P. D. MISHRA - Madhya Pradesh Commentary with analytical notes by Shri P D Mishra ... Dr.V. Kurien,...

THE MADHYA PRADESH AND CHHATTISGARH SWAYATTA SAHKARITA ADHINIYAM 1999

(Insight Notes with Commentary)

P. D. MISHRA

PUBLISHED BY

SAMARTHAN – CENTRE FOR DEVELOPMENT SUPPORT RAIPUR, CHHATTISGARH

IN COLLABORATION WITH

SAHAVIKASA (Cooperative Development Foundation)

WARANGAL, ANDHRA PRADESH

The Chhattisgarh Swayatta Sahkarita Adhiniyam 1999 (Insight Notes with Commentary)

Samarthan – Centre for Development Support Raipur & Sahavikasa, Warangal

THE CHHATTISGARH SWAYATTA SAHKARITA ADHINIYAM 1999 (Insight Notes with Commentary) COPYRIGHT – SAMARTHAN – CENTRE FOR DEVELOPMENT SUPPORT RAIPUR EDITION - 2003 PRICE: Rs 100/- PUBLISHED BY - SAMARTHAN – CENTRE FOR DEVELOPMENT SUPPORT RAIPUR, CHHATTISGARH IN COLLABORATION WITH SAHAVIKASA (Cooperative Development Foundation) WARANGAL, ANDHRA PRADESH



This Commentary

Long before the liberalisation and globalisation of our economic

policies took the present turn, Planning Commission had

recognised the necessity of a ‘Model Act’ drafted by Chaudhari

Brahma Prakash Committee for cooperatives in 1990. The

Amendment of the Multi State Cooperative Societies Act in 2002

has been carried out much later and some states opted for a

parallel liberal law worked out in 1995 in the form of The Andhra

Pradesh Mutually Aided Cooperative Societies Act. The

Chhattisgarh Swayatta Sahakarita Adhiniyam 1999 is only an

improved version of this thought process

This Commentary with analytical notes by Shri P D Mishra

provides an interesting study of the process of the making of this

law in the State. He was surely well equipped with the material

and experience for the onerous task. He has earnestly and in his

own right brought out some deeper intents of this law for the use

and application of it, which could not have been possible for an

outsider.

- From the introduction of the book



Views and Opinions : Times of India, Ahmedabad - “Cooperative Panel urges State to adopt Chhattisgarh Model which seems to be in acknowledgement of the appreciation the Chhattisgarh Model has been receiving. According to CIP sources the Chhattisgarh Government is one step ahead of the Mutually Aided Cooperative Societies Act of Andhra Pradesh which was the first state to take the initiative to free cooperatives for government interference.”

Dr.V. Kurien, Panel Member Cooperative Initiative Panel, IRMA Campus Anand wrote, “I am happy to know that the new law for the self reliant cooperatives has come into force in Chhattisgarh. This should no doubt be the turning point for the cooperatives of the State and perhaps a guiding light for other states to emulate."

Shri Mohan Dharia, CIP Panel Member congratulated the State Government in following words in his letter dated Dec. 10, 1999. "We are sure that the Chhattisgarh self-reliant Co-operative Act will help in strengthening Co-operative movement in your state and also in the country, based on Chaudhary Brahma Prakash Model Act. I am happy that the Act passed by your state, has given due recognition to the recommendations of the Chaudhary Brahma Prakash Model Act which was approved by the Planning Commission of the Govt. of India while I was the Dy. Chairman."

DR. S.S.SISIODIA, PRESIDENT NATIONAL COOPERATIVE UNION OF INDIA -

"The Cooperatives which are self reliant mainly constitutes the credit cooperatives i.e. the Urban Cooperative Banks and Cooperative Credit societies. Since the proposed new Act is intended for all self reliant cooperatives, the needs of the credit cooperatives i.e. cooperative banks and credit societies should be particularly kept in mind while finalising the Act."

Shri Rama Reddy, President, Sahavikasa: Cooperative Development Foundation, Warangal, Andhra Pradesh, while expressing his satisfaction at the enactment of the parallel law, said: “It will be the most liberal cooperative law in the country and will become a model for others to follow”.


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INTRODUCTION

The dynamism of the concept of ‘Cooperation’ is well established when we speak about it as a ‘Movement’. It is also suggestive of a law flexible enough to suit to its purpose. As a ‘system’ otherwise, it can be regarded only a subject of a rigid codification which comes out from a basic distrust in human nature in the context of his behaviour in society. Cooperation is also taught and prescribed as a ‘way of life’ since long and the recognition of an outside social behaviour of an individual is well built in it. The need of a common liberal code is therefore the right option before the framers of law.

Cooperation as a policy and system has been recognised and adopted for long in our Country. It has been a successful vehicle for the implementation of many governmental schemes and plans. Both the Central as well as the state governments have made huge investments in the evolution and growth of the cooperatives and still depend largely on these institutions for carrying out many prestigious programmes. But the context is changing at a very rapid pace. Long before the liberalisation and globalisation of our economic policies took the present turn, Planning Commission had recognised the necessity of a ‘Model Act’ drafted by Chaudhari Brahma Prakash Committee for cooperatives in 1990. The Amendment of the Multi State Cooperative Societies Act in 2002 has been carried out much later and some states opted for a parallel liberal law worked out in 1995 in the form of The Andhra Pradesh Mutually Aided Cooperative Societies Act. The Chhattisgarh Swayatta Sahakarita Adhiniyam 1999 is only an improved version of this thought process.

I got the opportunity to have an in depth study of this legislation in my previous tenure as the Chief Secretary of the State. The cooperative leaders and various government officers about whom Mr. Mishra makes a mention in his ‘Inside’ really did a marvelous job in evolving a law, which was passed unanimously by the State Legislative Assembly.


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Apart from being new, this Law is still in an experimental phase. Mr. Mishra correctly observes that the two shall be getting merged one day. Logically enough, when the natural and vibrant cooperatives get growing out of their self-sufficiency, the governmental control should automatically cease and the new generation law evolves for this movement to continue.

This Commentary with analytical notes by Shri P D Mishra provides an interesting study of the process of the making of this law in the State. He was surely well equipped with the material and experience for the onerous task. He has earnestly and in his own right brought out some deeper intents of this law for the use and application of it, which could not have been possible for an outsider. I also wish to thank him for making the book interesting as a theory and also practice of cooperation for the readers and the co-operators working in the field. Bhopal 18-11-2002 K S Sharma Vice Chairman M P State Planning Board


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On Publication of Its Chhattisgarh Edition

I am very happy that the Cooperative Development

Foundation, Warangal, Hyderabad is bringing out

the Chhatisgarh Swayatta Sahakarita Adhiniyam

edition now which has come to be so named after

the adaptation of the Chhattisgarh Swayatta

Sahakarita Adhiniya 1999 as published in the

official Gazette Raipur, dated 13th June 2001.

According to clause 2 of this notification for the

words "Madhya Pradesh" wherever it occurs, the

word "Chhattisgarh" would be replaced. I have

accordingly tried to modify my original commentary.

However, if there are any omissions in this regard, I

believe that the content and core of the matter can

hardly be missed since the texture and tone of the

Act is originally one and the same.

P D Mishra


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INSIDE

On 21st March 1996 a delegation on behalf of the urban cooperative societies and Banks of the State was scheduled to meet the Chief Minister of Madhya Pradesh Shri Digvijaya Singh. The officers of the Cooperation Department were also invited in it. The delegation put forth the demand that since the urban cooperatives were not taking any assistance from the government, there should be a separate chapter added in the existing cooperative law for ensuring greater autonomy to these cooperatives.

