TaxTMI 
TaxTMI 
TaxTMI 
1961 (10) TMI 87
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....in new grounds of attack were added in para. 14 of the petition. To these grounds we shall advert later. The short facts giving rise to the petition are these. One Hakim Mohammad Ajmal Khan was a physician (of Unani medicine) of all-India repute. He lived in Delhi and started a pharmaceutical institute in the town known as Hindustani Dawakhana in the year 1903. He also established a medical college known as the Tibbia College. He died in the year 1927. But before his death, in the year 1911, he along with certain other persons formed a society styled Anjuman-i-Tibbia and had it registered under the Societies Registration Act, 1860 (Act XXI of 1860). The name of the society was changed in 1915, and it became known as the Board of Trustees, Ayurvedic and Unani Tibbia College, Delhi. For convenience we shall refer to it as the Board. The Board ran the Tibbia College' and an attached hostel. The pharmaceutical institute was also managed by it, though at one stage petitioner No. 2 claimed the institute as his private property. Certain rules and regulations were made for the functioning of the Board, which were amended from time to time. The main objects of the Board were thus stated ....
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.... first Secretary of the Board. In the year 1948 Shri Rameshwar Dayal, the then Collector of Delhi, and Dr. Yudhvir Singh the then President of the Delhi Municipal Committee, and certain other persons were elected as members of the Board. Dr. Yudhvir Singh was elected President and one Shri Mool Chand Gagerna was appointed Joint Secretary. Soon after the elections in 1948, a struggle ensued between different groups of members for obtaining control of the Board and the college, and for possession of the Hindustani Dawakhana. Certain criminal proceedings followed. On October 18, 1949, a suit was brought in the court of the senior Subordinate Judge, Delhi under H. 92 of the Code of Civil Procedure against the Secretary and 31 members of the Board. In that suit an application was made for the appointment of a receiver and on October 19, 1949, the Subordinate Judge appointed two local advocate as joint receivers with plenary powers. These receivers took possession of the Dawakhana and the college between October 19 and 23, 1949. When the suit was still pending, the Delhi State Legislature passed an Act called the Tibbia College Act, 1952 (Delhi Act No. 5 of 1952), hereinafter referred t....
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.... impugned Act, the Act is bad because its several provisions violate the fundamental rights guaranteed to the petitioners under Art. 14, 19 and 31 of the Constitution. Two subsidiary points have also been urged before us, one to the effect that the Delhi State Legislature could not by the impugned Act over-ride the provisions of the Societies Registration Act, 1860 which is a Central Act, and the other to the effect that the Delhi State Legislature acted mala fide in passing the impugned Act. We shall presently deal with these arguments in the order in which we have stated them. It is necessary to state here, however, that a preliminary objection similar to the one urged against the previous petition was also urged in respect of the present petition. The learned Solicitor General appearing on behalf of the respondents has urged that by reason of the failure of the members to pay the annual subscription in time, all of them ceased to be members in 1950-1951; therefore, the elections held in 1955 were of no effect there being no one competent to elect; and the Board as a Board ceased to exist before 1955 and neither petitioner no. 1 nor petitioner no. 2 could maintain the present wr....
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....III). There was an exception provided with regard to the Legislative Assembly of the State of Delhi in respect of public order, police etc., which is not relevant for our purpose. Section 22 said that if any provision of a law made by the Legislative Assembly of 0, Part State was repugnant to any provision of a law made by Parliament, then the law made by Parliament, whether passed before or after the law made by the Legislative Assembly of the State, shall prevail and the law made by the Legislative Assembly of the State shall, to the extent of the repugnancy, be void. There is an Explanation to the section which is not 'relevant for our purpose and need not be read. The point which the learned Advocate for the petitioners has emphasised is that under s. 21 aforesaid, the extent of the legislative power of the Delhi State Legislature was limited to the making of laws for the whole or any part of the Delhi State with respect to any of the matters enumerated in the State List or in the Concurrent List of the Seventh Schedule to the Constitution. Now, item 32 of the State List (List II) is in these terms: "32. In corporation, regulation and winding up of corporations, other tha....
