 32";
(b) after clause (j), the following clauses shall be inserted, namely:
"(ja) the co-operative societies for which the election shall be conducted;
(jb) the functions to be discharged and the manner in which those are
to be discharged by the returning officer";
(c) after clause (m), the following clause shall be inserted, namely:
"(ma) other measures or acts under clause (n) of sub-section (2) of
section 49";
(d) after clause (r), the following clauses shall be inserted, namely:
"(ra) the turnover under clause (a) of sub-section (2) of section 63A;
(rb) the form in which the accounts or other relevant records shall be
maintained under sub-section (4) of section 63A";
(e) after clause (w), the following clauses shall be inserted, namely:
"(wa) period within which the multi-State Co-operative society shall
devide or reorganise under the proviso to sub-section (1) of section 103;
(wb) the fee under sub-section (2) of section 106;
(wc) the manner, time and procedure of appeal under sub-section (5) of
section 106;";
Amendment
of section
124.
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(f) after clause (x), the following clauses shall be inserted, namely:
"(xa) the documents, notice, etc., required to be filed or delivered, or
served in electronic form under sub-section (1) of section 120A;
(xb) the manner of electronic form under sub-section (2) of section 120A;".
205
STATEMENT OF OBJECTS AND REASONS
The Multi-State Co-operative Societies Act, 2002 repealing the earlier law, that is, the
Multi-State Co-operative Societies Act, 1984 was enacted with a view to consolidating the
provisions relating to the Multi-State Co-operative Societies registered with objects not
confined to one State and serving the interests of members in more than one State, to
facilitate the voluntary formation and democratic functioning of co-operatives as peoples
institutions based on self-help and mutual aid and to enable them to promote their economic
and social betterment and to provide functional autonomy. The Multi-State Co-operative
Societies Act, 2002 came in force with effect from the 19th August, 2002.
2. With the passage of time and developments in the co-operative movement in the
country, certain difficulties have been experienced by the Multi-State Co-operative Societies
in the implementation of the Multi-State Co-operative Societies Act, 2002. Conference of
the State Co-operative Ministers was held on the 7th December, 2004 to, inter alia, ascertain
the difficulties experienced by the Multi-State Co-operative Societies. In pursuance of the
resolution passed in the said conference, a High Powered Committee or Co-operatives was
constituted under the Chairmanship of Shri S.G. Patil.
3. In view of the recommendations made in the Report of aforesaid High Powered
Committee and suggestions received from the co-operative sector and other stake holders
and considering the importance of Multi-State Co-operative Societies in the national economy
and the experience gained during the last eight years of implementation of the Multi-State
Co-operative Societies Act, 2002, it has been felt that the said Act should be amended to
keep the legislation in tune with the changing economic policies and to facilitate the Multi-
State Co-operative Societies to take advantage of the new and emerging opportunities and
to keep pace with other economic entities and facilitate raising of resources by the Multi-
State Co-operative Societies more efficiently and effectively by making appropriate
provisions for promoting their functional autonomy.
4. The Bill proposes to amend the Multi-State Co-operative Societies Act, 2002, inter
alia, to
(a) make the management of these co-operative societies more responsible to
the members and accountable by making provision for (i) constitution of Interim
Board, (ii) accounting standards, (iii) constitution of Audit and Ethics Committee;
(iv) calling for information or explanation by the Central Registrar of the Multi-State
Co-operative Societies, (v) Special Audit;
(b) strengthen the provision relating to election of the members of the Board of
the Multi-State Co-operative Societies;
(c) make provisions for broad based representation in the Board of the Multi-
State Co-operative Societies by providing reservation for the Scheduled Castes, the
Scheduled Tribes and women;
(d) take certain measures which would facilitate the building of self-reliant,
democratic and professionally efficient co-operative institutions;
(e) bringing transparency in the functioning of the Multi-State Co-operative
Societies by making provision for appointment of Co-operative Information Officer,
Chief Information Officer for providing information about the affairs and management
of the Multi-State Co-operative Societies and also make provision for appeal.
206
5. The Notes on clauses appended to the Bill explain the provisions of the Bill in
detail.
6. The Bill seeks to achieve the above objectives.
NEW DELHI; SHARAD PAWAR
the 22nd October, 2010.
207
Notes on clauses
Clause 2.This clause seeks to amend section 5 of the Multi-State Co-operative
Societies Act, 2002 relating to the Multi-State Co-operative Societies which may be registered.
It is proposed to amend sub-section (1) of the aforesaid section, inter alia, to impose
an obligation upon the Multi-State Co-operative Societies to give an undertaking to the
effect that it shall make available its products and services to its members, after its registration
as multi-State co-operative society under the Multi-State Co-operative Societies Act, 2002.
Societies Act, 2002 relating to registration of the Multi-State Co-operative Societies.
It is proposed to amend the aforesaid section to extend the period for disposal of
application for registration from four months to five months after recording reasons therefor.
Clause 4. This clause seeks to amend section 10 of the Multi-State Co-operative
Societies Act, 2002 relating to bye-laws of the Multi-State Co-operative Societies.
It is proposed to amend sub-section (2) of the aforesaid section to include electronic-
mail address in the address of the society.
Societies Act, 2002 relating to amendment of bye-laws of the Multi-State Co-operative
Societies.
