In a cooperative housing society, office-bearers are fiduciaries who are expected to act in the best interest of the society and its members. When an office-bearer owns a housekeeping, security, or any other service agency and actively pressures the society to engage that agency, it raises a clear issue of conflict of interest. Such conduct undermines transparency, fairness, and the cooperative principles on which housing societies are founded.
What Is a Conflict of Interest?
A conflict of interest arises when a person in a decision-making position stands to personally benefit—directly or indirectly—from that decision. In your case, the office-bearer’s financial interest in the housekeeping agency directly conflicts with their duty to take unbiased decisions for the society.
Legal Provision Under the Model Bye-Laws
You can strongly rely upon Bye-Law 116 of the Model Bye-Laws of Cooperative Housing Societies.
This bye-law clearly states that:
• No officer of the society shall have any interest, directly or indirectly, in any contract made with the society
• This restriction applies to contracts for services, purchase or sale of property, and any other transaction
• The objective is to prevent misuse of position and self-dealing by managing committee members
The only limited exception under this bye-law relates to investment in or loans taken from the society for providing residential accommodation to paid employees of the society, which is not applicable in your situation.
Therefore, engaging a housekeeping or security agency owned by an office-bearer is expressly prohibited under the bye-laws.
Role and Responsibility of the Managing Committee
The managing committee is collectively responsible for ensuring that:
• All service providers are appointed through a fair and transparent process
• Decisions are taken without personal bias or financial interest
• Society funds are utilised prudently and in compliance with the bye-laws
If the committee knowingly allows such an engagement, it may be accused of dereliction of duty and acting against the interest of the society.
What Practical Steps Can Members Take?
Members can take the following steps:
• Object in writing to the proposed appointment, citing Bye-Law 116
• Demand that the matter be placed before the general body for discussion
• Insist on obtaining multiple quotations and comparative statements
• Request the society to frame a conflict-of-interest policy applicable to office-bearers
Escalation if the Society Proceeds Regardless
If the managing committee still proceeds with such an appointment despite objections:
• A complaint can be filed with the Registrar of Cooperative Societies
• The action may also be challenged as void and contrary to the bye-laws
• Office-bearers may be held personally accountable for losses caused to the society
Importance of a Conflict-of-Interest Policy
It is advisable for societies to formally adopt a conflict-of-interest policy, clearly prohibiting:
• Appointment of agencies owned by committee members or their relatives
• Participation of interested office-bearers in decision-making
• Any form of coercion or undue influence
Such a policy strengthens governance and protects the society from disputes and legal exposure.
Conclusion
In summary, a housing society must not engage services from an agency owned by its office-bearer. This is a clear violation of Bye-Law 116, which prohibits transactions with interested persons. Members are well within their rights to object, seek general body intervention, and approach the registrar if required. Transparent governance and avoidance of personal interest are essential for the smooth functioning of any cooperative housing society.
