Short Answer

When a flat is mortgaged or under a bank loan, any transfer of ownership in a cooperative housing society requires prior written consent from the lending bank, and the society can approve the transfer only after verifying that the bank’s charge has been cleared or transferred in compliance with the Gujarat Cooperative Societies Act, 1961 and Rules, 1965.

Detailed Explanation

In many cooperative housing societies, members take loans by mortgaging their flats to banks or financial institutions. When such a flat is to be sold or transferred, the mortgage or bank’s charge must be properly handled before the society can approve the new member’s admission.

Under Section 30 and Section 38 of the Gujarat Cooperative Societies Act, 1961, and Rule 32 of the Gujarat Cooperative Societies Rules, 1965, the society cannot transfer the membership or property rights without the consent of the lending bank, since the property is encumbered.

Here’s how transfers are handled in such cases:

Bank Consent Letter:

The existing member (borrower) must obtain a “No Objection Certificate (NOC)” or “Consent Letter” from the bank stating that the loan has been repaid, or that the bank consents to the transfer of ownership to another person.

Verification by the Society:

The society’s managing committee verifies the NOC and ensures there is no outstanding loan, lien, or legal charge on the flat.

Transfer of Charge (if loan continues):

If the buyer agrees to take over the existing loan, the bank must execute a formal transfer of charge agreement, and the society must update its records accordingly.

Resolution and Entry in Membership Register:

After verification, the committee passes a resolution approving the transfer and records the new member’s name in the membership ledger under Rule 32.

Registrar’s Oversight (in case of dispute):

If there is a conflict — such as the bank objecting to transfer or the seller defaulting on the loan — the matter must be referred to the Registrar of Cooperative Societies under Section 30 for direction.

In all cases, the society must avoid approving any transfer without confirming the bank’s written consent, as doing so can expose it to legal liabilities.

Real-world Scenarios

Scenario 1: Mr. Mehta sells his flat to Mr. Shah, but the flat is under a bank mortgage. The bank issues an NOC confirming full repayment, and the society approves the transfer after verification.

Scenario 2: Mrs. Desai sells her mortgaged flat, and the buyer agrees to continue the existing loan. The bank transfers the loan account and issues consent to the society, which updates its records accordingly.

Scenario 3: Mr. Patel tries to sell his flat without bank permission while the loan is still active. The society rejects the transfer until the bank’s NOC is submitted, preventing legal complications.

Reference

Section 30 and 38 of the Gujarat Cooperative Societies Act, 1961: Official PDF

Rule 32 of the Gujarat Cooperative Societies Rules, 1965: Official PDF