Amendment of Bye laws of Societies and Clubs

Except the rights with respect to alter, extend or abridge the ‘purposes’, as provided under Section 12, the Societies Registration Act, 1860 does not specifically state anything as to the amendment of Memorandum or Rules and Regulations. The provisions in the bye laws of the society govern the amendment.

2. No Alteration of Fundamental Principles of Foundation and Trust

Any action taken contrary to the bye laws would be ultra vires.[2] Even the entire members of an association, altogether, cannot legally do a thing which is ultra vires. But, they are at liberty to amend their bye laws in accordance with law. Nevertheless the power of amendment is not unlimited – it should not be hit by the doctrines of illegalities and ‘basic principles of foundation’ or ‘basic structure’.

It is held in Inderpal Singh Vs. Avtar Singh:[3]

In Sri Bhaben Chandra Pegu Vs. The State of Assam[4] the Division Bench considered the relevant statutory Rule under which meeting of the governing body of a college had to be convened and pointed out that acts in violation of the Rules would be void, unlawful and illegal and was liable to be set aside.

It is not open for the majority of the members of an association to alter the fundamental principles upon which it is founded, unless such a power is specifically reserved. This principle laid down in Milligan Vs. Mitchel , [5] Attorney General Vs. Anderson[6] and Free Church of England Vs. Overtoun[7] is referred to in Prasanna Venkitesa Rao Vs. Srinivasa Rao.[8]

House of Lords in Free Church of England Vs. Overtoun[9] (by a majority of 5-2) found that the minority was entitled to the assets of the Free Church. It was observed that when men subscribe money for a particular object, and leave it behind them for the promotion of that object, their successors have no right to change the object endowed. It was held that, by adopting new standards of doctrine (and particularly by abandoning its commitment to ‘the establishment principle’, which was held to be fundamental to the Free Church), the majority had violated the conditions on which the property of the Free Church was held.

In Noel Frederick Barwell Vs. John Jackson (1948)[10] it was held as under:

3. Principles of Trust are Inbuilt in Societies and Clubs

Actions of persons in fiduciary position should subserve their position as such. In Church of North India Vs. Lavajibhai Ratanjibhai[11] it was pointed out by our Apex Court that in terms of Section 5 of the Societies Registration Act, only if the property of a society is not vested in trustees the same would be deemed to have been vested for the time being in the governing body of a society.[12]

The trustees or the governing body administer the ‘property of the society’ as per its bye laws so as to fulfill or attain the ‘aim and objects’ the founders viewed. They acquire and hold the property for and on behalf of the members of the society subject to the trust and obligations imposed by law, the bye laws and the fundamental principles upon which it is founded. These propositions lead to the unerring conclusion that our law brings-in principles of trust in the affairs of the societies and clubs. [13]

4. Power to Amend the Rules Is Implicit

The Memorandum of Association is a contract amongst the members of the Society. The authority to frame, amend, vary and rescind such rules, undoubtedly, vests in the General Body of the Members of the Society. The power to amend the rules is implicit in the power to frame rules; [14] provided, as shown above, it should not hit the ‘basic principles of foundation’.

Even when there is no specific power to amend the bylaws or Rules, an (unregistered) association can amend the same (without destroying its ‘Basic Structure’), as this power is ‘ sui generis ‘. In other words, such powers can also be taken to be derived out from inherent authority vest with the club or society, especially since they are voluntary (unregistered) associations function under the fundamental guarantees extended by the Constitution of the Country. Therefore, there may be no scope to explore deep to find out the genesis of this right. But, once the Societies Registration Act or the bye laws provide a particular procedure for amendment of bye laws, the same has to be strictly observed, as shown below.

5. Meaning of ‘Purpose’

Section 1 of the Societies Registration Act refers to ‘purpose’ and Section 2, the ‘object’. The connotations conveyed by these two terms have to be derived from the wordings of these two sections.

