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Societies' right
to own property
18/04/2000 The Star Articles of Law with Bhag Singh
MANY activities are carried out using the legal framework of a society. A
society needs to be registered under the Societies Act 1966 to be legitimate.
But this does not make the society a body corporate.
Societies are organisations usually formed to pursue cultural, political,
social, sporting or even religious purposes, or "some other common interest
which does not amount to carrying on a business." Thus some industry bodies
which exist to pursue their interests are also registered as societies.
As a society is not a body corporate or an incorporated body, can it hold
property in its own name? There are provisions in the Societies Act 1966 allowing
property to be vested in the society, but these are more permissive than being
a real power.
Furthermore, the word property can refer to movable and immovable property,
as well as a tenancy, lease or freehold interest.
Some people say that a society can actually hold property in its own name
and so it is as good as a corporate body. This view is somewhat incorrect.
But it is necessary to point out the basis on which a society can own property
in its own name first. Sections 9(a) and 9(b) of the Societies Act 1966 read:
Section 9(a): The movable property of a society, if not vested in trustees,
shall be deemed to be vested for the time being in the governing body of the
society, and in all proceedings civil and criminal, may be described as the
property of the governing body of the society by its proper title if known.
Section 9(b): The immovable property of a society may, if not registered in
the names of trustees, notwithstanding the provisions of any written law to
the contrary, be registered in the name of the society, and all instruments
relating to that property shall be as valid and effective as if they had been
executed by a registered proprietor provided that they are executed by three
office-bearers for the time being of the society, whose appointments are authenticated
by a certificate of the Registrar, and stamped with the seal of the society.
However, it will be seen that these clauses makes provisions in the event
that no trustees exist. Thus these two clauses imply that there should be
a trustee in whom the property is vested.
In some cases, these clauses do not change the status of society to one similar
to a body corporate so that it can do everything in its own name. A society
still has the status of an unincorporated entity. It cannot be equated to
a body corporate.
In our own context, the Societies Act 1966 certainly does not confer on a
society the status of an incorporated body. Sections 9(a) and (b) merely provide
for a situation where property is obtained in the absence of an appointed
trustee. It therefore caters to an exigency.
In cases when a society has entered into a tenancy or a lease in its own name,
the courts have held that a society cannot do so as it does not have a capacity
for that purpose.
It could be argued that if movable and immovable property could vest in a
society, why not a lease or tenancy? The greater should include the lesser.
However, societies as a whole are not corporate bodies. Sections 9(a) and
(b) provide for exceptions and do not establish a general principle. It is
important for the officers of a society to be aware of this.
It is advisable that a clause for appointment of trustees is incorporated
in the constitution. The society's members have an option to decide how the
trustee clause is to be worded.
The trustee appointed may be an individual or a body corporate, and may be
few or just one. The trustee or trustees may be appointed from year to year
or for a few years or for life or until otherwise removed.
One advantage of having a trustee is that the property is vested in a person
different from the governing body, and as such the trustee may be able to
view a particular situation more dispassionately and thus provide an added
safeguard.
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