Saji Koduvath, Advocate
Synopsis
- 1. Definition of ‘Member’ & Right to Vote
- 2. State-Acts Empower Registrar to Call Elections
- 3. Membership in a Society, not a Fundamental Right
- 4. ‘Subscription in Arrears’: Afford Opportunity of Payment
- 5. Individual Membership Rights
- 6. Individual Can Maintain Cause of the Collective Body
- 7. Individual and Corporate Membership Rights
- 8. When Minority can File Suits Without Sanction of Majority
- 9. Exceptions to the rule in Foss Vs. Harbottle
- 9. No Personal Liability on Members & Gov. Body
- 10. Co-op: Society has Corporate Personality & Its Liability
- 11. Elected Representatives of a Church can Protect Property
- 12. No Taxing When Members Avail the Facilities
- 13. Admission of New Members
- 14. Instances When Court Interferes
Provisions of the Societies Registration Act, 1860:
- 15. Member defined: For the purposes of this Act a member of a society shall be a person who, having been admitted therein according to the rules and regulations thereof, shall have paid a subscription, or shall have signed the roll or list of members thereof, and shall not have resigned in accordance with such rules and regulations;
- Disqualified members: But in all proceedings under this Act no person shall be entitled to vote or be counted as a member whose subscription at the time shall have been in arrears for a period exceeding three months
1. Definition of ‘Member’ & Right to Vote
Norms & Formation of Governing Body is Left to Bye Laws.
The definition of ‘Member’ in the Societies Registration Act, 1860 (in Sec.15) is not exhaustive, as it is ‘for the purposes of this Act’ alone. Therefore it is legitimate to say that the disqualifications specified in the second limb of Section 15 (restriction to vote; and not to count as a member, because of subscription-arrears) is confined[1] to the activities enjoined to the ‘members’ in the So. Registration Act: ie. to take part in the meeting to make bye laws (S. 9), amend the ‘purposes’ (S. 12), take decision to ‘amalgamate’ with another society (S.12), dissolution (S. 13), etc.
So. Regn. Act does not specifically deal with or direct ‘election’ of the governing body.[2] The mode and modalities of formation of the governing body is resolutely left, under Sec.16, to the ‘rules and regulations of the society’.
Sec.16 reads:
- Governing body defined: The governing body of the society shall be the governors, council, directors, committee, trustees, or other body to whom by the rules and regulations of the society the management of its affairs is entrusted.
It cannot be understated as an omission in the Act. Pointing out the fundamental right guaranteed (Article 19(1)(c) of the Constitution of India) to form associations, and that the bye laws bind the members as a contract, even if it can be argued that the founders of a society are free to make bye laws which provide for permanent governing body, without an election, it appears that such a society cannot be recognised under the Societies Registration Act in our country which values democratic principles as paramount. Bye laws of a society or a club is a contract amongst its members; and therefore, it must be reasonable.[3]
It is also possible to demonstrate that the right to vote can be conferred upon the life-members or honorary-members even in a registered society (who have not signed the roll/list of members or are in arrears). In Periyar Self-Respect Propaganda Institution Vs. State of Tamil Nadu[4] it is observed:
- “By putting an end to the life membership or life offices, there is no putting an end to the right to form an association as such. The holding of an office for a particular tenure or for that matter for life is a matter of internal arrangement amongst members constituting the Institution or the Charitable Society and certainly it cannot assume the colour of a fundamental right. Neither the Institution nor the Charitable Society, or the present incumbents of the life offices could claim that they could form associations only with the life offices engrafted in the rules, or if they had already formed, they must be allowed to continue to have that set up and any disturbance thereof would amount to violation of the right to form an association guaranteed under Art. 19(1)(c). If at all, such a right could be characterized as a peripheral or concomitant right which may facilitate the fulfillment of the objectives of the founders of the Institution and the Charitable Society. But, there is no constitutional guarantee that every association formed shall effectively achieve its objectives without interference by law. Neither the members nor the association of members could claim that they have a fundamental right to have office for life.”
