NCDRC differentiate between Association registered as Society and Trust

Homebuyer’s association is the cost effective and faster way to demand justice from Consumer Forums. Even though NCDRC have supported cases by buyer groups, if you are planning to drag the builder in the court of law for all the wrongdoings committed by him, you have to be careful about the technicalities and loopholes in our system. Instead of discussing the issues, 80 percent of the time is spent in justifying the technicalities of our age old laws.

Lately, buyers group across the country have started to formally organize themselves and are in the process of registering the homebuyers associations. You may not find any difference in an Associations/Society and a Trust but the courts certainly differentiate between the two.

While the Hon’ble Supreme Court of India empowered Home buyers associations in Lotus Panache Welfare Association vs The 3C Company case, the NCDRC in its recent judgement said that any group registered as Trust can not be allowed to file cases on behalf of buyers.

What’s the difference between a Society and a Trust?

a) An Association or Society

An association is registered under The Societies Registration Act, 1860. The objectives of the society are specific and not general in nature. An association is governed by “rules of regulation” and “memorandum of association”. Two family members can’t be part of the association.

Copy of the Act: Societies Registration Act, 1860

b) A Trust

A trust is registered under Indian Trusts Act, 1882. Unlike a democratic system in an association, one man controls the trust. Even family members can become trustees. Trust are governed by trust deed and objectives are general in nature.

Copy of the Act: Indian Trusts Act, 1882

Lots of Jargons, right? Well, recently one of the homebuyer’s association registered the group as Trust under Indian Trusts Act, 1882 and they had to face unnecessary technicalities.

Case study

In the case of Logix Blossom Greens Buyers’ Welfare Association vs Logix Infratech Pvt. Ltd. for Blossom Greens project in Noida, the NCDRC rejected the complaint filed by the buyer’s group. The commission observed that Complainant Associaton is a charitable trust and it does not fall within the definition of ‘consumer’ under the Consumer Protect Act.

What went wrong? 

Even though the lawyer of the association referred to the case of Lotus Panache Welfare Association Vs. M/s. Granite Gate Properties Pvt. Ltd, the Commission had a different view on the matter.

Court opinioned that:

Under the Consumer Protection Act, 1986, a complaint  can be filed by a consumer. Under Section 2(1)(d) ‘consumer’ is defined to mean ‘any person’ who buys goods or hires or avails of any services for consideration.  The word ‘person’ is also defined under Section 2(1)(m), which includes – (i) a firm, whether registered or not; (ii) a Hindu Undivided Family; (iii) a Co-operative society; and (iv) every other association of persons whether registered under the Societies Registration Act,  1860 or not.

Trust is not included in the definition of the word ‘person’. The Legislature included cooperative society under the definition ‘person’ but not ‘public trust’; secondly, trust is not a legal entity.

Thus, we hold that the complaints filed by the Trust are not maintainable for the reasons that the Trust is not  ‘person’ entitled to file the complaint under the Consumer Protection Act, 1986; and, also that both the complaints are filed by Trust without making the all the Trustees as Complainants.  Hence, these complaints are not required to be entertained.”

The order

Since the Complainant Associaton is a charitable trust, it does not fall within the definition of ‘consumer’. Therefore, relying upon the decision of Pratibha Pratisthan Trust (Supra), we hold that the consumer complaint filed by Complainant Association is not maintainable. In any case, present consumer complaint has not been filed on behalf of all the Trustees.

The present complaint is not maintainable and the same stand dismissed in limine.

Copy of the order: Logix Blossom Greens vs Logix Infratech Ltd – NCDRC

The Logical Buyer’s point of view

Section 12(1) (b) of the Act apart from giving a right to a consumer to file a complaint also gives a right to “consumer associations” to file complaints on behalf of consumers. In other words, whether an association is considered to be a consumer or not is irrelevant for the adjudication of this complaint. The enquiry needs to be restricted to adjudicating whether the members whose interest are represented in the complaint are consumers are not. A special right has been given to a “Consumer Association” to file a complaint under section 12 1(b) of the Consumer Protection Act. It is unfortunate that this judgement in a way takes away that right.

Secondly, the judgement in a way adjudicates that a complaint by society such as in the Lotus Panache Welfare Association case is maintainable but a complaint by a trust is not maintainable as there is a difference between them. The Act clearly defines what a recognised consumer Association is and who can file a complaint under the Act. The Act defines that recognised consumer association needs to be registered under the companies act or any law in force in the union of India. Therefore the act neither makes a mention in favour of a society or against the trust. Therefore there is no basis to treat a society and trust differently.

Conclusion

It is ironic that the case got stuck in such technicalities. Thankfully there was no adverse observation on the Associations registered under Society Registration Act. To be on safer side, the homebuyers groups should ensure register their associations under The Societies Registration Act, 1860.

Follow this article to  understand about Associations: Home Buyers Associations, their benefits and registration process

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