M. Krishnamoorthy vs The Government of Tamil Nadu andKalaimagal Sabha

K. Govindarajan, J.—The petitioner claiming that he is a member of the 4th respondent society, which was registered under the provisions

of the Tamil Nadu Societies Registration Act, 1975, has filed the above writ petition seeking to quash the notice issued by the 1st respondent

dated 6.11.1998 and to direct the 1st respondent for the appointment of a Retired High Court Judge as the custodian to take control of the funds

and assets of the Society intended for the benefit of the members and to distribute the same either in the shape of funds or property or both to the

members of the Society who prove their entitlement. The 4th respondent society was founded on 15.1.1984 and was registered as a society under

the said Act. The society admitted the members and implemented certain Schemes as members beneficial scheme. If a person wants to become a

member after 1.4.1998 he has to pay the amounts as follows:-

Each member is to contribute Rs. 12,500/-;

If he makes a one time payment, he can pay Rs. 11, 500/- and become a member;

If he desires to become a member by paying the aforesaid amount in monthly instalment, he may do so by paying Rs. 250/- per month for 50

months. The aforesaid monthly amount of Rs. 250/- is apportioned as follows :-

Contribution towards Share Capital for the purchase of immovable property Rs. 6/-

Contribution towards general fund for investment in property for the benefit of the members Rs. 200/-

Contribution towards marriage and education fund for the members Rs. 2/-

Contribution towards publication of ''Kannimai'' Sabha''s journal. Rs. 6/-

Contribution towards death fund for the benefit of the members Rs. 6/-

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Total Rs. 250/-

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A sum of Rs. 10/- out of Rs. 32/- paid in the first month is adjusted towards entrance fee to the society.

According to the petitioner, after becoming a member of the 4th respondent Society, he had enrolled about 3000 members thereby helping the

Society, to collect a sum of Rs. 1.00 crore approximately. Under the petitioner there are about 20 Member Relationship Officers who have

assisted the petitioner by canvassing to. enroll as members in the 4th respondent. Society. The post of Manager would be conferred on a member

who enrolled a minimum of 200 members. The Manager and the Member Relationship Officers would together be paid the Travelling Allowance

at 6% out of the amount collected towards contributions and they would not be paid any other amount. According to the petitioner, the Society,

apart from doing activities in furtherance of its objects for the genera) or the public welfare, was also collecting funds to be utilized exclusively for

the benefit of its members. The above said funds were collected under different heads such as purchase of property, marriage, education, death

etc., which were kept in separate accounts and utilized for the said purposes. It is the case of the petitioner that the said Society has enrolled more

than 5.75 lakhs members as on 15.1.1998 and acquired Valuable immovable properties of the face value of Rs. 84 crores. the present market

value would be worth about Rs. 300 crores. The said properties are situate in about 450 places in 29 Districts of Tamil Nadu. The Society under

the Member''s beneficial Scheme would divide these properties amongst its members by the year 2006 and thereby each member shall get a plot

of land worth Rs. 2, 00, 000/-.-

The 1st respondent issued a show cause notice to the President of the 4th respondent Society as to why action should not be taken u/s 34-A of

the Societies Registration Act, and a Special Officer appointed for a period of one year. on 6.11.1998. These proceedings of the 1st respondent

are under challenge in the above writ petition.

This Court directed the learned Government Advocate to take notice and get instructions, and thereafter at the instance of the learned

Government Pleader, the matter was adjourned from time to time and finally it was posted to 23.2.1999. On that day the learned Government

Pleader informed the Court that pursuant to the show cause notice, the Special Officer has been appointed. It was surprise to the Court to hear

such submission, when the matter is pending, and when the learned Government Pleader appearing for the respondents 1 to 3 took time to get

instructions, the respondents 1 to 3 have appointed the Special Officer to make the proceedings ineffective.

The respondents filed a counter stating that several complaints were received against the 4th respondent Society alleging that the affairs of the

Society are conducted fraudulently and are mismanaged and the funds of the Society are misappropriated. So, an elaborate inquiry u/s 36(1) of the

said Act was conducted and the irregularities were found out. The District Registrar, Namakkal, the 3rd respondent sent a notice to the 4th

respondent Society, calling for explanation. The explanation was given by the President of the Society and thereafter the. District Registrar had

recommended supersession of the Committee and appointment of the Special Officer. The 1st respondent again issued a notice on 5.11.1998.

Since there was change in the post of President of the Executive Committee, another notice dated 6.11.1998 was issued to all the existing

committee members as contemplated u/s 34-A (1) (a) of the said Act requesting them to show cause as to why the committee should not be

superseded and a Special Officer appointed. It is stated that the General Manager of the 4th respondent Society filed a writ petition on

W.P.No.25153/1998 to quash the said notice of the 1st respondent, and the same was dismissed on 5.1.1999.

