Saji Koduvath, Advocate, Kottayam.

Synopsis.

• 1.         Introduction
• 2.         Dissolution: Intention of Founders
• 3.         Dissolution on Unanimous Decision
• 4.         No Beneficial Interest
• 5.         Dissolution and Fundamental Principles
• 6.         Dissolution – Power of Governing Body
• 7.         Dissolution – Power Given to Gov. Body is Distinct
• 8.         ‘Forthwith’ Meaning
• 9.         Voting by Proxy
• 10.      Dissolution: Property Goes to Another Society.
• 11.      Effect of Sec. 14 on a Defunct Society
• 12.      Effect of Withdrawal of Majority of the Members
• 13.      Dissolution of Societies by Court
• 14.      Dissolution of Societies by Registrar
• 15.      Dissolution: Not Answer for Ills – Civil Court Jurisdiction
• 16.      Can the Members Convert a Society into a ‘Trust’?
• 17.      Dissolution & Unification of Churches
• 18.      S. 14 not Applicable to Literary/Scientific Clubs
• 19.      Can a Society be Transformed as Trust, by Resolution
• 20.      Effect of Unification of a Trust and a Registered Society
• 21.      Escheat

Provisions of the Societies Registration Act,1860:

• 13. Provision for dissolution of societies and adjustment of their affairs
• Any number not less than three-fifths of the members of any society may determine that it shall be dissolved, and thereupon it shall be dissolved forthwith, or at the time then agreed upon, and all necessary steps shall be taken for the disposal and settlement of the property of the society, its claims and liabilities according to the rules of the said society applicable thereto, if any, and if not, then as the governing body shall find expedient,
• Provided that, in the event of any dispute arising among the said governing body or the members of the society, the adjustment of its affairs shall be referred to the principal court of original civil jurisdiction of the district in which the chief building of the society is situate; and the court shall make such order in the matter as it shall deem requisite.
• Assent required:
• Provided that no societies shall be dissolved unless three-fifths of the members shall have expressed a wish for dissolution by their votes delivered in person, or by proxy, at a general meeting convened for the purpose:
• Government consent:
• Provided that 4 [whenever any Government] is a member of, or a contributor to, or otherwise interested in any society registered under this Act, such society shall not be dissolved 5 [without the consent of the Government of the 6 [State] or registration].
• 14. Upon a dissolution no member to receive profit
• If upon the dissolution of any society registered under this Act there shall remain, after the satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the said society or any of them, but shall be given to some other society, to be determined by the votes of not less than three-fifths of the members present personally or by proxy at the time of the dissolution, or in default thereof, by such court as aforesaid:
• Clause not to apply to Joint-stock Companies: Provided, however, that this clause shall not apply to any society which has been founded or established by the contributions of share-holders in the nature of a Joint-stock Company.

1. Introduction

A society or a club can be dissolved by its members, on appropriate grounds and adopting the procedures laid down by the Bye laws (and the Act, if any,  applicable). It can also be done by the Registrar, Court or Government, if the provisions of the Act applicable so provides.

If a society is formed for attaining a specific purpose, it will be dissolved on fulfilling that purpose. Sections 13 and 14 of the Societies Registration Act provide for dissolution of societies and the consequences of such dissolution.

Since the Societies Registration Act provides a particular procedure for dissolution, the same has to be done as per that procedure. Because, if a thing is prescribed to be done in a particular way, it can be done in only that way, and by no other way.[1]

2. Dissolution: Intention of Founders

It is not open for the majority of an association to alter the fundamental principles upon which it is founded.[2] When the intention of the founders of an unregistered society or a club (as expressed in the bye laws or as manifested in any other binding mode) is to use its property for the benefit of the present and future members, then the members of a particular time are not entitled to put an end to (and appropriate) the same by themselves.  The same rule applies to public or permanent trust predicated by the founders or by the bye laws.