2. State-Acts Empower Registrar to Call Meeting for Elections
Societies Registration Act, 1960 as amended by the State of UP empowers the Registrar to call a meeting of the General Body of a society for electing its office bearers. In such cases, it is legitimate to say that the Registrar has to resort the definition in the Act to determine the members entitled to attend the meeting and to vote.
3. Membership in a Society, not a Fundamental Right
It is settled law that no citizen has a fundamental right under Article 19(1)(c) of the Constitution of India to become a member of a society, though it is a Co-operative Society established under a statute.[5]
The Hindi Sahitya Sammelan Vs. Jagdish Swamp[6] is the authority for the proposition that the right to form an association enjoins with it a right to continue to be associated with it as well as to ensure that only those persons are admitted to the association whom they voluntarily admitted.
In Satya Narain Tripathi Vs. State of UP[7] it is observed as under
- “But a right to form an association on the one hand and the right to be elected to an office of such association or to participate in the elections on the other hand have been held to be distinct rights and the latter can be claimed only in accordance with the provisions of the bye-laws of the association or under a statute while the former can be claimed also as a fundamental right.”
Vide 97th Amendment to the Constitution of India[8] the right to form Co-operative Societies has been made a fundamental right. But the same would not alter the principle of membership in such societies; because, the right to form a Co-operative Society is different from the right to become a member therein which continues to be governed by the provisions of the Act, the Rules and the Bye laws.[9]
4. ‘Subscription in Arrears’
Affording Opportunity of Making Payment
Non-payment of subscription will not amount to relinquishment of membership, unless the person had been afforded a specific opportunity of making payment by calling upon him to pay the arrears or face the consequences. The Societies Registration Act does not provide for automatic expulsion or removal/termination of membership for non-payment of subscription fees.
While considering Section 2 (b) of the Karnataka Societies Registration Act (similar provision to Sec. 15 of the Societies Registration Act), the High Court of Karnataka (R.P. Sethi, G. Patri Basavana Goud JJ.), in Lingappa Police Patil Vs. Registrar of Societies[10] after referring to dictionary meaning of ‘resignation’ and various Supreme Court decisions[11] it is held as under:
- “In view of what we have noted hereinabove, it cannot be said that mere non-payment of the subscription would amount to resignation within the meaning of Section 2 (b) of the Act. Non-payment of subscription would also not amount to relinquishment of membership, unless a person is afforded a specific opportunity of making payment by calling upon him to pay the arrears or face the consequences. The society may be justified and the respondents may prescribe any such rule which provides for affording an opportunity to the defaulting member to make the payment of the arrears of subscription and upon failure, without valid reasons, declare the defaulter to cease to be the member for the purposes of the Act and the Rules. A reference to the proviso to Sub-section (2) of Section 6 of the Act clearly indicates that save as otherwise provided by the Act, no rule or regulation of the society can exclude any member from being entitled to vote.”
In Lingappa Police Patil Vs. Registrar of Societies[12] it is also held that the Rule of the Society which declared a person would cease to be a member merely on his default to make the subscription, without even providing him an opportunity to show cause[13] for not making the payment within a specified period appeared ‘to be very harsh’; and that ‘confiscatory and deprivatory provisions made, resulting in civil consequences, should not have been allowed’ to be incorporated in the bye laws. The Division Bench struck down the impugned Rule it being contrary to the provisions of the Act.
5. Individual Membership Rights
(See Chapter: Individual Membership Rights)
With respect to the individual membership rights of a member of a society registered under the Societies Registration Act, the general principles governing the rights of an individual share holder or a member of a company would apply.[14]
Following are recognised by Courts as ‘individual membership rights’ in a company[15].
- (i) Right to vote,
- (ii) right to stand as a candidate as a director and
- (iii) set-right illegal acts.