Soon we came to understand that Andhra Pradesh had come to enact The Andhra Pradesh Mutually Aided Cooperative Societies 1995 with this end in view. It was enlightening to note that Andhra had come to evolve a middle path towards the implementation of the Model Act. I was reminded of the heated discussions of the all India conferences about the concern of the State governments for the security of the huge money they had invested in the cooperative Societies by way of share capital, loan, subsidy or government guarantee.

Madhya Pradesh found this model workable. The then Cooperative Commissioner Shri Suraj Prakash took lot of interest in it and first constituted a committee of officers under me. It soon prepared a draft. The Government later on constituted a high level committee of experts in the Chairmanship of the Cooperation Minister Shri B.R. Yadav. The committee visited Hyderabad and Gujarat for on the spot study purposes and had wide ranging discussions with the officials and non-officials of these states. The most important contribution in the field during these visits was available from Shri Rama Reddi, Chairman C.D.F and Dr. V. Kurien, the Member Cooperative Initiative Panel, Anand, Gujarat.

There was another idea operating simultaneously that instead of going for an independent parallel Act, if we opted for a separate chapter for the selected cooperatives, it would more expeditiously set the pace of progress in the sector in the state. Shrimati Tajwar Raman Sahni was the Principal


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Secretary cooperation at that time. She working overnight for it prepared a chapter after cutting and pasting the parallel Act. It was however, felt soon that the over all scheme of the model will get affected and the long ranging reforms will not be able to be introduced. Shri Shankar Narayanan, the then Agriculture Production Commissioner again sat for word-by-word discussion and a workable draft thus came up for enactment.

The National Cooperative Union Of India was not in favour of going for a parallel legislation. In response to its one such letter dated 5-7-1999, Madhya Pradesh wrote, "You may be aware that Govt. of Madhya Pradesh extensively amended Madhya Pradesh Cooperative Societies Act 1960 incorporating a number of provisions and the suggestions of Model Cooperative Act as recommended by the Brahma Prakash Committee. However, it has been felt that amending the whole Act on the lines of Model Cooperative Act is not possible for a number of reasons, the most important of all being the huge investment of the State Government by way of share capital, loan or govt. guarantee. More over, with the passage of time the Model Cooperative Act also requires to be remodelled and reconsidered on a number of counts. For instance, the strengthening of the federal structure at the cost of primary cooperative and the revised role of cooperatives in a liberalized economy of the day are at least two such major factors, which deserve greater attention of us all. The Govt. of Madhya Pradesh has been actively in touch with developments in the field of cooperation all around in the country as well as in States like Andhra Pradesh, Bihar, Jammu and Kashmir, Karnataka and Punjab etc. The concerns for Cooperative expressed by International Labour Organisation, Cooperative Development Foundation, Hyderabad and Cooperative initiative Panel, Anand naturally have a bearing on such long drawn thought process. We have, thus, worked on a Parallel Act for more than two years and have formulated a bill, which is on the process of legislation. We are sure that it is a far developed version than the Andhra or Karnataka model and should very well suit the cooperation climate of most of the States in the country.


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"The National Cooperative Union of India as an apex organization of the cooperative societies in general, however, need not have any misgivings about a parallel law enacted by some of the States in the country. The subject has been discussed time and again in various national level forums and seminars attended by a number of Ministers in charge cooperation, Secretaries and Registrars of various States as well as the representatives of Govt. of India and there has been throughout a consensus about the utility and significance of such a parallel act. It is therefore to be suggested that the NCUI should persuade Govt. of India now to come out with a national policy on cooperation along with faster enactment of Model Cooperative Act so that the process of liberalization of the existing cooperative societies Act becomes faster and a better harmony is worked out for the desired growth of the movement."

It was later on 23-23 September 2001 in the Fourteenth Cooperative Congress of India convened by the National Cooperative Union of India that I had the opportunity to present my paper on the subject. As of today, it is an acknowledged truth that the state governments have both the options, i.e. they can amend their existing acts or they can go for a parallel legislation.

The two acts on one subject for all time to come cannot be a permanent solution. The Referential Act 1997 had provided that the registration of societies in future should take place only in the new act. Some state governments have been trying to arrange automatic conversion in the new act ensuring that the societies are registered in the new one alone. The government of Madya Pradesh agrees in principle that in course of time the cooperative societies shall be refunding the assistance they have received and the two acts shall be merging into one substantially.

In a recently convened meeting of Cooperation Ministers by the Union Minister for Agriculture and Cooperation Shri Ajit Singh in New Delhi on 8th August 2002, the Case for a


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Parallel Act was one of the agenda items which now lays down the policy of the centre as follows-

(i) As is already known that in the pursuance of the Model Cooperatives Act as suggested by the Ch.Brahm Perkash Committee, some states viz. A.P., M.P., Bihar, J&K and Karnataka and recently Orissa have enacted parallel cooperative Acts for the self-reliant and mutually aided cooperative societies. The idea behind the parallel Acts is to provide for a separate law to ensure full autonomy to the cooperatives which do not have any government assistance in the form of equity/ shareholding, grants, loans or guarantees. So far about 9000 societies have been registered under the Parallel Acts.

(ii) It is observed that the vast majority of the cooperatives still continue to be governed by the main Acts providing for govt. support and control in the management and administration of these societies required for execution of the public policies. It is however, felt that the cooperative reforms should pervade the entire cooperative sector. In fact, the objective of the cooperative reforms is to enable the entire cooperative movement to be the real people’s movement. It is informed that in some states like AP and Bihar, the Parallel Acts are becoming quite popular and more and more societies are coming forward for registration under the Parallel Acts. This reinforces the need to have liberalized Cooperative Act on the pattern of the Multi-State Cooperative Societies Act, 2002.

I wish to record my deep sense of gratitude for those who were material and instrumental in the making of the Swayatta Sahakarita Adhiniyam 1999. The Chief Minister of Madhya Pradesh Shri Digvijaya Singh has been genuinely the first and the foremost source of inspiration. The High-level committees were presided by Shri B.R. Yadav, Shri Hajari Lal Raghuvanshi and Shri Mahendra Singh in their Ministerial tenure. Their contribution was immense. On 15-6-1999 Shri Mahendra Singh, the chairman and the Minister in charge cooperation presented the report of the committee to the


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Chief Minister. He ultimately piloted the Bill in the Assembly and got it passed. Dr. V. Kurien aptly wrote to him on 3rd December 1999,

“The 23rd November will always be remembered as a historical date for the cooperative movement of India. This has been made possible only by the foresight and political will shown by you in ensuring that a liberal law for the cooperatives in Madhya Pradesh ' Madhya Pradesh Swayatta Sahakarita Act 1999' is passed unanimously in the state Assembly. I am confident that this enabling legislation will see the emergence of a new generation cooperatives which will be the models for the revival of the genuine self reliant cooperatives in India"

Deputy Chief Minister of the State and the Chairman of the M.P. State Cooperative Bank Shri Subahash Yadava, Cooperation Minister Dr. Govind Singh and the office bearers of the state level cooperative institutions have constantly advised for its improvement. Dr. Sawai Singh Sisodia, Chairman National Cooperative Union of India has been virtually a presence in the beginning, middle and culmination of it. He had at every occasion to forward new, concrete and thought provoking ideas for assimilation.

Padm Vibhushan Shri V. Kurien, Member Cooperative Initiative Panel, Anand, Gujarat, its officers Sudarshan Shri Niwas and Hatekar and Shri Ram Reddi Chairman C.D.F. Hyderabad were the true and untiring guides in this endeavour.