Underhill, in his treatise ‘Law of Trusts and Trustees’, explained it thus:

• “However, the crucial difference surely is that no absolutely entitled members exist if the gift is on trust for future and existing members, always being for the members of the Association for the time being. The members for the time being cannot under the Association Rules appropriate trust property for themselves for there would then be no property held on trust as intended by the testator for those persons who some years later happened to be the members of the Association for the time being.”[3]

The bye laws considered in Shanti Swarup Vs. Radhaswami Satsang Sabha, Dayal Bagh,[4] provided the terms for dissolution as under: ‘The society shall stand dissolved in case no Satsang Guru reappeared within two years of the death of the last Satsang Guru’. It was held that such bye laws were invalid and inoperative, they being militated against the provisions of Section 13 of the Societies Registration Act, 1860.

3. Dissolution on Unanimous Decision

If the Rules of an unregistered society or a club do not contain a provision for the dissolution by vote of majority (or by a specified majority), its dissolution could be brought about only by a unanimous decision of its members.[5]

4. No Beneficial Interest

In the Unani Tibia College case[6], the Supreme Court held as to beneficial enjoyment of property of a registered society as under:

• “During the subsistence of a society, the right of the members is to ensure that the property will be utilized for the charitable objects set out in the memorandum and these did not include any beneficial enjoyment.  Nor did the members of the society acquire any beneficial interest (that is, ‘proprietary interest’ or interest pertaining to owner) on the dissolution of the society. … We are clearly of the opinion that that right is not a right of property within the meaning of Article 19(1)(f).” (Para 23).

5. Dissolution and Fundamental Principles

It is not open for the majority of the members of an association to alter the fundamental principles upon which it is founded unless such a power is specifically reserved.[7]

It is observed by our Apex Court, with respect to a private religious trust, in Profulla Chorone Requitte Vs. Satya Chorone Requitte[8] as under:

• “According to English Law, beneficiaries in a private trust, if sui juris or of one mind, have the power or authority to put an end to the trust or use the trust fund for any purpose and divest it from its original object. Whether this principle applies to a private endowment or debutter created under Hindu Law, is a question on which authorities are not agreed. In Doorganath Roy Vs. Ram Chander Sen, (1876) 4 Ind App 52 (PC), it was observed that while the dedication is to a public temple, the family of the founder could not put an end to it but ‘in the case of a family idol, the consensus of the whole family might give the (Debutter) estate another direction’ and turn it into a secular estate.  Subsequently, in Pramatha Nath Mullick Vs. Pradymna Kumaar Mullick (1925) 52 Ind App 245, the Judicial Committee clarified that the property cannot be taken away from the idol and diverted to other purposes without the consent of the idol through its earthly agents who, as guardians of the deity, cannot in law consent to anything which may amount to an extinction of the deity itself”.

It is held in Inderpal Singh Vs. Avtar Singh:[9]

• “Rule of Law demands and dictates that the people follow the Law. The Constitution, whether of the State or of a Society registered under the Societies Act, is paramount. …. The doctrine of factum valet is applicable to cure the violation of a directory provision or a mere matter of form but does not cure the violation of the fundamental principles or the essence of the transaction.

Fundamental Rules Cannot Not Be Altered

In Noel Frederick Barwell Vs. John Jackson AIR 1948 All 146 it was held as under:

• “51. It has been argued by Mr. Pathak on the basis of this decision and the decision of the House of Lords in Hole v. Garnsey (1930) 1930 A.C. 472, already referred to, that the rules of every association may be divided into two classes – the rules relating to fundamentals and the ordinary rules. Learned Counsel went on to urge that the fundamental rules could not be altered even by a unanimous vote of the members, though, if the rules provided for amendments, the other rules could be ant ended. It is not necessary for me to go into this question as the point does not arise in this case, but if I may say so without meaning any disrespect, the cases cited above have entirely been misunderstood. All that their Lordships intended to say was that the rules of any club being framed for the purpose of carrying on the objects of the club, ordinarily any power to amend such rules must be limited to the contemplated scope of the original rules and that under the general powers of amendment the alteration should not affect the foundation of the club or should not be incompatible with its fundamental objects.
• 52. Dealing with this question Lord Han – worth, Master of the Bolls, in Doyle v. White City Stadium Ltd (1935) 1 K.B. 110 said:
• ‘When these rules as altered are still for the purpose of carrying out the original purpose of the society or body of persons, the altered rules are made binding on the plaintiff. If there was an attempt fundamentally to alter the purpose for which the rules had been originally drawn up, the prospective agreement to adhere to-fresh rules, or any alteration in the rules, would not apply. It is quite plain from the decision in Thelluson v. Viscount Valentia (1907) 2 Ch. 1 that if and so long as the rules are akin to the purpose for which a society exists, there is no inherent, objection to an alteration of those rules or to further rules being made for the same purpose’.”