It is proposed to amend sub-section (7) of the aforesaid section to provide for
registration of amendments with such modifications as may be necessary to bring them in
conformity with the provisions of the Act.
Societies Act, 2002 relating to amalgamation or transfer of assets and liabilities or division
of Multi-State Co-operative Societies.
It is proposed to amend the aforesaid section, inter alia, to enable the Society to
decide, with the approval of the Central Registrar, to wind up or convert itself into any other
legal entity and to transfer its assets and liabilities in whole or in part to such legal entity.
Societies Act, 2002 relating to cancellation of registration certificate of Multi-State
Co-operative Societies.
It is proposed to amend the aforesaid section, inter alia, providing for cancellation of
registration if such registration has been obtained by misrepresentation of facts, submission
of false or misleading information, suppression of material facts or fraud; or the number of
members or the number of societies or the number of persons as the case may be, which
have been at any time reduced below the number of members or societies or persons as
specified in sub-section (2) of section 6 of the principal Act.
Societies Act, 2002 relating to conversion of a co-operative society into a Multi-State
Co-operative Society.
It is proposed to amend sub-section (5) of the aforesaid section to provide that the
co-operative society shall cease to be as such under the law relating to co-operative societies
in force in the State, from the date of registration of amendment of its bye-laws by the
Central Registrar and the Registrar of co-operative societies of the State shall make an order
to this effect, within a period of one month from the receipt of the copy of registration
certificate.
208
Societies Act, 2002 relating to persons who may become members of the Multi-State
Co-operative Societies.
It is Proposed to amend sub-section (4) of the aforesaid section to extend the period
for disposal of application for admission as a member of the society from four to six months
and providing for that the administrator or administrators, as the case may be, appointed
under this Act to manage the affairs of a multi-State co-operative society shall not admit any
new member to such society without the prior approval of the Central Registrar.
Societies Act, 2002 relating to exercising the rights by members.
It is proposed to amend the aforesaid section to provide that the member shall not
exercise his rights unless he has made payment in respect of all dues to the society including
the payment in respect of membership or availed minimum level of services as may be
specified in the bye-laws.
Societies Act, 2002 relating to disqualifications for being member of a Multi-State
Co-operative Society.
It is proposed to amend the aforesaid section to provide that failure to avail the
product and services made available by the society as specified in its bye-laws may render
a person ineligible for being a member of the society.
Societies Act, 2002 relating to expulsion of members.
It is proposed to amend sub-section (2) of the aforesaid section to extend the time
period from one to three years as may be specified in the bye-laws from the date of expulsion
of the member for being eligible for re-admission as member.
Societies Act, 2002 relating to manner of exercising vote.
It is proposed to provide that the member may also exercise his vote at a meeting
through electronic form.
Societies Act, 2002 relating to redemption of shares in Multi-State Co-operative Society.
It is proposed to amend sub-section (1) and sub-section (2) of the aforesaid section
to provide that the society may refund full or part of the share capital held by the Government
who shall accept such redemption on the face value or book value of shares, whichever is
higher.
Societies Act, 2002 relating to constitution, powers and functions of general body.
It is proposed to amend sub-section (3) of the aforesaid section with a view to
provide that the administrator shall not represent the co-operative society or other multi-
State co-operative society beyond a period of six months.
Societies Act, 2002 relating to board of directors of Multi-State Co-operative Societies.
It is proposed to amend sub-section (3) and insert sub-sections (4), (5) and (6) in the
aforesaid section to specify the field of expertise for the co-opted directors and to provide
reservation of seat for the Scheduled Castes and the Scheduled Tribes and women in the
board of the society. It is also proposed to provide that the director shall disclose the
nature of his concern or interest and of that of his relatives at the meeting of the board of the
society and he shall not be present in the discussion of or vote on any contract or arrangement
in which he is concerned or interested.
209
Clause 17.This clause seeks to insert section 41A after section 41 of the Multi-
State Co-operative Societies Act, 2002.
It is proposed to insert the aforesaid section to provide for the constitution of interim
board for rehabilitation or revival of sick society.
Societies Act, 2002 relating to disqualification for being a member of the board of Multi-
State Co-operative Society.
It is proposed to amend sub-section (2) of the aforesaid section with a view, inter
alia, to provide that default by members in making contribution to the Co-operative Education
Fund or Co-operative Rehabilitation and Reconstruction Fund and filing the statutory
returns within the specified time shall render them ineligible for being elected as members of
the board.
Societies Act, 2002 relating to elections of members of the board of Multi-State Co-operative
Societies.
It is proposed to amend the aforesaid section to provide, inter alia, that the Central
Government shall appoint Co-operative Election Authority for conduct of elections in the
society. It also seeks to provide that the term of office bearers shall be co-terminus with the
term of board of directors and only elected or nominated members of the board shall be
eligible to be elected as Chairman or Vice-Chairman or President or Vice- President of the
board. It further seeks to provide that the board may fill a causal vacancy of the members of
the board by nomination out of the same class of members in respect of which the casual
vacancy has arisen, if the term of office of the board is less than half of its original term. It
also seeks to provide for extension of period for conduct of election by the Central Registrar
from ninety days up to one year. It also seeks to stipulate that no person shall be eligible to
be elected as a member of the board or office bearer of a multi-State co-operative society
unless he is an active member of the general body of that society.
Societies Act, 2002 relating to powers and functions of the board of Multi-State Co-operative
Society.
