In this article, Geeta Menon pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses whether a society can acquire a trust or not.
Introduction
A society and trust are two different entities. Different laws and enactments deal with societies and Trust. In India societies are again divided into a society simpliciter governed by the Societies Registration Act, 1860 with corresponding State enactments and the other category of societies are the co-operative Societies which is now exclusively within the individual State realm. In so far as trusts are concerned the Indian Trusts Act contemplates various types of Trust which will be discussed in this article but there are other trusts like charitable and religious trusts and endowments which are governed by different laws and enactments. This article proposes to examine whether a society can acquire a trust and will not explore or discuss the specific kinds or types of societies or trusts.
Definition and meaning
Society
The enactment of the Societies Registration Act, 1860 was primarily meant for the registration of literary, scientific and charitable societies. However, the preamble of the Act expands the type of societies covered under the said Act.[1] Section 1 of the Societies Registration Act, 1860 provides as under:
Societies formed by memorandum of association and registration
Any seven or more persons associated for any literary, scientific or charitable purpose, or for any such purpose as is described in section 20 of this Act, may by subscribing their names to a memorandum of association and filing the same with the Registrar of Joint-stock Companies 4[4]] form themselves into a society under this Act.
S.20 then provides as to which type of societies the Act applies. However, a perusal of some of the sections of the Societies Registration Act uses the term “trustees”[2].
Section 1 as extracted above indicates that seven or more persons can form a society. Since “person” is not defined under the said Societies Registration Act, one would have to fall back on the definition of person found in the General Clauses Act, 1897. Section 3 (42) defines “person” to include any company or association or body of individuals, whether incorporated or not.
A Society under the scheme of the Act has a perpetual existence, common seal and can be sued and sue.
TRUST
Trust is sought to be interpreted and explained in the Indian Trusts Act, 1882.
S.3 reads as under:
- “trust”: A “trust” is an obligation annexed to the ownership of the property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner:
Further Author of the trust, trustee , beneficiary have also been defined to mean the person who repossess or declares the confidence is called the “author of the Trust”; the person who accepts the confidence is called the “trustee”; the person for whose benefit the confidence is accepted is called the “beneficiary”. Thus author, trustee or the beneficiaries can be a person.
Section 5 and 6 of the Indian Trusts Act provides under what circumstances and conditions a trust is created. A trust can be created by any person having capacity to contract and by a minor subject to permission of the Court.[3]
Acquisition of a Trust by society
- The erstwhile State of Bombay had enacted the Bombay Public Trusts Act, 1950. After the formation of states of Maharashtra and Gujarat following the State Reorganisation Act, the said Act was adopted by both the States of Maharashtra and Gujarat. Under the said Bombay Public Trusts Act, a society by default is registered as a Trust.
- The definition of Society would contemplate that seven or more persons may form a society. If one goes by the definition of person under the General Clauses Act, it can be a company, or a body of individuals or an association whether incorporated or not. So the issue that arises is whether a Trust is a person.
- Various judicial decisions more particularly under tax laws have held that Trust is a juristic person and can also be considered coming within the definition of person. Thus a trust can be a member of the Society.
- Now the question arises whether a society can acquire a trust. Section 12 of the Societies Registration Act reads as under:
- Societies enabled to alter, extend or abridge their purposes.− Whenever it shall appear to the governing body of any society registered under this Act, which has been established for any particular purpose or purposes, that it is advisable to alter, extend or abridge such purpose to or for other purposes within the meaning of this Act, or to amalgamate such society either wholly or partially with any other society, such governing body may submit the proposition to the members of the society in a written or printed report and may convene a special meeting for the consideration thereof according to the regulations of the society.
But no such proposition shall be carried into effect unless such report shall have been delivered or sent by post to every member of the society ten days previous to the special meeting convened by the governing body for the consideration thereof, nor unless such proposition shall have been agreed to by the votes of three-fifths of the members delivered in person or by proxy, and confirmed by the votes of three-fifths of the members present at a second special meeting convened by the governing body at an interval of one month after the former meeting.
Thus, reading of this section indicates that the governing body of the Society has the power to amalgamate the society wholly or partially with any other society. If one takes the Bombay Public Trusts Act applicable both in Maharashtra and Gujarat, the societies get automatically registered as a trust. If we apply this principle a trust can be treated as a type of society. If trust is treated as a type of society under s.12 there is no bar for a society to amalgamate wholly or partially with any other society. Of course, the legal requirements under which it can be done as laid down in section 12 have to be satisfied.
However, the issue is whether the term amalgamation can be included to mean acquisition. In my opinion, the concept of amalgamation can be considered as a type of acquisition.
If the Trust has all the characteristics of a Society and meet all the legal criterion for a Society as contemplated either under the Societies Registration Act or State laws on Societies, there is no legal bar for a Society to acquire a trust.
As stated earlier some of the provisions of the Societies Registration Act refer to the term “trustees” to mean them as members of the Society. If the term trustees is considered synonymous with the members of the Society, it will lead to the inevitable conclusion that the trust can be considered as a kind of society. Thus, applying the principle and provision of s.12 of the Societies Registration Act, which provides for amalgamation wholly or partially with another society, it would make it possible for a society to acquire a Trust.
Moreover, the definition of author, trustee and beneficiary contemplate it being a “person”. A society is also a person being an association of individuals. Under these circumstances, a society can create a trust if it satisfies the conditions laid down for formation of a trust. If one has the ability to create or forma Trust it can be implied that it can also acquire.
In the Indian Constitution, “Societies” is found in the State List while “trust” is in the concurrent list. Similarly, “co-operative societies” is also found in the State List. Under these circumstances, the provisions of the various enactments under the Societies and Co-operative Societies made by the individual States in the Indian Union will determine whether a society can acquire a Trust.
In so far as Trusts are concerned, many States have passed individual enactments governing the law of trusts while several states have not enacted them. Under these circumstances coming to a general conclusion regarding acquisition of a trust by a society will be hazardous.
Conclusion (Whether a society can acquire a trust or not?)
Judicial pronouncements in India have held a trust to be akin to an association of persons. Moreover while defining author, trustee beneficiary etc, the term used in person. A “society” can be treated and considered as a person. Thus there is no legal bar under the general enactments for a society to acquire a trust. As discussed the provisions of the Societies Registration Act which provides for amalgamation can only imply that a society can acquire a trust.
[1] Preamble.− WHEREAS it is expedient that provision should be made for improving the legal condition of societies established for the promotion of literature, science, or the fine arts, or for the diffusion of useful knowledge, 3[3][the diffusion of political education] or for charitable purposes;
[2] See sections 5, 6 and 16.
[3] See s.7 of the Indian Trusts Act
