How to Sue Societies, Clubs and Companies

Jojy George Koduvath.

Introduction:

Societies, Clubs and companies are formed by people associated with them. A Company is a Juristic person. Hence it can sue or be sued in its name. Procedure in a suit by or against a registered society is different from that against an unregistered society or a club.

How to Sue an Unregistered Society or a Club

An unregistered society or a club is not a legal person; [1] and therefore, it has to sue or be sued only in the name of all its members. It can be done invoking Order I Rule 8 CPC which enables one or more of ‘numerous’ persons having common interest to sue or be sued in a representative character.

When a suit is filed by a member seeking reliefs concerning the society or a club, relating to a matter common to all members, he has to file it (also) as representing other members of the society other than the defendants (usually office-bearers of the society or club); and if it is a personal matter of the plaintiff, seeking relief against all other members, the plaintiff has to sue against one or two members (usually office-bearers) as representatives of others.

The objective of Order I Rule 8 CPC, an enabling provision, is avoidance of multiplicity in litigation; and the decision in such a suit binds all present and future members also.[2]

Decision Binds all Represented, and Constitute Res Judicata

The condition necessary for the application of Order I Rule 8 is that the persons on whose behalf the suit is brought must have the same interest and the decision in a representative suit would bind all the persons sought to be represented, and constitute res judicata, under Section 11, CPC.[3]

Registration does not Confer Juristic Personality

Registration of Societies under the Central or State Societies Registration Act does not give the society a corporate status.[4] In Illachi Devi Vs. Jain Society Protection of Orphans India[5] it is held further by our Apex Court as under:

i) The mere fact of registration will not make a society distinct from association of persons. (Para 20)

ii) A Society registered under the Societies Registration Act is not a body-corporate as is the case in respect of a company registered under the Companies Act. In that view of the matter, a Society registered under the Societies Registration Act is not a juristic person. (Para 21)

iii) A society, whether registered or unregistered, may not be prosecuted in criminal court, nor is it capable of ownership of any property or of suing or being sued in its own name. (Para 22) Vesting of property does not take place in the Society. Similarly, the society cannot sue or be sued. It must sue or be sued through a person nominated in that behalf. (Para 26)

‘Suit By or Against a Regd. So.’ is Virtually Suit By or Against Entire Members

A society or a club, both registered and unregistered, is the compendium of its members. When it sues or is sued all its members should be made parties. Registration of Societies under the Central or State Societies Registration Act does not give the society a corporate status.[6]

Expressions in the Societies Registration Act, ‘property belonging to a society’[7] and ‘property of the society’,[8] do not give the society a corporate status; and it “merely describes the property which vests in trustees or Governing Body”.[9]

Following the above propositions, it can be legitimately concluded that the common expression, ‘suit by or against a society’, legally and virtually denotes suit by or against its entire members.

How Sec. 6 is an Enabling Provision

The earlier view taken by various courts in India was that the registered societies were legal persons and they could sue or be sued in their own name;[10] and that Sec. 6 was only an enabling (or added) provision to sue or be sued in the name of the president, secretary, etc. This view does not hold good in the light of Unani Tibia College case[11]and Illachi Devi case.[12]

Suing entire members of the society, either in person or invoking Order I Rule 8 CPC, is the normal rule. But, Sec. 6 enables to sue or be sued every registered society in the name of its president, secretary, etc., as shall be determined by the rules and regulations of the society (or through such person as shall be appointed by the governing body for the occasion).

Suit shall be in the Personal Name of President, Chairman, etc.

From the expression in Sec. 7 of the Societies Registration Act that ‘proceedings shall be continued in the name of or against the successor of such person’, it is clear that the words in Sec. 6 of the Societies Registration Act, ‘sue or be sued in the name of President, Chairman, or Principal Secretary, or Trustees,’ refers to filing suit by or against the President, Chairman, Principal Secretary or Trustees in their ‘personal name’; and not in their ‘official status’ as President, Chairman, Principal Secretary or Trustees.