Sections 1 and 2 of the Societies Registration Act reads:

6. Amendment: Difference between ‘Purpose’ Clause and other Clauses of Bylaws

Subject to the provisions in the Act, if any, applicable and the bye laws, the final authority of every society and club shall vest in the general body [15] of the members in general meeting, summoned in such manner as may be specified in the bye-laws .

The provision for amendment in Sec. 12 is stringent. But, it is confined to object-clause alone. It is mandatory.[16] Once the Societies Registration Act or the bye laws provide a particular procedure for a particular affair (such as amendment of bye laws, election or dissolution), the same has to be carried on as per that procedure. Because, if a thing is prescribed to be done in a particular way, it can be done in only that way, and by no other Way.[17] Now the following questions may arise-

7. Society, and not the Court, to Determine Validity of Amendment

It is for the members, and not the court, to determine whether or not the alteration of its Rules is for the benefit of the association or company; and the court will not readily interfere with an alteration made in good faith, if the amendment is made after considering all relevant factors. All members are bound by a valid alteration whether they voted for or against it.[19] What is in the interest of the society is primarily for the society alone to decide and it is not for an outside agency to say.[20]

It is observed in In re, Goneshberi Tea Co. P Ltd.[21] as under:

In Greenhalgh v. Arderne Cinemas[22] it is held that ‘a share holder has no right to assume that his company’s articles would always remain in a particular form and he cannot object to an alteration as fraudulent provided it was passed bona fide and did not unfairly discriminate.’

But, in Most Rev. PMA Metropolitan Vs. Moran Mar Marthoma Mathews, [23] the Supreme Court observed:

8. Voting by Proxy

Proxy is not a common law right. It is the creature of law of agency.[25] Therefore, proxy shall not be entitled to attend the meetings or to vote in a Company or other Associations unless the enactment concerned or the bye laws applicable specifically provide for the same.

The relationship between the member and his proxy being that of a principal and agent, the rights and obligations, including the matters as to (i) competency, (ii) revocation, (iii) limitations, (iv) entitlement of the agent to compensation, (v) effect of revocation upon third parties, (vi) termination of authority etc., are governed by the law of contract.[26]

9. Halsbury’s Laws of England

Alteration must be in Good Faith for the Benefit of the Company

Subject to the principles of public-policy, any person or group can change their persuasions. The validity of the amendment of the bye laws of a society is tested by Courts, if so required, on the touch-stone of good-faith and doctrine of ultra-vires. Halsbury’s Laws of England[27] reads as to alteration of articles of a company as follows:

10. Amendment Comes into Effect before Registration

The Societies Registration Act does not require registration of ‘alteration’ in the Rules and Regulations. Therefore, it cannot be held that registration of the amendment is a condition precedent for giving effect to such an alteration.

In Managing Committee, Khalsa Middle School Vs. Mohinder Kaur[28] the Supreme Court drew a distinction between the provisions of the Companies Act, 1956 and the Societies Registration Act and observed:

11. No Power Upon the Registrar to Grant Approval to Amendment

There is no provision in the Societies Registration Act expressly conferring power upon the Registrar to grant his approval to the amendments carried out to any bye-laws by a registered society.

12. Amalgamation

Registered societies can be amalgamated only by resorting to the lawful modes for amalgamation in the So. Registration Act.[29] A Society can be merged into another society alone, and not into a Trust.[30] Upon amalgamation one society ceases to exist, and its losses cannot be adjusted against profits of amalgamated society.[31]

13. Can a Society be Transformed as Trust, by Resolution

See Chapter: Dissolution of Societies and Clubs

[1] Joint Registrar of Co-operative Societies, Kerala Vs. TA Kuttappan: (2000) 6 SCC 127; Damyanti Naranga Vs. Union of India: AIR 1971 SC 966; K. Nithyanandam Vs. State of Tamil Nadu : 2006 (1) CTC 1; Zoroastrian Co -operative Housing Society Vs. District Registrar: AIR 2005 SC 2306.

[2] Lila Parulekar Vs. Sakal Papers (P) Ltd.: (2005) 11 SCC 73: AIR 2005 SC 4074; Raja Himanshu Dhar Singh Vs. Addl. Registrar Co-op. Societies: AIR1962 All 439.

