Based on the Telangana Mutually Aided Co-operative Societies Act, 1995

If you are a flat owner, plot owner, villa owner, member of a gated community, or part of a residents’ group in Telangana, the Telangana Mutually Aided Co-operative Societies Act, 1995 is one of the most important laws you should understand. It explains how a housing society can be registered, how members get voting rights, how the managing committee must function, how funds are to be used, and what remedies are available when the society is not managed properly.

In Telangana, many apartment associations and housing groups operate like a society, but not every group is legally registered or properly governed. The MACS Act provides a statutory framework for self-governance, democratic decision-making, financial discipline, member rights, audit, inquiry, dispute resolution, renewal and winding up of the society.

A Mutually Aided Co-operative Society is a member-driven and self-reliant co-operative society registered under the Telangana Mutually Aided Co-operative Societies Act, 1995.

The important point under this law is that the society must be financially independent. Its bye-laws must prohibit it from accepting share capital, land, subsidy or any other assistance from the State Government, Central Government or Local Authority.

For apartment societies, villa communities, plot owner groups and housing societies, this means that the society is formed by members themselves, funded by members themselves and governed by members themselves through democratic control.

The Act is based on co-operative principles. Membership must be voluntary and open. The society must be democratically managed. Every member has one vote. Surplus belongs to members and is dealt with as per the Act and bye-laws. The society is also expected to educate its members, office-bearers and employees on co-operative principles.

Registration of Housing Society under MACS Act

A housing society can be registered where at least 11 individuals from different families come together with a common objective. In the case of apartment societies, the common bond may be residence in the same apartment complex, gated community, villa project, layout or residential colony.

The members are required to prepare bye-laws and apply to the Registrar of Mutually Aided Co-operative Societies.

Registration Renewal of Housing Society under MACS Act

Every housing society registered under the MACS Act is required to renew its registration every five years.

Renewal is granted only where the society has maintained updated accounts, completed audit, conducted elections as per bye-laws, complied with the Act and ensured member education as required.

If renewal is not obtained, the Registrar may cancel the registration certificate and initiate winding-up proceedings.

The application generally involves the following steps.

Step 1 - Drafting of Bye-Laws

The bye-laws are required to be prepared in accordance with the Act. These bye-laws should cover membership rules, admission of members, rights and duties of members, composition of the Board, meetings, voting rights, fund management, audit, dispute resolution, dissolution and other internal governance matters.

Step 2 - Founding Meeting of Members

The proposed members should hold a founding meeting and formally approve the bye-laws. The minutes of this meeting should be properly recorded and signed. At least 11 eligible individuals from different families should participate in the formation process.

Step 3 - Preparation of Registration Documents

The society is required to prepare and submit the prescribed documents, including the bye-laws, member list, identity details, address details, minutes of the founding meeting and registration fee. The registration fee is 1% of the authorised share capital, subject to minimum and maximum limits as applicable.

Step 4 - Submission before Registrar

The application is submitted before the Registrar. The Registrar may register the society or communicate reasons for refusal within the prescribed period.

Step 5 - Registration Certificate

Once registered, the society becomes a body corporate. It gets perpetual succession, a common seal and legal capacity to own property, enter into contracts, sue and be sued in its own name. It has to be noted that any society which has received Government land, share capital, subsidy or Government assistance cannot be registered under the MACS Act. Such society may fall under the Telangana Co-operative Societies Act, 1964. 

Society as a Body Corporate

After registration, the society becomes a body corporate by the name under which it is registered.

One important point is that transactions entered into in good faith before registration, during the formation stage, may be treated as valid transactions of the society after registration.

This is useful in cases where the founders or proposed members have signed documents, made payments or entered into preliminary arrangements for the purpose of forming the society before the registration certificate is issued.

Display of Name by the Society

Every registered society is required to display its full name, registration number and registered office address.

This should be done on notice boards, official publications, contracts, business letters, invoices, receipts, cheques, promissory notes and bills of exchange.

In practice, many housing societies mention only the society name on documents and notice boards. However, under the Act, the full registered particulars should be properly displayed and used in official communication.

The bye-laws are the internal constitution of the housing society.

They determine how the society will admit members, conduct meetings, elect the Board, collect maintenance, maintain accounts, distribute surplus, resolve disputes and deal with defaulting or non-participating members.