The respondents have denied the fact that the members of the Society are entitled to claim any funds or properties, as Section 42 of the said Act

prohibits the distribution of properties of the Society among its members. So, the question of appointing custodian as requested for the purpose of

distributing the same to its members would not arise.

The learned Senior Counsel appearing for the petitioner on the basis of the bye-laws as approved by the concerned authorities, has submitted

that the bye-laws provide scheme to help the members of the Society to gel property and marriage donation. The said scheme is as follows:-

6(j) Sabha shall collect Rs. 2,500/- as contribution and Rs. 1,500/- as late fee contribution. Now sabha collects Rs.4, 300/- i.e. Rs.2,500/- as

contribution and Rs. 1,800/- as late fee contribution. Sabha will raise the late fee contribution according to the growth of Sabha. This is applicable

for first 5000 members. Soon after 5000 members are enrolled sabha shall enroll l/8th share members, The share shall be Rs. 315/- as contribution

Rs. 685/- as late fee contribution totaling to Rs. 1,000/- Late fee contribution shall be included in the general fund. The contribution shall also be

included in the general fund. The contribution shall also be collected in the general fund. The contribution shall also be collected in monthly

instalments. The contribution shall be collected according to the resolution made by the General Body Meeting.

All the contribution collected shall be utilized for the purpose of purchasing lands in the members'' name. All the lands to be purchased are the

lands of Sabha members i.e. all the Registered members at the time of dissolution of the Sabha. The lands so purchased shall be used for the

purpose of growing trees, running animal husbandry farms, for conducting Art & Cultural activities for the 19 years. At the end of the 20th year the

same lands shall be divided and handed over to the members.

On any reason Sabha can''t sell the land. The lands can be divided only among members. The lands are not the Sabha''s property, but the property

of its members. At the time of dissolution the property of the members shall be divided under Tender system.

(j) (2) Committee members are selected by the General body once in 3 years. Sabha can change the committee members according to its

resolution. Sri S. John is appointed by the general body on salary basis as General Manager of the Sabha. He shall maintain administration

according to the resolutions and instructions given by the General body. General Manager shall be paid 3% of the income of the Sabha. If Sabha

doesn''t get the profit he shall not be paid and post shall be treated as Honorary. The General Manager shall be paid 3% from the late fee

contribution. Sabha doesn''t function at profit motive.

But the Sabha will get natural income by the raising of the land values and the service charges. The administration of the Sabha run from the late fee

contribution as follows: 3% for the General Manager, 2% for office staff and 5% for the office administration, i.e. in total only 10% of the late fee

contribution shall be used for the administration.

All the excess contribution amount if any, shall be handed over to the members in case Sabha deems the collected amount is not necessary for

sabha or at the time of dissolution of the Sabha. All belonging of Sabha members are not the Sabha property but they are properties of the

members only. The Kalaimagal Sabha members are permitted to purchase buildings, if necessary, any where in the name of Kalaimagal Sabha

members.

On the basis of the above said bye-law, the learned Senior Counsel has submitted that the bye-laws which had been approved under the said Act

by the concerned authorities contemplate distribution of the properties purchased by the 4th respondent Society for the benefit of its members and

the Society cannot sell the land and so the said properties purchased for the benefit of its members cannot be treated as the properties of the

Society, so as to enable the authorities concerned to deal with the same under the guise of supersession of the Society. It is the specific case of the

learned Senior Counsel that those properties are not the properties of the Society but the properties of the members of the Society and so Section

42 of the said Act cannot be made applicable to the facts of the present case. On that basis the learned Senior Counsel has submitted that in view

of the large extent of the properties purchased in various places, and the numerous members who contributed on the basis of the said bye-law as

approved by the concerned authorities, with the hope that they would get back their properties as contemplated under the bye-laws, it is proper

that a custodian should be appointed for the purpose of distribution of these properties to its members. According to him, the Government

machinery cannot act as quick as it requires and thereby the members would be prejudiced.

The learned Government Pleader appearing for the respondents has submitted that the scheme of the said Act provides for supersession of the

Committee if in the opinion of the 1st respondent, the affairs of the registered Society are mismanaged and not functioning properly. Accordingly to

him, in this case after giving due opportunities to the concerned parties, the 1st respondent has come to such a conclusion. Referring to Sec.42 of

the said Act, the learned Government Pleader has submitted that if upon the dissolution of any registered Society, there shall remain after

satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the Society,

but shall be given to some other registered Society or to any other association of persons having the same object or objects, similar to those of

such registered Society to be determined by a special resolution or in default thereof by the Court. The learned Government Pleader has also

submitted that the petitioner is not an aggrieved person, and the committee members of the 4th respondent Society have submitted their objections

on various dates which were considered by the 1st respondent and the Committee was superseded on 15.2.1999 which is not under challenge. On

that basis the learned Government Pleader has submitted that the writ petition has to be dismissed, as the petitioner cannot maintain the same.

