Registration of A Society

Registration of A Society

Minimum 7 or more persons, eligible to enter into a contract can form society for various bona fide purposes. Under the Jammu and Kashmir Act, and Telengana Area Act, only 5 persons can form a society.

Eligibility

Besides individual, following persons are eligible to form a society by subscribing to the memorandum of a society:

• Foreigners
• Partnership firm
• Limited company
• Registered society
• Minors not eligible

Purposes for Which A Society Can be Formed

A society can be formed for the promotion of literature, science or the fine arts or the diffusion of useful knowledge/political education or for charitable purposes. Section 20 of the principal Act specifies the following purposes for which societies may be registered under the Act:

• Grant of charitable assistance
• Creation of Military orphan funds
• Societies established at the General Presidencies of India
• Promotion of
• Science,
• Literature,
• Fine Arts,
• Instructions or diffusion of useful knowledge,
• Diffusion of political education,
• Foundation or maintenance of libraries or reading rooms,
• Public museum and galleries of paintings,
• Works of Act,
• Collections of natural history,
• Mechanical and philosophical inventions,
• Instruments,
• Designs

Formation for Profit Motive Prohibited

For a society registered under Societies Registration Act, 1860 or under the Section 25 of Companies Act, profit motive for personal use is disentitled. Whatever profit is made through the working of such a society, is accountable for, and is necessary to put back the profit in the working of such a society. The Companies Act under section 25 also prohibits any payment of any dividends of its members as part of profit earned.

Registration of Society

Place of registration

The registration of a society is to be done under the act wherever obtaining and not in the state where the benefit is claimed.

Once the persons proposing to form a society have decided upon the name of the society and have prepared a draft of the memorandum and rules and regulations the society the following procedures would have to be adopted for getting the society registered:

Signing of Memorandum of Association

All subscribers (minimum 7) should sign each page of the memorandum and the signature should be witnessed by an Oath Commissioner, Notary Public, Gazetted Officer, Advocate, Chartered Accountant, Magistrate First Class with their rubber/official stamp and complete address.

Documents required to be filed with the registrar of the society

• Covering letter requesting for registration stating in the body of letter various documents annexed to it.

• Memorandum of Association in duplicate along with a certified copy.

• Rules and regulations

• Where there is a reference to any particular existing places of worship like temple, masjid,gurdwara etc. sufficient documentary proof establishing legal competents and control of applicant society over such places should be filed.

• Affidavit of non-judicial stamp paper of appropriate value by President or Secretary of the office.

• Documentary proof house tax receipt, rent receipt in respect premises shown as registered office of a society or ‘No Objection Certificate’ from the owner of the society.

Effect of Registration / Non-Registration of A Society

The Societies Registration Act, 1860 lays down procedure for registration of societies for variousbonafide purposes.

The registration gives the society a legal status and is essential

• for opening bank accounts,
• obtaining registration and approvals under Income Tax Act,
• lawful vesting properties of societies, and
• gives recognition to the society at all forums and before all authorities.

When the society is registered, it and its members become bound to the same extent, as if each member had signed the memorandum.

A society, registered under this Act, must confine its activities to the sphere embraced by its objects.

A tax imposed on a society is one imposed on the society and not on its members.

A society registered under the Act enjoys the status of a legal entity apart from the members constituting it. A society so registered is a legal person just as an individual but with no physical existence. As such it can acquire and hold property and can sue and be sued.

The society should be registered under the Act to acquire the status of juridical person.

In the absence of registration, all the trustees in charge of the fund have alone a legal status and the society has no legal status, and, therefore, it cannot sue and be sued. A non-registered society may exist in fact but not in law. It is immaterial under the Act whether the society is registered but where the benefit is claimed, the registration of society under the Act us required. An unregistered society cannot claim benefits under the Income-tax act.

Read more

Arbitration

Arbitration

The Arbitration and Conciliation Act, 1996 came into force with effect from 22.8.1996. It consolidates and amends the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards.

It applies to the whole of India. It applies to the State of Jammu and Kashmir to the extent of the provisions relating to enforcement of foreign awards, which apply in full, other provisions apply insofar as they relate to international commercial arbitration or conciliation.

The Act is based on the conciliation rules adopted by the United Nations Commission on International Trade (UNCITRAL)

What is arbitration?

Arbitration is a process of dispute resolution in which a neutral third party (called the arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard. It is the means by which parties to a dispute get the same settled through the intervention of a third person, but without having recourse to court of law.

What is an arbitration agreement?

1. Arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not.

2. The parties make an agreement that instead of going to the court, they shall refer the dispute to arbitration.

3. The arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Where an arbitration clause is included in a contract and the contract is avoided due to misrepresentation or fraud, the arbitration clause may still continue to be binding.

4. Where, however, there was no contract at all between the parties or contract was void ab initio, the arbitration clause cannot be enforced.

5. An arbitration agreement/clause must be in writing. Although no formal document is prescribed, however, it must be clear from the document that the parties had agreed to the settlement of dispute through arbitration.

6. Where the arbitration agreement or clause is contained in a document, the parties must sign the document. Besides, the arbitration agreement may be established by-

1. an exchange of letters, telex, telegram or other means of telecommunication; or

2. an exchange of statement.

Appointment of an Arbitrator

Who May be Appointed

A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. In case of an international commercial arbitration, where the parties belong to different nationalities, the Chief Justice of India may appoint an arbitrator of a nationality other than that of the parties.

Number of Arbitrators

The reference may be made either to a single arbitrator or a panel of odd number (i.e. 3, 5,7, etc.) of arbitrators. The parties are free to fix the number of arbitrators by agreement. If there is no agreement, the reference shall be made to a sole arbitrator.

Grounds for Challenging Appointment

The appointment of an arbitrator may be challenged if

1. circumstances exist that give rise to justifiable doubts as to his independence or impartiality or
2. he does not posses the qualifications agreed to by the parties.

Place of Arbitration

The parties are free to agree on the place of arbitration and failing an agreement to do so the place shall be determined by the arbitral tribunal having regard to the circumstances of the case and convenience of the parties.

Who May Refer to Arbitration?

An arbitration agreement is a contract and thus, any party to such an agreement must have the capacity to contract.

What Disputes May be Referred?

The parties to an arbitration agreement may refer to arbitration, a dispute which has arisen or which may arise between them, in respect of a defined legal relationship, whether contracted or not.

Thus, all matters of civil nature whether they relate to present or future disputes may form the subject matter of reference. The dispute, however, must be the consequence of legal relationship arising out of an obligation, the performance of which is a duty under the law and for its breach a remedy is provided.

Bar to Suit

When the parties have entered into an arbitration agreement, they cannot file a suit in a court of law in respect of any matter covered by the agreement; otherwise the very purpose of arbitration will be frustrated. The court will normally not intervene except where so provided by the Act.

What Disputes Cannot be Referred For Arbitration

The following disputes cannot be referred to arbitration:

1. Insolvency proceedings.
2. Lunacy proceedings.
3. Proceedings for appointment of a guardian to a minor.
4. Question of genuineness or otherwise of a will or matter relating to issue of a probate.
5. Matters of criminal nature.
6. Matters concerning Public Charitable Trusts.
7. Disputes arising from and founded on an illegal contract

Interim Orders by Court
A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before its enforcement, apply to the court for any of the following matters-

1. appointment of guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings;
2. preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;
3. securing the amount in dispute in the arbitration;
4. detention, preservation or inspection of any property or thing which is the subject matter of the dispute, or to authorize for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for obtaining full information or evidence;
5. interim injunction or the appointment of a receiver; or
6. such other interim measure of protection as may appear to the court to be just and convenient.

A court has jurisdiction to pass interim orders even before arbitral proceedings commence and before an arbitrator is appointed.

Setting aside an Award

An application for setting aside an arbitral award may be made before the court, by a party within three months of receipt of the award by him. The court may set aside an award on the following grounds:

1. a party was under some incapacity;
2. the arbitration agreement is not valid under the law;
3. the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
4. the award deals with a dispute not contemplated by or beyond the scope of the submission to arbitration;
5. the composition of the arbitral tribunal or the arbitral proceedings was not in accordance with the agreement or with the law;
6. the subject-matter of the dispute is not capable of settlement by arbitration under the law; or
7. the arbitral award is in conflict with the public policy of India.

Appeal

An appeal shall lie before the court, against the following orders-

1. granting or refusing to grant any interim measure
2. setting aside or refusing to set aside an arbitral award and
3. granting or refusing to grant an interim measure of protection.

No second appeal shall lie against the appellate order of the court, except, however, that an appeal may be made to the Supreme Court.

Read more

Dishonor of Cheque

Dishonor of Cheque

Liability under the negotiable instruments act

• Where any cheque drawn by a person for the discharge of a liability is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honor the cheque or;
• That it exceeds the amount arranged to be paid from that account by an agreement made with that bank

Such person cheque shall be deemed to have committed an offence and shall be punishable with imprisonment for a term, which may extend to two year, or with fine, which may extend to twice the amount of the cheque or with both.