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....ited into one body under a special denomination, having perpetual succession under an artificial form, and vested by the policy of the law with the capacity of acting in several respects as an individual, particularly of taking and granting property, of contracting obligations and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation or at any subsequent period of its existence". (Halsbury's Laws of England, 3rd Edn. Vol. 9, page 4.) A corporation aggregate has therefore only one capacity, namely, its corporate capacity. A corporation aggregate may be a trading corporation ora non-trading corporation. The usual examples of a trading corporation are (1) charter companies, (2) companies incorporated by special acts of parliament, (3) companies registered under the Companies Act, etc. Non-trading corporations are illustrated by (1) municipal corporations, (2) district boards, (3) benevolent institutions, (4) universities etc. An essential element in the legal conception of a cor....
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....urpose and should be read in full. 5. 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 by their proper title. "6. Every society registered under this Act may sue or be sued in the name of the president, chairman, or principal secretary, or trustee, 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 of the trustees thereof, if on an application to the governing body some other officer or person be not nominated to be the defendant." Section 7 provides for non-abatement of suits or proceedings and the continuance of such suite or proceedings in the name of or against the successor of the person by or against whom....
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....ers of the said society or any of them, but shall be given to some other society, to be determined by the votes of not less than three-fifths of the members present personally or by proxy at the time of the dissolution, or, in default thereof, by such Court as aforesaid: Provided, however, that this clause Shall not apply to any society which shall have been founded or established by the contributions of shareholders in the nature of a Joint Stock Company." Now, the question before us is regard being had to the aforesaid provisions-was the Board a corporation? Our conclusion is that it was not. The most important point to be noticed in this connection is that in the various provisions of the Societies Registration Act, 1860, there are no sufficient words to indicate an intention to incorporate, on the contrary, the Provisions show that there all absence of such intention. Section 2 no doubt provides for a name as also for the objects of the society. Section 5, however states that the property belonging to the society, if not vested in trustees, shall be deemed to be vested in the governing body of the society and in all proceedings, civil and criminal, the property will be d....
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....abling legal proceedings to be brought in respect of the property of a registered trade union. Since the legislature had no intention of giving such unions corporate status with power to hold property and to sue and be sued in their registered names, it was necessary to provide for the vesting of their property in trustees and to permit them to bring or defend legal proceedings in respect of that property on the unions behalf. section 8 of this Act, having provided for the vesting of the union's property in its trustees, the present section supplements that section by empowering the trustees to bring or defend, on the union's behalf, civil or criminal proceedings concerning its property." In Bonsor v. Musicians' Union((L. R.) 1956 A. C. 104.) the position Of a registered trade union in England came under consideration of the House of Lords in an appeal from the Court of Appeal. On a review of earlier decision including the decision in Tuff Vale Railway v. Amalgamated Society of Railway Servants([1901] A. C. 426.), Lord Macdermott, Lord Keith of Avenholm and Lord Somervell of Harrow held that a registered trade union was not juristic person distinguishable at any at any moment....
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....ciety, the adjustment of the affairs shall be referred to the Court. Here again the governing body is given a legal power somewhat distinct from that of the society itself; because under s.16 the governing body shall be the governors, council, directors, committee, trustees or other body to whom by the rules and regulations of the society the management of its affairs is entrusted. We have, therefore, come to the conclusion that the provisions aforesaid do not establish the main essential characteristic of a corporation aggregate, namely, that of an intention to incorporate the society. We may further observe that the scheme and provisions of the Societies Registration Act,1860 are very similar to those of the Friendly Societies Act, 1986 (59 and 69 Vict. 0.25), as amended in certain respects by subsequent enactments. It is appropriate to quote here what Dennis Lloyd has said in his 'Law relating to Unincorporated Association' (1938 edn.) at page 59 in respect of the provisions of the Friendly Societies Act, 1896 as modified by subsequent enactments. He has said: The modern legislation still maintains the policy of the older Acts in withholding corporate status from friendly soci....
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....ombay ((1945) 48 Bom. L. R. 941.) where Bhagwati, J., held that a Society registered under the Societies, Registration Act, 1860 was a legal entity apart from the members constituting it, and it can sue and be sued in its own name. The question which fell for decision in that case was not whether a society registered under the Societies Registration Act was 'incorporated' as that term is legally understood. The question there was whether such a society could sue or be sued accept in the manner provided by 6 and 7. It was held that it could and the reason given was thus expressed by the learned Judge: " I am of opinion that the provisions contained in ss. 6, 7 and 8 of the Societies Registration Act are not inconsistent with the user of the registered name of the society in connection with legal proceedings. As Lord Lindley observed in Taffy Vale Railway Company's case (supra), "I do not say that the use of the name is compulsory but it is at least permissive." If this is the true legal position of a society registered under the Societies Registration Act, the objection .. that the plaintiffs and the defendants are one and the same and that the suit as framed is no....