It is proposed to amend sub-section (2) of the aforesaid section with a view to
empower the board to elect President and Vice-President of the society from amongst the
elected or nominated members of the board.
Societies Act, 2002 relating to meetings of the board of Multi-State Co-operative Society.
It is proposed to amend the aforesaid section to provide for convening of meeting of
the board by the chief executive on receipt of requisition from one-fourth of the directors. It
also provides for quorum of the meeting of the board of directors and participation of the
directors through video conferencing or through other electronic means to be counted for
the purpose of quorum.
Societies Act, 2002 relating to powers and functions of the Chief Executive.
It is proposed to amend the aforesaid section with a view to extend the period for
presentation of the draft, annual report and financial statement for the approval of board
from thirty to forty-five days.
Societies Act, 2002 relating to the committees of the board of Multi-State Co-operative
Society.
210
It is proposed to amend sub-section (1) and insert sub-section (1A) in the aforesaid
section with a view to empower the board to constitute executive committee and other
committees or sub-committees. It also seeks to provide that the board shall constitute an
audit and ethics committee.
It is proposed to insert the aforesaid section with a view to provide for establishment
of Co-operative Rehabilitation and Reconstruction Fund.
Societies Act, 2002 relating to restrictions on borrowing by the Multi-State Co-operative
Society.
It is proposed to amend the aforesaid section to provide that the multi-State co-
operative society doing banking business shall be governed by the directions issued by
Reserve Bank of India. It also seeks to remove the existing restriction on borrowings by the
society to the extent of only twenty-five per cent. of its paid-up share capital and proposes
to allow the society to raise resources to the extent of its paid-up share capital, free reserves
and surpluses.
Societies Act, 2002 relating to appointment and remuneration of auditors.
It is proposed to amend sub-section (7) of the aforesaid section to empower the board
to fill up the vacancy of auditor caused by the resignation or death of auditor from out of the
panel of auditors approved by the Central Registrar.
Societies Act, 2002 relating to powers and duties of auditors.
It is proposed to insert sub-section (6) to the aforesaid section to provide for laying
down of auditing and accounting standards by the Central Government.
Societies Act, 2002 relating to the power of the Central Government to direct special audit in
certain cases.
It is proposed to amend sub-section (1) and insert sub-section (1A) in the aforesaid
section to empower the Central Government to order for special audit where Central or State
Government holds share capital or shares.
Clause 29.This clause seeks to amend section 78 relating to inquiry by the Central
Registrar.
It is proposed to amend sub-section (1) and insert sub-sections (1A) and ( 1B) in the
aforesaid section to empower the Central Registrar to call from the society any information
or explanation and documents. It also provides for holding of enquiry by the Central
Registrar if it is found that the business of the society is being carried on for a fraudulent or
unlawful purpose.
Societies Act, 2002 relating to reference of disputes.
It is proposed to amend the aforesaid section, inter alia, to provide that any of
dispute shall be referred to the Central Registrar instead of arbitrator and that the Central
Registrar on receipt of the reference of dispute may decide the dispute himself or transfer it
for decision to such person and upon such terms and conditions as may be specified.
Societies Act, 2002 relating to execution of decisions etc.
211
It is proposed to amend the aforesaid section to provide that in case of default, the
contribution to the co-operative education fund shall be recovered as land revenue.
Societies Act, 2002 relating to co-operative societies functioning immediately before
reorganisation of States.
cancellation of registration by Central Registrar of the deemed multi-State co-operative
society if all the successor States take necessary steps to divide or reorganise the said
multi-State co-operative society into State co-operative societies.
Societies Act, 2002 relating to offences and penalties.
It is proposed to amend the aforesaid section to increase the amount of penalty for
the specified offences.
Societies Act, 2002 relating to copies of bye laws etc. to be made open to inspection.
It is proposed to insert sub-section (2) to the aforesaid section to provide for
appointment of Co-operative Information Officer, Chief Information Officer for providing
information about the affairs and management of the society and also make a provision for
appeal.
Societies Act, 2002 relating to inspection of books of accounts, etc. of Multi-State Co-
operative Societies.
inspection of books of accounts, etc. of the society by Central Registrar or any person
authorised by him on his behalf.
It is proposed to insert the aforesaid section to provide for filing of applications,
documents, etc. in electronic form.
Societies Act, 2002 relating to the power of the Central Government to make rules.
It is proposed to amend sub-section (2) of the aforesaid section to include certain
specified matters under the provision of power to make rules.
212
MEMORANDUM REGARDING DELEGATED LEGISLATION
Clause 13 of the Bill empowers the Central Government to make rules to provide
for the manner of exercising vote in electronic form.
2. Clause 19 of the Bill empowers the Central Government to make rules for
specifying (a) the co-operative societies for which the elections shall be conducted by
the Cooperative Election Authority; (b) the function to be discharged and the manner
in which those are to be discharged by the returning officer appointed by the Election
Authority.
3. Clause 24 of the Bill empowers the Central Government to make rules to provide
for (a) the percentage of turnover of a multi-State co-operative society to be credited to
the Co-operative Rehabilitation and Reconstruction Fund; and (b) the form for
maintenance of separate account and other relevant records in relation to the Fund in
consultation with the Comptroller and Auditor General of India.
