Under the Maharashtra Cooperative Societies Act, 1960 (MCS Act), cooperative housing societies are not permitted to invest their surplus funds in shares of private or public companies. The investment powers of housing societies are strictly regulated to safeguard member funds and ensure financial prudence.
According to the Model Bye-Laws and provisions under the MCS Act, housing societies are allowed to invest their surplus amounts only in the following:
- District Central Co-operative Bank or State Co-operative Bank, provided they have been awarded an ‘A’ audit classification for the last three consecutive years.
- Nationalised banks, only if no such qualifying cooperative bank exists in the district.
- Securities listed under Section 20 of the Indian Trusts Act, 1882, which include:
- Government of India bonds
- State Government securities
- Municipal debentures
- Other safe instruments listed under the Act
Additionally, societies can invest in:
- Shares, security bonds, or debentures issued by another cooperative society with limited liability.
The law explicitly disallows investment in shares of private or public companies, whether listed or unlisted. These are considered risky ventures and do not align with the fiduciary responsibility a housing society holds toward its members.
The State Government may, by general or special order, permit any additional modes of investment for housing societies. However, unless such an order is issued and specifically includes company shares, investment in corporate equities remains prohibited.
A housing society cannot legally invest its surplus funds in the shares of companies. It must restrict its investments to approved banks, cooperative institutions, or government securities as outlined in the MCS Act and the Indian Trusts Act. Any deviation from this can result in regulatory action, and office bearers may be held personally liable for such unauthorized financial decisions.
