Explanation regarding Levy of Cultural Charges not permitted.

Explanation regarding Levy of Cultural Charges not permitted.

As per the model byelaws, 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.

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

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 which 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.

For Social, Cultural or Recreational activities; Society should use the reserve fund as described in Byelaw 147(b) iii, iv and utilize it as indicated in Byelaw 5(d).
Byelaw 147(a) After providing for the interest upon any loans and deposits and after making such other deductions as required under Section 65(1) and 66 of the MCS Act 1960 and Rule 49A of MCS Rules 1961, twenty five percent (25%) of the net profit of all the business carried on by or on account of the Society, shall be placed at the credit of the RESERVE FUND of the Society.
Byelaw 147(b) The remaining seventy five percent (75%) of the net profit of the Society shall be utilised as provided under Rule 50, 51, 52, 53 of MCS Rule 1961.
Byelaw 147(b)iii 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
Byelaw 147(b) iv the objects specified in the bye-law No. 5(d).
Byelaw 5(d) To undertake and provide for, on its own account or jointly with a cooperative or Other Institution Social, Cultural or Recreational activities.

Voluntary Donations / voluntary contribution from members are acceptable.
Society can take sponsorship to conduct such events as per Byelaw 5(d).
Society can fix the number of events /festival as per the National / State Government rules. Two important events are Republic Day & Independence Day. Rest events/ festival can be decided and approved in GBM.

Your Committee proposes that:

i)             We should stop collection of cultural and Festival expenses, as per the auditors suggestion and byelaws, and,

ii)             we should apportion a certain amount every year from the Reserve Fund to a Members Welfare Fund for conduct of such social and welfare activities,