These rights can be asserted by a member in his personal capacity without the sanction of the majority or without impleading the company as a co-plaintiff or defendant.
In the often quoted decision, Nagappa Chettiar Vs. Madras Race Club[16] it is observed:
- “A share-holder is entitled to institute a suit to enforce his individual rights against the Company such as his right to vote or his right to stand as a director of a company at an election ……….. It is open to a majority always to set right a thing which was done by the majority either illegally or irregularly if thing complained of was one which the majority of the company were entitled to do legally and was within the powers of the company, by calling a fresh meeting. That is the reason why in such cases the court refuses to interfere at the instance of a share-holder even in a representative action brought by him. If the majority, however, acts in an oppressive manner, it is not as if the minority are without a remedy. …… From this it follows that a share-holder or share-holders are entitled to bring an action:
- (1) In respect of matters which are ultra vires the company and which the majority of share-holders were incapable of sanctioning (See Burland Vs. Earl, 1902 AC 83);
- (2) Where the act complained of constitutes a fraud on the minority and
- (3) Where the action of the majority is illegal“.
6. Individual Can Maintain Cause of the Collective Body
Where the right of an individual is affected or infringed, and, he has no other effective remedy, and where there are no vitiating circumstances such as delay, latches, etc., the cause of the collective body will be maintainable at the instance of an individual.[17]
7. Individual Membership Rights and Corporate Membership Rights
The Kerala High Court in Joseph Vs. Jos[18] observed as under:
- “… There are two kinds of rights for a member of the company, one the individual membership right, and the other the corporate membership right. So far as the corporate membership rights are concerned, a shareholder can assert those rights only in conformity with the decision of the majority of the shareholders. An individual membership right is a right to maintain himself in full membership with all the rights and privileges appertaining to that status. …”
8. When Minority can File Suits Without Sanction of Majority
Exceptions to the rule in Foss Vs. Harbottle
See Chapter: How to Sue Societies & Clubs
9. Liability of So: No Personal Liability on Members & Gov. Body
See Chapter: Court’s Jurisdiction to Interfere in the Internal Affairs.
10. Co-op: Society has Corporate Personality; Liability It’s Own
Merely because of a person having been its president for some time will not be liable for payment of the dues of a Co-operative Society; because, a Co-operative Society registered under the Co-operative Societies Act is a legal entity invested with a corporate personality which makes it distinct and different from the various members constituting it. The liability of the society is its own and not that of its members or office bearers, and has to be met by the society itself.[19] It is held in State of Punjab Vs. Amolak Ram Kapoor[20] as under:
- “Since the Board was a society registered under the Societies Registration Act and as per rules and regulations it could acquire and sell property, the recovery of arrears of sales tax imposed on the Board could only be recovered from the property of the Board and not from the members of the Board.”
Ninety Seventh Amendment of our Constitution provided constitutional status to the Co-operative Societies and it has brought out radical changes in the concept of Co-operative Societies. Democratic functioning and autonomy have now become the core constitutional values of a Co-operative Society.
11. Elected Representatives of a Church can Protect Property
In Latin Archdiocese of Trivandrum Vs. Seline Fernandez[21] the question came whether the plaintiffs were competent to represent the parish and claim rights against the third party defendants. The third parties (though were also parishioners of the very same Church), by the nature of the claim set up by them, as against the Church, with reference to the property, stood as rival claimants with the Church.
The court found that the suit having been initiated and prosecuted with the ultimate aim of protecting the Church property (as per the Canon Law Church property vests in the hands of the Bishop or the Vicar and clearly mandates a consent from either of these two personalities for initiating a litigation) the sanction of the ordinary was not necessary; and that the plaintiffs who were the elected representatives, entrusted with the administration of the Church, were competent to initiate civil proceedings before the Civil Court. And that under the Canon law, the temporal goods belong to the parish (which, by law, was a public juridic person) and every administrator was bound to protect the property of the Church with the diligence of a good house holder; and also that the plaintiffs, individually, being the parishioners of the Church, were competent to represent the ‘juridic person’.