Procedural Defects Should Not Defeat A Just Cause

It is trite law that one should not be non-suited for technical reasons, and that procedural defects or curable procedural irregularity which is curable or which does not go to the root of the matter should not be permitted to defeat a just cause. [13] It was pointed out in United Bank of India Vs. Naresh Kumar[14] by our Apex Court that there is sufficient power in the Courts, under the Code of Civil Procedure, to ensure that injustice is not done to any party who has a just case.

Supreme Court Expanded Powers of Authorities of Companies in Filing Pleadings

Under Order 29 Rule 1 of the CPC, Secretary or any Director or other Principal officer can sign pleadings by virtue of their office. A company being a juristic entity, Board of Directors can authorise any person to sign pleadings by passing a resolution or giving a power of attorney, by virtue of Order 6 Rule 14 read with Order 29 Rule 1 CPC. If pleadings have been signed by one of its officers, a Company can ratify it. Such action can be express or implied.

It is held in United Bank of India Vs. Naresh Kumar (1997)[15] that a Court can, after taking all the circumstances of the case, come to the conclusion that the company must have ratified the act of signing the pleading. It was pointed out that the courts below should have, in any case, directed the company to produce a proper power of attorney or they must have allowed a competent person to be examined to prove ratification.

Courts own words in United Bank of India Vs. Naresh Kumar (1997)[16] read as under:

“10. It cannot be disputed that a company like the appellant can sue and be sued in its own name. Under Order 6 Rule 14 of the Code of Civil Procedure a pleading is required to be signed by the party and its pleader, if any. As a company is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the company. Order 29 Rule 1 of the Code of Civil Procedure, therefore, provides that in a suit by or against a corporation the Secretary or any Director or other Principal Officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto and de hors Order 29 Rule 1 of the Code of Civil Procedure, as a company is a juristic entity, it can duly authorise any person to sign the plaint or the written statement or its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the Code of Civil Procedure. A person may be expressly authorised to sign the pleadings on behalf of the company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers a Corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The Court can, on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial, come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer.”

Proper Authorisation Essential

It is beyond doubt that a proper authorisation is essential for filing suit by a Company. Though, Secretary or any Director or other Principal officer can sign pleadings by virtue of their office, as per Order 29 Rule 1 of the CPC, the view followed in some earlier decisions was that neither the directors nor the managing director would have the right to represent the Company in the suit unless duly authorised by a resolution taken by the Board of Directors to that effect, at a meeting duly constituted for the said purpose.[17]

In State Bank of Travancore Vs. Kingston Computers (2011)[18] it is held by our Apex Court as under:

“14. In our view, the judgment under challenge is liable to be set aside because the Respondent had not produced any evidence to prove that Shri Ashok K. Shukla was appointed as a Director of the company and a resolution was passed by the Board of Directors of the company to file suit against the Appellant and authorised Shri Ashok K. Shukla to do so. The letter of authority issued by Shri Raj K. Shukla, who described himself as the Chief Executive Officer of the company, was nothing but a scrap of paper because no resolution was passed by the Board of Directors delegating its powers to Shri Raj K. Shukla to authorise another person to file suit on behalf of the company.”

In this decision (State Bank of Travancore Vs. Kingston Computers) there was no scope to ponder on the doctrines as to ‘technical or procedural defects’ as done in the earlier decision in United Bank of India Vs. Naresh Kumar (1997). [19] The decision, State Bank of Travancore Vs. Kingston Computers may be distinguishable from United Bank of India Vs. Naresh Kumar. In State Bank of Travancore Vs. Kingston Computers there was no evidence to show that the signatory was a Director of the Company, and no resolution of the Board of Directors was produced to prove that the signatory was authorized to file the suit.

It was observed by Delhi High Court in Nibro Limited Vs National Insurance Co. (1991)[20] that if a director or a secretary was authorised by law to file a suit on behalf of a company, then he could certainly give the authority to another person as provided under Order III Rule 1 CPC. Order III Rule 1 provides that ‘any appearance, application or act in or to any Court, required or authorised by law to be made or done by a party in such Court, may, except where otherwise expressly provided by any law for the time being in force, be made or done by the party in person, or by his recognised agent, or by a pleader appearing, applying or acting, as the case may be, on his behalf. Provided, that any such appearance shall, if the Court so directs, be made by the party in person’. However, if there is an express provision of law, then that will prevail. Thus, if an authority is given to a pleader or a recognised agent as provided by law, the recognised agent or pleader can file an appearance or file a suit in court if the party himself is not in a position to file it.

