Inside the scandal: How a housing co-op society took 2,781 members for a ride

The probe was launched after the co-op society released over Rs 180 crore to a private company

The Health and Family Welfare Department Employees’ House Building Co-operative Society Limited in Mysuru has nearly 25 operational flaws, including serious violations, an inquiry by the Registrar of Cooperative Societies (RCS) has revealed.

The investigation was launched after the co-op society released over Rs 180 crore to a private company for developing three layouts without assessing progress.

The 14-month-long inquiry found that the society worked against the interests of its members and disregarded established rules and regulations, with some directors treating the society as their personal business.

The probe was carried out under Section 64 of the Karnataka Cooperative Societies Act.

Most of the issues revolve around agreements signed with M and M Bengaluru Pvt Ltd for developing three housing layouts, two of which are in northern Bengaluru. The society expanded its jurisdiction to Bengaluru without approval and lacked transparency in selecting the developer.

The society’s shady association with the builder began in June 2011 when it signed the first agreement to develop a layout in Mysuru. Despite zero progress in the first project, the society signed a second agreement in June 2012 to build layouts off Doddaballapur Road and Devanahalli.

The original agreement showed that the developer was expected to charge Rs 675 per square foot for sites on Doddaballapur Road and Rs 617 for sites in Thindlu (Devanahalli). In August 2015, the rates were revised to Rs 954 and Rs 882, respectively, without consulting the board.

Sites at the project named ‘Health City’ were sold to the society’s members and associate members. So far, 2,781 members paid Rs 180 crore.

Intriguingly, the developer registered the land he bought from the farmers using the members’ installment money in his own name and not to the society.

The society released nearly Rs 178.20 crore between 2013 and 2015 in instalments to the developer, violating its own rules that money should not be released without obtaining land as collateral to the value of the sums released.

The RCS probe concluded earlier this year also found no need to develop three layouts in five phases by engaging the same developer who showed little or no progress on the ground. Shockingly, the developer either pledged or sold the land he bought for developing the layouts.

Past presidents’ tenure

Society’s president Shankar Naik said majority of the flaws uncovered happened in the tenures of the past presidents, and the society is cooperating with the probe.

“We are producing all (concerned) documents. Delays in handing over the site is due to delays in payments,” he said.

A senior official from the RCS-Bengaluru branch said they will carry out further investigations under Section 68 of the Societies Act after studying the compliance report filed by the society.