New Delhi: The government wants to rewrite a law that’s about 150 years old to make the functioning of non-governmental organizations (NGOs) transparent by allowing, among other changes, the public scrutiny of their accounts, according to the ministry of corporate affairs (MCA).
“The ministry is setting up an expert committee to look into” the Societies Registration Act and suggest amendments, said a senior official at the ministry, who did not want to be identified. “This is being done because the archaic law pertains to 1860.”
The government’s drive to allow greater scrutiny is mirrored by the requirements of donor agencies.
“The need has been felt as several of these institutions are granted funds from the government and multilateral institutions such as the World Bank and the United Nations Educational, Scientific and Cultural Organization,” the official said. The constitution of a working group to review the law was a part of the 100-day agenda of the MCA.
According to the present Act, any seven or more persons associated for any literary, scientific or charitable purpose can register a society with the registrar of joint-stock companies through a memorandum of association, which essentially describes their statement of purpose.
The Societies Registration Act is on the concurrent list of the Indian constitution, which means both the Centre and the states can legislate on the subject. When there is a dispute in interpretation, the Central legislation prevails.
The ministry is considering a model Central Act that can act as a template for the states, the official said. The implementation of the Act falls within the purview of the corporate affairs ministry.
“The expert committee is expected to be constituted soon as the process of shortlisting experts has already begun,” said the MCA official, without divulging any names or their fields of expertise.
Another MCA official, who also did not want to be identified, said his team had made a presentation to the ministry of rural development on the e-filing of accounts and other information by companies through the MCA 21 website.
“Since the rural development ministry has been funding several such associations, particularly NGOs, they found the MCA’s e-filing” system could help track progress made by the groups, the official said.
Consolidated annual statements are required to be filed by registered societies as well but these are not in electronic format, making them difficult to scrutinize.
“Annual returns and balance sheets are required to be filed by some 800,000 companies in the country under the Companies Act. Since companies are doing this online, their records can be viewed by anyone by logging on the MCA website,” the official said.
New Central legislation would act as a template and help resolve differences, said a legal expert.
“The model Act can be a guide and will especially come in handy in interpreting any order or precedent and avoid controversies,” said G.R. Bhatia, partner at Luthra and Luthra Law Offices in New Delhi. “Besides, there should be a provision made by MCA that societies compulsorily go for e-filing of their statements so that transparency can be maintained and data is easily accessible.”