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Dhruv Gaglani (Querist)
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20 February 2012 Dear All,
In a case, the Managing Committee, Chairman and the Secretary has not filed Form M-20 bond, the indemnity form with Registrar and has been managing the affairs of the society since last one year. Now what is the way out?
We received a legal opinion to reverse all the major acts done by the Committee in last one year, resign, appoint a new Committee and then again record all the major acts done by the previous Committee. My question is, Is it necessary to go to such a length for a small glitch in a procedure or is it possible to ratify all the acts done by the Committee during the last year.

Kindly help.

CA Sumat Singhal

CA Sumat Singhal (Expert)
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20 February 2012 M20 bond has to be given by all memebrs of managing committee within 45 days after elections are held in cooperative society and new managing committee has assumed office .
if members of managing committee have failed to execute bond then they are disqualified to be members of MC
NOW READ THIS WHOLE FOR COMPLETE UNDERSTANDING
ON THE 46TH DAY OF NOT FILING THIS INDEMNITY FORM, the member’s election will stand annulled, and his authority will be lost. He loses all power to sign any document on behalf of the society, including cheques, statement of accounts, circulars, agenda and minutes of meetings, letters and representations to Registrar of Cooperative Societies, court cases, etc.

ALL DECISIONS ARE NULL & VOID. All decisions taken in his official capacity will be without authority. All papers that he has signed, including cheques and agreements, will be invalid in the eyes of law. All resolutions and actions of the entire managing committee with his involvement, INCLUDING REDEVELOPMENT ACTIVITIES, will be null and void, even if the other members filed their M-20 Bond in time. The society will be thrown into a management crisis.

RISK OF CRIMINAL PROSECUTION. If a person who has not signed M-20 Bond continues to sign on society documents, then he can be prosecuted for serious crimes including fraud, cheating, misrepresentation and forgery. For example, the managing committee members of Rachna Co-Operative Housing Society on Hill Road, Bandra, Mumbai were slapped with fraud and forgery charges for entering into a redevelopment agreement without filing M-20 Bonds.

ABETMENT OF CRIME. If other managing committee members (who signed M-20 Bond in time) try to uphold, support or cover-up the actions of a defaulting managing committee member, then they also will become party to his crimes, and may be prosecuted for abetment.

RISK OF CLAIMS ON OTHER MANAGING COMMITTEE MEMBERS. As per No. 138 of New Model Bye Laws (2009), “The members of the committee shall be jointly and severally responsible for making good any loss which the society may suffer on account of their negligence or omission to perform any of the duties and functions cast on them under the Act, Rules and the bye laws of the society.” Section 73(1AB) says almost exactly the same thing in respect of “acts and omissions detrimental to the interests of the society”. If members who have themselves filed M-20 Bonds knowingly or unknowingly allow their defaulting colleagues to continue working, then they will be guilty of negligence. If the defaulting member causes any loss to the society through acts of commission or omission, then criminal and financial liabilities will also fall on them.

NEXT MANAGING COMMITTEE ALSO DISQUALIFIED. If a managing committee has a chairman or honorary secretary who failed to file a valid M-20 Bond, then this committee will not even have the authority to call for fresh elections. If a disqualified managing committee calls fresh elections, those elected at such elections will be disqualified ab initio, even if they file their M-20 Bonds in time. This chain reaction will continue to all the subsequent elections and managing committees.

CA Sumat Singhal

CA Sumat Singhal (Expert)
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20 February 2012 ONLY ONE REMEDY: DY. REGISTRAR APPOINTS ADMINISTRATOR, WHO CALLS ELECTIONS. If the managing committee of your cooperative housing society has failed to file a valid M-20 Bond, then the only remedy is that any member of that society should approach the Deputy Registrar to appoint an administrator, who will call for fresh elections. (Please note: Other shortcut solutions may be acceptable to Registrar’s office for reducing their own workload. However, shortcuts are not legally foolproof; they may return to haunt the society if any dispute arises even years later. If, in future, a dispute goes to court, such a patchwork solution can become a major legal infirmity for the managing committee, and may result in years of wasteful court proceedings. Please avoid shortcuts at all costs.)

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