[3] 2007-4 Raj LW 3547

[6] (1888) 57 LJ Ch 543

[8] AIR 1931 Mad. 12. See also: Inderpal Singh Vs. Avtar Singh: 2007-4 Raj LW 3547; Allahabad High School Society Vs. State of UP: 2010-5 ADJ 734, 2010-82 All LR 83; P. Jayader Vs. Thiruneelakanta Nadar Chinnaneela Nadar: ILR 1966-2 Mad 92.

[10] AIR 1948 All 146

[11] AIR 2005 SC 2544. See also: Vinodkumar M. Malavia Vs. Maganlal Mangaldas: (2013) 15 SCC 394.

[12] Relied on in Vinodkumar M. Malavia Vs. Maganlal Mangaldas Gameti: (2013) 15 SCC 394.

[13] See: Chapter: Incidents of Trust in Clubs and Societies

[14] Supreme Court Bar Association Vs. BD Kaushik: (2011) 13 SCC 774; AIR 2011 (SCW) 5804

[15] Supreme Court Bar Association Vs. Registrar of Societies: ILR 2012-22 Del 1031; Girish Mulchand Mehta Vs. Mahesh S. Mehta. 2010 (1) Bom. C.R 31

[16] Ram Charan Agarwala Vs. Shridhar Misra: AIR 1962 All 610; Shridhar Misra Vs. Jaichandra Vidyalankar: AIR 1959 All 598.

[17] See: Indian National Congress (I) Vs. Institute of Social Welfare: AIR 2002 SC 1258; Supreme Court Bar Association Vs. The Registrar of Societies: ILR 2012-22-Dlh-1031; Patna Improvement Trust Vs. Smt. Lakshmi Devi: 812 SCR [1963] Supp. State of Bihar Vs. J.A.C. Saldanha (1980) 1 SCC 554: AIR 1980 SC 326; Vinodkumar M. MalaviaVs. Maganlal Mangaldas Gameti: (2013) 15 SCC 394; Nazir Ahmed case: AIR 1936 PC 253.

[19] Hari Chandana Yoga Deva v. Hindustan Co-op. Insurance Society: AIR 1925 Cal 690

[20] State of Maharashtra Vs. Karvanagar Sahakari Griha (2000) 9 SCC 295; Zoroastrian Co -operative Housing Society Vs. District Registrar AIR 2005 SC 2306.

[21] (1964) 34 Comp Cases 556, 565 (Cal)

[22] (1950) 2 All ER 1120 (CA)

[23] AIR 1996 SC 3121 (Jeevan Reddy and SC Sen JJ.). Shai, J did not concur with this view.

[24] Most Rev. PMA Metropolitan Vs. Moran Mar Marthoma Mathews: AIR 1995 SC 2001.

[25] Nand Prasad Vs. Arjun Prasad: AIR 1959 Pat 293.

[26] B. Ramachandra Adityan Vs. TN Mercantile Bank Shareholders Assn: 2009-5 CTC 727; SRMST Narayanan Chettiar Vs. Kaleeswarar Mills: AIR 1952 Mad 515

[27] Para 554 (Vol. 7(1) 4th Edn., Reissue, 1988)

[28] (1993) Supp. 4 SCC 26 ; AIR 1993 SCW 3006. Sindhi Edn. Society Vs. Chief Secty. Govt of Delhi: AIR 2010 SCW 5393; 2010-8 SCC 49

[29] Vinodkumar M. Malavia Vs. Maganlal Mangaldas Gameti: (2013) 15 SCC 394.

[30] Janta Junior High School, Sonhita VS State of UP: 2016-3 LBESR 748: 2016-34 LCD 2722

[31] Rajasthan R. S. S. & Ginning Mills Fed. Ltd. Vs Dy. Commissioner of Income Tax, Jaipur: 2014-11 SCC 672.

Read in this cluster (Click on the topic):

Book No. 1 . Handbook of a Civil Lawyer

Book No. 2: A Handbook on Constitutional Issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India