Among the officers of the state government, Shri K.S. Sharma, the then Chief Secretary is to be remembered for keenly devoting many hours and days in the clearance of the Bill. Shri V.W. Umarekar, retired Draft man-in-Chief of the Law Department skillfully performed the role of a surgeon in operating and integrating the various parts of it efficiently. Among the officers of the Department, Shri K.Shankar Narayanan, Principal Secretary, Shri Hoshiyar Singh, Secretary, Shri Suraj Prakash, Shri Dilipraj Singh Chaudhari,


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Shri O.P. Rawat the Registrars – all deserve my highest gratitude.

The Madhya Pradesh Swayatta Sahkarita Act being a very recent one, court rulings are not available at present about its provisions. One landmark decision of Andhra Pradesh High court in the Corresponding provision of conversion has been duly made use of. It is a soul-searching exercise, in fact, since it goes much deeper into the making of this law and its prospects in the emerging new scenario of Co-operatives of the 21st Century. There are 1 to 16 appendices covering important reports, recommendations and correspondences. The national policy on Co-operative has also been incorporated as appendix No.13 followed by a list of some proposed amendments, which have been found suitable from the point of view of legal and technical accuracy as annexure 13 and a comparative analysis with the resource acts of the Madhya Pradesh Swayatta Sahkarita Adhiniyam 1999 as annexure 16.

My well- wishers Shri Braj Narayan Singh (Retired I.A.S.), Ms. D.P. Vasundhara of C.D.F, Shri Bhagwati Prasad Mishra, Chairman State Cooperative Union M.P. Bhopal and Shri Sushil Kumar Mishra M.D. State cooperative Union have all inspired me to take up this work.

Bhopal P. D. Mishra


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Raipur, the 13th June 2001 NOTIFICATION

No.F-3/COOP./15/2437 - In exercise of the powers conferred by Section 79 of the Chhattisgarh Reoganisation Act, 2000 ( No. 28 of 2000). the State Government hereby makes the following order, namely :

1. (i) This order may be called the adaptation of laws order, 2000.

(ii) It shall come into force in the whole State of Chhattisgarh on the Ist day of November,2000

2. The laws as amended from time to time, specified in the schedule to this order, which were in force in the State of Chhattisgarh immediately before the formation of the State of Chhattisgarh are hereby extended to and shall be in force in the State of Chhattisgarh until replaced or amended. Subject to the modification that in all the laws for the words "Madhya Pradesh" wherever they occur the word "Chhattisgarh" shall be substituted.

3. Anything done or any action taken including any appointment, notification, notice, order, rule, loan, regulation certificate of licence) in exercise of the powers conferred by or under the laws specified in the schedule shall continue to be in force in the State of Chhattisgarh.

SCHEDULE S.No. (1) Name of the Laws (2)

1. The Madhya Pradesh Co-operative Societies Act

1960(No. 17 of 1961)


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2. The Madhya Pradesh Co-operative Societies Rules 1962

3. The Madhya Pradesh Sahakari Krishi Aur Gramin Vikas Bank Adhiniyam, 1999

4. The Madhya Pradesh Swayatta Sahakarita Adhiniyam 1999

5. The Madhya Pradesh Sahakari Society (Punargathan aur Nirman) Adhyadesh 2000

6. The Madhya Pradesh Sahakari Sewa Bharti Niyam, 1965

7. The Madhya Pradesh Adhinasth Sahakari (alipikiya Vargiya) Sewa Bharti Niyam, 1967

8. The Madhya Pradesh Adhinasth Sahakari (lipik Vargiya) Sewa Bharti Niyam, 1966

9. Madhya Pradesh Sahakarita Vibhag Chaturth Shreni Sewa Bharti Niyam, 1967

By order and in the name of the Governor of Chhattisgarh.

C H Behar, Additional Secretary

THE CHHATTISGARH

SWAYATTA SAHAKARITA ADHINIYAM, 1999


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(No.2 of 2000)

Statement of Objects and Reasons

Chhattisgarh Co-operative Societies Act 1960 (17th of 1961), like all other State Co-operative Laws of the country, was an outcome of the recommendation of the model bill by the Expert Committee on the cooperative Law appointed by Government of India in 1957. Based on Ardhanariswaran Committee report, some amendments were made in 1990 for the professionalisation and democratisation in the working of the cooperative societies. Model Cooperative Act suggested by the Chaudhary Brahma Prakash Committee in 1991 was another mile stone for the Government of Chhattisgarh to make important amendments for removing restrictive powers of the Government and the Registrar, and for ensuring elected committees of the societies enjoy more freedom for work and take suitable decisions themselves.

2. In order to ensure further democratisation and provide more autonomy to the co-operatives a Parallel Act is now proposed to be enacted. Andhra Pradesh Government has already passed the Andhra Pradesh Mutually aided Co-operative Act 1995 for this purpose and the process of having a parallel act on the same lines is in progress in many other States. Co-operative Development Foundation, Hydrerabad and the Co-operative Initiative Panel, Anand further developed an up-to-date model referential Act 1997 incorporating internationally accepted principles of co-operation, based on which a committee constituted in the chairmanship of the Co-operative Minister has prepared a draft for the State of Chhattisgarh.

3. In the proposed Act new definitions have been provided for new term but words or expressions used and not defined in it have been provided the meaning they carry in the existing M. P. Co-operative Society Act. New provisions about the eligibility and the admission of members have been added since co-operatives provide for new set of rights and duties of the members. The members as well as the potential members have been proposed to be imparted necessary training.


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4. Annual General Body has been specially defined and duties of it prescribed in detail. The duties and responsibilities of the Board of Directors have been specified and it has been made responsible for holding elections. The Board of Directors shall determine the terms and conditions of the staff. The Act provides for mobilization of funds, deployment of funds and also for the disposal of surplus and the management of deficit. Co-operatives can get their accounts audited either by an auditor of the Government or by a Chartered Accountant. It has also been provided that if the Board of Directors does not call Annual General Meeting, does not hold elections, or does not get audit done in time, it will automatically cease to function and new elections will be held within three months.

5. A three member Arbitration Council to be constituted by the AGM has been provided for deciding-the internal disputes of the members and the Co-operative. The appeal of its decision will lie before the Co-operatives Tribunal constituted under section 77 of the M.P. Co-operative Societies Act. The Tribunal will also have original jurisdiction in matters where there is a dispute between the Co-operative and the Registrar.

6. Annual returns to be filed by a Co-operative and a report by the Registrar to the Government have been prescribed. Elaborate procedure for the dissolution of the Co-operative by the members as well as by Registrar on specified grounds has been laid down along with duties and powers of the liquidator. State Govt. has been empowered for two years for the removal of difficulty in giving effect to the provisions of this Act and the right to information has been incorporated as a provision. Rules under this Act shall not be necessary to be framed and the byelaws shall provide for the procedure on subject matters mentioned in Schedule "B."

7. In the end the internationally accepted principles of co-operation have been incorporated as schedule "A" and the subject matters for framing byelaws in Schedule "B."

8. Therefore this Bill.


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TABLE OF CONTENTS Clauses Chapter I

PRELIMINARY 1. Short title, extent and commencement 2. Definitions

Chapter II INCORPORATION

3. Registrar and other officers. 4. Registration of cooperative. 5. Conversion of a cooperative society into cooperative. 6. Cooperative to be body corporate. 7. Byelaws. 8. Amendment of byelaws. 9. Name of a cooperative. 10. Location of head office. 11. Transfer of assets and liabilities. 12. Division of cooperative.


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13 Amalgamation of cooperatives. 14. Merger of cooperatives. 15. Vesting of assets and liabilities in resulting cooperative. 16 Conversion of a cooperative into a cooperative society. 17. Saving of rights and obligation of resulting cooperative etc. 18. Fee for services.

Chapter III MEMBERSHIP

19. Eligibility for membership in cooperative. 20. Disqualification of member. 21. Admission of member. 22. Withdrawal of membership. 23. Cessation of membership. 24. Termination of membership. 25. Register of members. 26. Education of members etc. 27. Exercise of rights. 28. Votes of membership and manner of exercising vote. 29. Liability of member.

