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How to Recover Transfer Fees Obtained Illegally by Cooperative Housing Societies in West Bengal

Introduction:

This is a vast topic to be discussed here. Nowadays we find that there are many cases related to the recovery of the transfer fees which is obtained illegally by the Co-operative Housing Societies in West Bengal.

If any Co-operative Housing Societies in West Bengal gains any transfer fees illegally from an individual who intends to buy apartments or flats or wants to sell the apartment or flat to another third person then they are liable to refund the amount to the individual within a specific period which is mentioned by the court of law. There is no bar to any member to donate to the Co-operative Society and if Co-operative is gaining any amount from any member as a donation or transfer fees then they should pay for it.

There was no notification or any law which would restrict the boundary of an amount to be given and it was paid unofficially by the members till 1987.

The government had released notification and law in the year 2003 which restrict the transfer fees or donations at 0.5% which any member can pay to the Co-operative Society if he or she thinks better to make the payment and the act which regulate this condition is the West Bengal Co-operative Societies Rules, 1987 and this is defined in the Sub-rule (2) of Rule 142 of the West Bengal Co-operative Societies Rules, 1987.

Any Co-operative Society can take funds only according to the laws of the state or if there are any other laws to collect funds and which are necessary to collect or compulsory or as stated by the competent authority and which is legal then they can collect funds from the members of the society. The Co-operative Society cannot make any profits from the members regarding the transfer fees or donation and if anyone makes such payment then it should be voluntary without any compulsion and coercion and tax must be paid on it.

Bombay High Court has ruled that no Co-operative can collect any transfer fees from any member and it is considered as illegal.

West Bengal Co-operative Societies Act, 2006 provides different sections such as Sections 32, 49 and 92 to 94 which gives power to the State Government and Registrar to superintendence over the activities and actions of the Co-operative Housing Societies and it also mentions that if any Co-operative Housing Society illegally collects any money from its members as a condition of transfer of membership in violation of the rules framed by the government under different Acts and Rules then they have the power to pass necessary order to the Co-operative Society to refund the amount within the specified period.

Any person or an individual is deprived in this cases then they can write a simple notice to the Co-operative demanding for a refund of the transfer fees which was illegally obtained by the Co-operative Society if then also they are unable to recover the amount, they can write a warning letter to the Co-operative Society stating that he or she will file a suit against the Society and if they fail to comply with the letter then it will lead to Registrar order to recover the money. And even the Co-operative fails to comply with the directions of the Registrar then the aggrieved party or the member of the Society who is deprived can approach to the State Government Court to recover the money.

Case Analysis:

“Dover Co-Operative Housing vs State Of West Bengal And Ors. on 18 June 2007, Calcutta High Court”

“After hearing the learned Counsel for the parties and after going through the materials on record we find that the dispute involved in the present case is whether the Co-operative Housing Society had the right to demand a particular sum of money as a condition of according permission to transfer of the membership. It is true that such a question is definitely a dispute within the meaning of Section 95 of the Act and was referable before the Registrar. If a former member of the Co-operative Society decides not to refer such dispute within the time fixed before the Registrar, his remedy for recovery of the money will, no doubt, for the time being, become barred after the expiry of the time of reference.”

“In the case before us, we find that according to Rule 142(2) of the West Bengal Co-operative Societies Rules, a Co-operative Housing Society may raise such fee or donation as may be specified by the State Government from time to time by notification for according consent for transfer by a member of his land, house or apartment to another person having eligibility to become a member of the society. There is no dispute that until the year 2003, no such notification was issued and in the notification of the year of 2003, the societies were for the first time permitted to accept by way of such transfer-fees an amount equivalent to 0.5% of total consideration money. Therefore, prior to the issue of the notification of the year 2003, a Co-operative Society was not authorized to accept any amount of money by way of transfer-fees. In the case before us, the money was received in the year 1988 when the State Government did not issue any notification but Rule 142(2) was very much in existence. For the purpose of construction of the true meaning of the said Rule, we propose to quote the same:”

“A Co-operative Housing Society may raise such fee or donation as may be specified by the State Government from time to time by notification for according consent for transfer by a member of his land, house or apartment to another person having eligibility to become a member of the society.”