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....50 to the Court of the District Judge, Poona. Then the matter was taken to the High Court on appeal from the decision of the District Judge. The appeal came up for hearing before our learned brother Mudholkar, J. (who was then a Judge of the Bombay High Court) and Patel, J. After referring to several decision including the decision of Bhagwati, J. in Satyavart Sidhantalankar v. The Arya Samaj, Bombay ((1945) 48 Bom. L. R. 341.) our learned brother held that the Servant of India Society registered under the Societies Registration Act was a legal entity and a quasi-corporation. He further held that entry 44 in List I and the first part of entry 32 in List II relating to incorporation, regulation and winding up of corporations' must be given a liberal construction and quasi-corporations would come under those entries. Basing himself on a parity of reasoning relating to entry 7 in List III which related to 'Contracts', he said that if quasi. contracts would come under entry 7, quasi-corporation must also come under entries 43 and 44 of List I and the first part of entry 32 of List II. mr.. Justice Patel took a different view. He said: A reference to entry 32 of the State List shows t....
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.... by the second part of entry 32 which talks of "unincorporated trading. literary, scientific, religious and other societies and association". In entry 32 there is a dichotomy in the two parts thereof: the first part relates to incorporated societies which are corporations in the true sense of that term, and the second part relates to unincorporated societies. The justification is between incorporated societies and unincorporated societies and there can be no doubt as to which of the two parts in which a society registered under the Societies Registration Act, 1860 will fall, be it called a quasi-corporation or by any other name. A society registered under the Societies Registration Act may have characteristics which are analogies to some of the characteristics of a corporation; yet it is not incorporated and remains an unincorporated society. AS soon as it is held that it is an unincorporated society, it must come under the second Part of entry 32 of List II. In this view of the matter it is unnecessary to decide the further questions as to (1) whether the objects of the old Board extended beyond the State of Delhi, and (2) if other entries such as entry 11 of List II an....
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....with the college in Delhi and the pharmaceutical institute attached to it. Section 7 which gives the powers and duties of the new Board is in these terms: 7. The Board shall exercise the following powers and perform the following duties, namely:- (a) to maintain the Ayurvedic and Unani Tibbi College, Delhi with a view to impart higher eduction to men and women in the Ayurvedic and Unani Systems of Medicine and to promote and conduct research in the same: (b) to maintain and improve the Hindustani Dawa Khana and Rasayanashala; (c) to provide for studies to enable incorporation, where necessary of the principle of the modern system of Medicine and surgery in order to help the scheme of studies for the Ayurvedic and Unani systems according to the exigencies of time; (d) to help produce and publish books in order to facilitate the carrying out of the objects specified in the clauses (a) to (c); (e) to receive gifts, donations or benefactions from Government and to receive bequests, donations and transfer of movable or immovable properties from trustees, donors or transferors, as the case may be; (f) to deal with any property belonging to or vested in the Board in such manner as ....
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....named instead of the Society." It no doubt says that all rights, powers and privileges which immediately before the appointed day belonged to or were vested in the old Board shall vest in the new Board; but it adds that those rights, powers and privileges shall be applicable for the purposes for which the new Board is constituted. We must, therefore, read B. 9 as being subject to the provisions of 7 of the Act. In terms 9 says that the rights, powers and privileges of the old Board shall be available to the new Board and shall be applied for the purposes for which the new Board is constituted . The words underlined are important, and show clearly enough that the right, powers and privileges of tho old board are available to the new for a limited purpose only, namely, for the purposes for which the new Board is constituted. If the purposes for which the now Board is constituted are confined to the institutions in Delhi, then obviously the objects for which the new Board is incorporated do not extend beyond the State of Delhi. The conclusions at which we have arrived may now be summarised as follows: (1) On registration under tho Societies Registration Act, the old Board did....
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....nd frequent interruption in work and studies of the institution." In our view the petitioners have not made out any basis for the contention that (1) there were other institutions similarly situated, and (2) petitioner No. 1 was picked out for unequal treatment. The names of no other institutions similarly situated have been disclosed. In the first Sholapur case Chiranjit Lal Chowdhuri, v. The Union of India ([1950] S. C. R. 869, 915, 914.) it was held by a majority of Judges of this court that even one corporation, (in our case one society) or a group of persons can be taken as a class by itself for the purpose of legislation, provided it exhibits some exceptional features which are not possessed by others. The courts should prima facie lean in favour . Of constitutionality and should support the legislation if it is possible to do so on any reasonable ground, and it is for the party who attacks the validity of the legislation to place all materials before the court which would go to show that the selection is arbitrary and unsupportable. Throwing out of vague hints that there may be other Instances of similar nature is not enough for this purpose". (per Mukherjea, J....