Chapter IV

MANAGEMENT

30. General body. 31. Functions, responsibilities and powers of general body. 32. General meetings. 33. Board of directors. 34. Presidents and Vice President of Cooperative. 35. Functions, responsibilities and powers of board. 36. Eligibility for directorship in cooperative. 37. Elections. 38. Tenure of directors. 39. Board meetings. 40. Decision by majority of votes. 41. Minutes of proceedings of meetings. 42. Vacancies etc not to invalidate proceedings.


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43. Proceeding of meeting to be deemed to be good and valid.

44. Staff.


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Chapter V FINANCE

45. Mobilisation of funds. 46. Deployment of funds and profits. 47. Disposal of surplus. 48. Management of deficit. 49. Operation of special funds.

Chapter VI ACCOUNTABILITY

50. Accounts, records and documents to be maintained. 52. Returns to be filed with Registrar. 53. Inquiry.

Chapter VII OFFENCES

54. Prohibitions of use of word “cooperative”. 55. Offences.

Chapter VIII DISPUTES

56. Disputes. 57. Constitution of Arbitration Council.

Chapter IX DISSOLUTUON

58. Dissolution of cooperative by members. 59. Dissolution of cooperative by Registrar. 60. Appointment of liquidator. 61. Duties of liquidator.


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62. Powers of liquidator. 63. Disposal of surplus assets of liquidated cooperative. 64. Bar of suits or legal proceedings. 65. Final accounts.

Chapter X

MISCELLANEOUS

66. Previous sanction of Reserve Bank of India or NABARD in certain matters.

67. Certain provisions of cooperative societies Act to apply 68. Removal of difficulty. 69. Right of information 70. Bar of jurisdiction of courts 71. Indemnity for acts done in good faith Schedule A. Schedule B.

Appendix 1-16


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THE CHHATTISGARH SWAYATTA SAHKARITA ADHINIYAM, 1999

(CHHATTISGARH ACT NO. 2 OF 2000)

(Received the assent of the Governor on the 29th December, 1999; assent first published in the “Madhya Pradesh Gazette (Extra-ordinary)” dated the 4th January, 2000).

An Act to provide for the formation of cooperative and conversion of a cooperative society into the cooperative as self-reliant, self-help, mutually-aided, autonomous, voluntary, democratic, business enterprises, owned, managed and controlled by members for their economic and social betterment, through the financially gainful provision of services which fulfil a common core need felt by them, and for the matters connected therewith or incidental thereto,∗

Be it enacted by the Chhattisgarh Legislature in the Fiftieth Year of the Republic of India, as follows:

The preamble or a statute like the "long title" is a part of the Act and is an admissible aid to construction Although not an enacting part, the preamble is expected to express scope, object and purpose ground and the cause of making the statute the evils sought to be remedied and the doubts which may be intended to be settled" (By G.P. Singh in his book "Principles of Statutory Interpretations" third Edition page 116) ∗ The preamble of this Act only indicates the essential characteristics of a cooperative and does not project it as a government promoted, government controlled and a government managed organisation with the objective of distributing public resources equitably. The Model Act had suggested that after the preamble, the second and third sections should indicate "the State policy on Cooperatives" and "The Cooperative Principles" respectively. This Act is now incorporating the state policy in the Preamble as such and has incorporated Cooperative Principles in Schedule A. From the legal point of View, the present scheme is in perfect order as the Act should begin with "Short title, extent and commencement" only. As regards the National Policy later approved on cooperatives, its very Action Plan No.1 speaks about "greater autonomous and operational freedom to cooperatives." This preamble pre-empts this requirement and incorporates it in letter and spirit.



CHAPTER - I

PRELIMINARY

Commentary- This is a parallel legislation for cooperatives in the State as The Chhattisgarh Cooperative Societies Act 1960 (17th of 1961) is already in force. The necessity of a parallel Act may be disputed as there are only five other States (Andhra, Bihar, Jammu and Kashmir, Karnataka and Madhya Pradesh) who have gone for such legislation. Many other States even after constituting expert groups in this direction are rethinking to amend their existing acts only.

In the background of this move lie the recommendation of the Planning Commission of Government of India circulated through Model Act 1990 prepared by Chaudhary Brahma Prakash Committee. This Model Act was proposed to be adopted by all State Governments (including Government of India) so that the interference of Governments and the Registrar got reduced and the cooperatives could function on the basis of cooperative principles. It contained 50 Sections in all. On an analysis at that time it was felt by the then Government of Madhya Pradesh that about 12 Sections could well be adopted but most of the provisions required to be suitably amended. The greatest of all hindrances was the huge financial stake of the Government in the form of Share capital, loans, Government guarantee and subsidies. The Government's concern for the security of this investment continued to result in the shape of governmental control as well as Registrar's interference till Andhra Pradesh in 1995 found a via media in the form of Andhra Pradesh Mutually Aided Cooperative Societies Act 1995. This parallel legislation of the State promised to ensure due freedom to the cooperatives who either have no assistance received from the Government or have paid it back or at least entered into a memorandum of understanding for such return on the stipulated terms. The Andhra model naturally proved to be a workable model for other state governments and the Bihar and Jammu Kashmir governments promptly borrowed the pattern.



In a ceremony organised by Cooperative Development Foundation Hyderabad, Shri L.C. Jain, one of the three members of the Cooperative Initiative Panel, Anand, Gujarat (the other two members being Dr. M.V. Kurien and Shri Mohan Dharia) released Referential Act: 1997. This was a further developed version of the APMACSA. This model further took into account other latest development in the field and the Andhra experience did contribute to it a lot.

The erstwhile Madhya Pradesh Government had constituted a committee in the Chairmanship of the Cooperative Minister of the State which after exhaustive consultation with co-operators, experts and after paying visits to Andhra and Gujarat states prepared its own draft which has become the basis of this legislation.

One point, which goes in favour of the parallel legislation, is the fact that the Model Act of 1990 can perhaps not meet the requirements of the present times. The trend of that time was to strengthen the federal cooperatives for taking all the care of the primary societies. They were proposed to be entrusted the task of audit and election along with supervision. Autonomy at present is the keynote of every cooperative whether, primary, secondary or the Apex. If the federal cooperatives were to replace the Registrar then many more problems were bound to be there. Secondly, the context of the globalisation of the market economy was not present in 1990. Thus the model of 1990 could not well serve the purpose.

It will not perhaps be out of place to mention that most of the State Governments, including Orrisa have in the meantime amended their existing Cooperative Acts to conform to the provisions suggested by the Model Act 1990 and they may well be looking forward to integrate the two.

1. Short title, extent and commencement.

(1) This Act may be called the Chhattisgarh Swayatta Sahkarita Adhiniyam, 1999.



Commentary- The Madhya Pradesh Raj Bhasha Adhiniyam 1962 makes Hindi to be the language of all Statute in the State. The name of the Statute thus entitles it the status of a personal noun which cannot be translated. The title of the Act is in Hindi and even while translating it into English or any other language, it will remain unaltered. Swayatta literally means autonomous. Autonomy being the backbone of the present cooperatives, the framers of this Act adopted this very term. This appeared to them as a better substitute for self–reliant or self-supporting as the other ingredient of democracy automatically gets incorporated in it.

It is heartening to note in this context that in the Multi State Cooperative Societies Act passed by the Parliament now on the recommendation of the Parliamentary Standing Committee on Agriculture & Cooperation regarding amendments to it, the word 'autonomy' has been incorporated in the preamble itself.