The right of worshippers to file suits, for reliefs outside S. 92 CPC, is well accepted.[22] It has been clearly laid down by the Supreme Court in Deoki Nandan Vs. Murlidhar[23] that the worshippers have a ‘beneficial interest’ (not the ‘proprietary interest’ or interest pertaining to owners). A worshipper has his own right to institute a suit to protect his right to worship and for that purpose to protect the debuttar property and that he can do so in his personal capacity as worshipper and not as a next friend of the deity. [24] Even in matters where Indian Trusts Act applies, Section 63 of the Indian Trusts Act is not exhaustive of remedies available to a beneficiary. Where the trustee has improperly alienated trust property the beneficiary can sue third parties for more effective reliefs than those contemplated by Section 63.[25]
When the Shebait acted adversely to the interest of the idol and fails to take action to safeguard its interest, it was held by our Apex Court in Bishwanath Vs. Thakur Radha Ballabhji[26] that there was no justification for denying the right to a worshipper to file suit to seek appropriate reliefs. The Supreme Court observed that it had been held in a number of decisions[27] that worshippers may file a suit praying for possession of a property on behalf of an endowment. It was also observed that an idol was in the position of a minor and when the person representing it leaves it in a lurch, a person interested in the worship of the idol could certainly be clothed with an ad hoc power of representation to protect its interest. In Ramchand Vs. Janki Ballabhji Maharaj[28] the Supreme Court held that a person, who has made large donations for the maintenance of the temple, has clearly a substantial interest to maintain a suit for possession of the temple and its property against the Pujari or Manager, on behalf of the deity to protect the property from mismanagement or misappropriation.
12. No Taxing When Members Avail the Facilities
In Commissioner of Income-tax Vs. Darjeeling Club Ltd.[29] a Division Bench of Calcutta High Court observed that there was a long line of decisions in which it had been held that supplies made by a club to its members or the facilities afforded by a club to its members for a price would not amount to business activity of the club, even though there might be surplus of revenue over expenditure and the surplus could not be taxed as business profits if the sales were confined to the members of the Club only. There cannot be any distinction, with respect to this matter, between a temporary member and an honorary member. Any surplus contribution will be held for the benefit of the members. The benefit of the surplus fund must go back to the members as a class.
Where facilities including accommodation is provided to the members through the instrumentality or agency of the Club, neither the Club is the landlord, nor the members – during their stay – are the tenants of the Club. The members by virtue of their membership are entitled to avail of the facilities of their Club (accommodation) according to its rules, as of right. What is paid by the members for their accommodation cannot be treated as rent and the income cannot be regarded as income from the house-property under the Income Tax Act.[30]
13. Admission of New Members
The bye laws of a Society or a Club prescribe the qualifications of the Members to be admitted. They are in the nature of contract between the members. Therefore the right of admission of new members also remains at the will and option of the members.[31] The State or an enactment cannot compel admission of members, contrary to the bye laws of a Society.[32] What is the ‘interest’ of the Society or a Club is to be determined by the society.[33]
14. Instances When Court Interferes
See Chapter: Court’s Jurisdiction to Interfere in the Internal Affairs.
15. Disqualification of Members
Section 21(1)(g) of the Telangana Co-operative Societies Act, 1964, provides that a person shall be disqualified for being a member if he fails to attend two consecutive annual General Body meetings without leave of absence. Proviso to sub-Section (3) of Section 21 states that “no member shall be removed under this sub-Section unless he had an opportunity of making a representation against the proposed action of removal and a copy of resolution removing the member shall be communicated to such person and on such communication, he shall be deemed to have ceased to be a member of the society”.
