Association of persons

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 June 2013 What is the status of unregistered association ?If AOP is not registered then it is assessed at which status ?

Ajay Mishra

Ajay Mishra (Expert)
Follow

21 June 2013 Hi

It may be noted that an illegal association under section 11, is not an association for illegal purpose. Section 11 only makes the association illegal that is, the law does not recognise the right of more than 10/20, as the case may be, persons to carry on business as an association, but the business of the association is not unlawful. This section will apply only where a company, association, or partnership carries on business for acquisition of gain either by itself or by any of its members.
1. Joint family carrying business activities are not illegal association
Section 11 does not apply to a joint family. When two or more joint families carry on business, then both the male and female members shall be taken into account, but the minor members of such families shall be excluded for reckoning the number of persons, which is maximum 10/20 as the case may be.
It has been held in the case of Agrawal & Co. v CIT by the Supreme Court that two or more joint families as such cannot form a partnership.
2. Object of acquisition of gain is the basic criterion
Section 11 not apply to such associations, which does not have the object of acquisition of gain, therefore charitable, social, religious, scientific, clubs and other associations which do not have the object of acquisition of gain will fall outside the ambit of section 11(2).
3. Consequences on the illegal association and its members
Any business carried on for making gain in contravention of section 11 will be considered illegal and shall be responsible in the following respects:—
(1) the persons carrying on the said business will be held personally liable for all the debts and obligations incurred in such business;
(2) an illegal association of more than twenty persons carrying on any such business will not be able to initiate any legal proceedings against a person to recover debts due to the said association [Pattada Uthayya v Pattada Somappa (1956) 26 Comp Cas 121 (Mys)];
(3) illegal association cannot be subject to liquidation under the provisions of the Companies Act, 1956. However, an association of more than 20 persons, can be wound up as an unregistered company;
(4) every person who is a member of a company, association or partnership formed in contravention of this section will be punishable with fine which may extend to Rs. 10,000;
(5) the offence under section 11 is compoundable by the Regional Director under the provisions of section 621A of the Companies Act, 1956.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now