INTRODUCTION
The Companies Act, 2013 defines the term ‘body corporate’. Section 2(11) of the Companies Act, 2013 explains the type of entities that are considered as body corporates in contemporary times. Since, the definition of a body corporate is comprehensive, therefore, to distinguish whether or not an entity is a body corporate, it is significant to consider the characteristics of each entity individually. For this article, we are focussing on ‘society’ as an entity and shall analyse the aspect of whether or not it fulfils the criteria of a ‘body corporate’. The society, as an entity, was devised for non-commercial and non-profitable purposes which mostly includes the advancement of several altruistic activities like culture, music, art, education, religion, and other paramount activities. The societies in the form of associations, clubs, and other social groups are encouraged since they work for non-profitable causes and help grow activities that are essential for the development of our nation. These activities have resulted in the need for a legal entity that could own, acquire, and manage funds and assets for the achievement of charitable or promotional goals as defined by donors. To accomplish this, a society can be formed. A ‘society’ has been characterised in several ways. It’s been described as a business or group of people (usually unincorporated) who come together by mutual consent to reflect, determine, and act together for a collective good.
IS SOCIETY A BODY CORPORATE?
Although Section 2(11) of the Companies Act defines ‘body corporate’ and considers it to be inclusive, it doesn’t approve societies to be considered as body corporates. In its Circular No. 8(26)/2(7)/63-PR on March 13, 1963, the Department of Company Affairs claimed that the word “body corporate” does not include a ‘society’ registered under the Registration Act of 1860. For a society to run a business legitimately, it must get registered under the Societies Registration Act,1860. However, the registration itself does not render any society to be a body corporate. In the S.P. Mittal case1, the Apex Court of India discussed the meaning of corporation provided in the Halsbury’s Laws of England2 to comprehend the chief features of a corporation. Those features are:
- Separate legal entity;
- Perpetual succession;
- Needs incorporation;
- Can sue or be sued in its name;
- Can own separate property;
- Common seal;
It has been stated by the Patna High Court in K.C. Thomas v. R.L. Gadeock and Anr3 where it approached the ruling of Bonsor v. Musicians’ Union4, a registered society under the Societies Registration Act,1860 is not a form of body corporate since it does not function as a separate legal entity. The society and its members are not considered different from each other dissimilar to that of a company (corporate personality) incorporated under the Companies Act in India. However, societies can hold properties in their name just like any other corporate personality as mentioned in section 5 of the Societies Registration Act,1860. Section 5 of the act says “Property of society how vested. —The property, movable and immovable, belonging to a society registered under this Act, if not vested in trustees, shall be deemed to be vested, for the time being, in the governing body of such society, and in all proceedings, civil and criminal, may be described as the property of the governing body of such society for their proper title.” It is comprehended that the legal claim or entitlement of the property would be of the trustees or the governing body, but the actual or equitable entitlement will be vested in the society. For a body corporate to exist, its incorporation is necessary. To substantiate, in the case of The Board of Trustees, Ayurvedic… vs The State of Delhi and Another5, the Supreme Court while discussing section 5, 66, 77 , and 88 of the Societies Registration Act, 1860, observed that the given sections indicate no such intention of incorporating a society as it is the case with other corporate personalities such as companies. Moreover, as per the Registration Act,1860, the only requirement for a society to exist is the registration rather than an incorporation of the same, which is contrary to the nature of a corporate body, as every corporate personality needs incorporation along with its registration.
CONCLUSION
To conclude the above discussion, now, it is unambiguous to say that a society is not a form of body corporate. For it to be one, it has to fulfil the conditions and main criteria of a body corporate which, as a matter of fact, it doesn’t, as stated by the Apex Court in the decision of S.P. Mittal Etc. Etc. vs Union of India and Others. As compared to the formalities that a company as a corporate personality has to perform and comply with, a ‘society’ has very limited obedience and compliance that it observes to run its venture. Therefore, it can be rightly said that a ‘society’ in its fundamentals is not a body corporate, however, it is a definite way to run a business.
ENDNOTES
11983 AIR, 1 1983 SCR (1) 729.
2Halsbury’s Laws of England, Third Edition, Vol. 9, page 4.
3AIR 1970 Pat 163, 1969 (17) BLJR 942, (1970) ILLJ 599 Pat
421 [1901] A.C. 426.; 22 [1910] A.C. 87.; 23 84 L.J.K.B
51962 AIR 458, 1962 SCR Supl. (1) 15
6Suits by and against societies.—Every society registered under this Act may sue or be sued in the name of the president, chairman, or principal secretary, or trustees, as shall be determined by the rules and regulations of the society and, in default of such determination, in the name of such person as shall be appointed by the governing body for the occasion: Provided that it shall be competent for any person having a claim, or demand against the society, to sue the president or chairman, or principal secretary or the trustees thereof, if on application to the governing body some other officer or person be not nominated to be the defendant.
7Suits not to abate. —No suit or proceeding in any Civil Court shall abate or discontinue by reason of the person, by or against whom such suit or proceedings shall have been brought or continued, dying or ceasing to fill the character in the name whereof he shall have sued or been sued, but the same suit or proceeding shall be continued in the name of or against the successor of such person.
8Enforcement of judgment against society. —If a judgment shall be recovered against the person or officer named on behalf of the society, such judgment shall not be put in force against the property, movable or immovable, or against the body of such person or officer, but against the property of the society. The application for execution shall set forth the judgment, the fact of the party against whom it shall have been recovered having sued or having been sued, as the case may be, on behalf of the society only, and shall require to have the judgment enforced against the property of the society. State Amendments.
Article by Ms. VARTIKA SRIVASTAVA, in April, 2021 while interning at the Chambers of Advocate Shankarlal Raheja.
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