What constitutes an offence

Such cheque should have been presented to the bank within a period of six months of the date of on which it is drawn or within the period of its validity, which ever is earlier; and

The payee or holder in due course of such cheque should have made a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque within thirty days of the receipt of the information by him from the bank regarding the return of the cheque unpaid; and

The drawer of such cheque should have failed to make the payment of the said amount of money to the payee or the holder in due course of the cheque within fifteen days of receipt of the said notice.

The cheque in question should have been issued in discharge of whole or part of a debt or liability otherwise the maker of the cheque is not liable for prosecution. For example if the cheque is given as a gift or present and if the bank dishonors it the maker of the cheque is not liable for prosecution.

Offences by Companies

If the person committing the offence is a company, every person who, at the time offence was committed, was in charge of, and responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished.

If a person proves that the offence was committed without his knowledge, or that he had exercised due diligence to prevent the commission of such offence, he shall not be punishable.

Where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial Corporation owned or controlled by the Central Government or State Government, he shall not be liable for prosecution.

Where any offence has been committed by a Company and f it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any director, manager, secretary, or other officer of the Company, such person shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Presentation of cheque any number of times

There is no embargo upon the payee to successively present a dishonored cheque during the period of its validity.

There is no restriction regarding the no of times a cheque can be presented and that every subsequent representation and dishonor gives rise to fresh cause of action for filing complaint.

In the course of business transactions it is not uncommon for a cheque being returned due to insufficient funds or similar such reason and being presented again by the payee after sometime, on his own volition or at the request of the drawer, in expectation that it would be encashed.

For dishonor of one cheque there can be only one offence and such offence is committed by the drawer immediately on his failure to make the payment within 15 days of the receipt of the notice served.

On each presentation of the cheque and its dishonor, a fresh right and not cause of action accrues. Therefore the payee without taking pre-emptory action in exercise of his right may, go on presenting the cheque so as to enable him to exercise such right at any point of time during the validity of the cheque.

Cause of action would arise only on failure to pay after notice.

Once a notice for payment is given a fresh cause of action will not arise if the cheque is presented again and it is dishonored.

Effect of stop payment

Stop payment instructions cannot obviate the offence.

Even if stop payment instructions are given and notice of the same is given to the payee or holder in due course liability cannot be avoided.

The position will not be different even if the drawer had instructed the bank to stop payment prior to the presentation of the cheque for encashment.

Once the cheque is issued there is a presumption, that the holder received the cheque for the discharge, of any debt or liability and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under the Act.

Notice in case of dishonor

The requirement of giving of notice is mandatory. If no notice making a demand for payment is served upon the drawer within 30 days from the date of dishonor of cheque, a complaint is not maintainable unless the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.

Notice means a notice in writing.

A postal acknowledgement due containing the signature of the accused is proper proof of service of the notice on the addressee shown in the postal acknowledgement.

When a notice is returned by the sender as unclaimed such date would be the commencing date in reckoning the period of 15 days. Such reckoning would be without prejudice to the right of the drawer of the cheque to show that he had no knowledge that the notice was brought to his address.

The notice need not necessarily be by registered post only. It can be sent by a telegram, fax or by a letter as well.

However it is preferable to send the notice by registered post, as that is clear evidence of service.

Period for payment

If payment is not made within 15 days of the receipt of the notice then the offence shall be deemed to have been committed.

The cause of action for filing complaint would arise after the completion of 15 days from the date the drawer receives the notice and fails to pay the amount within that period.

The court cannot take cognizance prior to the lapse of the period of 15 days even if there was a denial of the liability earlier, even after denial liability to pay the amount, the accused can at any time change his mind within 15 days of receipt of notice, make payment and avoid prosecution.

The offence shall be deemed to be committed only from the date when notice period expired.

The drawer cannot take the excuse that he had no reason to believe when he issued the cheque that the cheque may be dishonored on presentation for the reasons stated above.

Remedies

1.    To file a civil suit

2.    To file a complaint under section 138 of the Negotiable Instruments Act, 1881

3.    To file complaint under section 420 for cheating under the Indian Penal Code

In case a person has filed suits for recovery, he is not precluded from filing a complaint under section 138 of the Negotiable Instruments Act and section 420 of the Indian Penal Code. Both remedies may be simultaneously possible. A civil suit cannot debars the criminal prosecution.

Read more

Business Law Notes #2 : Meetings & Resolutions « Ritu’s Weblog

Business Law Notes #2 : Meetings & Resolutions « Ritu’s Weblog

Excellent blog by Ms. Ritu Khabia. Impressive articles about Business Law and Company Law. Useful for Law students and Lawyers as well.

Read more