If Principles of Trust in a Club, It is in a Very Limited Sense

In Noel Frederick Barwell Vs. John Jackson AIR 1948 All 146 it was held further as under:

• “58. The next argument of learned Counsel is based on the law of trust. He has urged that the property of the club vests in the committee of management and the ordinary and temporary members are all beneficiaries and that under the law of trust all beneficiaries must join in the extinction of the trust. In a sense, “the office bearers of any public body or institution including a club, are trustees, but I am afraid this cannot be of much assistance to learned counsel. There is no question in this case of the right of the officers of the club to put an end to it and I have already said that if there is a trust it is in a very limited sense. This is a case where the members of the club have passed a resolution by a majority, that the club should be dissolved, and the decision must, therefore, to my mind, rest on the decision of two simple questions, firstly whether the rules of the club have made any provision with regard to its dissolution and, if so, whether the rules have been complied with, and secondly, if there is no such rule, whether the resolution is valid and should be given effect to.”

In this decision the minority judgment pointed out, as to trust, as under:

• “Finally it is said that the committee of the club are trustees of the club property and that the trust could only be extinguished with the consent of all the beneficiaries. But if a trust exists, it is created by the rules of the club and the trustees held the trust property subject to those rules; and if the rules permit of a dissolution at the will of the majority of the members then with the winding up of the club there is an extinguishments of the trust.”

6. Dissolution – Power of Governing Body

            A registered society is dissolved on resolution of the members of the society with required majority. Sections 13 and 14 of the SR Act provide for dissolution of societies and the consequences of such dissolution.  If the rules of the society do not lay down rules for disposal and settlement of the property on dissolution, the governing body is expressly authorized to do the same as it ‘finds expedient’. 

7. Dissolution – Power Given to Gov. Body is Distinct from Society

In Board of Trustees, Ayurvedic & Unani Tibia College, Delhi Vs. The State of Delhi,[10] the Constitution Bench of our Apex Court held that the governing body is given a legal power somewhat distinct from that of the society itself.   It is observed:

• “Section 13 provides for dissolution of societies and adjustment of their affairs. It says in effect that on dissolution of a society necessary steps shall be taken for the disposal and settlement of the property of the society, its claims and liabilities, according to the rules of the society; if there be no rules, then as the governing body shall find it expedient provided that in the event of any dispute arising among the said governing body or the members of the said society, the adjustment of the affairs shall be referred to the court. Here again the governing body is given a legal power somewhat distinct from that of the society itself.”

8. ‘Forthwith’ Meaning

In Bidya Deb Burma Vs. District Magistrate Tripura, Agartala,[11] our Apex Court interpreted ‘forthwith’ as under:

• “When a Statute requires that something shall be done ‘forthwith’ or ‘immediately’ or even ‘instantly’, it should probably be understood as allowing a reasonable time for doing it.”

9. Voting by Proxy

See Chapter: Amendment of Bye laws

10. Dissolution: Property Goes to Another Society.

As per the Societies Registration Act, on dissolution, the left-behind-property of a society goes to another society as determined by the members of the society or by the court (S. 14) for being managed by ‘some other society’ and to be utilized for like purposes.[12]

11. Effect of Sec. 14 on a Defunct Society

Various State enactments empower the Registrars of Societies to dissolve societies.

In Mrigan Maity Vs. Daridra Bandhab Bhandar[13] it is observed that though only a few members of the society  have shown any interest in matters pertaining to the society for 36 years or so, it might  still not be presumed that the society was defunct that would warrant dissolution under the So. Rgn. Act.

From the object and scheme of the Societies Registration Acts it is clear that though the registration of a society may be cancelled by the Registrar or Court for it becomes defunct, the same would not set free the society from the clutches of the Societies Registration Act as to the provisions for dissolution.

