The Book of Law

Here’s a brand new entrant into India’s list of companies — a church. The Madras High Court ruled this week that the Church of South India Trust Association (CSI-TA) is a company registered under the Companies Act, and that the Registrar of Companies (RoC) is entitled to invoke the provisions of the Companies Act by calling upon CSI-TA to produce documents for inspection under Section 209A of the Act.The ruling points out that it is the duty of the directors and other officers or employees of the company to provide all assistance for such inspection of the records.The ruling is a tribute to years of legal activism by a Chennai-based former banker, John S Dorai , who has been demanding a proper revelation of the assets of the church and its use, as well as demanding to know how the church could be run the way it is presently done, and if it indeed was a company as defined under the Companies Act.Dorai has good reasons to be inquisitive: The assets of the church, spread across the four southern states, are in the region of Rs 1 lakh crore, and receipts are estimated to be roughly Rs 1,000 crore.The CSI has 22 dioceses across the four states, besides one in Jaffna, Sri Lanka. With a membership of some 4 million believers, Dorai feels he is not the only one who wants a scrutiny of the church’s books of accounts.However, as in all legal matters, there is some hair-splitting involved. While the church officials admit that CSI-TA is a company, as ruled by the court, they say the CSI by itself is not a company.Dorai counters that head-on: “CSI-TA, in its capacity as a company is in effect the parent entity, and the property of CSI is vested in this company. Income and assets of CSI are managed by CSI-TA. CSI officials hold positions in CSI-TA on ex-officio terms, and this is not in agreement with Companies Act statutes”.Some history is in order, to understand the church-and-trust entity. During the British rule it was the Church of India (CI) that was in operation. The retreat of the British led to the formation of the Church of South India in 1947, and for the north of the country, another entity, the Church of North India, took shape.Dorai says the CSI-TA, which set itself up as a company in 1947, has not ensured that the memorandum of association and articles of association of CSI-TA were made to comply with the requirements of the Companies Act, 1956. Dorai moved the authorities, alleging that the CSI-TA was a “habitual defaulter” in filing statutory returns in time and that the company was “misusing the foreign exchange account into which there was considerable inflow of money”.The church’s general secretary, MM Philip disagrees: “The litigation against us is false. The point he [Dorai] is making is against CSITA, which is a company. The CSI is a church. We are a democratic church, and in a democratic functioning such disagreements occur. There are always some aggrieved parties who raise such issues. We are not worried about any examination of the books.”The Book of Accounts Dorai says any legal body that has such revenue flows must be a registered firm, as a trust, society or company and must explain all its financial dealings. “The laity were earlier ignorant, and when the bishops asked for a few lakh rupees for some reason, no questions were asked. Now, things are changing around the world, and questions are being raised”.Not all churches, however, are run like the CSI-TA, and therefore are unlikely to have to open their books of accounts to the RoC. The largest of them all, the Catholic church, does not have consolidated statements like the CSI church. Instead, each Catholic church functions as a trust, which is an association of persons, following the Canon law, says a chartered accountant familiar with auditing books of the Catholic church.The Madras High Court ruling has set the ground for inspection of CSI-TA’s books by the RoC, and Dorai says the company will have to draw up a memorandum and articles of association that are in consonance with Companies Act norms.Philip says the CSI-TA has not decided whether to go in appeal against the court ruling. What seems likely now is that the auditors will march in, and verify accounts as they do with every other company.The implications can be huge, and not just for the litigants in this case.The Church of South India, in its original version as Church of India (CI), came into being in 1647, when a chaplain of the East India Company’s merchant fleet celebrated Mass in a temporary chapel at Fort St George, Madras. The consecration of the first Anglican church happened in 1680 in the precincts of the fort. Exactly 300 years after the first Mass in Madras, in 1947 the Church of South India Trust Association (CSI-TA) was registered as a company.