In Bollineni Ravindranath Vs. Sate of Telangana[34] the The High Court of Telangana held that exclusion of members of the society from the voters list of eligible voters for not attending two consecutive General Body meetings of the society was patently illegal. It was pointed out that there was no material to show that they followed the procedure in Section 21(3) proviso to disqualify any member who did not attend two consecutive Annual General Body meetings without leave of absence, by giving him an opportunity of being heard as mandated by the proviso thereto, and thereafter such member was removed by the General Body of the society.
In Arun Laxman Ashan Vs. Jeevan C Idnani[35] details furnished by respondents as to forming front were rejected on the ground that the same were not in accordance with the requirement under the rules. Though steps were taken by respondents within time limit, certain documents were not filed within the time limit. No opportunity was given to respondents to cure such defects. The Bombay High Court held that the provisions of Rule 5, directing time-limit to furnish (proper) application, was directory and not mandatory.
Whether the edict in a statute is mandatory or directory is to be determined with reference to the nature and circumstance in which it is given. In Pratap Singh Vs. Krishna Gupta[36] the Supreme Court has observed that some rules are vital and go to the root of the matter; that they cannot be broken; that others are only directory and breach of them can be overlooked provided there is substantial compliance with the Rules read as a whole and provided no prejudice ensues; and that it is a well settled general rule that an absolute enactment must be obeyed or fulfilled exactly but it is sufficient if a directory enactment is obeyed or fulfilled substantially. In Hari Vishnu Kamath Vs. Ahmad Ishaque[37] it is stated as under:
- “It is well-established that an enactment in form mandatory might in substance be directory and that the use of the word shall does not conclude the matter. The question was examined in length in Lulius v. Bishop of Oxford (1880) 5 AC 214 and various Rules were laid down for determining when a statute might be construed as mandatory and when as directory. They are well-known and there is no need to repeat them. But they are all of them only aids for ascertaining the true intention of the Legislature which is the determining factor and that must ultimately depend on the context.”
[1] See: Sec. 9-14, 17 and 20.
[2] But various States’ amendments (and State-Acts) provide for the same.
[3] Alty Vs. Farrell: (1896) 1 QB 638; Kruse Vs. Johnson: (1898) 2 QB 91, Scott Vs. Pilliner: (1904) 2 KB 855, Repton School Governors Vs. Repton Rural District Council:(1918) 2 KB 133; Chester Vs. Bateson: (1920) 1 KB 829; Attorney General Vs. Denhy: 1925 Ch 596: All referred to in: Municipal Board Vs. Rizwan Beg: AIR 1964 All 544.
[4] AIR 1988 Mad 27
[5] Zoroastrian Co -operative Housing society Ltd. Vs. District Registrar, Co -operative (Urban) AIR 2005 SC 2306; State of U.P. Vs. C.O.D. Chheoki Employees’ Co-op. Society Ltd : AIR 1997 SC 1413; Supreme Court Bar Association and Ors. Vs. B.D. Kaushik: (2011) 13 SCC 774.
[6] AIR 1971 SC 966
[7] 2008 – 2 ADJ 222, 2008-71 All LR 698
[8] Implemented with effect from 15th February, 2012
[9] Lok Sevak Cooperative House Building Society Ltd. Vs. S.P. Goyal: 1997 (1) RCR(Civil) 14
[10] ILR 1997 Kar 3127
[11] J. K. Cotton Spinning and Weaving Mills Co. Ltd. Vs. State of UP: AIR1990 SC 1808; Union of India Vs. Gopal Chandra Misra: AIR 1978 SC 694
[12] ILR 1997 Kar 3127
[13] Sarbjit Singh Vs. All India Fine Arts and Crafts Society: ILR 1989-2 Del 585: AIR 1990 NOC 26(Del).
[14] Satyavart Sidhantalankar Vs. Arya Samaj, Bombay: AIR 1946 Bom 516; Nagappa Vs. Madras Race Club: AIR 1951 Mad 831; Shridhar Misra Vs. Jaihandra: AIR 1959 All 598.