12. Effect of Withdrawal of Majority of the Members from a Society

Where the membership in a society has been reduced to a few as massive portion of the members had been withdrawn, the validity of the resolutions taken by the General Body of such remaining members cannot be discarded as the decision of minority.

In JN Chaudhary Vs. State of Haryana[14]  where all members of a Co-operative Society except 10 out of 278 have been  withdrawn and thus the society practically reduced to a defunct one, our Apex Court considered the validity and correctness of the General Body resolution of the society in view of which a land was put to auction sale, and upholding the sale it was observed:

• “… In a matter where the decision has been taken collectively by the General Body reflected in the form of a resolution passed by the General Body, it would be unjust and inappropriate to nurture a lurking doubt and keep suspecting the decision by entertaining the version of a handful who might be disgruntled or might be genuine but would be difficult to be gauged by any court so as to overrule the General Body resolution and accept the view of the minority based on no evidence except assumption and speculation”.

13. Dissolution of Societies by Court

There are no detailed provisions or meticulous particulars in the Societies Registration Act, 1860 for the dissolution of a society under the orders of the Court. But various States’ Acts and amendments provide for the same.

Section 25 of the Travancore Cochin Literary Scientific and Charitable Societies Registration Act, 1955 provides that an application can be made by the State Government, or one tenth of the members of the society, to the District Court and court may after enquiry pass the following orders:

• Removing the existing governing body;
• Appointing a fresh governing body;
• Framing a scheme for the better and efficient management; and
• Dissolving the society.

Sub Section (1) of Sec. 13B of the Societies Registration Act, 1860 as amended in the State of UP provides for dissolution of a Society by Court on any of the following grounds:

• (a) the society has contravened any provision of this Act or of any other law for the time being in force and it is just and equitable that the society should be dissolved;
• (b) the number of the members of the society is reduced below seven;
• (c) the society has ceased to function for more than Three Years preceding the date of such application;
• (d) that the society is unable to pay its debts or meet its liabilities, or
• (e) the registration of the society has been cancelled on the ground that its activities have been or are or will be opposed to public policy.

The court acts upon the application of the Registrar or on an application made by not less than one-tenth of its members. The court also acts upon an application of the District Magistrate on the ground that the activities of the society constitute a public nuisance or are otherwise opposed to public policy.

Section 25 of West Bengal Act also provides for dissolution of a society by Court on similar grounds. 

14. Dissolution of Societies by Registrar

Sec. 13A of the Societies Registration Act, 1860 as amended in the State of UP provides the power of the Registrar to dissolve a Society. If there are reasonable grounds to believe that any of the grounds mentioned in clauses (a) to (e) of sub-section (1) of Section 13B exists he shall send to the society a notice calling upon it to show-cause within such time as may be specified in the notice why the society be not dissolved. In case the society fails to show any cause or if the cause shown is considered by the Registrar to be unsatisfactory, the Registrar may move the Court for making an order for the dissolution of the Society.  Various State enactments empower the Registrars of Societies to dissolve societies.  The grounds include:

• Carrying on any unlawful activity;
• Object clause has not been fulfilled; 
• Office/society ceased to function for a particular period;
• Members are below the required number;
• Society has been declared/become insolvent;
• Activities are against the Governmental policy;
• Contravened any law including the So. Regn. Act; 
• Not managing its affairs properly,
• Business of the society is being carried out fraudulently or not in accordance to the bye laws or objects.

15. Dissolution is Not an Answer for all Ills – Civil Court Jurisdiction

Holding that the dissolution of a society is not an effective answer for all ills of a society or complaints of the members, it is observed by Karnataka High Court in Ram Vs. Murlidhar[15] that the power of the Registrar  (Under the Karnataka Societies Registration Act, 1960) to dissolve the society might not be a proper answer to the grievances and the complaints of the plaintiffs when the plaintiffs were not seeking for any dissolution of the society but for proper management.

16. Can the Members Convert a Society into a ‘Trust’?

Society and trust are different concepts in the eye of law. Therefore, there cannot be a ‘transfer or conversion’ of society to trust or vice-versa.[16] The Karnataka High Court, in Chief Controlling Revenue Authority Vs. H Narasimhaiah[17] it is held that the documents as to conversion of the properties of a society into a trust property fall within the meaning of “settlement” under the Stamp Act. (It may be noted that, in this case, the court did not consider whether ‘trust’ is an ‘institution’ and whether such a change amounts to, or result in, dissolution of the society.)

