Short Answer

Yes, a society must obtain member approval before paying for or taking over amenities that were originally promised by the builder.

Under Section 73 and Section 74 of the Gujarat Cooperative Societies Act, 1961, all major financial decisions — including expenses related to amenities, maintenance, or new facilities — require approval through a General Body Meeting (GBM). Without such approval, any payment made by the managing committee can be challenged as unauthorized or irregular expenditure.

Detailed Explanation

When a builder hands over a cooperative housing project to the society, certain amenities (e.g., clubhouse, garden, gym, parking area, or security systems) may remain incomplete or subject to additional payment demands.

In such cases, the society cannot unilaterally pay or enter into agreements with the builder without the consent of members, since the funds belong collectively to all members.

• Legal Basis:

Section 73 – Powers and Duties of Committee:

The managing committee acts as a trustee of the society’s funds. It may carry out routine expenses like maintenance or repairs, but major financial transactions — such as payments for amenities, common infrastructure, or redevelopment — require prior approval of the General Body.

Section 74 – Supremacy of General Body:

This section establishes that the General Body’s decision is binding on the committee.

Therefore, before paying the builder for promised amenities, the committee must:

Call a General Body Meeting (GBM).

Present full details of the builder’s demand (cost estimate, previous agreement, payment justification).

Obtain written approval (majority vote or special resolution).

Record the decision in the minutes of the meeting for legal validity.

If the payment is made without such approval, it can be deemed unauthorized, and the Registrar can take action under Section 93 (mismanagement inquiry) or Section 96 (recovery of loss) of the Act.

• When Approval Is Mandatory:

Member approval is mandatory when:

Builder demands extra payment for amenities promised in the sale agreement.

Society decides to purchase or upgrade any common facility (e.g., new lift, generator, gym equipment).

Society undertakes maintenance contracts for facilities previously managed by the builder.

Builder proposes a “pay-to-complete” offer for pending work like clubhouse or parking development.

• When Committee Can Act Without Approval:

Only routine or urgent expenses (e.g., electricity bill, small repairs, water maintenance) can be handled by the managing committee without calling a GBM.

Even then, such payments must be ratified in the next General Body Meeting to ensure transparency.

• Step-by-Step Procedure for Compliance:

Builder’s proposal or demand letter is received by the society.

Committee reviews legal documents (sale deed, builder agreement, RERA registration).

Notice of GBM is issued (minimum 7 days prior).

Members vote on whether to approve payment.

Resolution passed by majority (or two-thirds if by-law requires).

Decision recorded in meeting minutes and signed by the chairperson and secretary.

Payment made only after approval, with supporting documents attached to accounts.

• Consequences of Non-Approval:

If the society pays the builder without member approval:

The expenditure can be disallowed during audit (as per Rule 115 of the Gujarat Cooperative Societies Rules, 1965).

The Registrar can hold committee members personally liable for the payment.

Members can file a mismanagement complaint under Section 93.

The committee may face disqualification under Section 81 for violating financial governance.

Real-world Scenarios

Scenario 1: In Ahmedabad, a builder demanded ₹5 lakh for completing the clubhouse. The society committee paid without approval. During audit, the expense was flagged, and members demanded refund recovery under Section 96.

Scenario 2: In Surat, the society held a GBM and approved ₹3 lakh to complete an unfinished garden promised by the builder. The payment was documented, and no objections arose later.

Scenario 3: A Vadodara society paid extra for parking allocation without member consent. The Registrar ordered an inquiry under Section 93 and suspended the committee.

References

Section 73 & 74 – Gujarat Cooperative Societies Act, 1961 (Duties of Committee & Powers of General Body): Official PDF

Section 93 & 96 – Inquiry and Recovery for Mismanagement: Official PDF

Rule 115 – Audit Objection of Unauthorized Expenditure, Gujarat Cooperative Societies Rules, 1965: Official PDF