For the English term 'cooperative' Sahkarita is the substitute. As a matter of fact, cooperative or Sahkarita, they are adjectives, but traditionally they have now come to be used as noun. Moreover, the word cooperative or Sahkarita conveniently places the new generation cooperatives into a distinct category altogether.

(2) It extends to the whole of the State of Chhattisgarh.

(After the reorganisation of the erstwhile Madhya Pradesh into two States with effect from 1-11-2000, the jurisdiction also got extended to the newly formed Chhatisgarh state for two years.)

(3) It shall come into force on such date as the State Government may, by notification, appoint.

(The Act came into force originally on 15th February 2000 vide notification F-5-13/97/15-1 dated 15-2-2000 got published in the official gazette)

2. Definitions.



Commentary- Only those words have been defined which are new and have not been defined in the Chhattisgarh Cooperative Societies Act 1960, The object of the definition clause is to avoid the necessity of repetition in describing all the subject matter to which the words or expressions so defined is intended to apply.

(1) In this Act, unless the context otherwise requires:

(a) "arbitration council" means a group of three individuals constituted by the general body of a cooperative for settlement of disputes under section 57 in accordance with the provisions of this Act and the byelaws;

(b) "board" means the governing body of a cooperative by whatever name called, to which the direction of the affairs of the cooperative is entrusted under the byelaws;

(The present Chhattisgarh Cooperative Societies Act uses the term committee instead. Even the byelaws of the present cooperatives formed under the old Act employ the term' Board' without any legal basis. 'Board' thus being an important term already under use, urgently required a full-fledged definition.)

(c) “byelaws’ means the byelaws of a cooperative for the time being in force and includes the amendment made therein from time to time;

(Referential Act 1997 proposed the articles of association for use. This was in line with other companies formed under Companies Law. Again the framers of the Chhattisgarh Act adopted the old term with an up to date definition.)

(d) "Chief executive" means the individual, in paid or honorary capacity, nominated or elected or appointed by the board from among members, directors or others, in accordance with the byelaws, who shall perform such functions, have such responsibilities and exercise such



powers as specified in the byelaws, and assigned by the board;

Commentary- The existing Act also defines this term but the present definition fulfils the condition of the Chief Executive's being accountable to the byelaws and the board and not any office bearer as such.

(e) "common need" means the economic need, which is common to all persons who wish to form a cooperative, or have taken membership in a cooperative, and which is consistent with the objective of the cooperative;

Commentary- The cooperative is a need-based organisation. This should in fact be the connecting thread among various individuals. The objectives of the cooperative should clearly imbibe the common need to be identifiable for organisation and the perpetuation of it.

(f) "Cooperative", where used as a noun, means an autonomous association of persons united voluntarily to meet their common need through a jointly owned and democratically controlled enterprise registered under this Act;

Commentary- A cooperative is distinct from the cooperative society according to this definition. Evidently, this definition takes care of the important ingredient of a cooperative being voluntary, need based and democratically controlled organisation.

(g) “cooperative society’ means a society registeredunder the Cooperative Societies Act;

(h) “cooperative Societies Act” means the Chhattisgarh Cooperative Societies Act, 1960 (No.17 of 1961);

(i) “cooperative business” means a business, which intends to function in accordance with the cooperative principles specified in Schedule A,



(j) “cooperative identity” means the statement of cooperative I identity specified in Schedule A;

(k) “cooperative Tribunal” means the Chhattisgarh State cooperative Tribunal constituted under section 77 of the Cooperative Societies Act;

(l) "core services" means the central services provided to members, through which a cooperative intends to meet the need common to all members for the fulfilment of which the cooperative was formed, and includes value-adding services;

Commentary- Core service is important in consonance with common need defined in clause. A cooperative has to be fully need-based is further reinforced here. Some byelaws may even in this manner provide members to incur disqualification if they fail to contribute or avail core services of a society.)

(m) "Court" means the Civil Court of competent jurisdiction;

Commentary- Registrar exercising judicial powers in the existing Acts was one area under severe attack from different quarters. It has been suggested now that the existing relevant law should take their own course and empowering Registrar or any other authority by judicial powers is disallowing cooperative an unhampered growth.

(n) "deficit" means the net excess of expenditure over income, arrived at, at the end of a financial year;

(o) "deficit charge" means the amount collected from or debited to the accounts of, members, in proportion to the use or non-use of the services of the cooperative, in accordance with the byelaws and resolution of the general body, to meet deficit, if any, in whole or in part;

(p) “delegate” means a person elected by group of individual members to represent them in the general



body of the cooperative in accordance with the byelaws of the cooperative;

(The term delegate can be easily got confused with the term representative. These two terms carry just the opposite meaning in the Referential Act 1997. Swayatta Sahkarita Act borrows the existing meaning of the old State Act to avoid any confusion in this field.)

(q) “delegate general body” in relation to a cooperative means all its delegates;

(r) “delegate general body meeting” means a meeting of the delegates, called and conducted in accordance with the provisions of this Act and the byelaws;

(s) “director” means the director of the board;

(t) ‘family’ means a person, his spouse, and his children dependent on him and his other relatives dependent on him and jointly residing with him;

(u) "general body" in relation to a cooperative, means all its members;

(v) "general meeting" means a meeting of the general body called and conducted in accordance with the provisions of this Act and the byelaws;

(w) "member" means a person who is admitted as a member of the cooperative in accordance with the provisions of this Act and the byelaws;

(x) "office-bearer" means President and Vice President and director elected by the board to any office of cooperative in accordance with the byelaws;

(y) "potential member" means a person who does need the core services being offered by a cooperative, and is eligible to be a member of that cooperative, but has not yet applied for membership;



(It is important to note that not only the need-based service concerns the member but the larger concerns of the society at large have also been attended to. Cooperatives thus have not to confine themselves for the growth and development of the chosen few, but indeed universalise their approach by opening gates for the prospective members in timely recognition of their necessities.)

(z) “primary cooperative “means a cooperative of which no other cooperative is a member;

(aa) “ Registrar” means the Registrar of cooperatives appointed under section 3 of this Act;

(bb) “Representative” means a member nominated for the time being by a cooperative to represent its interest at the time of promotion of a secondary cooperative and at a meeting of secondary cooperative to which the cooperative is affiliated;

(cc) "secondary cooperative" means a cooperative whose members are cooperatives;

(dd) “service “means such facilities as are organised primarily for being provided by the cooperative to members to meet its objective;

(ee) "special resolution” means a resolution of the general body which has the approval of more than fifty percent of the members having right to vote and not less than two third members present and voting at the general meeting;

(ff) “surplus" means the excess of income over expenditure, arrived at, at the end of a financial year, after the payment of interest, if any, on share capital, and before the payment of surplus refund, and allocation of reserves and other funds;



(gg) "surplus refund" means the refund from the surplus given to or credited to the accounts of, members, in proportion to their use or non use of the services of the cooperative in accordance with the byelaws and resolution of the general body;

(2) Words and expressions used in this Act and not defined herein but defined in the Chhattisgarh Cooperative Societies Act, 1960 (No.17 of 1961), and the rules made there under, shall have meaning assigned to them in that Act and the rules made there under.

Commentary- This provision endows Swayatta Sahkarita Adhiniyam the character of a supplementary rather than a parallel Act as such. There are a number of provisions to be applicable mutatis mutandis here. This is also suggestive of a mind-set of the framers that the two could be well integrated some day. It is held by the Supreme Court in Life Insurance Corporation of India case (AIR 1965 SC 1985) that a definition section may borrow definitions from earlier Acts and the definitions so borrowed need not be found in the definition section but in some other provisions of the Act.



