There is no restriction on the Society to set up a cultural fund and collect the contribution for such a fund. There is no restriction that such a fund to be created only from profit earned by Society. The only prohibition for levy and collection of charges is that it should be approved by the General Body and said charges should not contradict the provisions of the Act, Rules and Bye-laws of the society
It is settled legal position after the judgement of the Supreme Court in Bengal Secretariat Coop. Land Mortgage Bank & Housing Society Ltd. v. Aloke Kumar [Civil Appeal 7261 of 2022] reported in 2022 SCC OnLine SC 1404 that the Co-operative Society is to function democratically and the internal democracy of a society, including resolutions passed in accordance with the Act, the Rules, and the bye-laws have to be respected and implemented. The above observations of the Supreme Court are squarely applicable to the Societies registered under the provisions of the Maharashtra Co- operative Societies Act, 1960.
Under the Model Bye-laws adopted by the Housing Society, one of the objects of the housing society is to undertake social, ‘cultural’ or recreational activities. Bye-Law No.5(f) provides that to do all things, necessary or expedient for the attainment of the objects of the Society, specified in these Bye-Laws is an object of the Society.
Bye-Law No. 5(c) provides that to raise funds for achieving the objects of the Society is also one of the objects of the Society. Thus, to raise funds to undertake Social, Cultural or recreational activities itself is one of the objects of the Housing Society.
It is to be noted that such type of activities are required as Society Members along with their family members reside in such housing societies. It is also important to note that the defnition of “society” under Section 2(27) of the said Act specifies the same as an autonomous association of persons, united voluntarily to meet their common needs and aspirations through a jointly owned and democratically controlled enterprise and adhering to the co-operative principles and values. It is well established that human being is a social Hence, it is important for the housing Societies to organise and conduct Social, Cultural or Recreational activities.
The Model Bye-laws provide for collection of charges from the members as provided in Bye-law 65. Bye-law No.65(q) provides that ‘any other charges’ can be collected from the members of the Society. Bye-law No.66(m) provides that such ‘any other charges’ should be approved by the General Body of the Society and such charges should not contradict the provisions of the Act, Rules and Bye-laws of the Society. Bye-law No.5(d) specifically provides that the object of a Co-operative Housing Society inter alia is to undertake and provide for, on its own account or jointly with a co-operative or other institution for ‘social, cultural or re-creative activities’.
In Mrs. Jyoti Sharadchandra Lohokare vs The Managing Committee, Shreeji Ville CHS Ltd. & Ors. (Bombay High Court), it was noted that Bye-law No.148(b)(iii) provides for allocation to a Common Welfare Fund, such part of the profit as the General Body may determine to be utilised in furtherance of the objects specified in the Bye-law No.5(d). The Court considered whether it could be said that such an amount can be utilised only if the housing Society earns a profit. It was held that if the objects of the housing Society are seen, then it is not a profit making body, but the charges are levied for the purpose of collecting funds for the objects of the society and one of the objects of the society is to undertake social, ‘cultural’ or re-creative activities.
It was held that Bye-law No.148 cannot be interpreted in such a manner that there is a restriction on the Society to set up a cultural fund and collect the contribution for such a fund and that such a fund to be created only from profit earned by Society. The only prohibition for levy and collection of charges is that it should be approved by the General Body and said charges should not contradict the provisions of the Act, Rules and Bye-laws of the society.
Accordingly, if the Bye-laws of the Housing Society specifically provide for undertaking social, ‘cultural’ or recreational activities, and the charges towards ‘cultural fund’ are approved by the General Body of the Housing Society, the mandatory levy is permissible.