4. Clause 32 of the Bill empowers the Central Government to specify the period
within which all the successor States shall take necessary steps to divide or re-organise
the multi-State co-operative societies into State co-operative societies to confine their
objects, services and the members to respective States.
5. Clause 34 of the Bill empowers the Central Government to make rules to specify
(a) the fee for obtaining information from the Co-operative Information Officer about
the affairs and management of the society; and (b) the manner, time for filing and
procedure of appeal.
6. Clause 36 of the Bill empowers the Central Government to make rules (a) to
specify a date and the manner of authentication of application and other documents to
be filed or delivered in electronic form, (b) for the manner of authentication of the
document and notice, etc. served or delivered in the electronic form, (c) the manner for
registration or authentication of applications, balance sheet, etc. maintained by the
Central Registrar in electronic form, (d) the manner of inspection of bye-laws, balance
sheet, etc. to be made through the electronic form, (e) the manner of payment of fees,
charges or other sums through the electronic form, (f) the manner of performing duties
or discharging functions or exercising powers or doing any other act to be performed
or discharged or exercised or done by the Central Registrar in the electronic form, and
(g) the manner to provide the electronic form to be exclusive or alternative or in addition
to the physical form.
7. The matters in respect of which rules may be made under the aforesaid
provisions are matters of procedure and administrative detail and it is not practical to
provide for them in the Bill itself. The rules made under this Bill are also required to be
laid before Parliament. The delegation of legislative power is, therefore, of a normal
character.
213
ANNEXURE
EXTRACTS FROM THE MULTI-STATE CO-OPERATIVE SOCIETIES ACT, 2002
(39 OF 2002)
* * * * *
5. (1) No multi-State co-operative society shall be registered under this Act, unless,
(a) its main objects are to serve the interests of members in more than one State;
and
(b) its bye-laws provide for social and economic betterment of its members
through self-help and mutual aid in accordance with the co-operative principles.
* * * * *
7. (1) * * * * *
(2) The application for registration shall be disposed of by the Central Registrar within
a period of four months from the date of receipt thereof by him.
(3) Where the Central Registrar refuses to register a multi-State co-operative society,
he shall communicate, within a period of four months from the date of receipt of the application
for registration, the order of refusal together with the reasons therefor to the applicant or
applicants, as the case may be:
Provided that no order of refusal shall be made unless the applicants have been given
a reasonable opportunity of being heard:
Provided further that if the application for registration is not disposed of within a
period of four months specified in sub-section (2) or the Central Registrar fails to communicate
the order of refusal within that period, the application shall be deemed to have been accepted
for registration and the Central Registrar shall issue the registration certificate in accordance
with the provisions of this Act and the rules made thereunder.
* * * * *
10.(1) * * * * *
(2) In particular, and without prejudice to the generality of the foregoing power, such
bye-laws may provide for all or any of the following matters, namely:
(a) the name, address and area of operation of the society;
* * * * *
11.(1) * * * * *
(7) If, on receipt of application under sub-section (5), the Central Registrar is satisfied
that the proposed amendment
(a) is not contrary to the provisions of this Act or of the rules;
(b) does not conflict with co-operative principles; and
(c) will promote the economic interests of the members of the multi-State co-
operative society,
he may register the amendment within a period of three months from the date of receipt
thereof by him.
* * * * *
17. (1) A multi-State co-operative society may, by a resolution passed by a majority of
not less than two-thirds of the members, present and voting at a general meeting of he
society held for the purpose,
* * * * *
Multi-State
co-operative
societies
which may be
registered.
Registration.
Bye-laws of
multi-State co-
operative
societies.
Amendment
of bye-laws of
a multi-State
co-operative
society.
22
Amalgamation
or transfer of
assets and
liabilities, or
division of
mu l t i - St a t e
co-operat i ve
societies.
214
(3) The resolution of a multi-State co-operative society under sub-section (1) or sub-
section (2) shall contain all particulars of the transfer or division or amalgamation, as the case
may be.
* * * * *
(7) On receipt of an application for the registration of new societies formed by division
in accordance with the resolution passed under sub-section (1) or of a new society formed
by amalgamation in accordance with the resolution passed under sub-section (2), the Central
Registrar, on being satisfied that the resolution has become effective under sub-section (6)
shall, unless for reasons to be recorded in writing he thinks fit to refuse so to do, register the
new society or societies, as the case may be, and the bye-laws thereof.
* * * * *
21. (1) Where the whole of the assets and liabilities of a multi-State co-operative
society are transferred to another multi-State co-operative society or to a co-operative society
in accordance with the provisions of section 17, the registration of the first-mentioned multi-
State co-operative society shall stand cancelled and the socity shall be deemed to have been
dissolved and shall cease to exist as a corporate body.
* * * * *
(3) Where a multi-State co-operative society divides itself into two or more multi-State
co-operative socieites or two or more-co-operative societies in accordance with the provisions
of section 17, the registration of that society shall stand cancelled on the registration of the
new socieites, and that society shall be deemed to have been dissolved and shall cease to
exist as a corporate body.
* * * * *
22.(1) * * * * *
(5) (a) * * * * *
(c) The Registrar of Co-operative Societies referred to in clause (b) shall thereupon
make an order directing that the society had, as from the date of registration by the Central
Registrar, ceased to be a society under the law relating to co-operative societies in force in
that State.
