CAN THERE BE A SOCIETY EXCLUSIVELY
FOR A RELIGIOUS COMMUNITY?
A CASE STUDY
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By K P C Rao., LLB. FCMA., FCS
Practicing Company Secretary
kpcrao.india@gmail.com
BACKGROUND
The concept
of co-operation came up in 1844 when Rochdale Pioneers established a
Co-operative Society of Weavers. Its ideals were widely accepted around the
world and are known as principles of co-operatives. The 23rd congress of the
International Co-operative Association accepted and reformulated the
“Principles of Co-operative”. They are:
1) Voluntary and open membership;
2) Democrative control;
3) Limited interest of share capital;
4) Distribution of surplus to members;
5) Promotion of Co-operative education and
training;
6) Co-operation among Co-operatives.
Generally a
need is felt to set up an institution of non-commercial nature for promotion of
numerous charitable activities like education, art, religion, culture, music,
social welfare, sports, etc. Associations, Clubs or Societies are formed to
help these purposes as they work on non-profit basis. To legalise such
organisations, the Societies Registration Act, 1860 was enacted. For identical
purposes, a non-profit association can be registered under Section 25 of the
Companies Act, 1956. However, the registration, operation and management of an
association registered under the former Act are easier and simpler
comparatively.
After the
Constitution of India came into force, the Societies Registration Act, 1860,
(the Act) has continued to be in force in all the States by virtue of Article
372 of the Constitution. A registered society is a legal entity but it is not a
body corporate (Board of Trustees v.
State of Delhi.
It is separate from its members. It can own properties. It is capable of suing
or being sued. The position of a society is comparable with an incorporated
company under the Companies Act 1956.
The Act has
been continuing to be applicable in all the States with some amendments made by
almost all the States in operation, administration and management of societies
within the respective States.
A society
can be registered by minimum seven individuals which may include foreigners, or
registered society for the promotion of literature, science or fine arts or
diffusion of useful knowledge and political education or charitable purposes,
as specified in Section 20 of the Act as under:-
(i)Grant
of charitable assistance.
ii) Creation
of military orphan funds.
iii) Societies
established at the several Presidencies of India
(iv) Promotion
of –
a) Science
b) Literature
c) Fine
Arts
d) Instructions
of diffusion of useful knowledge.
e) Diffusion
of political education
f) Foundation
or maintenance of libraries or reading rooms
g) Public
museum and galleries of paintings.
h) Works
of art
i) Collections
of natural history
j) Mechanical
and philosophical investments
k) Instruments
l) Designs
Various
States have added other objects like social welfare, sports & games,
environment, compassion of living creatures, recreation, athletics, cultural
activities, research work, welfare of physically handicapped etc.
A “Charitable .purpose” is a purpose
which has some elements of general public benefit, it does not embraces
purposes which are religious or predominantly religious [Md. Yunus v. The Inspector General of Registration[2]].
A charitable purpose includes religious purpose [Hindu Public and another v. Rajdhani Puja Samithee and others[3]].
A
CASE STUDY
Facts
of the Case
The Zoroastrian Co-operative Housing
Society is a society registered on 19.5.1926, under the Bombay Co-operative
Societies Act, 1925. The Society applied to the Government of Bombay for
acquisition of certain lands in Ahmadabad District, then in the State of
Bombay, under the Land Acquisition Act, 1894 for the purpose of erecting houses
for residential use of its members and to further the aims and objects of the
Society. On the Government of Bombay agreeing to the proposal, the Society
entered into an agreement on 17.2.1928 with the Government under Section 41 of
the Land Acquisition Act. Certain lands were acquired. From the lands thus
acquired at its cost and given to it, the Society allotted plots of land to the
various members of the Society in furtherance of the objects of the Society. On
the re- organization of States, the Society became functional in the State of
Gujarat and came within the purview of the Gujarat Co-operative Societies Act,
1961. Section 169 of that Act, repealed the Bombay Co- operative Societies Act,
1925 and in sub-section (2) provided that all societies registered or deemed to
be registered under the Bombay Act, the registration of which was in force
immediately before the commencement of the Gujarat Act, were to be deemed to be
registered under the Gujarat Act. The Gujarat Act came into force on 1.5.1962.
Thus, the Society came to be regulated by the Gujarat Co-operative Societies
Act, 1961 (hereinafter referred to as 'the Act').