The Bombay High Court, in Alcon Electronics Pvt. Ltd Vs. (2015),[21] observed, with respect to the source of power of the Directors, as under:

“The essential requirement of this provision is that the Company which is a juristic person must itself decide to sue. Once that is done, it would authorise one of its Directors who is the agent of the Company or its principal officers the Secretary of the Company or the Managing Director to file the Suit. The suing in each case is a separate act. The Company acts only through its meetings. Hence the Board of Directors in the day to day management of the company must decide and resolve to sue or not to sue. A blanket authority cannot be given to a particular Managing Director or Director to sign the papers and document/s, including the power to sue. The power to sue requires application of mind upon the particular cause of action. It requires the Company to pay the requisite Court fee. It requires the Company to be represented by a legal officer being an Advocate of the Court. It is an act which, therefore, is not a part of the day to day management of the Company. A Company would decide in a given case upon legal advice or otherwise whether or not it would sue upon a given cause of action. Such exercise is imperatively required to be performed if the intention of the Company, which is only a juristic person, is to be deciphered. That act, of course, may be undertaken even after the filing of the Suit and ratified by the Board as all other acts of management. However, the seminal requirement is to see the act of the Company though its Board or members (dependent upon whether the resolution is passed in the Board meeting or a general meeting) or is given by the Company itself (under its Articles of Association).”

In Nibro Limited Vs. National Insurance Company Ltd. (1991),[22] it is observed, with regard to the source of power of the Directors, as under:

“25. It is well-settled that under Section 291 of the Companies Act except where express provision is made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting–in all others cases the Board of Directors are entitled to exercise all its powers. Individual directors have such powers only as are vested in them by the Memorandum and Articles. It is true that ordinarily the court will not unsuit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has far-reaching effects. It often affects policy and finances of the company. Thus, unless a power to institute a suit is specifically conferred on a particular director, he has no authority to institute a suit on behalf of the company. Needless to say that such a power can be conferred by the Board of Directors only by passing a resolution in that regard.”

It is pointed out by the Delhi High Court in Radico Khaitan Limited Vs. J D Wines (2020)[23] as to the authority of ratification of the act of the officers in signing pleadings, by a Company.

Our Law Does Not Favour ‘Corporation Sole’

Our law does not favour characterising a ‘Corporation Sole’ as a Juristic Person,[24] except officials such as President of India, District Collectors, Secretaries/Office-Heads of various Departments of Government, Village Officers, etc.

Sec. 6 Impliedly Bars Filing a Suit in the Name of Society

As already stated, our Apex Court has repeatedly[25] made it clear that Sec. 6 of the Societies Registration Act provides that a registered society must sue or be sued through the office bearer or a nominee, as provided in that section. Therefore, it can be concluded that Sec. 6 impliedly bars filing a suit in the name of the society, otherwise than through its President, Secretary or the nominated person.

When Society (or All Its Members) need not be Necessary Party?

Suit to protect or recover property

As held by the Privy Council in Jagadinadra Nath Vs. Hemanta Kumari Debi[26] and our Apex Court in Vemareddi Ramaraghava Reddi Vs. Kondaru Seshu Reddi,[27] Shebait of a temple has the authority to institute a suit in his own name to protect and recover property belonging to the deity.[28] By various authoritative decisions, it is made clear that when the trust is admitted, or where the right or title over the property is not in dispute the deity will not be a necessary party, in suits for protection of the property and the rights of the trust.[29] Same is the case for framing a scheme.[30] In Monindra Mohan Vs. Shamnagar Jute Factory[31] a Division Bench held that the deity is not a necessary party in a suit filed on behalf of the Hindu public for declaration that the land in question was a debasthan of the idol and that it is a public place of warship.