From the relevant portion of the bye-laws of the 4th respondent Society extracted above, it is clear that the properties were purchased though in

the name of the 4th respondent Society, they are only for the benefit of its members with an object to distribute the same to the members who

contributed for the said specific purpose. The only objection that has been raised by the learned Government Pleader to the submission made by

the learned Senior Counsel for the petitioner is that under Sec.42 of the said Act, the members of the 4th respondent Society are not entitled for

any profit or any property from the 4th respondent Society which has been dissolved. I am not able to accept the said submission.

The functioning of the 4th respondent Society is entirely different in nature comparing to the other Societies. In spite of Sec.42 of the said Act,

the concerned authorities have approved the bye-laws framed by the 4th respondent-Society to get contribution from its members, to purchase the

properties, to be distributed in the year 2006 to those who have contributed for the same. The members of the 4th respondent-Society have

contributed the money only on the basis of the bye-laws approved by the concerned authorities. When the 4th respondent-Society has come

forward with the scheme legally approved by the authorities concerned, now it cannot be said that the said bye-laws are contrary to the provisions

of the said Act and so they cannot be acted upon. When a group of public, who are the members of the 4th respondent-Society have contributed

money with the legitimate expectation of getting back the property worth of their investment, it cannot be said that the contribution of the members

expecting some property in the year 2006 is based on false hope or with illegal gain, but, it is based on legally approved bye-laws by the

appropriate authorities appointed for that purpose under the statute. So, when the public, who are the members of the 4th respondent-Society

were made to contribute on the basis of the approved bye-laws of the Society, at this stage it cannot be said that I they are not entitled for any

property which are purchased only for their benefit. In the bye-laws of the 4th respondent-Society, it is specifically stated that the Society has no

right to sell the properties purchased for the benefit of its members. In view of the above. the submission of the learned Government Pleader on the

basis of Sec.42 of the said Act cannot be countenanced and the members who contributed and eligible should be allowed to get the benefits

derived from out of their contribution.

So, in the interest of the innocent investors, this court has to find out a solution so as to enable the members of the 4th respondent-Society to

get their share in the properties purchased, and intended for then-benefits. Taking into consideration of the above said facts, I am of the view that

the Special Officer who has been appointed to deal with the affairs, may not be able to discharge his function effectively all alone and to the

satisfaction of the members in view of the fact that large extent of the properties and huge amount of money are involved. So, this Court is of the

opinion that Receivers should be appointed to take charge of the properties purchased by the Society for the benefit of its members in various

places and funds available for distribution among the members who are all lawfully entitled for the same.

Hence, (1) Thiru N. Meenakshi Sundaram, Advocate, (Retired District Judge). Chennai, (2) Thiru S. Navaneethakrishnan. Advocate,

Chennai, and (3) the Special Officer appointed to the Society, are appointed as Joint Receivers to take charge of the properties so purchased by

the 4th respondent-Society, as well as the funds available, and the entire accounts, and to take care of the affairs of the Society for the purpose of

distributing the outcome of the properties purchased for the benefit of its members from the sale proceeds of the same and the funds available in

the Society for that purpose.

The following are the procedures to be followed by the said Receivers:-

(i) The Joint-Receivers are directed to take charge of the office and other properties and funds which stand in the name of the 4th respondent-

Society;

(ii) The Joint-Receivers shall find out as to who are all the members of the 4th respondent-Society entitled for the benefit of getting the share in the

properties so purchased by the 4th respondent-Society under clause (6) of the said by-laws;

The Joint-Receivers are directed to sell the properties on the basis of the time-bound program, either by public auction or calling for tenders. The

Joint-Receivers should get prior approval from this Court before even confirming any such offer;

The Joint-Receivers shall distribute the sale proceeds of the properties so purchased to the members of the 4th respondent-Society who had

contributed for the same, on the basis of the ratio of contribution and on the basis of their entitlement for such sale proceeds. Even with respect to

the cash which is in the bank deposit, or with respect to any other deposit, if the Joint-Receivers find that the same have to be distributed to the

members of the Society, the said distributions have to be done only with the prior permission of this Court

If any balance amount is available, after getting report from the Joint-Receivers, this Court will decide about the future course of action.

The Special Officer who is also one the Joint-Receivers is directed to render his full co-operation with his team of officers for the other Joint-

Receivers in working out the above said scheme, since administrative works are to be carried out in the office of the Society.

The Joint-Receivers 1 and 2 are entitled to initial payment of a sum of Rs. 5,000/- each, per month, from today. The remuneration will be fixed on

the progress of the work, and on the joint-memo of the Receivers 1 and 2.

The incidental expenses if any that are to be incurred by the Receivers 1 and 2 should be met by the Society through the third-receiver, the Special

Officer.

If any difficulty is experienced by the Joint-Receivers in carrying out the directions of this Court, they can approach this. Court for clarification or

for getting further directions in this regard. In view of the above, this writ petition is ordered accordingly, with the above observations. No costs,

Consequently, the connected W.M.Ps are closed.