On the
scheme of the Bombay Co-operative Societies Act, the Society had applied for
registration in terms of Section 9 of that Act. The application was accompanied
by the proposed bye-laws of the Society. The Registrar of Co-operative
Societies, on being satisfied that the Society had complied with the provisions
of the Act and the Rules and that the proposed bye- laws were not contrary to
the Act and the Rules, granted registration to the Society and its bye-laws and
issued a certificate of registration in terms of Section 11 of that Act. As per
the bye-laws, the objects of the Society were to carry on the trade of
building, and of buying, selling, hiring, letting and developing land in
accordance with Co-operative principles and to establish and carry on social,
re-creative and educational work in connection with its tenets and the Society
was to have full power to do all things it deemed necessary or expedient, for
the accomplishment of all objects specified in its bye-laws, including the
power to purchase, hold, sell, exchange, mortgage, rent, lease, sub-lease,
surrender, accept surrenders of and deal with lands of any tenure and to sell
by installments and subject to any terms or conditions and to make and
guarantee advances to members for building or purchasing property and to erect,
pull down, repair, alter or otherwise deal with any building thereon. All
persons who had signed the application for registration are original members by
virtue of bye-law No.7. The said bye-law further provided that other members
shall be elected by the Committee of the Society, provided that all members
shall belong to the Parsi Community subject to satisfying other conditions in that
bye-law. Bye-law No. 21 provided for sale of a share held by a member but with
previous sanction of the Committee which had full discretion in granting or
withholding such sanction. It was also provided that until the transfer of a
share is registered, no right was acquired against the Society by the
transferee, and no claim against the transferor by the Society was also to be
affected.
In short,
the qualification for becoming a member in the Society was that the person
should be a Parsi and that the transfer of a share to him had to have the
previous sanction of the Committee of the Society.
Issues
Examined by the Court
Zoroastrian
Cooperative Housing Society grants membership to Parsees only. It does not
admit any other person preferring a different religion as a member.
Accordingly, if a member wants to transfer his membership or the property
allotted to him to another he should obtain prior permission of the Society
approving the transfer. If the Society rejects the permission, the transfer will
not operate in any manner against the Society. It means that any transfer made
by one member to another who is not a member without the permission of the
Society is no transfer. If the Society chooses to resume the ownership of the
property the same cannot be questioned.
The validity of the bye-laws which
made the membership exclusive to Parsee Community and the condition that no
member can transfer his membership or the property allotted to him to another
without the Society’s permission has come up before the Supreme Court in Zoroastrian Cooperative Housing Society and
another v. Dist. Registrar, Cooperative Society (Urban) & others[4].
There is further contention that the formation and maintaining a society
which is exclusive to a religious community offends public as enunciated in the
Constitution of India in its Article14, 16, 19 and 300(A).
However, Mr. Soli J. Sorabjee, learned
Senior Counsel appearing for the appellants contended that under Article 19(1)
(c) of the Constitution of India, Parsis had a fundament right of forming an
association and that fundamental right cannot be infringed by thrusting upon
the association, members whom it does not want to admit or against the terms of
its bye- laws. He submitted that the content of the right of association
guaranteed by Article 19(1) (c) of the Constitution of India has been
misunderstood by the High Court and the Authorities under the Act. He also
contended that there was nothing in the Act or the Rules which precluded a
society from restricting its membership to persons of a particular persuasion,
belief or tenet and the High Court was in error in holding that membership
could not be restricted to members of the parsi community for whose benefit the
very society was got registered. Though, grounds based on Article 26 of the
Constitution of India raised, were not pursued, it was pointed out that under
Article 29, the parsis had the right to conserve their culture. It was
submitted that bye-law No.7 was perfectly valid and so long as it did not violate
anything contained in the Act or the Rules, it could not be held to be invalid
or unenforceable and the society cannot be compelled to act against the terms
of its bye- laws. He also submitted that there was no absolute restraint on
alienation to attract Section 10 of the Transfer of Property Act and the
restraint, if any, was only a partial restraint, valid in law. There was
nothing illegal in certain persons coming together to form a society in
agreeing to restrict membership in it or to exclude the general public at its
discretion with a view to carry on its objects smoothly.