CHAPTER II

INCORPORATION

3. Registrar and other officers.

(1) The State Government shall appoint a person to be the Registrar of cooperatives for the State and may appoint one or more officers of the following categories to assist him, namely:

(a) Additional Registrar of cooperatives; (b) Joint Registrar of cooperatives; (c) Deputy Registrar of cooperatives; (d) Assistant Registrar of cooperatives; (e) such other categories of officers as may be specified

by the State Government in this behalf. Commentary- Generally speaking, He creates, he nourishes and he destroys a cooperative. In his own eyes too, he is a friend, philosopher and guide. The co-operators, the critics and the new generation leaders no longer agree with this concept. The institution of Registrar cooperatives has been under constant attack from many quarters. His too much interference in the working of cooperatives is stated to be the main cause of the cooperatives not making success on the expected lines. The negative role of the authority apart, too much dependence of the cooperatives on the Registrar deprived them from their endeavour of even standing on their feet. It has been even suggested that this institution is just not necessary and the case of registering a society could be well taken care of by a functional Registrar. The Model Cooperative Societies Act purposefully provided for the 'Registration offices' instead of 'Registrar.' It, however, lay down that the person to be appointed as Registrar should have a minimum five years' working experience in the field of cooperatives. Swayatta Sahkarita has borrowed the relevant provision from the existing Cooperative Societies Act. It has been expected from the age-old institution to live up the revised role and him self take a lead for the new generation cooperatives to grow.



(2) The officers appointed to assist the Registrar shall within such areas as the State Government may specify, exercise such powers and perform such duties conferred and imposed on the Registrar by this Act as the State Government may, by special or general order, direct.

Commentary- The powers have been delegated to above officers vide Government delegation dated 24 April 2000.

(3) The officers appointed to assist the Registrar shall be

subordinate to him and shall work under his general guidance, supervision and control. 4. Registration of Cooperative. (1) Subject to the provisions of this Act, a cooperative which intends to be self reliant, autonomous, voluntary, and

democratic business enterprise constituted in accordance with the cooperative principles specified in Schedule A, or a

cooperative established with the object of facilitating the

operations of such cooperatives, other than the housing cooperative shall

registered under this Act.

Commentary-The registration of a cooperative society is a must in view of the provisions of section 6 which provides that the registration of a cooperative shall render it a body corporate.



Housing societies have been left from the ambit of this Act as it was a general fear expressed before this enactment that the protection of the rights of members of a housing society is all important and the Government or the Registrar must take this care for the time being. In its policy of Housing and Environment declared in 1985, the Government of the then Madhya Pradesh had taken this resolve. There have been serious moves towards the inclusion of a separate chapter in the existing Act for the purpose.

Provided that no cooperative which has taken loan, share capital, subsidy or Government guarantee from Government -shall be registered as a cooperative under this Act.

Commentary- For the words "which has taken loan, share capital or Government guarantee from Government" have been substituted in Chhattisgarh vide The Chhattisgarh Act No. 24 of 2001published in the Chhattisgarh gazette (Extraordinary) dated the 17th October, 2001..

(2) No cooperative, other than a cooperative of

which another cooperative is a member, shall be registered under this Act unless it consists of at least twenty persons competent to contract under section 11 of the Indian Contract Act, 1872 (IX of 1872) and belonging to twenty different families. Commentary- For the word "twenty" whenever it occurs, the word "ten" has been substituted vide The Madhya Act No. 24 of 2001published in the Chhattisgarh gazette (Extraordinary) dated the 17th October, 2001. The amendment has been made in response to the growing demand for faster organisation of the cooperatives in the State and that the twenty as the minimum initial number is on a very high side which is probably unique in the country. This Act does not restrict a cooperative from being registered on the ground that another cooperative is



operating in the similar area or that the Registrar is not satisfied with the fact that the cooperative would be economically viable. This could result into the monopolization by some cooperatives while preventing new cooperatives to get formed and grow fast. Since the emergence of a non-cooperative competitor can no way be checked, it is not justified that the cooperative should grow in a controlled atmosphere. The modern concept of free market and the world economy liberalised globally, the cooperatives have also been left to themselves to come up, grow and stand on their own.

(3) For the purpose of registration, an application

therefor shall be submitted to the Registrar by hand or by registered post, signed by at least ten persons qualified under sub-section (2) who wishes to form a primary cooperative or by a duly authorised person on behalf of every such registered cooperative, which wish to form a secondary cooperative.

(4) The person by whom or on whose behalf such

application is made, shall furnish such information in regard to the

proposed cooperative as the Registrar may require. (5) Every such application shall be accompanied by - (a) the original declaration signed by

applicants expressing commitment to the cooperative principles specified in Schedule A;

(b) the original and four copies of the

proposed byelaws of the cooperative as adopted by the applicants;



(c) a true copy of the resolution passed at a meeting by the applicants adopting the byelaws;

(d) a list of names of the applicants with their

complete addresses;

(e) a copy of a treasury challan in support of

payment of registration fee calculated in accordance with the provisions of sub-section (1) of section 18.

Commentary- Such procedures are generally the subject matter of the rules framed normally to supplement the procedural requirement of the statute. The elaborate procedure has been duly prescribed here for this Act to be self contained in itself. The Rules have also not been provided in the scheme so that the Government is not able to make any back door entry for interference in the working of the cooperatives. It has been stated that not only the objectives have to be fair but the means to achieve them should also be fair. In view of achieving this objective, some such provisions, though procedural in nature have been incorporated in the Act and just not left the byelaws to take care of. There are instances of unfair means being followed when there are procedural lacuna in order to achieve certain goals by vested interest people. It is expected this and many other provisions of like nature in this Act will effectively check any such misuse of the system.

(6) The Registrar shall register the cooperative and also take on

record its byelaws and communicate by registered post a certificate



of registration and the original byelaws signed and sealed by him,

within sixty days from the date of submission or receipt of application for the purpose subject to the fulfilment of the following conditions, namely:-

(a) the application is in conformity with the

requirements laid down by this Act; (b) the object of the proposed cooperative is

the economic and social betterment of its members through the provision of core services to fulfil such common need as specified in the proposed byelaws;

(C) the proposed byelaws are not inconsistent

with the provisions of this Act and are not against the aims and objects of the cooperative; and

(d) the registration fee has been paid.

(7) If the conditions laid down in sub-sections(5) and (6) are not

fulfilled, the Registrar shall communicate by registered post the order of refusal together with the reasons there for, within sixty days from the date of submission or receipt of application for registration, as the case may be, to the person as specified in the application for the purpose: Provided that no order of refusal shall be passed without giving an opportunity of being heard to the applicant.

Commentary- This Act does not provide for the deeming provision of registration as suggested by the Model Act. The issue has been since discussed at length at various levels and is seemingly settled in this provision after fixing up the conditions and the time limit in registration along



with appropriately providing for the opportunity of being heard.

(8) The certificate of registration signed and sealed

by the Registrar shall be conclusive evidence that the

cooperative mentioned therein is a cooperative duly registered

under this Act, unless it is proved that the registration of the

cooperative has been subsequently cancelled. (9) No cooperative shall commence business unless

it has obtained a certificate of Registration under sub-

section(7) and every member of such cooperative carrying on business in

contravention of this sub-section shall be severally liable for all

liabilities incurred in such business.

(10) Where within sixty days of submission or receipt of the application for registration, as the case may be, an applicant receives neither the certificate of registration nor the order of refusal, the applicant may move the Cooperative Tribunal for redressal. Commentary- Cooperative Tribunal is only an appellate or a revisionary authority in the Cooperative Societies Act 1960. In case of a denial of Registration under the old Act, the appeal also lies before the Registrar. The refusal of registration at all level in the new Act is a matter of direct jurisdiction of the Cooperative Tribunal.



