Spouse’s independent property and shares below 66.72 square metres do not attract cooperative membership disqualification.

The Petitioners challenged orders passed by the Registrar of Cooperative Societies (RCS) in 2004 and the Financial Commissioner in 2011 and 2024, which cancelled their memberships in the Arawali Cooperative Housing Society Ltd.

The memberships were originally held by Mr. Kewal Kishan Kapoor and Mr. Manohar Lal Kapoor (enrolled in 1996) and were transferred to the Petitioners in 2001.

Following a complaint by a third party, the RCS held that the original members were disqualified under Rule 25 of the Delhi Cooperative Societies Rules, 1973, because they and their spouses co-owned a property in Shalimar Bagh at the time of joining.

The lower authorities concluded that the spouses did not have independent resources to purchase their shares of the property, meaning the consolidated shares of the couples exceeded the statutory limit of 66.72 sq. metres.

The Petitioners had been in possession of the allotted flats for approximately 25 years.

Rule 25(1)(c)(i) of the Delhi Cooperative Societies Rules, 1973, which prohibits membership for those owning residential property in Delhi in their own name or their spouse's name, provided that the disqualification does not apply to co-sharers whose share is less than 66.72 sq. metres.

The Court also relied on the principle established in Alimuddin v. The Registrar of Cooperative Societies and R.K. Aggarwal v. Registrar of Cooperative Societies, which interpreted the phrase "in the name of" to mean that the property must actually be owned by the member, even if held benami in the name of a spouse or child, to attract disqualification.

The Court found that the Shalimar Bagh property shares were reflected in the wives' Wealth Tax returns, and it was speculative for the Financial Commissioner to assume the husbands provided the purchase funds without evidence.

Given the property was purchased in 1985, the Court held it was unreasonable to expect the production of bank statements decades later.

It determined that the authorities failed to prove the wives were not independent legal entities with their own resources.

Most significantly, the Court applied the Proviso to Rule 25(1)(c)(i), noting that the individual shares of the members were less than the 66.72 sq. metre threshold.

Following the R.K. Aggarwal precedent, the Court reasoned that since the property was held in the names of the wives and the members' own shares were below the limit, no disqualification could be sustained against the original members or their transferees.

It held that the disqualification was not attracted as the wives’ ownership was documented and the members' shares fell within the statutory exemption.

The Court directed the Society to recommend the Petitioners' names to the Delhi Development Authority (DDA) for formal allotment and conversion to freehold, subject to the payment of outstanding maintenance charges.