Bifurcation of Society and formation Federation
By Legal Bureau
To divide into two part or branches
What is necessity of bifurcation of the Society:-
The Maharashtra Co-Operative Societies Act, 1960 (Section 17) and the Maharashtra Co-Operative Societies Rules, 1961, provide for division of a Co-Operative Society.
Lot of buildings are constructed on the single plot by the Builder. It is responsibility of the builder to firm society and gives conveyance to the society after formation of the Society. The builder always avoid to go for the conveyance but every member has right to ask for conveyance of the building/society. Sometimes there are disputes amongst members residing in different buildings belonging to the Society. When buildings are different and society is single there is always a chance of disputes even after bifurcation the disputes with regards to the ownership and maintenance expenses of the open space. This creates an element of lack of confidence amongst the members residing in different buildings. Sometime members can go for the Federation of the Society. In such circumstances it may be advisable to bifurcate the Society.
Grounds for Division:-
It is at the discretion of the Registrar to permit the Society to bifurcate or not. Usually Division of a Society is not permissible unless the Registrar is convinced that there is no alternative other than to divide a society into one or more subdivisions. The Registrar may consider division of a Co-operative housing Society on the following grounds:-
The membership is so large that the affairs of the Society are unmanageable.
The units (building) are located on distinct plots which are far away from each other, rendering the management of the Society difficult.
There are factions in the Society.
The pre-requisite for bifurcation:-
The plots on which the buildings are constructed should be independent of each other in the Municipal records. If the buildings are constructed on the same plots, the plot should be divisible. If the plot is not divisible, bifurcation is not possible. Sometime the disputes arises when the society wanted to go for conveyance if there are two wings in one building but the Registration of the society is different i.e. wingwise such kind of societies can not go for bifurcation.
How to go for bifurcation:-
The Secretary of the Society should first prepare a scheme for two or more units and place the same before the meeting of the Managing Committee of the society.
The scheme should include:-
Reasons for bifurcation
Details of the land and building to be divided.
The basis on which the assests and liabilities are proposed to be divided.
Procedure and steps for bifurcation:-
A general body meeting, with due notice as provided in the bye-laws of the society, should be conveyed. A proposal for division of the society should be included in the agenda of the General Body Meeting. Copies of the proposed scheme of division of the society should accompany the notice and both should be filed with the Registrar.
A copy of resolution, deciding for division should indicate all the reasons of bifurcation of the Society and has to be passed at the General Body Meeting with at least two third of the total number of members of the Society.
The society should make an application to the Registrar, together with a copy of the notice convening the General Body Meeting, a copy of the proposed scheme of division of the society and a copy of the resolution of the General Body Meeting of the society deciding to divide the Society. This is necessary to obtain the Registrar’s preliminary approval of the scheme.
On getting preliminary approval of the scheme, the Hon’ble Secretary of the society has to prepare the statement of division of assets and liabilities as on the last day of the proceeding Co-Operative year on the basis of the scheme of division adopted while submitting proposal of preliminary approval of the scheme. On the basis of the statement referred to above, he should prepare two or three balance sheets, according to the number of units into which a Society is proposed to be divided. Although the Act and the Rules thereunder do not provide for submission of audited balance sheets, it is advisable to get the balance sheets (consolidated) and the divided balance sheets audited. The balance sheets should be accompanied by supporting schedules.
The Hon’ble Secretary should then call a Managing Committee Meeting and place before it the letter from the Registrar communicating the preliminary approval of the scheme of division and the consolidated balance sheet, the assets and liabilities which are proposed to be divided, the divided balance sheets with scheduls in support of the items in the balance sheets.
The Managing Committee should then consider the proposal put up by the Hon’ble Secretary and decide the time, date and place of the General body meeting at which the proposal for final bifurcation of the society is to be considered.
The agenda of the General body meeting should include as an item, consideration of the proposal of division of the society for securing final approval thereto of the Registrar.
After preliminary approval the Registrar ask the society to submit a proposal with necessary required documents for final approval of the scheme, if he is fully convinced that there is no alternative other than to divide the Society.
Require Necessary documents:-
Notice and Agenda of the GeneralBody Meeting.
A copy of the letter received from the Registrar, communicating the preliminary approval of the
scheme of division of the society.
Copy of the consolidated balance sheet and divided balance sheets with supporting scheduls.
A copy of the statements, indicating how the scheme of division will be beneficial of the society.
A copy of the statement indicating how the assests and libilities of the society are divided.
Names of the Chief Promoters, who will formally act as Chief Promoters of the proposed new societies to come up as a result of division of the society.
The names for the proposed new societies.
The resolution of division of the society containing the purpose behind division of the society, how the scheme is beneficial to the members, full details of the scheme of division of assets and libilities etc. will have to be passed by 2/3 rd mejority of the members present and voting at the General body meeting.
After the Resolution of bifurcation is passed the society has to give notice in Form ‘G’ attached to the Maharashtra Co-operative Societies Rules, 1961, to all members, creditors and other persons, who are likely to be affected by the scheme and has to punish it in one of the newspapers. A copy of the notice has also to be exhibited on the notice board of the Society and on the notice board of the Registrar’s office. The expenditure could be avoided by securing exemption from the Government as provided under Rule 16 (3) (provision) of the Maharashtra Co-Operative Societies, Rules,1961.
Necessity of public Notice:-
The Members, persons or Creditors who are likely to be affected by the scheme, have to exercise an option within one month of the publication of the notice, as to which of the new societies they want to join or they may demand repayment of their share money, or interest in the capital/ property of the society or dues. If the option is not excercised within the stipulated period, the society could assume that the member, creditors or the persons likely to be affected by the scheme have assented to the scheme. If the option is excercised, the society will satisfy the claims as per the options exercised.
Final Registration proposal of new societies:-
The Chief Promoters named in the proposal should prepare registration proposals of the respective societies and submit it finally to the Registrar as under:-
A report indicating how the society has complied with the provisions, regarding bifurcation presupposing two divisions only of the society.
A copy of the notice and agenda of the General Body meeting of the Society.
A copy of the scheme, along with the consolidated balance sheet and divided balance sheet and schedules.
A copy of the resolution of the General Body of the Society.
A copy of the notice in ‘G’ form.
A cutting of the paper, in which the notice in form ‘G’ was published.
Registration proposals of the new societies.
After submitting the final proposal for bifurcation to the Registrar of Co-operative Societies it is at the discretion of the Registrar to permit the Society to bifurcate or not. Usually it takes more than one year time to complete the bifurcation formalities. It may be emphasized that it is possible to get permission for having wing wise societies.