* * * * *
CHAPTER IV
MEMBERS OF MULTI-STATE CO-OPERATIVE SOCIETIES AND THEIR DUTIES, RIGHTS AND LIABILITIES
25. (1) * * * * *
(4) Every application for admission as a member of a multi-State co-operative society
shall be disposed of by such society within a period of four months from the date of receipt
of the application, and the decision of such society on the application shall be communicated
to the applicant within fifteen days from the date of such decision:
Provided that if the application is not disposed of within the period aforesaid, or the
decision is not communicated within a period of fifteen days of the expiry of the aforesaid
period of four months, the multi-State co-operative society shall be deemed to have made a
decision, on the date of expiry of such period, refusing admission to the applicant.
* * * * *
28. No member of a multi-State co-operative society shall exercise the rights of a
member, unless he has made the payment to the society in respect of membership, or has
acquired such interest in the society, as may be specified in the bye-laws.
29. No person shall be eligible for being a member of a multi-State co-operative society
if
* * * * *
Cancellation
of registration
certificate of
multi-State
co-operative
societies in
certain cases.
Persons who
may become
members.
Members not
to exercise
rights till due
payment
made.
Disqualifica-
tion for
member of a
multi-State
co-operative
society.
Conversion of
a co-operative
society into a
multi-State
co-operative
society.
215
(d) he has made any default in payment of any amount to be paid to the multi-
State co-operative society under the bye-laws of such society.
30.(1) * * * * *
(2) No member of the multi-State co-operative society who has been expelled under
sub-section (1) , shall be eligible for re-admission as a member of that society, for a period
of one year, from the date of such expulsion.
* * * * *
32. Every member of a multi-State co-operative society shall exercise his vote in person
and no member shall be permitted to vote by proxy:
Provided that a multi-State co-operative society or a co-operative society or any other
institution which is a member of any other multi-State co-operative society may, subject to
the provisions of sub-section (3) of section 38 and the rules, appoint its representative to
vote on its behalf in the affairs of such multi-State co-operative society.
* * * * *
35. (1) Shares held in a multi-State co-operative society by any of the authorities
referred to in clauses (c) to (g) of sub-section (1) of section 25 shall be redeemable in
accordance with the bye-laws of such multi-State co-operative society and in a case where
the bye-laws do not contain any provision in this regard, in such manner as may be agreed
upon between the multi-State co-operative society and such authority.
(2) The redemption of shares referred to in sub-section (1) shall be on the face value of
the shares.
* * * * *
CHAPTER V
DIRECTION AND MANAGEMENT OF MULTI-STATE CO-OPERATIVE SOCIETIES
38.(1) * * * * *
(3) Where in any meeting of the general body or the board of a multi-State
co-operative society, a co-operative society or another multi-State co-operative society is to
be represented, such co-operative society or other multi-State co-operative society shall be
represented in such meeting only through the Chairperson or the president or the Chief
Executive or a member of the board of such co-operative society or other multi-State
co-operative society, as the case may be, if such member is so authorised by the board and
where there is no board of such co-operative society or other multi-State co-operative society,
for whatever reasons, through the administrator, by whatever name called, of such
co-operative society or other multi-State co-operative society:
Provided that where the bye-laws of a multi-State co-operative society provide for
representation of other institutions in any meeting of general body or the board of such
multi-State co-operative society, such institutions shall be represented through its nominee.
* * * * *
41. (1) * * * * *
(3) The board shall consist of such number of directors as may be specified in the bye-
laws:
Provided that the maximum number of directors in no case shall exceed twenty-one:
Provided further that the board may co-opt two directors in addition to twenty-one
directors specified in the first proviso:
Manner of
exercising
vote.
Redemption of
shares.
Expulsion of
members.
Board of
Directors.
Constitution,
powers and
functions of
general body.
216
Provided also that the functional directors in the national co-operative societies shall
also be the members of the board and such members shall be excluded for the purpose of
counting the total number of directors specified in the first proviso.
* * * * *
43. (1) * * * * *
(2) A person shall not be eligible for being elected as member of board of a multi-State
co-operative society for a period of five years if the board of such multi-State co-operative
society fails
* * * * *
(c) to prepare the financial statement and present the same in the annual general
meeting.
* * * * *
45. (1) The conduct of elections to the board of a multi-State co-operative society shall
be the responsibility of the existing board.
* * * * *
(5) The term of office of the elected members of the board shall be such, not exceeding
five years from the date of elections, as may be specified in the bye-laws of a multi-State
co-operative society:
Provided that elected members shall continue to hold office till their successors are
elected or nominated under the provisions of this Act or the rules or bye-laws and assume
charge of their office.
(6) Where the board fails to conduct election of the members of board, the Central
Registrar shall hold the election within a period of ninety days from the date when such
election became due.
(7) No person shall be eligible to be elected as a member of the board of a multi-State
co-operative society unless he is a member of the general body of that society.
(8) The expenses for holding election by the Central Registrar shall be borne by the
multi-State co-operative society.
* * * * *
49. (1) * * * * *
(2) Without prejudice to the generality of the foregoing powers, such powers shall
include the power
* * * * *
(m) to take such other measures or to do such other acts as may be prescribed or
required under this Act or the bye-laws or as may be delegated by the general body.
50. (1) The Chief Executive shall convene the meetings of the board at the instance of
the chairperson or president of the multi-State co-operative society.
