Sinking fund

Part 3

v     Utilisation

(1)   For Structural Repairs

As stated earlier, the sinking fund is meant for reconstruction of the building. However, if it becomes necessary for a Co-operative housing society to make any structural addition to and/or alterations in the building in order to strengthen it and if it has no funds to carry out such alterations it can fall back upon its sinking fund.

(2)   Procedure for withdrawing Amount of sinking fund and Creating a charge on Sinking fund investment for carrying out Structural Repairs

As per Bye-law No. 14(c) in case of withdrawal from the sinking fund either for structural repairs or for reconstruction of the building, prior permission of the Registering Authority is necessary.  A Co-operative Housing Society which has no funds or is not able to raise the funds required for withdrawal of the amount of sinking fund or for creating a charge on the sinking fund investment.

(a)     An architect should be appointed at a general body meeting on such terms and conditions as are suggested by it for inspection of the building and specifying the nature of the structural repairs necessary.

(b)    After entering into a contract with the architect subject to the items and conditions approved by the general body meeting, the architect should be called upon to prepare plans and estimates with specifications of the structural changes required to be carried out.

(c)     On receiving the report from the architect covering the necessary repairs, along with plans, estimates and specifications, the managing committee should invite tenders for the work in consultation with the architect. The Committee should examine the tenders received and prepare its own report on the tenders received and make its recommendations as to the tender which in its opinion ought to be accepted.

(d)    The plans, estimates with specifications, the tenders received and the committee’s report thereon should be placed before the general body meeting which has been called for the purpose of considering the above documents and taking a decision thereon.  The general body meeting should also authorise the committee to make an application to the Registering Authority for permission to draw the required amount from the Sinking Fund as also to create additional charges on the sinking fund investment to the extent required.

(e)     The committee should then enter into a contract with the contractor whose tender has been accepted by the general body meeting, on the terms and conditions set out by the general body meeting.

(f)      The Registering Authority should then be requested to grant the necessary permission to withdraw the required amount from the sinking fund/create charge on the sinking fund investment.

(3)   Procedure for withdrawing Amount from sinking fund for Reconstruction of the building

It may necessary for a Co-operative Housing Society to withdraw the entire amount to the credit of its sinking fund for reconstruction of the building when it finds that the existing building has become unsafe for occupation.  In such a case, a Co-operative Society should follow the following procedure:-

(a)     An architect should be appointed at the general body meeting on the terms and conditions approved by it for certifying the present state of the building and the need for reconstructing the entire building and further for preparing plans, estimates and specifications for the reconstruction of the building.

(b)    After entering into a contract with the architect, subject to the terms and conditions prescribed by the general body meeting, the architect should be called upon to examine the state of the building and certify to its present condition and the need for reconstruction of the building. The architect is also called upon to furnish plans and estimates with specifications for reconstruction of the building.

(c)     On obtaining the certificate from the architect regarding the need for reconstruction of the building, along with plans and estimates with specification, the managing committee should invite tenders for the work, in consultation with the architect.

(d)    The tenders received should be scrutinized by the committee in its meeting and its report thereon should be prepared in which the committee recommends the tender which in its opinion should be accepted.

(e)     A general body meeting of the society must be called to consider the report of the architect, the plans and estimates with specification for reconstruction of the building and the tenders with the scrutiny report of the managing committee.  The managing committee must be authorised to make an application to the Registering Authority for permission to withdraw the entire amount of the sinking fund to be used in reconstruction of the building.

(f)      The managing committee should act as per the decision of the general body.

Note:   Necessary resolution to be passed at the General Body Meeting.

(4)   Register of sinking fund

It is advisable to maintain a register to record the collection of funds and interest carried from investment memberwise.