“ If we construe the provisions contained in Rule 142(2) in the proper perspective, we find that up to the year 2003, nothing was specified by way of notification authorizing a Co-operative Society to raise by way of fee or donation any amount for according consent for transfer and therefore, up to the year 2003, a Co-operative Society was authorized to accept “nil” amount of money for giving consent and from the year 2003, for the first time, the State Government has authorized the societies to accept something as transfer-fees or donation for the above purpose by limiting it to 0.5% of the consideration money. We are unable to accept the contention of Mr Chatterjee, the learned Senior Counsel appearing on behalf of the Co-operative Housing Society that up to the publication of the notification in the year 2003 there was no restriction in accepting transfer-fees and that the restriction was imposed for the first time by publication in the notification.”

“ In our view, Rule 142(2) prohibits the society from accepting any amount as transfer-fees unless sanctioned by the notification and that too, to the extent indicated in the notification. Therefore, in the year 1998, the society was not authorised to accept any amount as transfer-fees as in the absence of any notification, there was no sanction for such acceptance.”

“We, therefore, dispose of the appeal being FMA No. 828 of 2Q05 by recasting the relief granted by the learned Single Judge as indicated above by directing that if the entire amount is not paid within one month from today, the State Government will take necessary step for the realization of the amount by the appointment of an administrator over the affairs of the Society by dissolving the existing Board with the authority to realize the money from the assets of the society as indicated above.”

The above case says that Co-operative Society can collect transfer fees at the rate of 0.5% under the Sub-rule (2) of Rule 142 of the W.B.C.S. Rules of 1987. It also mentions that there was no such notification released by the government till 2003 to collect transfer fees and so the amount is refunded to the member again.

“Bharatiya Bhavan Co-Operative vs Smt. Krishna H. Bajaj & Ors on 17 February 2010 Bombay High Court”

“The Respondent challenged the receipt of the amount representing 3% of the consideration amount towards transfer fees as illegal demand for transfer fees having been paid under coercion in the guise and name of the building repair and maintenance fund for the first time by her Advocate’s notice dated 11th August 1994. Under that notice, she demanded repayment of the amount paid to the Society with interest at 21% p.a thereon along with other amounts upon certain bills for repairs raised upon the Society. That having not been repaid by the Society the Respondent No.1 filed a dispute before the First Co-operative Court at Mumbai being C.C.No.1/1222/94. The learned Co-operative Court partly allowed the dispute for a refund of the amount paid to the Society under coercion with interest at 12% p.a thereon.”

The above case declares that the Respondent challenged the Co-operative Society and demanded the transfer fees back along with interest from the Society and the learned Co-operative Court directed the Co-operative to refund the amount paid by her as transfer fees along with interest at the rate of 12% p.a. since this transaction was made under coercion.

“Smt. Kusum Lata Gupta And Ors. vs Registrar Cooperative Societies on 29 January, 2007 Delhi High Court”

The principal issue which arises for consideration in these writ petitions is whether or not the respondent societies could charge any gate money / entry fee / development fund / transfer fee / common good fund from the bona fide purchasers, who had purchased the flats from the original members of the society. Almost all the respondent societies concerned have charged from the petitioners herein, who are purchasers of flats from the original members of the society, charges of the aforesaid nature of various amounts ranging up to about a lac of rupees, from each of the purchasers of the flats so as to make them members of the society.”