The bye-laws should specifically cover the following matters:

Membership Rules

The bye-laws should mention who can become a member, how a person can apply for membership, what participation is expected from members and in what situations a member may be suspended or expelled.

Admission and removal of members is an important matter. It should not be treated as a routine power of the managing committee unless the Act and bye-laws permit the process. The General Body has an important role in such matters.

A person also cannot simultaneously be a member of two co-operative societies providing the same or similar services.

Board Composition

The Board of Directors is responsible for management of the society. The Board cannot have more than 21 members.

There must be reservation of at least one seat for SC/ST members and two seats for women.

The Board may also co-opt up to two functional directors. One such person may have experience in banking, finance or management, and another may have experience in the field relevant to the society’s activities. However, co-opted directors cannot vote in elections and cannot become office-bearers.

Where a casual vacancy arises, it can be filled by nomination only where less than half of the Board’s term remains.

Fund Management

The society may collect funds from its members in the manner permitted under the Act and bye-laws.

A housing society generally collects maintenance charges, deposits, share capital and other member contributions. The Act does not permit acceptance of deposits from non-members.

Surplus funds should be invested only in permitted avenues such as post offices, nationalised banks and scheduled commercial banks. Speculative investments are not permitted.

Meetings and Voting Rights

Board meetings are required to be held at least once every three months.

The General Body is the supreme authority of the society. Important matters such as election of the Board, approval of accounts, amendment of bye-laws, surplus distribution, major policy decisions and dissolution are placed before the General Body.

A member must be enrolled for at least one year before becoming eligible to vote. A member who does not attend two consecutive Annual General Body Meetings without leave, or does not use the minimum services of the society, may be disqualified from voting after being given a reasonable opportunity to explain.

Amendment of Bye-Laws

The bye-laws can be amended by a resolution of the General Body. At least 20 clear days’ notice should be given to all members before the meeting.

Certain important amendments, such as change in name, objects, member rights or dissolution process, are required to be registered with the Registrar within the prescribed time.

A society may change its liability, transfer its assets and liabilities to another society, divide itself into two or more societies or amalgamate with another society.

Such matters require a General Body resolution.

This becomes important where a large housing project is divided into different blocks or phases, or where two resident associations are proposed to be merged into one common society.

Creditors and members who disagree with such decision are given a window to withdraw as per the Act.

A society may promote a subsidiary organisation through a General Body resolution.

For example, where a society creates a separate maintenance body, club or other organisation for carrying out specific activities, the annual report of such subsidiary organisation must be placed before the General Body every year.

The society may also enter into a joint venture with an outside organisation. Where such collaboration requires creation of a separate entity, it may be registered as a company or public society. The General Body should review such collaboration every year.

The Board of Directors, commonly called the managing committee in housing societies, is elected by the General Body and is responsible for managing the day-to-day affairs of the society.

The Board acts subject to the Act, rules, bye-laws and resolutions of the General Body.

The Board’s powers and duties include collection of dues, maintenance of common areas, appointment of staff, supervision of contractors, preparation of accounts, presentation of audited statements and filing of returns.

The Board also has power to suspend any officer or staff member, initiate criminal prosecution, prepare and publish the list of defaulters, review overdue amounts and take legal action wherever required.

The Board is also required to contribute to the Co-operative Education Fund as applicable.

Elections are to be conducted under the superintendence, direction and control of the State Co-operative Election Authority.

The Board must ensure that elections are held before the expiry of its term.

Where the Board fails to initiate elections in time, the concerned directors may attract disqualification from serving on the Board of any co-operative society for the prescribed period.

After a new society is registered, the Registrar may appoint an Ad-hoc Board. Such Ad-hoc Board functions until the first elected Board assumes office or for a maximum period provided under the Act.

Rights of Members

Members of a registered housing society have important statutory rights.

Every member has one vote in General Body matters. Members have the right to participate in decision-making, approve accounts, elect directors, amend bye-laws and decide important issues relating to the society.

Members also have the right to inspect bye-laws, minutes of General Body meetings, audit reports and their own account statements during business hours, subject to payment of prescribed or nominal fee.

If one-tenth of the members sign a requisition, the Board must convene a Special General Body Meeting within the prescribed time. If the Board fails to do so, the Registrar can convene the meeting.

Members also have the right to complain where there is gross violation of the Act. One-third of directors or one-tenth of members may apply to the Registrar for inquiry.

Expulsion of Member

A member cannot be expelled casually or without due process.

