Can a Society levy Cultural Charges compulsorily in maintenance bill on members?

Q: Dayanand Nene ji, can a Society levy Cultural Charges compulsorily in maintenance bill on members?

Our Chairman says it is AGM decision.

Please clarify.

Ans:  Society cannot charge or demand money / donation for the Cultural/Festival Expenses from their members/residents. The Society cannot implement such Resolution in AGM / SGM and put burden of contributing any money on all the members including the members who are not interested to participate, even though such Resolutions are passed.

( Here, a Muslim or Christian member can deny to contribute these expenses if only Hindu festivals are celebrated in his society).

This practice of charging Cultural Charges is followed by many housing societies but because of several reasons though not permissible under Bye-Laws it goes on. 

A technical argument done by Managing Committee's is that there is neither an express prohibition nor permission to ask compulsory contributions for funding activities which are voluntary.

Two components are comprised in “the Society Charges” which are listed in great detail in Chapter VIII. 

LEVY OF CHARGES OF THE SOCIETY. The contributions to be collected from the members of the society, towards outgoings and establishment of the funds, are referred to in the bye-laws-laws as “the charges” as a matter of convenience. Following open items are also listed namely

1.Bye-Law No 69 “(xv) Any other charges”

2.Bye-Law No 70(xii)Any other charges approved by the general body at its meeting.

3.Bye-Law No 71(xv) Any other charges : As may be decided by the general body of the society at its meeting

So managements of housing societies are confused. Contribution to Cultural Activity Fund is covered under any three of the above open items. They fail to distinguish between “the charges”  and “funds” Collection to pay on Cultural activities has to be held as contribution to funds and not to outgoings As per Collins English Dictionary Outgoings means “expenses, costs, payments, expenditure, overheads, outlay” which is different from fund.

More convincing argument is however as under:

Ancillary object of housing societies at clause (d) in Bye-Law No 5 reads: “To undertake and provide for, on its own account or jointly with a co-operative institution, social, cultural or recreational activities;” Not for no reason, it is positioned after a clause ( c ) reading: “To raise funds for achieving the objects of the society;”

Funds for activities permitted under Object 5(d) are to be drawn from the Welfare Fund to be established as provided in Clause (iii) of Bye-Law No 148(b) reading: To allocate to a common welfare fund, such part of the profit, as the annual meeting of the general body may determine, to be utilized in furtherance of the objects specified in the bye-law No. 5(d).

Normally an express provision has to be exhausted first as a common sense application. Housing society management argues that we are non-profit organizations. 

This stems from incorrect accounting of member’s contribution as Income and all outgoings as Expenses. Incorrect because barring NOC, Parking Charges, delayed payment interest charge all amounts to be collected do not have a character of income because these are members’ funds (collectively they are “housing society”) pooled in to spend for common causes.

Another mistake is in calculation of monthly collections which must fully conform to Bye-Law No 71(a) opening line reading : “The Committee shall apportion the Share of each member towards the charges of the society on the following basis:” 

It is obligatory duty and even the general body meeting has no say in this matter. But rarely does management fully absorb all outgoings in to rate fixed, thereby diverting interest income to outgoings. Result is loss or just break even.

Raghavan, if  you feel convinced and committed to the cause of well managed housing society, but fail to convince the managing committee, please do make a complain to Dy, Registrar that the managing committee is not fully complying with requirement of Bye-Laws endangering financial position. 

Voluntary contribution cannot be forced upon is another breach of important co-operative principle. You can even file a complaint to District Consumer Forum as the managing committee is providing a deficient service by not collecting society funds as directed under Bye-laws.