Recovery of Dues in a Cooperative Housing Society after amendment of Sec 101 of MCS Act 1960 in 2019...

“Recovery of Dues in a Cooperative Housing Society after amendment of Sec 101 of MCS Act 1960 in 2019...”

A common problem in housing societies (and quite a persistent one at that) is non-payment of dues by members. Defaulters often refuse to pay for common charges such as electricity, lift, water, service staff payments or even dodge overall maintenance charges. At times, the managing committee is found to be lax or apathetic to defaulting members and does not recover dues on time or in full. This is unfair to other residents who regularly pay their dues and they might have to bear the brunt of surplus charges that they are not responsible for.

A member who has failed to pay dues for three consecutive months is considered a defaulter. In the past, the procedure to recover dues was to file a case in the cooperative court. 

“However, after an amendment in Section 101 of the Maharashtra Cooperative Societies Act 1960, the procedure for recovery has been laid down definitively and has been handed over to the Registrar of Co-operative Societies.”

What is the procedure to recover dues from society defaulters as per law?

Step 1: The first measure is to send a simple letter of notice to the defaulter, informing him of the outstanding dues (with interest that could lead up to 21%) instructing him on how and when to pay the arrears. Issue a warning in the letter stating failure to comply will lead to Registrar’s order to obtain recovery of dues.

Step 2: If the member still doesn’t pay, pass a resolution in the general meeting to file for recovery of dues and send a final warning letter to the member informing him of the decision.

Step 3: Apply to the Registrar’s office for recovery of dues by submitting necessary documents and paying a fee (between Rs 15 to Rs 1000 – refer to the table below) via a challan payable to RBI.

Amount to be recovered 

Inquiry Fee based on claim amount 

Court Fee

Up to Rs 1000 

5.5% 

Rs. 15

Rs 1001 – Rs 2000 

4.5% 

Rs. 20

Rs 2001 – Rs 5000 

3.5% 

Rs. 20

Rs 5001 and more 

3.0% (up to Rs 1000) 

Rs. 25

Step 4: The Registrar investigates the matter, verifying the claims made by the society of outstanding dues and may even ask for a hearing from the member to understand his side of the story. After due diligence and verifying the truthfulness of the claim, the Registrar issues a Recovery Certificate.

Step 5: Thereafter, the society approaches the state government court where the presiding Recovery Officer issues a demand notice to the Sale Officer who is required to attach the moveable property of the member.

Step 6: The Sale Officer visits the residence of the defaulting member and submits an inventory of all his movable property, hands it over to the member along with the demand notice. At this stage, the member has the opportunity to pay his dues.

Step 7: If the member does not pay up, the Sale Officer will seize the movable property and hand it over to the managing committee (usually Secretary or Chairman) of the society.

Step 8: The next action is to organize an auction of the defaulter’s property so that the proceeds can be made to settle his outstanding dues. The Sale Officer fixes the date, time and place for the auction.

Step 9: If the amount is still not completely recovered in spite of the auction, the Sale Officer has the right to auction the member’s residence to recover the balance dues. (Note that such extreme cases are few and far in between as the member generally agrees to pay the arrears before such circumstances can arise).

Why should the dues be paid on time? What should be the society’s responsibilities in due recovery?

Payment of dues on time is not a debatable issue. It is the member’s duty as per model bye-laws to pay all maintenance charges and any other charges that are agreed upon originally between the member and the society. Members should understand that not paying their dues on purpose and prolonging such irresponsible behaviour can result in serious legal action against them. In case if the member finds that the charges are unnecessarily high and disputes them, the right way to resolve the issue is to take it up officially with the managing committee instead of defaulting on payments. At the same time, if the society faces defaults in payments for over three months in spite of sending notices, it should follow the above-stated procedure and not resort to other illegal measures such as cutting electricity, water or gas connections. Ideally, even without having to involve the Registrar and the subsequent formalities, member and the society should be able to come to some sort of a resolution internally. If not, the law should be followed precisely.