While
deciding this case the Court has examined the following issues:
1)
On the
question whether the bye-law is opposed to the statute and accordingly opposed to public policy.
2)
On the
question whether the bye-law is opposed to public policy as enunciated in the
Constitution under Article 14, 16, 19 and 300A?
3)
On the
question of need for a permission of the society before transfer of membership
or the transfer of ownership of the plot allotted to third party who is not a
Parsee.
Court
Ruling
1)
On the question whether the bye-law is
opposed to the statute and accordingly opposed to public policy
The validity
of a bye-law, that too an approved bye-law, has to be tested in the light of
the provisions of the Act and the rules governing cooperative societies. In so
testing the search should be to see whether a particular bye-law violates the
mandate of any of the provisions of the Act or runs counter to any of the
provisions or to any of the rules. Sec 24(1) of the Act only provides for open
membership to a person, aspiring to be a member, possessing a qualification
prescribed by the bye-laws. It is not an
open membership dehors the qualification prescribed by the bye-laws. Where as
in case of Daman Singh, [AIR 1985 SC 973],
the Court held that when a cooperative society is governed by the appropriate
registration it will be subject to the intervention made by the concerned
legislation, it only meant that a legislative provision in the Act can be
introduced for the purposes of eliminating a qualification for membership based
on sex, religion or persuasion or mode of life. But, so long as there is no
legislative intervention of that nature, it is not open to the Court to coin a
theory that a particular bye-law is not desirable and would be opposed to
public policy as indicated by the Constitution. The Constitution, no doubt,
provides that in any State action there shall be no discrimination placed
either on religion or on sex. But, Part III of the Constitution has not
interfered with the right of the citizen to enter into a contract for his own
benefit and at the same time incurring certain liability arising out of the
contract. As observed by the High Court
of Bombay in Karva Nagar Sahakari Griha
Rachanasamstha, Mariyadit and othes v. State, [AIR 1989 Bom. 392], members
have joined the Society in accordance with the bye-laws and the members join a
housing society while ascertaining what would be the environment in which they
reside. It is not permissible for the
State Government to compel the society to amend its bye-laws as it would defeat
the object of formation of the society. In that case the society was
constituted with the object of providing peaceful accommodation to its members.
Though, there may be circumstances justifying the State taking steps to meet
shortage of accommodation, it is not open to the State Government to issue a
direction to the Registrar of Cooperative Societies to direct the Cooperative
Society to make requisite amendments to the bye-laws and grant permission to
its members to raise multi-storied constructions.
In appeal
from the decision reported as State of Maharashtra and others v. Karva Nagar
Sahakari Griha Rachana Samstha, Maryadit and others, [2000 (9) SCC 295], the
Apex Court while dismissing the appeal stated that it was clear that though a
power was conferred on the Registrar to direct amendment of the bye-laws of a
society, yet, a paramount consideration is the interest of the society. So
also, the power of the State Government to issue direction in public interest
could not be exercised so as to be prejudicial to the interest of the society.
In the opinion of the Supreme Court, what was in the interest of the society
was finally for the society alone to decide and it was not from outside agency
to say. Where, however, the Government or the Registrar exercise statutory
powers to issue directions to amend the bye-laws, such direction should satisfy
the requirement of the interest of the society.
This makes it clear that the interest of the society is paramount and
that the interest would prevail so only as there is nothing in the Act or the rules
prohibiting the promotion of such interest. Owing by Chheoki Employees’ Cooperative Society Ltd.’s case, [AIR 1997 SC
1413] neither the member respondent No. 2 nor the aspirant membership,
Respondent 3 had the competence to challenge the validity of bye-laws of the
society or to claim the right of membership in the society.
It appears
to us that unless appropriate amendments are brought to the various Cooperative
Societies Act incorporating a policy that no society shall be formed or if
formed, the membership in no society shall be confined to persons of a
particular persuasion, religion, belief or region, it would not be said that a
society would be disentitled to refuse membership to a person who is not duly
qualified to be one in terms of its bye-laws.
2) On the question whether the bye-law is
opposed to public policy as enunciated in the Constitution under Article 14,
16, 19 and 300A?