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....in the emergence of the right of the members to that property. It is, therefore, necessary to ascertain the precise rights the members of the Board possessed to see whether the changes effected by the impugned Act amount to on infringement of their rights within the meaning of Art. 19(l)(f). During the subsistence of the society, the right of the members was to ensure that the property was utilised for the charitable objects set out in the memorandum and these did not include any beneficial enjoyment Nor did the members of the Society acquire any beneficial interest on the dissolution of the society; for 8. 14 of the Act, quoted earlier, expressly negatived the right of the members to any distribution of the assets of the dissolved body. In such an event the property had to be given over to some other society, i.e., for being managed by some other charitable organisation and to be utilised for like purposes, and the only right of the members was to determine the society to whom the funds or property might be transferred and this had to be done by not less than three-fifths of the members present at the meeting for the purpose and, in default of such determination, by the civil cour....
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.... it was held that the right of the first respondent under Art. 19(l)(f) was violated. The facts of that case were wholly dissimilar and the respondent's right there did not depend on his being a member of a society. In the second Sholapur case Dwarkadas Srinivas v. The Sholapur Spinning & Weaving Co. Ltd .([1954] S. C. R. 674.) a Controller was appointed by Government to supervise the affairs of the mills of a certain company under the Essential Supplies Emergency Powers Act, 1946. The controller made certain requisitions which the Directors refused to comply with. The Governor-General then made an ordinance which was followed by an Act. Under the provisions of the ordinance the Central Government delegated all its powers to the Government of Bombay. The Government of Bombay then appointed certain Directors to take over the assets and management of the mills. These new Directors passed a resolution making a call of ₹ 50/- on each of the preference Shares payable at the time stated in the resolution. The appellant in that case was a preference shareholder who was called upon to pay ₹ 1,62,000/- in pursuance of the resolution aforesaid on the preference shares where which....
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....r given, that the Delhi State Legislature had legislative competence or power either to amend the Societies Registration Act, 1860 in respect of unincorporated societies, or to make a law for a particular unincorporated society, and even to create a new corporate body provided its objects were confined to the State of Delhi of Delhi. In effect the impugned legislation provides for a disolution of the old Board which was an unincorporated society and for the creation of a new corporate body for the management of the Ayurvedic and Unani Tibbi College, Delhi. In this view of the matter, no question of any conflict with the Societies Registration Act, 1860 arises in this case. It has also been argued that the impugned legislation is a piece of colourable legislation because the Delhi State Legislature acted mala fide in enacting it. This argument is completely answered by what this Court said in K. C. Gajapathi Narayan Deo v. The State of Orissa (S.C.R. 1, 10, 11.). This court said: It may be made clear at the outset that the dotrine of colourable legislation does not involve any question of bona fide or male fides on the part of the legislature. The whole doctrine resolves itself i....
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....on under Art. 32 of the Constitution has been preferred by the Board of Trustees, Ayurvedic and Unani Tibia College, through its Secretary, Hakim Mohammad Jamil Khan By Act 5 of 1952 called the Tibia College hi Act, 1952 the erstwhile Delhi State Legislative Assembly dissolved the Board of Trustees of the Ayurvedic and Unani Tibia (College, incorporated a Board called 'Tibia College Board' and transferred to that Board all the property, rights, powers and privileges of the Board of Trustees of the Ayurvedic and Unani Tibia College also the management and control of the Ayurvedic and Unani Tibia College to the aforesaid Board. The reason for doing so would appear from the Statement of objects and Reasons appended to the Bill which are as follows: This Bill seeks to take powers for transferring the management of the Ayurvedic and Unani Tibia College, Delhi, from its present trustees to a Board under the control of the Delhi State Government. The College has been grossly mismanaged for some time past with the result that its reputation is very low today. In early 1949, the situation deteriorated to such an extent that there were students strikes, defalcation of funds and frequent int....