* * * * *
52. The Chief Executive shall under the general superintendence, direction and control
of the board, exercise the powers and discharge the functions specified below, namely:
* * * * *
(j) present the draft annual report and financial statements for the approval of
the board within thirty days of closure of the financial year;
* * * * *
53. (1) The board may, subject to such conditions as may be prescribed, constitute an
Executive Committee and other committees or sub-committees as may be considered
necessary:
Disqualifica-
tions for being
a member of
board.
Elections of
members of
board.
Powers and
functions of
board.
Meeting of
board.
Powers and
functions of
Chief
Executive.
Committees of
board.
217
Provided that other committees or sub-committees, other than the Executive Committee
shall not exceed three.
* * * * *
67. (1) A multi-State co-operative society may receive deposits, raise loans and receive
grants from external sources to such extent and under such conditions as may be specified
in the bye-laws:
Provided that the total amount of deposits and loans received during any financial
year shall not exceed ten times of the sum of subscribed share capital and accumulated
reserves:
Provided further that while calculating the total sum of subscribed share capital and
accumulated reserves, the accumulated losses shall be deducted.
* * * * *
(3) A multi-State co-operative society may issue non-convertible debentures or other
instruments subject to the provisions of any law for the time being in force to raise resources
for the fulfilment of its objects to the extent of twenty-five per cent. of its paid-up share
capital.
* * * * *
CHAPTER VIII
AUDIT, INQUIRY, INSPECTION AND SURCHARGE
70. (1) * * * * *
(7) (a) The multi-State co-operative society may fill any casual vacancy in the office of
an auditor; but while any such vacancy continues, the remaining auditor or auditors, if any,
may act:
Provided that where such vacancy is caused by the resignation of an auditor, the
vacancy shall only be filled by the multi-State co-operative society in general meeting.
* * * * *
77. (1) Where the Central Government is of the opinion
(a) that the affairs of any multi-State co-operative society are not being managed
in accordance with self-help and mutual aid and co-operative principles or prudent
commercial practices; or with sound business principles; or
(b) that any multi-State co-operative society is being managed in a manner likely
to cause serious injury or damage to the interests of the trade, industry or business to
which it pertains; or
(c) that the financial position of any multi-State co-operative society is such as
to endanger its solvency,
the Central Government may at any time by order direct that a special audit of the multi-State
co-operative society's accounts for such period or periods as may be specified in the order,
shall be conducted and may by the same or a different order appoint either a chartered
accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants
Act, 1949 or the multi-State co-operative society's auditor himself to conduct with special
audit:
Provided that the Central Government shall not order for special audit of a multi-State
co-operative society's accounts if that Government or the State Government either by itself
or both hold less than fifty-one per cent. of the paid-up share capital or of the shares in such
multi-State co-operative society.
* * * * *
Appointment
and remunera-
tion of
auditors.
Restrictions
on borrowing.
Power of
Central Govern-
ment to direct
special audit in
certain cases.
38 of 1949
218
78. (1) The Central Registrar may, on a request from a federal co-operative to which a
multi-State co-operative society is affiliated or a creditor or not less than one-third of the
members of the board or not less than one-fifth of the total number of members of a multi-
State co-operative society hold an inquiry or direct some person authorised by him by order
in writing in this behalf to hold an inquiry into the constitution, working and financial
condition of a multi-State co-operative society:
Provided that no inquiry under this sub-section shall be held unless a notice of not
less than fifteen days has been given to the multi-State co-operative society.
* * * * *
CHAPTER IX
SETTLEMENT OF DISPUTES
84. (1) Notwithstanding anything contained in any other law for the time being in
force, if any dispute other than a dispute regarding disciplinary action taken by a
multi-State co-operative society against its paid employee or an industrial dispute as defined
in clause (k) of section 2 of the Industrial Disputes Act, 1947] touching the constitution,
management or business of a multi-State co-operative society arises
(a) among members, past members and persons claiming through members, past
members and deceased members, or
(b) between a member, past members and persons claiming through a member,
past member or deceased member and the multi-State co-operative society, its board or
any officer, agent or employee of the multi-State co-operative society or liquidator,
past or present, or
(c) between the multi-State co-operative society or its board and any past board,
any officer, agent or employee, or any past officer, past agent or past employee, heirs
or legal representatives of any deceased officer, deceased agent or deceased employee
of the multi-State co-operative society, or
(d) between the multi-State co-operative society and any other multi-State
co-operative society, between a multi-State co-operative society and liquidator
of another multi-State co-operative society or between the liquidator of one multi-
State co-operative society and the liquidator of another multi-State co-operative society,
such dispute shall be referred to arbitration.
* * * * *
(3) If any question arises whether a dispute referred to arbitration under this section is
or is not a dispute touching the constitution, management or business of a multi-State co-
operative society, the decision thereon of the arbitrator shall be final and shall not be called
in question in any court.
(4) Where a dispute has been referred to arbitration under sub-section (1), the same
shall be settled or decided by the arbitrator to be appointed by the Central Registrar.
(5) Save as otherwise provided under this Act, the provisions of the Arbitration and
Conciliation Act, 1996 shall apply to all arbitration under this Act as if the proceedings for
arbitration were referred for settlement or decision under the provisions of the Arbitration
and Conciliation Act, 1996.