Expulsion may be considered where the member has caused financial loss to the society or has been involved in criminal activity against the society.

Before expulsion, the member must be given an opportunity to make a representation. A copy of the expulsion resolution must be sent to the member within the prescribed time.

Financial Framework: Funds, Surplus and Deficit

A housing society may raise funds from members in the form of share capital, maintenance charges, deposits and debentures.

The Act prohibits the society from accepting deposits from non-members.

Where surplus is generated, the General Body decides how it should be used. Surplus may be applied towards deficit cover fund, reserve funds, patronage rebate, interest on share capital and other purposes permitted by the Act and bye-laws.

Where the society incurs a deficit, the Board must place a report before the General Body explaining the reasons and the plan to recover or adjust the deficit.

Accounts and Records to be Maintained

Every society must maintain proper accounts and statutory records at its office.

The records should include a copy of the Act, applicable laws and regulations, registered bye-laws, minutes book, member-wise patronage register, up-to-date voter list prepared within the prescribed time after year-end, audit reports, inquiry reports and compliance reports.

Proper maintenance of records is not only a good governance practice but also a statutory requirement. These records help members verify whether the society is functioning transparently.

Audit of Society

Every society is required to get its accounts audited annually.

The audit report is required to be placed before the General Body and filed with the Registrar.

In appropriate cases, the Registrar may order a special audit. Where the society deals with funds from creditors or external institutions, special audit may also be ordered on request of the creditor.

Annual Returns

Every society is required to file annual returns with the Registrar within six months from the close of the financial year.

The returns should contain annual report, audited accounts with auditor’s report, list of members, surplus or deficit disposal plan, details of directors with their term of office, list of bye-law amendments, and declaration regarding the date of General Body meeting and election conduct.

Filing of annual returns is an important recurring compliance for every registered society.

Inquiry by Registrar

The Registrar may also conduct or order an inquiry where there is gross violation of the Act. Such inquiry may be initiated on the Registrar’s own motion or on application by eligible persons, including members, directors, creditors or federation.

Power to Summon Persons and Documents

The person conducting a special audit or inquiry has power to require production of documents, summon employees or persons having interest in contracts of the society and demand explanations from the Chairperson.

At least 15 days’ notice is generally required, except where special circumstances justify shorter notice.

If documents are not produced or there is non-compliance, the Registrar may take steps for seizure of records as provided under the Act.

Service of Summons

The Act also provides how summons should be issued and served.

Summons may be served by personal delivery, at the last known address, by registered post or by public affixing.

This ensures that the inquiry or audit process is not defeated merely because a person avoids service or refuses to cooperate.

Action on Audit and Inquiry Reports

After audit or inquiry, the Registrar may direct the society to convene a General Body Meeting.

If the society fails to convene the General Body within one month of such direction, it is deemed that the General Body has accepted the findings of the report.

The Registrar may thereafter take independent action, irrespective of what the society decides later.

This provision is important because it prevents the managing committee from delaying action on audit or inquiry findings.

Supersession of Board

Where the Board is persistently negligent, acts against the interest of members, fails to conduct elections, or creates a management deadlock, the Registrar may suspend or supersede the Board.

An Administrator may be appointed to manage the affairs of the society and ensure that fresh elections are conducted within the permissible period.

Dispute Resolution

Disputes between members, between members and the society, or between the society and the Board may be referred for resolution as provided under the Act.

However, internal remedies provided in the bye-laws should first be exhausted.

An appeal against the Registrar’s decision lies before the Co-operative Tribunal. The Tribunal’s order has the force of a decree of a Civil Court.

A further appeal may be filed before the High Court within 60 days from the date of service of the Tribunal’s order.

Tribunal’s Power to Order Recovery

Where loss is caused to the society due to negligence, misconduct, misappropriation, breach of trust or other wrongful act, the Tribunal may order recovery from the concerned director, officer or employee.

It is not a valid defence for a director to say that the loss would have happened even without his negligence. If the negligence or misconduct contributed to the loss, liability may still be fixed.

The Act also provides penalties for non-compliance.

Failure to file a required notice or return, wilfully neglecting or refusing to furnish information, or making a false or insufficient return may attract punishment.

The punishment may include imprisonment up to one year, or fine up to ₹10,000, or both.

Where misappropriation, fraud or breach of trust is involved, provisions of the Indian Penal Code may also apply in addition to the penalty under the Act.