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Letter to stop unauthorized CHS members operating Bank Accounts

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  • Krishnaraj Rao
    Dear friends, Happy New Year! One way to prevent the arbitrariness of housing society managing committees is to ensure that all their paperwork � including
    Message 1 of 1 , Dec 31, 2011
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      Dear friends,

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      Happy New Year! One way to prevent the arbitrariness of housing society managing committees is to ensure that all their paperwork � including the M-20 bonds � is done strictly in accordance with the law.� Banks have the duty to ensure that unless the co-operative housing society (CHS) managing committee members fulfill all the statutory requirements, they will not be allowed to operate the society accounts, sign cheques, etc.

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      However, it is generally seen that co-operative banks neglect this duty. They turn a blind eye in even those cases where the papers are not maintained as per the law. The negligence of the banks enables unauthorized and mala fide persons to virtually hijack the society�s funds in many housing societies, under the pretence of being managing committee members.

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      Even though their legal status is questionable, such persons exercise control over the society�s funds, and virtually hold the society to ransom. After committing illegalities, they even use the society�s funds to meet legal costs to save themselves from the legal consequences. There are many instances of this in every city in Maharashtra.

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      In order to tighten the screws on such societies and ensure transparency, activists Ameet Israni and Meenal Rege have drafted the below letter to the Commissioner for Co-operation, Pune. We urge you to support this letter with your signature. Please email the following details to meenalrege@...: Your name, postal address, contact details (mobile no. and email) and profession.

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      This letter, with your endorsements, will be posted to the Commissioner for Co-operation and Registrar of Co-operative Societies, Maharashtra, (with copy to the Minister for Co-operatives, the Secretary of the Co-operation Department and others) on 7th January, 2012.

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      Warmly,

      Krish

      98215 88114

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      Letter Draft

      7th January 2012

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      To

      The Commissioner for Co-operation & Registrar of Co-operative Societies

      2nd floor, Central Building

      Opp. Sassoon Hospital

      Pune 411001

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      Sub:� To ensure that co-operative banks demand statutory documents from the managing committees of co-operative housing societies.

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      Dear Sir,

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      We would like to draw your attention to the fact that co-operative banks are generally not following the KYC (Know Your Customer) norms in the case of co-operative housing societies (CHS). These mandatory norms imposed by Reserve Bank are strictly followed by nationalised banks, but not by co-operative banks.

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      Co-operative banks are allowing the managing committees of co-operative housing societies to open and operate their accounts even in the absence of the following statutory documents:

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      1)����� A self-attested copy of the society�s certificate of registration

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      2)����� A self-attested copy of the society�s approved bye-laws certified by the registrar

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      3)����� A certified copy of the returning officer�s report to the existing chairman of the society, submitted to the registrar and the housing federation (and duly acknowledged by them)

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      4)����� A certified copy of the minutes of the general body meeting (duly acknowledged by the registrar) declaring the final results of the election. Please note, an unelected committee does not exist ab initio, therefore, an unelected office-bearer cannot act on behalf of the society.

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      5)����� A self-attested copy of the notice and the minutes of the AGM held after declaration of the election results (The full details of the election procedure are described in Annexure III of the bye-laws.of a CHS)

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      6)����� A self-attested copy of the managing committee�s resolution for operating the account of the society

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      7)����� Certified copies of the M-20 bonds signed by each member of the incoming managing committee and duly registered with the registrar�s office. (Please note, under section 73(1AB) of MCS Act 1960 and rule 58A of MCS Rules 1961, it is mandatory that all office bearers execute the bond within a specified time, failing which they cease to hold office: a person who has ceased to hold office cannot act on behalf of a society. Also, the bonds are effective only for the duration of the managing committee�s term of office, and not for even a single day afterwards. So the starting and ending dates of the term of office should be a part of the resolution.)

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      8)����� Last but not the least, certified copies of valid M-20 bonds of the outgoing managing committee issuing the notice of the general meeting for elections. In Bombay High Court�s judgment to Writ Petition 1671 of 2009, Justice Daga has ruled that if a committee has not filed the M-20 bonds, it is an illegal committee, and as such, is not authorized to call for a fresh election. If such a committee calls for an election, then the election and its results are also illegal.

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      Sir, the negligence of the banks in this respect enables unauthorized and mala fide �members to misappropriate and virtually hijack CHS funds, creating a grave crisis. It also allows several ongoing illegalities and irregularities to flourish unchecked.

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      All the above statutory documents are required under the KYC norms, read with Maharashtra Cooperative Societies (MCS) Act 1960 and MCS Rules 1961, and the society�s own bye-laws. It is, therefore, imperative that all banks operating the accounts of co-operative societies must have certified copies of all the documents mentioned above. They must demand these documents as part of the KYC norms.

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      Please direct that banks should appoint compliance / inspection officers to ensure rigourous compliance. As both co-operative banks and co-operative housing societies are under your charge, kindly issue a guidance circular to co-operative banks and auditors to rigourously enforce the KYC norms without any exceptions.

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      Thank you for your time, understanding and help.

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      Sincerely,

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      Your name, postal address, contact details (mobile no. and email) and profession.

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