“It is true
that in secular India it may be somewhat retrograde to conceive of cooperative
societies confined to a group of members or followers of a particular religion,
a particular mode of life, a particular persuasion. But, that is different from
saying that you cannot have a cooperative society confined to persons of a
particular persuasion, belief, trade, way of life or a religion. A cooperative society is not a State unless
the tests indicated in Ajay Hasia are
satisfied. There is no case here of the appellant that Appellant’s Society
satisfies the test laid down by Ajay
Hasia. [AIR 1981 SC 487] so as to be considered to be a state within the
meaning of Art. 12 of the Constitution. The fundamental rights in Part III of
the Constitution are normally enforced against State action or action by other
authorities who may come within the purview of Art.12 of the Constitution. It is not possible to argue that a person has
a fundamental right to become a member of a voluntary association or of a
cooperative society governed by its own bye-laws.
So long as
this position holds we are of the view that it is not possible, especially for
the Registrar who is an authority under the Cooperative Societies Act to direct
the cooperative society to admit as member, a person who does not qualify to be
a members as per the bye-laws registered under the Act. Nor can Registrar
direct in terms of Sec. 14 of the Act to amend the bye-laws since it could not
be said that such an amendment, as directed in this case is necessary or
desirable in the interests of the appellants’ society. What is relevant under
Sec. 14 of the Act is the interest of the society and the necessity in the context
of that interest. It is not in the interest of individual member or an aspirant
of membership.”
3)
On the question of need for a permission of
the society before transfer of membership or the transfer of ownership of the
plot allotted to third party who is not a Parsee.
“It can be
seen from the bye-laws of the present society that the society, more or less
adopted the model bye-laws made applicable to the Bombay Presidency. The object
of the society as set out in bye-law 2 treats “the object of society shall be
to carry on the trade of building and of buying, selling, hiring, letting and
developing land in accordance with cooperative principles and to establish and
carry on social, recreative and educational work in connection with tenets and
the society was to have full power to do all things it deems necessary or
expedient for the accomplishment of all objects specified in its bye-laws,
including the power to purchase, hold, sell, exchange, mortgage, rent and
lease, sub-lease, surrender, accept surrenders of and deal with lands of any
tenure and to sell by installments and subject to any terms or conditions and
to make and guarantee advances to members for building or purchasing property
and to erect, pull down, repair, alter or otherwise deal with any building
thereon”. Under bye-law No. 22, it is provided that any share held by a member
could be sold in terms of the other relevant bye-laws only with previous
sanction of the committee. The committee is given full discretion in granting
or withholding such sanction. Of course, in terms of the Acts and rules, the
refusal may be appealable before the authority under the Act and the society
may not be in a position to argue that its decision is final. But, that does not mean that the authority
under the Act is competent to ignore the bye-law relating to qualification to
membership and direct the society by exercising appellate or other power, to
admit a person to membership who is not qualified to be a member on the basis
of its notion of public policy or fairness in dealing. These approved bye-laws,
clearly conferred power on the committee to reject the application for
membership of a person who is not qualified in terms of the bye-law concerned
and this cannot be interfered with on the basis of anything contained in the
Act or the Rules.
We are
therefore, satisfied that by introducing a theory of what the Court considers
to be public policy, a society registered under the Co-operative Societies Act,
and cannot be directed to admit a member who is not qualified to be a member in
terms of its duly registered bye-laws.”
CONCLUSION
The
Court held that so long as the bye law which excludes others from becoming a
member within the scope of the Cooperative Societies Act which in this case
does not prohibit formation of societies of persons holding a common faith,
such bye-law cannot be declared as invalid. Since, the bye-law is within the
scope of the Act it cannot be declared as opposed to public policy as being
violative of the statute. The Court
further held that there does not arise any question of public policy since it
does not in any manner contradict the provisions of the Act. Moreover, the
issue of any provision being opposed to public policy of the Constitution or
any of its mandates contained in fundamental rights cannot be raised in the
case of Cooperative Society for it is not a “State” within the definition
contained in Article 12 of the Constitution of India.
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[1] Board
of Trustees v. State of Delhi AIR 1962 SC 458
[2]Md.
Yunus v. The Inspector General of Registration AIR 1980 Pat. 138
[3] Hindu
Public and another v. Rajdhani Puja Samithee and others AIR 1999 SC 964
[4]
Zoroastrian Cooperative Housing Society
and another v. Dist. Registrar, Cooperative Society (Urban) & others; AIR 2005 SC 2306