In Shri Digambar Jain Vs. Sub Registrar, Stamps, Indore[18] it is held in a similar situation that the documents would be ‘Declaration of Trust’ and not a ‘Conveyance’.

17. Dissolution & Unification of Churches

In Vinodkumar M. Malavia Vs. Maganlal Mangaldas Gameti[19] there was no resolution showing compliance with the procedure for dissolution as required under the Societies Registration Act, and all the materials on record only talked about amalgamation. Therefore it was held that the procedure for dissolution of the society had not been conformed to the requirements set out in Section 13 of the Societies Registration Act.

18. S. 14 not Applicable to Literary/Scientific Clubs

Sec. 14 of the So. Regn. Act reads:

• 14. Upon a dissolution no member to receive profit: If upon the dissolution of any society …  any property … shall be given to some other society…

Clause not to apply to Joint-stock Companies: Provided, however, that this clause shall not apply to any society which has been founded or established by the contributions of share-holders in the nature of a Joint-stock Company.

Sec. 14 lays down that upon the dissolution of a society registered under this Act, the property of that society shall not be distributed among the members, but shall be given to some other society, as directed in this Section.

In the proviso to this Section, it is stated that this Clause does not to apply to Joint-stock Companies. It is clear that the Associations ‘founded or established by the contributions of share-holders in the nature of a Joint-stock Company’ ‘for any literary, scientific, or charitable purpose’[20] can also be registered under the So. Regn. Act.

19. Can a Society be Transformed as Trust, by Resolution

Societies Registration Act (S. 14) provides special procedure for dissolution of societies. The left-behind-property of a Society, on dissolution, goes to another Society as determined by the members of the Society or by the court. Either during the subsistence of a Society or at the time of its dissolution the members of a Society do not have beneficial enjoyment of its property.[21]  In companies, the share-holders hold the property as their own.[22]

The property of a registered Society cannot absolutely vest in its members. In Board of Trustees, Ayurvedic & Unani Tibia College, Delhi Vs. The State of Delhi[23] it is held, with respect to the privileges conferred by registration of a society, as under:

• “Thus something in the nature of perpetual succession is conceded by the provision that the society’s property is to vest in the trustees for the time being of the society for the use and benefit of the society and its members and of all persons claiming through the members according to the society’s rules, and further (and this is the most noteworthy provision) that the property shall pass to succeeding trustees without assignment or transfer.”

The members of a registered Society are trustees for the future members who have to continue the aim and objects of the Society as envisaged by the founders or as manifested in the Rules or Bylaws. Such property ‘shall continue to exist in perpetuity and it would not cease to exist by a resolution’ of the society;[24] and therefore the members of a society do not have the right to annihilate the characteristics of the society and transfer or transform the same to a trust. In Pamulapati Buchi Naidu College Committee, Nidubrolu Vs. Govt. of AP[25] it is observed:

• “If what is vested in the College Committee or its governing body is a right of management simpliciter, there is no question of the members of the society or the members of the governing body being beneficially interested in its property.”
• “The Societies Registration Act, therefore, does not create in the members of the registered society any interest other than that of bare trustees. What all the members are entitled to, is the right of management of the properties of the society subject to certain conditions.” [26]

Underhill, in his treatise, ‘Law of Trusts and Trustees’, explained it thus:

• “However, the crucial difference surely is that no absolutely entitled members exist if the gift is on trust for future and existing members, always being for the members of the Association for the time being. The members for the time being cannot under the Association rules appropriate trust property for themselves for there would then be no property held on trust as intended by the testator for those persons who some years later happened to be the members of the Association for the time being”.[27]

20. Effect of Unification of a Trust and a Registered Society

Trusts and societies can be dissolved only by adhering to the special procedures for the same. Unification of a registered society with a trust, under the resolutions, will not dissolve the society, automatically. Similarly, unless the properties vested in a trust are divested in accordance with law, a lawful merger cannot be claimed. Registered societies and trusts have to resort to the lawful modes for amalgamation.[28]

21. Escheat

If a club or society is defunct and no one claims that the club or society functions, the principles and law on escheat allows the vesting of property in Government. But in case of dispute, the onus will be heavy on the State to make out a case of escheat or bona vacantia.