[15] See also: CL Joseph Vs. Jos: AIR 1965 Ker 68; Star Tiles Works Vs. N. Govindan: AIR 1959 Ker 254
[16] AIR 1951 Mad 831
[17] Committee of Management Arya Kanya Pathshala Inter College Vs. State of U P: 2011- 2 ADJ 65.
[18] AIR 1965 Ker 68.
Quoted in: Rajeev Saumitra Vs. Neetu Singh: 2016-198 Comp Cases 359.
[19] Baby Mathew Vs. Agricultural Income Tax Officer: 1994-207 ITR 967: 1996-131 CTR 214: 1994 (1) KLT 786.
[20] [1990] 79 STC 315 (P & H); ILR1991- 2 (P&H) 218
[21] 2013(4) Ker LT 283.
[22] Vemareddi Ramaraghava Reddi Vs. Kondaru Seshu Reddi, AIR 1967 SC 436; Bhagauti Prasad Khetan Vs. Laxminathji Maharaj: AIR 1985 All 228. In this case distinguished (pointing out actual worship of the idol sans right to worship) Sri Thakur Krishna Chandramajiu Vs. Kanhayalal, AIR 1961 All 206. See also: Jangi Lal Vs. B. Panna Lal, AIR 1957 All 743; Behari Lal Vs. Thakur Radha Ballabhji, AIR 1961 All 73
[23] AIR 1957 SC 133
[24] Sri Ishwar Vs. Gopinath Das: AIR 1960 Cal 741: See also : Samit Pani Brahmachary Vs. Mayapur Chaitanya Math: AIR1999 Cal 132; Thakurji Maharaj Vs. Dankiya: AIR 1986 All 247.
[25] See: Janakirama Iyer Vs. Nilkanth Iyer: AIR 1962 SC 633
[26] AIR 1967 SC 1044.
[27] Radhabai Vs. Chimnaji: (1878) ILR 3 Bom 27, Zafaryab Ali Vs. Bakhtawar Singh: (1883) ILR 5 All 497; Chidambaranatha Thambirarn Vs. P. S. Nallasiva Mudaliar: AIR 1918 Mad 464, Dasondhay Vs. Muhammad Abu Nasar: AIR 1917 Mad 112 (FB), Radha Krishnaji Vs. Rameshwar Prasad Singh: AIR 1934 Pat 584; Manmohan Haldar Vs. Dibbendu Prosad Roy: AIR 1949 Cal 199. Following two decisions of the Privy Council were also referred to: Pramatha Nath Mullick Vs. Pradyumna Kumar Mullick: 52 Ind App 245: AIR 1925 PC 139 Kanhaiya Lal Vs. Hamid Ali: 60 Ind App 263: AIR 1933 PC 198 (1).
[28] AIR 1970 SC 532. See also Kt. N. Ram Thenappa Chettiar Vs. N. S. Kr. Karuppan Chettiar: AIR 1968 SC 915
[29] 1985 (153) ITR 676: Referred to in Saturday Club Vs. Asst. Commr. Service Tax: 2005-1 Cal LT 575.
[30] Saturday Club Vs. Asst. Commissioner Service Tax Cell Calcutta : 2005-1 Cal LT 575
[31] Damyanti Naranga Vs. Union of India: AIR 1971 SC 966; Daman Singh Vs. State of Punjab AIR 1985 SC 973
[32] Zoroastrian Co -operative Housing Society Ltd. Vs. District Registrar, Co -operative (Urban) AIR 2005 SC 2306.
[33] State of Maharashtra Vs. Karvenagaar Sahakari Griha (2000) 9 SCC 295: Zoroastrian Co -operative Housing Society Ltd. Vs. District Registrar, Co -operative (Urban) AIR 2005 SC 2306
[34] LAWS(TLNG) 2021 1 2
[35] 2018-5 MHLJ 59A
[36] AIR 1986 SC 140
[37] AIR 1955 SC 233
