Legal Advice

Society has embezzled corpus fund

Query

Our housing society has embezzled the corpus fund of five crore. When the officer bearers of the newly elected RWA searched the books of account the embezzlement was revealed. Now, the former officer bearers are refusing to give any information about the corpus fund. They have misappropriated it for their own benefits and now showing reluctance to give details. What should society do in this circumstance?

Advice

Society is not an owner of the corpus fund. The flat owners contribute and raise a corpus fund for the maintenance of the property. The promoter or builder charges a fixed or variable amount to create a fund for maintaining amenities and hands it over to the society. Thus, society is the trusty of the corpus fund. 

Embezzlement of corpus fund by society

When the society has embezzled the corpus fund the flat owner should file an FIR under section 406. They have committed the offence of criminal breach of trust which is punishable under section 406 IPC. 

It is however, not possible for individual flat owners to lodge FIR against the officer bearers of previous society. Hence, the newly elected society should register an FIR for criminal breach of trust. The president and treasurer are the main culprits because they have control over the fund of society including the corpus fund. They are responsible for any misappropriation of funds.

Also read: No share certificate to illegal flat owner

The society’s bye laws states about the manner and purpose to which the society can utilise the funds. If the expenses were not authorised by the bye laws of society the society will be responsible for the embezzlement. 

Proceeding against society for misappropriation of corpus fund

You should initiate proceedings against the former office bearers of society by sending a legal notice. The newly elected society should demand from them to produce books of account and furnish details of expenses out of corpus fund. If they do not reply to the legal notice within a reasonable time period then society should lodge FIR for embezzlement of corpus fund. 

Call an emergency meeting of society and table the resolution for initiating criminal proceedings against the former officer bearers for embezzlement of corpus funds. Pass that resolution from the society and take steps. The society should take a certified copy of transaction details from the bank. Collect minutes and resolutions passed by the former society for maintenance work. Thereafter lodge an FIR.

Shivendra Pratap Singh

Advocate

High Court Lucknow

Property | RERA

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