It is appropriate to import this analogy to matters of societies also. Where the right or title over the property is not in dispute, and the suit is filed by a person who is bound to protect the property of a society, it can be concluded that the suit is not liable to be dismissed holding that the society as such (that is, all its members) is a necessary party. The ‘necessary party’ is not defined in the Code of Civil Procedure. But from the judicial dicta it may be laid down that there are two tests. Firstly, there must be a right to some relief against such party in respect of the matter involved in the proceedings in question, and secondly it will not be possible to pass an effective decree in the absence of such a party.[32]

It is observed in Latin Archdiocese of Trivandrum Vs. Seline Fernandez[33] that, though, as per the Canon Law the church property vests in the hands of the Bishop or the Vicar, the parish being by law a public juridic person, and the plaintiffs (the elected representatives of the parishioners entrusted with the administration of the church) were entitled to represent the juridic person, the plaintiffs were competent to initiate civil proceedings (with the ultimate aim of protecting the property belonging to the church) before a Civil Court.

Is Society, a Necessary Party?

Kania, J., in AS Krishnan Vs. M. Sundaram,[34] laid down (earlier view) as under:

“In my opinion as the position of the members of this society is similar to that of the share holders of the company and as the acts of the defendants which are challenged are in respect of the society it is necessary that the society should be a party to this litigation. I do not think it is competent to the plaintiff either alone or representing himself and the other members of the society other than defendants to bring a suit. …… In the absence of the society as a party to this litigation, I am of opinion that the suit as framed is not maintainable and the Court has no jurisdiction to try the suit in the absence of the society.”

Since it is unequivocally held by our Apex Court in Illachi Devi case[35] that a society cannot sue or be sued in its name, it is peremptory that the suit by or against a society should be brought as provided under Sec. 6 of the So. Regn. Act.

Sec. 6 is Not Strictly Followed by our Courts

If Sec. 6 is strictly followed:

no suit can be filed the name of the society;
in the absence of provisions in the bye-laws empowering the president/ secretary or anybody else to file a suit or writ-petition, and in the absence of due appointment by resolution by the General/Governing Body, the suit or writ-petition filed by the president/secretary or anybody else would not be maintainable;[36]
if the rules and regulations of the society do not determine the person against whom a suit is to be filed, any person having a claim or demand against a society can sue the president, secretary or the trustees thereof (in their name), only if in-spite-of-an-application to the governing body, some other officer or person is not nominated (to be the defendant); and
a general statement in the bylaw[37] authorising an office-bearer to ‘represent the society in any legal proceeding’ does not enable him to file a suit on behalf of the society; because, this provision, in the bye laws, would only authorise such office bearer to represent the society in a properly instituted suit; and the authority to file a suit is quite different from the authority to represent the society in a suit which has been validly instituted.

Doctrine of substantial representation

It is noteworthy that the diktats in Sec. 6 are not invariably followed by our courts; but, adopted the doctrine of ‘substantial representation’.[38] In Singhai Lal Chand Jain Vs. Rashtriya Swayamsewak Sangh, Panna[39] our Apex Court observed as under, with respect to an unregistered association, Rashtriya Swayam-sewak Sangh (RSS):[40]

“Procedure is the handmaid to the substantive justice. …. It is true that no permission of the Court was taken to be sued in a representative capacity by or on behalf of the Sangh. But Clause (b) of Order 1, Rule 8 indicates that it may sue or be sued, or may defend such suit, on behalf of, or for the benefit of all persons so interested. Clause (b) clearly applies to the facts in this case. The President of the Sangh, the Manager of the Sangh and a Member have duly represented the Sangh and defended the suit for the benefit of all the persons so interested in the Sangh.” [Note: The suit was for eviction of RSS through its Manager, its President; and the Head Master of Saraswati Shishu Mandir as a member of the Sangh.]