5. Conversion of cooperative society into cooperative. (1) Notwithstanding anything contained in the

Cooperative Societies Act, the cooperative society other than a housing cooperative society registered and functioning under the Cooperative Societies Act, which intends to convert itself into cooperative, may apply for conversion under this Act:

Provided that where the Central Government or State

Government have given share capital loan or Government guarantee to a cooperative society intending to convert itself into a swayatta cooperative under this Act, the cooperative society shall, before applying for under this Act, return such share capital loan, subsidy or guarantee to such Government, and such Government shall accept such returned share capital loan or guarantee as the case may be .

Commentary- In the substituted proviso inserted vide

The Chhattisgarh Act No. 24 of 2001published in the Chhattisgarh gazette (Extraordinary) dated the 17th October, 2001,the word subsidy has been deleted. The original proviso read, " Provided that where the Central Government or State Government have given share capital loan or Government guarantee to a cooperative society intending to convert itself into a swayatta cooperative under this Act, the cooperative society shall, before applying for under this Act, return such share capital loan or guarantee to such Government, and such Government shall accept such returned share capital loan or guarantee or grant as the case may be". .

It has not been provided in this Act for cooperative societies to enter into an agreement for the repayment of Government liability in a phased manner and get converted as swayatta sahkarita as provided in the laws of some States. There have been apprehensions of



cooperatives taking benefit of the new Act in spite of Government's financial involvement in them.

(2) (a)An application for conversion shall be submitted to the

Registrar by hand or by registered post, by the elected board of such cooperative society which intends to convert itself into a cooperative under this Act, on the basis of a resolution passed by a majority of members present at a meeting of the general body of the cooperative society making application under sub-section (1) (hereinafter in this section referred to as such general body), called with at least twenty days notice; provided that such meeting is attended by at least twenty-five percent of total members or five hundred members, which ever is less.

(b)The person by whom or on whose behalf such application is made shall furnish such information in regard to the cooperative society applying under sub-section(1) or the proposed cooperative as the Registrar may require.

(3) Every such application shall be accompanied by-

(a) a true copy of the resolution of such general body expressing commitment to the cooperative principles specified in Schedule A;

(b) evidences to show that the society is not in

possession of any share capital , loan or guarantee from the central or the State Government.

Commentary- Words "or has not received grant" in clause (b)have been omitted vide the Chattisgarh Act No. 24 of 2001published in the Chhattisgarh gazette (Extraordinary) dated the 17th October, 2001..



(c) the original and four copies of the byelaws of the proposed cooperative as adopted by such general body;

(d) a true copy of the resolution of such general

body adopting the byelaws; (e) a true copy of the latest annual report and

audited statement of accounts of such cooperative society; (f) a true copy of the resolution of such general

body along with particulars regarding the writing off of accumulated losses, if any from various reserves or by debiting to the accounts of members as decided at the meeting of such general body.

(g) a list of members who attended such general

body meeting; (h) a copy of the treasury challan in support of

payment of registration fee calculated in accordance with the

provisions of sub-section (1) of section 18.

(4) The Registrar shall register the cooperative and also take on record its byelaws and communicate by registered post a certificate of registration and the original byelaws signed and sealed by him, within ninety days from the date of submission or receipt of application for registration, as the case may be, to such person as specified in the application for the purpose subject to the fulfilment of following , namely:-

(a) the application is in conformity with the

requirements laid down by this Act;



(b) the object of the proposed cooperative is the economic and social betterment of its members through the provision of core services to fulfil such common need as specified in the proposed byelaws;

(c) the proposed byelaws are - (I) not inconsistent with the provisions of this Act; or (ii) not against the aims and objects of the cooperative; or (iii) Is in conformity with the cooperative principles specified

in Schedule A; and

(d) the registration fee has been paid.

(5) If the conditions mentioned in sub-sections (3) and (4) are not fulfilled, the Registrar shall communicate by registered post the order of refusal together with the reasons therefor, within ninety days from the date of submission or receipt of application for registration, as the case may be, to the person as specified in the application for the purpose; Provided that no order of refusal shall be

passed without giving an opportunity of being heard to the applicant.

(6) The certificate of registration signed and sealed by the Registrar shall be conclusive evidence that the cooperative mentioned



therein is a cooperative duly registered under this Act, unless it is proved that the registration of the cooperative has been subsequently cancelled, (7) Where within ninety days of submission or receipt of the application for registration, as the case may be, an applicant receives neither the certificate of registration nor the order of refusal, the applicant may move the cooperative Tribunal for redressal (8) Where a cooperative is registered under sub-section

(4), it shall send to the Registrar of Cooperative Societies a copy

of the registration certificate under the Cooperative Societies

Act, and a copy of the registration certificate under this Act, and

the Registrar of Cooperative Societies shall, within thirty days of the

receipt of such information, delete the name of such cooperative

society from the register of cooperative societies. (9) Where a cooperative is registered under sub-section (4),

the assets and liabilities, the rights and obligations, and members of the applicant cooperative society shall become the assets and liabilities, the rights and obligations, and the members of the cooperative registered under this Act, and all transactions of the applicant cooperative society shall be deemed to have been the transactions of the cooperative registered under this Act.



Commentary- The A..P. High Court in its land mark decision on a petition filed by the A.P. Dairy Development Cooperative staff and workers Union challenging the Vijaya Visakha District Cooperative Milk Producers’ Union being converted into a mutually aided cooperative union held that the conversion was rightfully done to minimise governmental interference and to promote self reliant and autonomous cooperative societies. The petition was filed mainly on the ground that by the order of conversion the three tier structure approved by the government on the basis of Anand pattern for procurement of milk, its sale as well as by products would be adversely affected. In his 46 page order in W.P. No. 14636 of 1999 0n 28 September 1999, Justice B.A.S Swami made following important observations-

“The Legislature having realised that the cooperative societies registered under the Act 7th of 1964 due to increased state participation in financing and management of the cooperative societies lead to an unfortunate situation where the cooperative societies themselves, by and large, have started to perceive themselves not as member controlled, member sensitive business, guided by the universally accepted principles of cooperation, but as channels to government subsidies and largesse and thereby sound and sustainable cooperative business, accountability, responsibility and self reliance has taken a back seat enacted the present enactment to confer more autonomy on the cooperative societies and to remove the state permitting formation of voluntary cooperative societies by excluding state control and make the cooperative movement more vibrant in the state. While making this legislation sufficient care was taken by the legislature to enable the societies registered under Act 7 of 1964 to become cooperative societies registered under this Act by making suitable provisions in the new Act.”



The court further went on to settle an important issue of government assistance also. It states” From this it is evident that a loan or guarantee given by the Government to a Federation for the purpose of loan lending to its constituents may not be treated as a loan or guarantee to the constituents, unless there is a specific mention of such a condition in the original agreement. “

Underlining the utility and the timeliness of a progressive Statute like this, the court further held, “ In the circumstances, any prudent person will try to come out of a sinking unit as and when opportunity comes and as the provisions of the new Act are intended to minimise the governmental interference and to promote more self reliant and autonomous cooperative societies, there is nothing wrong in the action of the 6th respondent in trying to get itself converted as the 7th respondent under the provisions of the new Act.”

Finally, the court rejected the petition as a public interest litigation and held, “ Further, this petition cannot be treated as a public interest litigation as the interest of the community at large is not going to be effected in any way by the conversion of the 6th respondent Union nor any injury is said to have caused to the public due to the conversion of the 6th respondent union.”

6. Cooperative to be body corporate.

The registration of a cooperative shall render it a body corporate by the name under which it is registered having perpetual succession and a common seal with power to acquire, hold and dispose of property, to enter into contracts, to institute and defend suits and other legal proceedings and to do all other things necessary for the purpose for which it was constituted. Commentary- This is an instance of creating statutorily a 'body' or a 'person' as against the natural scheme of



creation for legal requirement. This law-made being is necessarily a collective person- the 'body corporate' so that it has an identity of its own for suing or being sued when necessary.

