Mumbai Housing Society Queries: Can Committees Offer Early Maintenance Payment Discounts And Charge Interest On Late Dues?

Q. Can a society committee reward members by offering a discount (let’s say, 0.5%, as approved during the annual general meeting) on early payment of maintenance charges? Can it simultaneously levy interest as per the bylaws if payment is not received by the due date?

Gaurav Gandhi, Ghatkopar

A. Interest is a penalty for not honouring the commitment to pay the bills due within the timeline specified by the society. Though there is a specific provision for the levy of up to 12% interest in the Maharashtra Co-operative Societies Rules, there is no provision to offer a discount to members. Thus, it implies that there is no prohibition either. In my opinion, such a discount may be given to ensure timely payment of the maintenance bills.

We are aware that housing societies are non-profit-making entities and are governed by the principle of cooperation. Hence, every member is required to abide by the applicable legal provisions and society bylaws; this includes timely payment of the maintenance bills. However, sometimes the managing committee faces challenges in recovering the dues from defaulting members, and initiating the legal process may be timeconsuming. With due authorisation of the general body, some housing societies may offer a small amount of discount to incentivise members to pay the bills early. It may suit members who stay abroad and can make the annual payment of maintenance bills at the beginning of the year.

An incentive for prompt payment is generally viewed in commercial law not as arbitrary discrimination, but as a reasonable administrative incentive to ensure cash flow, provided every single member has an equal opportunity to avail of it. It only becomes discriminatory if the timeline or criteria selectively favour certain members. In fact, such a discount can be claimed by every member by making the payment within the given time. Further, the committee has to settle the bills of the service providers, staff, contractors, etc. Delay in payment may have adverse consequences, like interest, etc., which add a financial burden to the society. The amount of such a discount should be a small percentage with a specified upper limit to ensure that the balance between the income and expenses is well maintained.

Your society may consider amending bylaws by justifying the reason to include a provision for an early payment discount along with the specific amount and get the registrar’s approval.

The questions are answered by Sharmila Ranade, a legal expert associated with Mumbai Grahak Panchayat. The questions, in brief, may be sent to mpanchayat@gmail.com

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