In this decision the following passage from Surayya Begum Vs. Mohd. Usman[41] was quoted:

“The principle of representation of the interest of a person, not impleaded by name in a judicial proceeding, through a named party is not unknown. A karta of a Joint Hindu Family has always been recognised as a representative of the other members of the Joint Hindu Family, and so has been a trustee. In cases where the provisions of Order 1, Rule 8 of the Civil Procedure Code are attracted a named party in a suit represents the other persons interested in the litigation, and likewise a receiver appointed in one case represents the interest of the litigating parties in another case against a stranger. Similarly the real owner is entitled to the benefits under a decree obtained by his benamidar against a stranger and at the same time is also bound by the decision. Examples can be multiplied. It is for this reason that we find Explanation VI in the following words in Section 11 of the Code of Civil Procedure: ‘Explanation VI. – Where persons litigate bona fide in respect of a public right or of a private right claimed in common for themselves and others, all persons interested in such right shall, for the purposes of this section, be deemed to claim under the persons so litigating’.”

Notice to a Society, Notice to all Members

The notice to a Co-operative Society will be deemed as notice to all its members. In Daman Singh Vs. State of Punjab and Haryana[42] it is pointed out by our Apex Court, with respect to a Co-operative Society, that S. 13(9)(a) provides for the issue of notice to the societies and not to individual members and that S. 13(9)(b), however, gives the members an opportunity to be heard.

It is legitimate to maintain that, in appropriate cases, it may be proper to extend these principles as to service of notice, to both registered and unregistered societies, and a club also, with regard to the matters-touching-rights-or-duties of the society ‘as a body’; for example, notice as to nonpayment of tax or revenue. The notice to the society or a proper office bearer will be deemed as notice to all its members.

[1] Board of Trustees, Ayurvedic & Unani Tibia College, Delhi Vs. The State: AIR 1962 SC 458; Illachi Devi Vs. Jain Society Protection of Orphans India AIR 2003 SC 3397; Tata Vs. Tata, AIR 2010 SC 2943.

[2] TN Housing Board Vs. TN Ganapathy, (1990) 1 SCC 608: AIR 1990 SC 642; Jamiat Ulama Vs. Maulana Mahmood Asad Madni: ILR 2008-17 Dlh 1950

[3] Mahboob Sahab Vs. Syed Ismail: AIR1995 SC 1205; T N Housing Board Vs. T N Ganapathy, (1990) 1 SCC 608: AIR 1990 SC 642; Venugopala Naidu Vs. Venkatarayulu: (1989) Supp 2 SCC 3 56: AIR 1990 SC 444. Ahmed Adam Sait Vs. M. E. Makhri AIR 1964 SC 107. C Arumughathan Vs. S Muthusami Naidu: 1993-1 CivCC 79: 1992-1 Mad LJ 532

[4] Board of Trustees, Ayurvedic & Unani Tibia College, Delhi Vs. The State: AIR 1962 SC 458.

[5] AIR2003 SC 3397

[6] Board of Trustees, Ayurvedic & Unani Tibia College, Delhi Vs. The State: AIR 1962 SC 458. Illachi Devi Vs. Jain Society Protection of Orphans India: AIR 2003 SC 3397; Tata Vs. Tata, AIR 2010 SC 2943.

[7] Societies Registration Act: Sec. 5

[8] Societies Registration Act: Sec. 8 and 10

[9] Board of Trustees, Ayurvedic & Unani Tibia College, Delhi Vs. The State: AIR 1962 SC 458

[10] Shanti Sarup Vs. Radhaswami Satsang Sabha, Dayalbagh Agra: AIR 1969 All. 248; K.C. Thomas Vs. R.B. Gadaook, AIR 1970 Pat 163; Khiri Ram Gupta and Another versus Nana Lal: AIR 1964 Pat. 114, Satyavart Sidhantalankar Vs. Arya Samaj, Bombay : AIR 1946 Bom. 516; Nabadwip Bhajan Asram Vs. Commissioner of Nabadwip Municipality : AIR 1959 Cal 361; Sonar Bangala Bank Vs. Calcutta Engineering College: AIR 1960 Cal 409.

[11] Board of Trustees, Ayurvedic & Unani Tibia College, Delhi Vs. The State: AIR 1962 SC 458.

