2018 (9) TMI 837 - HC - Indian Laws

Payment of donation to the co-operative housing society - transfer of flat in favor buyer - Demand of ₹ 5,00,000/- towards the transfer charges - Whether the amount of ₹ 5,00,000/- was paid voluntarily towards donation? Held that - When the persons come together with common object of housing, after formation of a Cooperative Society, they are governed under rules and bye-laws of Maharashtra Cooperative Societies Act. So far as the members are concerned, the Cooperative Housing Society can collect or increase its funds only by legally permissible charges or fees. The Society is not expected to indulge into profiteering business from the members and if such amount is earned, then it is taxable under the law. There is no bar for any member to pay donation to the Society, however, it should be voluntary without any compulsion and coercion. No manner the transfer fees can be charged under the pretext of donation. The payment was made by two demand drafts of ₹ 2,50,000/- each on 27th April, 2005 and the said payment was challenged on 29th December, 2005 by filing Dispute No. 398 of 2005 before the Cooperative Court on the ground that it was paid under coercion. Thus, from this conduct of taking immediate steps against the Society and challenging the said transaction, it can be safely concluded that the amount was not a donation but money was a transfer fee paid out of compulsion and it was not voluntary payment. Petition dismissed.

Summary

Issues:
Challenge to order directing payment of amount with interest | Assessment of evidence by Cooperative Court and Appellate Court | Legality of demanding transfer fees | Voluntariness of payment towards donation | Interpretation of bye-laws and circular on transfer fees | Application of Contract Act and tax implications | Dominant position of Housing Society in transactions | Compliance with rules and bye-laws of Cooperative Societies Act | Sequence of events leading to payment challenge | Modification of interest rate in judgment

Analysis:
The Writ Petition challenges an order directing payment of a disputed amount with interest. The Cooperative Court and the Appellate Court's assessment of evidence is disputed by the petitioner, highlighting admissions made by the respondents regarding payment towards donation. The petitioner argues that voluntary payments to the Society should not be restricted by byelaws, citing a relevant judgment. Conversely, the respondents contend that the Society cannot demand transfer fees exceeding a specified limit, supported by legal provisions and circulars.

The issue of voluntariness in the payment towards donation is crucial. The judgment discusses the dominance of the Society in transactions and the need for payments to be free from coercion. Reference is made to a similar case where the Court differentiated between voluntary payments and coerced transactions. The judgment emphasizes the need for transactions to adhere to legal limits and avoid profiteering, with excess amounts being potentially taxable.

The history of disputes between the Society and the respondents, including the compromise on construction completion and subsequent sale, is examined to determine the legitimacy of the payment challenge. The judgment analyzes the sequence of events leading to the payment dispute, highlighting the discrepancy between the amount offered for transfer charges and the substantial donation paid, suggesting coercion in the transaction.

Ultimately, the Writ Petition is dismissed, with a modification in the interest rate for the amount to be returned to the respondents. The judgment reinforces the importance of voluntary transactions, adherence to legal provisions, and the need for transactions within permissible limits. Compliance with rules and bye-laws of the Cooperative Societies Act is emphasized, with implications for tax and contractual obligations.