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1991 (2) TMI 60

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..... up a statement of the case and referred it, with his opinion thereon, for the decision of the Chief Controlling Revenue Authority. The Chief Controlling Revenue Authority, in turn, in the order of reference, has stated the case, thus : "The author of the trust is the President of the National Education Society in Karnataka, a society registered under the Mysore state Registration Act, 1904, now called the Karnataka State Societies Registration Act, 1960. The terms of the instrument in brief are : 1. The National Education Society in Karnataka will become the National Education Society Trust. 2. The objects of the society shall remain the objects of the trust. 3. All the members of the Governing Council of the society become trustees. 4. All the assets and liabilities of the society including all its institutions, hostels and printing press and other ventures shall become the assets and liabilities of the trust. 5. This is a public charitable trust. According to the opinion of the Deputy Commissioner of Stamps, the entire ownership of the properties in the society is transferred to the trust. There is a disposition of property as well as transfer. As such, the documen .....

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..... this case, there is already a society owning properties which transfers the property to a trust or transforms itself into a trust." On the case stated, the Chief Controlling Revenue Authority has sought for the opinion of this court under section 54(1) of the Act on the following questions : " 1. Whether the deed in question is a declaration of trust chargeable to stamp duty under article 54A of the Schedule to the Karnataka Stamp Act, 1957 ? 2. Whether it is a settlement liable to duty under article 48 of the Schedule to the Karnataka Stamp Act, 1957, read with section 2(1)(q)(iii) ? 3. Whether it is both a declaration of trust as well as a settlement chargeable to aggregate stamp duty ? 4. If the document does not fall under any of the items aforesaid, what is the correct nature of the deed and the stamp duty payable thereon ?" In C. R. C. No. 4 of 1989 also, an instrument styled as the "Deed of trust" executed by the President of the Mahabodhi Society, Bangalore, was presented for its registration before the Sub-Registrar, Gandhinagar, Bangalore. The Sub-Registrar, seeing the recitals in the documents, felt doubt as to what is the proper stamp duty leviable on the s .....

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..... y purposes for which the society exists. In the instrument in question, the society becomes a trust and the property also gets transferred and as such there is a complete change in the status itself. Further, according to section 14 of the Karnataka Societies Registration Act, 1960, the movable and immovable properties belonging to the society shall, if not vested in the trustees, vest with the governing body. Secondly, there is no provision in the Act to change the character of the society to a trust. The only provision is section 21 which provides for amalgamation of societies. As there is no provision to change a society into a trust, the transaction in effect amounts to a transfer of the property. Thereby, it attracts a higher stamp duty as a settlement. The term "declaration of trust" as provided in article 54 of the Karnataka Stamp Act, 1957, is not defined but recourse can be had to the Indian Trusts Act, where the term trust has been defined as a confidence reposed in a person regarding a property. As such, a declaration of trust involves vesting of property out of confidence reposed on the trustee. Here, there is already society owning properties which transfers the prop .....

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..... careful study of the rules of the society and their implications have revealed that there is a lot of scope to inject unhealthy tendencies into the society by vested interests, and make the management unwieldy and its working ineffective and this may ultimately cause irreparable damage to the academic and administrative work, and the properties of the institutions and the management ; (emphasis supplied) .... VI. Whereas taking all these factors into consideration and having in view the future welfare of the institutions also, the Governing Council of the National Education Society of Karnataka unanimously resolved that the affairs of the society including all its above institutions and hostels, printing press and other ventures could be better administered by converting itself into a trust ; VII. Whereas the said proposal of the Governing Council of the society was placed before the special general body of the National Education Society of Karnataka convened for this purpose on May 18, 1986, and the said special general body meeting of the society UNANIMOUSLY resolved to convert the said society into a Trust as per the proposal of the Governing Council and the said resolution .....

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..... (2) A Public Charitable Trust by name "The National Education Society Trust" is hereby created .... (7) (a) Management: The Management of the National Education Society Trust shall vest in the BOARD OF TRUSTEES consisting of the following categories:-.... (8) Assets and Liabilities: (i) All the assets and liabilities of the National Education Society of Karnataka (Regd.) including institutions, hostels, printing press and other ventures, shall be the assets and liabilities of the National Education Society Trust. (ii) Assets shall mean and include all the movable and immovable properties, deposits and bank balances, endowments and securities .... (12) (a) The board of trustees shall have powers to sell, to settle or to exchange any of its properties only with the approval of the general body of the trust." Following are a few extracts from the document in C. R. C. No. 4 of 1989: "This DEED OF TRUST executed on the Twenty-seventh day of January One Thousand Nine Hundred and Eighty-eight, by the MAHABODHI SOCIETY, a society registered on 6-9-68 No. S. 123/68-69 under the Karnataka Societies Registration Act No.17 of 1960 having its office at No. 14, First Main Road, .....

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..... usly or by not less than a three-fourths majority." Learned counsel for the respondents in these cases submitted that the documents in question do not fall within the definition of "settlement" under section 2(i)(q)(iii) of the Act. Considering the nature of the documents, the stamp duty payable would be that under article 54A of the Act. Sri S. G. Sundaraswamy, learned counsel for the respondent in C. R. C. No. 4 of 1989, urged that the instrument in question attracts stamp duty under article 52(d) of the Act. He submitted that the respondent is society deemed to have been registered under the Karnataka Societies Registration Act, 1960 (for short "the Act, 1960"). He drew our attention to section 2(a) of the Act, 1960, in which "governing body" is defined thus : "'governing body' means 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 ;" He submitted that under section 14 of the Act of 1960, 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 go .....

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..... o a society. The memorandum of association is to contain the name of the society, the objects of the society, the names, addresses and occupations of the governors, council, directors, committee, or other governing body to whom, by the rules of the society, the management of its affairs is entrusted. The property, movable and immovable, belonging to a society may be vested in trustees, and if not so vested, is 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. Under section 16 of the Act, the governing body of the society 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." In the said judgment, the applicability of sections 4 and 5 of the Charitable Endowments Act (VI of 1890), to a registered society came up for consideration. It is in that context that the observation was made in paragraph 11 as extracted above. But, in paragraph 19 (at p. 777) of the same judgment, it is stated thus : "The .....

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..... Comp Cas 1, AIR 1985 SC 973, also do not advance the case of the respondents any further inasmuch as these authorities do not lay down that the societies registered are not legal entities or that the societies cannot hold properties. The case of Digambar Jain v. Sub-Registrar, Stamps, AIR 1970 MP 23, also does not help the respondents. In that case, the document merely declared the existence of a trust coupled with transfer of its management unlike the cases on hand where the properties belonging to the registered societies are sought to be transferred and vested in the newly created trusts. Section 14 of the Act, 1960, shows that the properties, movable and immovable, belong to a society registered under the Act, 1960. Such properties, if not vested in trustees, shall be deemed to be vested for the time being in the governing body of such societies. Thus, it follows that the properties belong to a society and vest in the governing body for the time being if not vested in trustees. Article 52(d) of the Act is attracted only to cases of transfer of any trust property from the trustees to another trustee or from a trustee to a beneficiary. In these cases, undisputedly, the pro .....

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