[12] Illachi Devi Vs. Jain Society Protection of Orphans India AIR 2003 SC 3397; Tata Vs. Tata, AIR 2010 SC 2943.

[13] United Bank of India Vs. Naresh Kumar: AIR 1997 SC 3; Uday Shankar Triyar Vs. Ram Kalewar Prasad Singh: AIR 2006 SC 269; Varun Pahwa Vs. Mrs. Renu Chaudhary: AIR 2019 SC 1186: 2019-3 JT 109

[14] AIR 1997 SC 3

[15] AIR 1997 SC 3

[16] AIR 1997 SC 3

[17] B. Mookerjee Vs State Bank of India: AIR 1992 Cal 250; Nibro Limited Vs National Insurance Co: AIR 1991 Del 25

[18] 2011-11 SCC 524

[19] AIR 1997 SC 3

[20] AIR 1991 Del 25

[21] 2015-1 Mh L 852

[22] AIR 1991 Delhi 25: Quoted in: United India Periodicals Pvt. Ltd. Vs. CMYK Printech Ltd. : 2018-248 DLT 227.

[23] 2020-2 AD(Del) 421.

[24] Samatha Hyderabad Abrasives And Minerals Vs. State of AP: AIR 1997 SC 3297; T.K. Santhanagopala Chettiar Vs. Thimmi M. Seetharama Chettiar 1968-2 Mad LJ 41; S Govinda Menon Vs. Union of India: AIR 1967 SC 1274; S C Sreemanavikraman Raja Vs. Controller of Estate Duty: 1957-2 Mad LJ 226.

[25] Board of Trustees, Ayurvedic & Unani Tibia College, Delhi Vs. The State: AIR 1962 SC 458; Illachi Devi Vs. Jain Society Protection of Orphans India AIR 2003 SC 3397; Tata Vs. Tata, AIR 2010 SC 2943.

[26] (1904) 31 Ind App 203 (PC)

[27] AIR 1967 SC 436: Referred to: Pramathanath Nath Vs. Pradyumna: AIR 1925 PC 139.

[28] Kishore Joo Vs. Guman BehariJoo Deo: AIR 1978 All 1. Referring: Jagadindra Nath Vs. Hemanta Kumari, (1904) 31 Ind App 203.

[29] Hangi Mal Vs. Panna Lal: AIR 1957 All 743

[30] Bimal Krishna Vs. Iswar Radha Ealla: AIR 1937 Cal 338.

[31] AIR 1939 Cal 699

[32] The Banaras Bank Ltd. Vs. Bhagwan Das: AIR 1947 All 18; Udit Narain Singh, Malpatharia vs. Additional Member Board of Revenue, Bihar and another, AIR 1963 SC 786.

[33] 2013(4) Ker LT 283.

[34] AIR 1941 Bom. 312

[35] Illachi Devi Vs. Jain Society Protection of Orphans India AIR 2003 SC 3397

[36] Advocates Association Vs. District Registrar and Registrar of Societies: AIR 2006-4 Kar R 218: 2006-4 Kar LJ 526; Relied on: Muddappa Vs. Panchaksharaiah: ILR1985 Kar 1230; Inamdar Vs. BF Swamy: ILR1991 Kar 1654

[37] See: Inamdar Vs. BF Swamy, ILR1991 Kar 1654. Referred to in Advocates Association Vs. District Registrar : 2006-4 AIR Kart 218

[38] Subramania Pillai Vs. Masterly: AIR1976 Mad 303

[39] AIR1996 SC 1211

[40] Note: RSS was a defendant; and not plaintiff.

[41] (1991) 3 SCC 114

[42] AIR1985 SC 973

Read in this cluster (Click on the topic):

Civil Suits: Procedure & Principles

Evidence Act

Constitution

Contract Act

Easement

Club/Society/Trust

How to Sue Societies, Clubs and Companies

Published by sajikoduvath

Leave a Comment Cancel reply

Share this:

Like this:

Related

Published by sajikoduvath

Leave a Comment Cancel reply