* * * * * *
CHAPTER XI
EXECUTION OF DECREES, ORDERS AND DECISIONS
94. Every decision or order made under section 39 or section 40 or section 83 or
section 99 or section 101 shall, if not carried out,
* * * * *
Inquiry by
Central
Registrar.
Reference of
disputes.
14 of 1947
Execution of
decisions, etc.
219
CHAPTER XIII
SOCIETIES WHICH BECOME MULTI-STATE CO-OPERATIVE SOCIETIES
CONSEQUENT ON REORGANISATION OF STATES
103. (1) Where, by virtue of the provisions of Part II of the State Reorganisation Act,
1956 or any other enactment relating to reorganisation of States, any co-operative society
which immediately before the day on which the reorganisation takes place, had its objects
confined to one State becomes, as from that day, a multi-State co-operative society, it shall be
deemed to be a multi-State co-operative society registered under the corresponding provisions
of this Act and the bye-laws of such society shall, insofar as they are not inconsistent with
the provisions of this Act, continue to be in force until altered or rescinded.
* * * * *
CHAPTER XIV
OFFENCES AND PENALTIES
104. (1) A multi-State co-operative society or an officer or member thereof wilfully
making a false return or furnishing false information, or any person wilfully or without any
reasonable excuse disobeying any summons, requisition or lawful written order issued under
the provisions of this Act, or wilfully not furnishing any information required from him by a
person authorised in this behalf under the provisions of this Act, shall be punishable with
fine which shall not be less than two thousand rupees and which may extend to ten thousand
rupees.
(2) Any employer who, without sufficient cause, fails to pay to a multi-State co-
operative society the amount deducted by him under section 60 within a period of fourteen
days from the date on which such deduction is made shall, without prejudice to any action
that may be taken against him under any other law for the time being in force, be punishable
with fine which may extend to five thousand rupees.
(3) Any officer or custodian who wilfully fails to hand over custody of books, accounts,
documents, records, cash, security and other property belonging to a multi-State co-operative
society of which he is an officer or custodian, to a person entitled under section 54, or
section 70, or section 78, or section 79, or section 89 shall be punishable with fine which may
extend to two thousand rupees and in the case of a continuing breach, with a further fine
which may extend to five thousand rupees for every day during which the breach is continued
after conviction for the first such breach.
* * * * * *
106. Every multi-State co-operative society shall keep a copy of the rules and its bye-
laws and also a list of its members, open to inspection free or charge at all reasonable times,
at the registered address of the society.
108. (1) The book of account and other books and papers of every multi-State co-
operative society shall be open to inspection during business hours
(i) by the Central Registrar, or
(ii) by such officer of the Government as may be authorised by the Central
Government in this behalf:
Provided that such inpection may be made without giving any previous notice
to that society or any officer thereof;
* * * * *
124.(1) * * * * *
(2) In particular, and without prejudice to the generality of the foregoing power, such
rules may provide for all or any of the following matters, namely :
* * * * *
Co-operat i ve
societies func-
tioning imme-
diately before
reorganisation
of States.
37 of 1956
Offences and
penalties.
26 of 1996
Copies of
bye-laws, etc.,
to be open to
inspection.
Inspection of
books of
account, etc.
of multi-State
co-operative
society.
Power to
make rules.
220
A
BILL
to amend the Multi-State Co-operative Societies Act, 2002.
(Shri Sharad Pawar, Minister of Agriculture, Consumer Affairs,

Food and Public Distribution)
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Salient Features of the Constitution (Ninety Seventh Amendment) Act, 2011
By Dr. Amit Kumar Agrawal
Secretary, Committee for Co-Operatives & NPO Sectors, ICAI
The Constitution (Ninety Seventh Amendment) Act, 2011 enacted by the Parliament of
India to amend the Constitution of India, received Presidential Assent on 12
th
January
2012 with the objective to enhance public faith in Cooperatives and insulate from
avoidable political and bureaucratic interference.
In part IV of a new Article 43B inserted, which Says:
The state shall Endeavour to promote Voluntary formation autonomous functioning,
democratic control and professional management of the co-operative societies.
The Central Government has asked state government to amend its respective state act in
line with The Constitution (Ninety Seventh Amendment) Act, 2011. The salient features
of the Act are -
x Accounts & Audit (Article 243ZM)
a) Maintenance of accounts of Co-operative Societies.
b) Auditing of accounts once in each financial year within six months of the
close of the financial year to which such accounts relate.
c) Lay down the minimum qualification and experience of auditors auditing
firms which shall be eligible for auditing accounts
d) Auditor shall be appointed by the general body of the Cooperative Society
from a panel approved by the State Government or an authority
authorized by State Government.
e) The audit report of an apex Co-operative Society defined by the state act,
which shall be laid before the State Legislature in the prescribed manner
which may be provided by the State Act.
x Filing of Return (Article 243ZP)
a) Every Co-operative Society shall have to file return within six months of
close of financial year to the designated authority.
b) The return should include the following matters
i. Annual Report of its activities
ii. Audited statement of accounts
iii. Plan for surplus disposal as approved by the general body of the
co-operative society
iv. List of amendments to the bye laws of the co-operative society
262
v. Declaration regarding holding of general body meeting and
conduct of elections when due
vi. Any other information required by the Registrar in pursuance of
any of the provisions of the State Act.
x Co-option of members (Article 243ZJ (3))
a) The State shall make amendments in their respective co-operative acts to
co-opt maximum two persons as members of the board in addition to
twenty one directors specified in the act.
b) The co-opted members should have experience in the field of banking,
management, finance or specialization in any other field relating to the
objects and activities of the co-operative societies.
c) They should have no right to vote in any elections of the co-operative
society in their capacity.
d) They are not eligible to be elected as office bearers of the Board.
