Transfer Of Dissolved Society's Assets To Successor Company Valid: Allahabad High Court

The Allahabad High Court has held that Section 13 of the Societies Registration Act, 1860 places no embargo on a society resolving to dissolve itself and to transfer its property to a company incorporated under Section 25 of the Companies Act, 1956. It held that once not less than three-fifths of the members resolve upon dissolution, the society stands dissolved forthwith, and the acquisition of its assets, liabilities and functions by such a company is within the legal framework.Section 13 of the Societies Registration Act, 1860 permits any number not less than three-fifths of the members of a society to determine that it shall be dissolved, whereupon it is dissolved forthwith, and requires all necessary steps to be taken for the disposal and settlement of the property of the society, its claims and liabilities, according to the rules of the society. Where a dispute arises among the governing body or the members, the adjustment of the affairs of the society is to be referred to the principal court of original civil jurisdiction of the district.Noting that the claim of the petitioner was highly belated, the bench of Justice Atul Sreedharan and Justice Siddharth Nandan held,“The Court has examined the statutory provisions of the Act, 1860 and finds that Section 13 does not put an embargo on the Society, to pass a resolution and take necessary steps for “disposal” and “settlement” of the property of the society, in favour of a company incorporated under Section 25 of the Act, 1956; and more so ever no dispute whatsoever was raised either by the governing body or the Members of the society.”UPCA was first registered as a society under Societies Registration Act, 1860. Thereafter, the assets were transferred to UPCA which was incorporated as a company under the Companies Act, 1956. The Society was thereafter dissolved. The dissolution of the Society and the transfer of assets were intimated to the Registrar, Firms, Societies and Chits, U.P.The Cricket Association of Uttar Pradesh, a rival body, filed a writ petition seeking a mandamus for transfer of the assets, accounts and resources of the dissolved society in its favour, a direction to the Board of Control for Cricket in India to transfer to it the liabilities conferred on the dissolved society, a ban on the company from cricketing activity in the State, a CBI investigation, and high-level committees to inquire into the affiliation and financial aid extended by the BCCI.The Court declined to ban the association or order CBI inquiry.Further, referring to Section 13 of the Societies Registration Act, 1860, the Court held that on a resolution passed by not less than three-fifths of the members the society stands dissolved forthwith, and that a reference to the principal civil court is required only where a dispute arises between the governing body or the members over the disposal and settlement of the property. It recorded that there was admittedly no such dispute and no such reference, and that none of the resolutions had ever been challenged. It held that the embargo in the second proviso to Section 13 of the Societies Registration Act, 1860, which forbids the dissolution of a society without the consent of the State Government where any Government is a member of, a contributor to, or otherwise interested in it, is not attracted merely on the State asserting an interest. The Court held that the State must first establish its contribution or interest on the record, and that where it fails to do so, its consent to the dissolution is not required.Earlier proceedings before the Allahabad High Court and a public interest litigation before the Delhi High Court had culminated in favour of the company, with the challenge to its registration under Section 25 turned down.“The only dual contingency which is contemplated is firstly when there is a dispute between the governing body or the members of the society, there shall be a requirement of reference to the Principal Court of Original Jurisdiction of the District and the second contingency is when either Government is a member or a contributor in the society and having interest in the said said registered society, in the said circumstances only the Society shall not be dissolved without the consent of the Government.”Neither contingency, the Court held, arose on the record before it. The Court declined to scrutinise the incorporation itself, noting that the Registrar of Companies, the competent authority, had acknowledged it as having been made according to law, and that the company had acquired a distinct legal personality from the date of its certificate of incorporation.Since the acquisition was within the legal framework, no mandamus could issue to the State authorities or to the BCCI in respect of the assets, accounts and resources of either the erstwhile society or the company. The Court left it open to the petitioner to approach the State Government on grievances confined to the interests of its members or to...

Transfer Of Dissolved Society's Assets To Successor Company Valid: Allahabad High Court

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Transfer Of Dissolved Society's Assets To Successor Company Valid: Allahabad High Court

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