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[1]   See: Indian National Congress (I) Vs. Institute of Social Welfare: AIR 2002 SC 1258; Supreme Court Bar Association Vs. The Registrar of Societies: ILR 2012-22-Dlh-1031; Patna Improvement Trust Vs. Smt. Lakshmi Devi: 812 SCR [1963] Supp.; State of Bihar  Vs. JAC Saldanh: (1980) 1 SCC 554: AIR 1980 SC 326; Vinodkumar M. Malavia Vs. Maganlal Mangaldas Gameti:  (2013) 15  SCC 394; Nazir Ahmed case: AIR 1936 PC 253.

[2]   Prasanna Venkitesa Rao Vs. Srinivasa Rao: AIR 1931 Mad. 12.         See also: Profulla Chorone Requitte Vs. Satya Chorone Requitte: AIR 1979 SC 1682.

[3]      Quoted in Most Rev. P.M.A. Metropolitan Vs. Moran Mar Marthoma: AIR 1995 SC 2001- Para 69.

[4]      AIR 1969 All 248

[5]      Noel F Barwell Vs. John Jackson: AIR 1948 All 146.         It is considered in Shridhar Misra Vs. Jaichandra Vidyalankar: AIR1959  All 598;        See also: Jamiat Ulama Vs. Maulana Mahmood Asad Madni: ILR 2008 -17 Dlh 1950;        Raja Himanshu Dhar Singh Vs. Addl. Registrar Co-Op. Societies: AIR1962 All 439.

[6]      Board of Trustees, Ayurvedic& Unani Tibia College Vs. The State: AIR 1962 SC 458.        Relied on in Dharam Dutt Vs. Union Of India: AIR  2004 SC1295.

[7]   Prasanna Venkitesa Rao Vs. Srinivasa Rao: AIR 1931 Mad. 12.      Relied on: Milligan Vs. Mitchel: 40 ER 852,      Free Church of England Vs. Overtoun: (1904) AC 515.  

[8]     AIR 1979 SC 1682

[9]     2007-4 Raj LW 3547

[10]  AIR 1962 SC 458 (para13)

[ 11] AIR 1969 SC 323

[12]  Board of Trustees, Ayurvedic & Unani T. College Vs. The State: AIR 1962 SC 458: Para 23.

[13]   2011-4 Cal LT 226

[14]    AIR  2014 SC 2018

[15] 2008-2 Kant LJ 141; 2008 AIHC 1391

[16]   See Chapter: ‘Incidents of Trust in Clubs and Societies’.

[17]   AIR 1991 Kar 392

[18]   AIR 1970 MP 23 (FB)

[19]   2013 AIR (SCW) 5782; (2013) 15  SCC 394

[20]   See S. 20.

[21] Board of Trustees, Ayurvedic & Unani T College Vs. The State:  AIR 1962 SC 458– Para 23.

[22]    Pamulapati Buchi Naidu College Committee, Nidubrolu Vs. Govt. of AP: AIR 1958 AP 773.

[23]    AIR 1962 SC 458

[24] Church of North India Vs. Lavajibhai Ratanjibhai: AIR 2005 SC 2544: 2005 (10) SCC 760. Followed in Vinodkumar M. Malavia Vs. Maganlal Mangaldas Gameti: 2013 AIR (SCW) 5782: AIR 2013 SC (CIV) 2849; (2013) 15  SCC 394.

[25]    AIR 1958 AP 773

[26]    See also: Raj Kumar Gaba Vs. State of UP: 2012-49 VST 252; Commissioner of Income Tax Vs. Merchant Navy Club: 1974-96 ITR 261; Gurdwara Prabandhak Committee Vs. Jagmonan Singh: ILR  1971-2 Del 515.

[27]    Quoted in Most Rev. PMA Metropolitan Vs.  Moran Mar Marthoma: AIR 1995 SC 2001- Para 69.                

[28] Vinodkumar M. Malavia Vs. Maganlal Mangaldas Gameti: (2013) 15 SCC 394.

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