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....so raised on behalf of the petitioner on the basis of certain decisions and my opinion in Servants of India Society, Poona v. The Charity Commissioner of Bombay (1) to the effect that upon registration J. the Board became at least a quasi-corporation. This contention has also been negatived by my learned brother. If, as the petitioner says the Board, after registration under the Societies Registration Act, 1860 was transformed into a corporation the Delhi Legislative assembly could not make a LAW with respect to it under Entry 32 because though under the first part thereof it can make a law affecting corporation, its powers cannot reach a corporation, the objects of which extend beyond the limit of the Delhi State. But as my learned brother has pointed out and with which I respectfully agree, the essence of a corporation is its incorporation' and as the Societies Registration Act does not provide for incorporation the petitioner cannot be recorded as a corporation. It is true that even though it possesses some of the attributes of a corporation it ii not a corporation but in my view it is a near corporation' or a quasi-corporation'. This is what I have held in the Servants of Indi....
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....a body all the normal powers of a legal person it will be a corporation in all but name. A registered society, however, cannot hold property and to that extent it must be treated a a voluntary association, made up of its constituents. Therefore, it can be regarded as a quasi-corporation or, in the words of Lords Morton and Porter, a near-corporation". Now, a quasi-corporation or a near corporation-whatever we may call it-being a legal entity at least for some purposes is not a mere society made up of its constituents. The question, therefore, must be considered whether the latter part of Entry 32 confers power on the State legislator to legislate about legal entities.' Let US consider the scope of the latter part of Entry 32. It permits the making of laws concerning societies and associations which are not incorporated. This would imply that thereunder the legislature cannot provide for the incorporation' of a society or association. One of the main results of incorporation is to confer upon the thing incorporated the status of a separate legal entity. Even so, under this Entry the legislator has a wide discretion in the matter of conferral of powers upon a society. But can ....
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....tenant Governor in Council of any Presidency or other territory for which a council may be appointed, with Power to make law and Regulations, under and by virtue of these Act: Provided always, that the said Governor General in Council shall not have the power of making any Laws or Regulations which shall repeal or in any way affect any of the Provisions of this Act. Or any of the Provisions of the Acts of the Third and Fourth Years of King William the Fourth, Chapter Eighty-five and the Sixteenth and Seventeenth Years of Her Majesty, Chapter Ninety-five, and of the Seventeenth and Eighteenth Years of Her Majesty, Chapter Seventy-Seven, which after the pacing of this Act shall remain in force: or any Provisions of the Act of the Twenty first and Twenty-second Years of Her Majesty, Chapter one Hundred and Six entitled an Act for the better Government of India; or of the Act of the Twenty-second and Twenty-third years of Her Majesty, Chapter Forty-one, to amend the same: or of any Act enabling the Secretary of State in Council to raise Money in the United Kingdom for the Government of India: or of the Acts for punishing Mutiny and Desertion in Her Majesty's Army or in Her Majesty's ....
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....ction of the impugned Act dissolved the petitioner, a legal entity and transfers its property, rights etc., to a corporation created by it. Thus it deals with a legal entity and the rights of that entity. This is wholly outside the ambit of the latter part of Entry 32. It would have been possible for the State legislature to resort to the first part of that Entry had the object of the society been limited to the Delhi state but, as already'' stated, the objects extent beyond the Delhi State. The reason why I think it would have been possible is that the entry is not restricted to incorporation of a corporation but deals also with the regulation or winding up of a corporation which would include a quasi-corporation or any other fictitious legal person, and further because the essence of winding up can be no different from that of dissolution. No doubt, ours is a federal constitution and the legislative fields of Parliament and of the state legislatures are demarcated, In addition we have a concurrent field in which Parliaments legislative power is exercisable and, subject to certain conditions, also that of the state legislatures. But even so, there is a certain amount of overlappi....
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....ion is to transfer to it what was, till then, with the petitioner-Board. The new Board was thus to serve only a consequential purpose and its incorporation cannot be said to be the pith and substance of the impugned Act. The activities of the petitioner were not confined to the state of Delhi. That Act cannot there fore, be sustained by reference to the first part of Entry 2. The pith and substance of the law being the dissolution of the petitioner Board, a legal entity, and transference of its property and rights to someone else, it cannot be sustained by reference to the power conferred by the latter part of Entry 32. For sustaining the law the learned Solicitor General had played reliance also on Entries 10 and 28 of List II. What we have to See, therefore, is whether the impugned law could be made by the Delhi Legislature under these entries. It is not disputed that the Petitioner-Board is a trustee. It is also clear from the objects with which the trust was established, (which have been set out in the judgment of my learned brother) that it was for a charitable purpose. The petitioner is, therefore, a charitable trust and the object of the law is to dissolve it and transfer....