“The directive of the Registrar of Cooperative Societies is clear and specific that the charging of entry fee in any form is illegal. It is also mentioned in the directive that the violation of this directive will be viewed seriously and the President / Secretary of the concerned society would be held responsible jointly and individually and the action will be taken against the society under the provisions of the Act and the Rules for any such violation. It is abundantly clear that the amount of Rs. 50,000/- was not paid voluntarily by the original allottee but was charged by respondent No. 3 from the petitioner in a clandestine manner. Respondent No. 3 has resorted to totally illegal practice by demanding entry fee from the petitioner and other similarly placed persons. Consequently respondent No. 3 is liable to refund the amount of the petitioner forthwith.”

“Be that as it may, we find no reason to take a different view than what was taken in the earlier decisions of this Court even after taking notice of the provisions of Rule 77 of the Delhi Co-operative Societies Rules, 1973. In our considered opinion, the submission of the counsel for the respondent societies that no directive could be issued by the Registrar of Co-operative Societies under Rule 77, is misconceived and unjustified. The respondent societies could not have demanded or levied a hefty amount of rupees one lac and above from those transferees. Accordingly, we direct that Rs. 10,000/- shall be paid by each of the transferees towards transfer fee as agreed to by all of them and the balance amount, if any, standing in the credit of the members of the society shall be appropriated towards any present or future dues payable to the society and the remaining amount, if any, shall be refunded by the concerned societies to the individual members within a period of two months from today failing which, interest @ 9% shall be payable on the said amount from the date of default. In terms of the aforesaid order, these writ petitions stand disposed of.”

The petitioner here paid some money as transfer fees and which was illegally obtained by the Society and later the society was challenged by the petitioner. Here the Court said that no Society can obtain money illegally and they also directed that the Society must refund the amount to the members along with some interest as specified in the above case.

“AlankarSahkariGriha Rachana Sanstha Vs Atul Mahadev Bhagat &Anr (Bombay High Court); Writ Petition No. 4457 of 2014; 31/08/2018”

“The respondents have admitted the letter sent to Society on 9th December, 2004 where they have offered to pay transfer charges Rs.25/- per sq.ft. , still it hardly comes upto Rs.85,000/- to 90,000/-and the donation amount of Rs.5,00,000/- is much higher. It is necessary to see the time factor and the sequence of the payment of so called donation and the challenge given to the said payment by the respondent by filing Dispute No. 398 of 2005 before the Cooperative Court. The respondents sent letter to Society on 9th December, 2004 wherein the respondents have expressed that they are ready to pay Rs.25,000/-. They expressed their willingness to pay Rs.25/- per sq.ft. after adjusting the deposit amount of Rs.50,000/- which was paid to the Society earlier by way of compromise. The payment was made by two demand drafts of Rs.2,50,000/- each on 27th April, 2005 and the said payment was challenged on 29th December, 2005 by filing Dispute No. 398 of 2005 before the Cooperative Court on the ground that it was paid under coercion. Thus, from this conduct of taking immediate steps against the Society and challenging the said transaction, it can be safely concluded that the amount was not a donation but money was a transfer fee paid out of compulsion and it was not voluntary payment.”

“This Writ Petition is dismissed, however, with following modification in the rate of interest:”

“The amount of Rs.4,75,000/- is to be returned to the respondents with simple interest @ 8% p.a. from 29th December, 2005 till realization of the amount. The remaining order of the Maharashtra State Cooperative Appellate Court is maintained.”

“In view of dismissal of Writ Petition, Civil Applications do not survive and the same are disposed of accordingly.”

The above case explains that the petitioners challenged the Co-operative Society because they illegally obtained some amount from the petitioners as transfer charges and this payment was not made as a donation but this was a transfer fee paid out of compulsion and it was not a voluntary payment. Then the court ordered to refund some amount along with interest as specified above in the case and the case was then dismissed.

Conclusion:

The above explains about the recovery of the transfer fees obtained illegally by the Co-operative Housing Societies in West Bengal. There are many cases arising day by day relating to this topic. So, it is better to consult with an expert before proceeding in such cases.

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