New opportunities for the members of the ICAI
x As per article 243ZJ (3), there is a provision which shall be inserted in the State
Cooperative Act, a member of ICAI can be appointed as a co-opted member
having experience in the field of banking, management, finance or specialization
in any other field relating to the objects and activities of the co-operative
societies.
x A per article 243ZP (a) & (b), Every Co-operative Society shall have to file return
within six months of close of financial year to the designated authority which
shall contain annual report and audited statement of accounts which shall
explore new professional opportunities for members of ICAI.

Points for Attention

x As per article 243ZM(2), state shall amend its act about minimum qualification
and experience of auditor and auditing firms that shall be eligible for auditing
accounts for co-operative societies.
x A per article 243ZM(3), Auditor shall be appointed by the general body of the
Cooperative Society
x The audit report of an apex Co-operative Society defined by the state act, which
shall be laid before the State Legislature in the prescribed manner which may be
provided by the State Act.
263
THE MULTI STATE COOPERATIVE SOCIETIES (AMENDMENT) BILL, 2010
- [BILL SUMMARY]
The Multi State Cooperative Societies (Amehdmeht) Bill, 2010 was ihtroduced ih the Lok Sabha oh
November 15, 2010 by the Mihister of Agriculture, Cohsumer Affairs, Food ahd Fublic Distributioh,
Shri Sharad Fawar. The Bill was referred to the Stahdihg Committee oh Agriculture
(Chairpersoh: Shri Basudeb Acharia), which is scheduled to submit its report withih few mohths.
The Bill amehds the Multi State Cooperative Societies Act, 2002, which regulates multi-state
cooperative societies i.e. cooperatives which serves the ihterest of members ih more thah ohe state.
This ihcludes federal cooperative societies whose membership is available ohly to a cooperative
society or a multi-state cooperative society ahd 21 hatiohal cooperative societies specified.
The cehtral goverhmeht may appoiht a Cehtral Fegistrar of Cooperative Societies. A multi-state
cooperative society may be registered if its maih object is to serve the ihterest of members
ih multiple states, its bye-laws provide for social ahd ecohomic bettermeht of its members ih
accordahce with the cooperative prihciples.
The key amehdmehts to the Act pertaih to time limit for disposal of applicatioh for registratioh,
distributioh of shares, cohstitutioh of ihterim board, holdihg of electiohs, cohstitutioh of fuhd ahd
dispute settlemeht.
Disposal of registratioh: The Act states that the Cehtral Fegistrar has to dispose off ah applicatioh
for registratioh withih four mohths. The Bill adds that the time may be extehded to five mohths after
givihg reasohs ih writihg.
Accordihg to the Act ah applicatioh shall be refused withih four mohths. lf it is hot disposed withih
that period, the applicatioh shall be deemed to have beeh refused. The Bill ihcreased the time period
to five mohths ahd adds that if ah applicatioh is hot disposed off withih the time period, it shall be
deemed to have beeh accepted as a member.
Distributioh of shares: The Act states that the shares of a cooperative society are redeemable by
a member accordihg to the provisiohs of the bye-laws. The redemptioh of shares shall oh face
value of shares. The Bill adds the proviso that the cooperative society may refuhd the share capital
held by the goverhmeht. The redemptioh of shares shall be oh face value or book value of shares,
whichever is higher.
Cohstitutioh of ihterim board: The Bill allows the Cehtral Fegistrar to declare ahy multi-state
cooperative society as sick. The cehtral goverhmeht may, oh the recommehdatioh of the Fegistrar
appoiht ah ihterim board for a maximum of five years. The Cehtral Fegistrar cah also declare a
cooperative to be viable withih the five years. The board of directors before the cooperative was
declared sick shall be reihstated.
Electiohs: The Act states that electiohs shall be cohducted by the existihg board. The Bill amehds
this to state that the cehtral goverhmeht may appoiht a Cooperative Electioh Authority to cohduct
electiohs ih cooperative societies to be prescribed.
Cohstitutioh of Fuhd: The Bill states that the cehtral goverhmeht shall set up the Cooperative
Fehabilitatioh ahd Fecohstructioh Fuhd. A cooperative society shall credit 0.005 to 0.1 of its
turhover to the fuhd, provided it does hot exceed Fs 3crores per year.
Dispute settlemeht: Uhder the Act, all disputes shall be referred to arbitratioh uhder the Arbitratioh
ahd Cohciliatioh Act, 1996. The Bill amehds it by statihg that all disputes shall be referred to
the Cehtral Fegistrar. lf there is a questioh as to whether a dispute touches the cohstitutioh or
mahagemeht of a society, it shall be decided by the Cehtral Fegistrar ahd shall hot be questiohed
by the court.
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National Conference on Co-operative Societies, Trusts,

(b) an individual as an advocate or a partnership firm of advocates by way of legal services

(Shri Sharad Pawar, Minister of Agriculture, Consumer Affairs,

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