New club management can't deny member benefits

When the management of a club changes, can the new management change the terms and conditions to the detriment of existing members? Or, can the new management deprive the members of any facilities? In a recent ruling, having far-reaching impact, the Maharashtra State Commission has held that a member cannot be deprived of the privileges and benefits to which he is entitled under an existing membership.

Bay City Welfare Society comprised those who were members of Bay City Resorts Private Limited. The resort had a swimming club membership for its pool at Bandra. Members had been enrolled on payment of a non-refundable deposit and entry fee, and were entitled to use the swimming pool on payment of membership fee, collected in advance.

Bay Resorts was taken over by Shaila Club & Resort Private Limited through an auction. So, the liability towards the swimming club members passed to Shaila Club, which in turn entrusted the day to day management to Savannah Life Style Private Limited (also called C'est la Vie). Members of the erstwhile Bay City Resorts continued paying membership fee to Savannah.

After the takeover, the club and swimming pool were given on a commercial basis for film and serial shooting. The club's property was clandestinely mortgaged to Greater Bombay Co-operative Bank against a loan. When the loan was not repaid, the bank sealed the club premises under a court order. The members were thus deprived of the use of the club facilities. Aggrieved, they filed a complaint before the Maharashtra State Commission claiming compensation for being deprived of their membership benefits.

The club objected that the complaint was time-barred, but this was overruled by the Commission as the members had been using the club facilities continuously till 2004. The cause of action arose when the members were deprived of their membership benefits, and the complaint was thereafter filed within the limitation period. During the hearing, the members gave up their claim against Bay City Resorts, as it had legally transferred the property. The Commission observed that Shaila Club had taken over the assets and liabilities, so it would be liable to provide facilities to the members. Depriving the members of the membership benefits would be unjust.

The Commission noted each member had paid a non-refundable deposit of Rs 50,000. Though they were originally members of Bay City Club, their membership had got transferred to Shaila Club, and they had automatically become members of the new club. So, Shaila Club was responsible and liable for continuing the membership benefits. Yet, the members were deprived of using the swimming pool since April 2005. Besides, Savannah Life Style would also be liable, since the day to day management was entrusted to it.

Narendra Kawde, pronouncing the order on behalf of the Bench along with Presiding Judicial Member P B Joshi, held Shaila Club and its director as well as Savannah Life Style and its director jointly and severally guilty of deficiency in service.

By its order of July 15, the Commission directed the clubs to forthwith provide the members access to the club on a regular basis, on the original terms and conditions of the membership. Alternatively, it directed the clubs to refund the deposit along with 12 per cent interest from December 31, 2004, when it deprived the members of the use of the club facilities. Besides, a compensation of Rs 1 lakh and costs of Rs 25,000 were also awarded. This judgement opens new avenues for aggrieved consumers to fight for their rights.

The author is a consumer activist