7. Byelaws.

(1) A cooperative, shall have a set of byelaws, and the

affairs of the cooperative shall be managed in accordance with the terms, conditions and procedure specified in the byelaws.

(2) Subject to the provisions of this Act, the functioning of

every cooperative shall be regulated by its byelaws.

(3) The byelaws may contain such matters as decided by

the general body and shall be specific on all matters listed in Schedule B.

Commentary- Schedule–B of the Act elaborately enlists the items on which byelaws have to be framed. These items clearly suggest that since there are no Rules necessary to be framed under this Act, the procedural requirements have to be met by the byelaws wherever necessary. Moreover, the conditions such as protection of rights of some weaker sections of the society or women etc. have to be attended by specifically making provisions in the byelaws.

8. Amendment of byelaws.

(1) A cooperative may decide, by a special resolution, to amend the provisions of its byelaws and for that purpose the text of proposed amendment with reasons therefor shall be sent to each member, along with the notice of the general meeting at which the proposed



amendment is to be discussed. Commentary- In fact power to make includes power to

amend. The amendment of the byelaws should be the result of the "Special Resolution" as defined in the Definitions clause. The attendance of the members in this case necessary is more than fifty percent and at least two third of the members present should vote in favour of it.

Byelaws of a cooperative are just like a contract or a memorandum of understanding that a cooperative jointly enter into agreement for managing the affairs of it. As a matter of course, the members of a cooperative should themselves draft their byelaws according to their specific requirement. When model byelaws are prepared and circulated for adoption, the members start having a passive approach towards them and such byelaws get typified for proceeding in a fixed direction only.

(2) A copy of an amendment of the byelaws shall be

forwarded by the cooperative by registered post to the Registrar within a period of thirty days from the date of the general meeting at which the resolution was passed.

(3) A copy of amendment forwarded to the Registrar shall be signed by the President and two directors and shall be accompanied by the following particulars:-

(a) a copy of the resolution adopting the amendment; (b) the date of the general meeting at which the

amendment was adopted; (c) the date on which the amendment comes into

force. (d) a list of members who attended such general

meeting and a list of members who voted for or against the resolution in



such general meeting.

(4) The Registrar shall take on record the amendment of the byelaws

received under sub-section (2) subject to the fulfilment of the following conditions, namely:-

(a) the amendment is not inconsistent with the

provisions of this Act or any of its existing byelaws or is not against the aims and objects of the cooperative; and

(b) the amendment is in conformity with the cooperative principles specified in Schedule A:- (5) The Registrar shall, by order, refuse to register the amendment if any of the conditions specified in sub-section(4) is not fulfilled :

Provided that no such order of refusal

shall be passed without giving a reasonable opportunity to the cooperative to reconsider the amendment within the period specified by him.

(6) The Registrar-

(i) may after considering the reply received in response to the

opportunity given under sub-section(5), refuse amendment; and

(ii) shall, if no reply is received within the period

specified by him under the proviso to sub-section(5), refuse amendment; and he shall communicate such decisions within thirty days of the receipt of such reply or the



expiry of the period referred to in clause(i), as the case may be.

(7) An appeal against the order of refusal shall lie to the Cooperative Tribunal for redressal. Commentary- The Model Act 1990 as well as the Referential Act 1997 proposed for the deeming and automatic registration of amendments respectively. The Referential Act goes a step further suggesting that if the Registrar considers that the legal validity of the automatic registration of the amendments is questionable, he can challenge them before a competent court. Swayatta Sahkarita on the other hand, enables the cooperative to approach cooperative Tribunal for relief if the Registrar does not register the amendments after recording the reasons and providing the cooperative an opportunity of being heard.

9. Name of cooperative.

(1) The full name of every cooperative shall contain the word

“cooperative” or its equivalent in any Indian language.

(2) A cooperative shall not be registered with the same name as another cooperative business already registered under this Act or the Cooperative Societies Act ;

Provided that where the byelaws of a secondary

cooperative require that all its members which are cooperatives to use a common name, the name of each such member-cooperative shall have its location or other distinguishing feature included in the name at the beginning or end of the common name.

(3) Every cooperative shall display its full name in legible characters in a conspicuous position:-



(a) at every office or place at which it carries on

business; (b) in all notices and other official publications; (c) on all its contracts, business letters, orders for

goods, invoices, statements of account, receipts and letters of credit; and

(d) on all bills of exchange, promissory notes, endorsements,

cheques and orders for money signed on its behalf.

(4) Every cooperative shall display its full name in legible characters

on its common seal. (5) A cooperative registered with limited liability under

this Act shall have as a suffix to, its name the word "limited" or its equivalent in any Indian language. (6) Nothing in sub-section (2) shall prevent a cooperative displaying

more conspicuously than the full name, any shorter name by which it is popularly known and which, too, is included in the byelaws.

Commentary- cooperatives engaged in the activities like marketing of their members produce do sometimes use a shorter name by which it is popularly known and gets its product popularised. This sub section therefore enables a cooperative to be identified with such brand name if necessary.

(7) A cooperative may, by an amendment of its byelaws, change its



name; Before changing the name the cooperative shall send notice

of its intention to change its name to the Registrar under this Act and the Registrar under the Cooperative Societies Act, along with the proposed name, and the Registrar shall, within fifteen days of receiving such notice inform the cooperative if such name is already in use by another cooperative or cooperative society, as the case may be.

(8) Where a cooperative changes its name, the Registrar shall enter the new name of the cooperative in the register of cooperatives in place of the former name on receipt of a copy of amendment of

byelaws under sub-section (2) of section 8 and issue a certificate to that effect.

(9) The change of name of a cooperative shall not affect

any rights obligations of the cooperative or any of its members or

past members or deceased members or render defective

any legal proceedings by or against it; and any legal

proceedings which might have been continued or commenced by or

against the cooperative by its former name shall be so continued

or commenced by its new name.

(10) A prominent cooperative, which changes its name, shall publicise such change in name in a prominent newspaper in the district in which its head office is located.

10. Location of head office.



(1) Every cooperative shall notify to the Registrar the full address of its head office, within sixty days from the date of its registration under this Act.

(2) Every cooperative shall display the full address of

its head office in legible characters in a conspicuous position :-

(a) at every office or place at which it carries on

business; (b) in all notices and other official publications; (c) on all its contracts, business letters, orders for

goods, invoices, statements of account, receipts and letters of credit; and

(d) on all bills of exchange, promissory notes, endorsements, cheques and order for money signed on its behalf.

(3) The board may, by resolution, change the address of

its head office. It shall give notice of such change to its members, creditors, the Registrar and to any secondary cooperative to which it is affiliated, within fifteen days of the passing of such resolution.

(4) The Registrar shall, within fifteen days of receiving

notice of change of address from a cooperative, take on record, in the register of cooperatives, the changed address of the head office of a cooperative.

11. Transfer of assets and liabilities.

(1) A cooperative may, by special resolution, decide to

transfer its assets and liabilities, in whole, to any other cooperative, which, by special resolution, agrees to receive such assets and liabilities.

Commentary- The provision pertains to the organisational

restructuring at the will of the members expressed through general body. The transfer of assets and



liabilities resulting due to division, amalgamation and merger of a cooperative has to be fully voluntary. There is no provision in it now for the Registrar or the government to do it forcefully in public interest or otherwise as in the case of existing laws.

(2) Where special resolutions are passed under sub-

section (1), each cooperative shall give notice thereof together with a copy of the resolution passed by it to all its members and creditors, and any member other than those who voted in favour of the proposed transfer of assets and liabilities or the proposed agreement to receive such assets and liabilities, as the case may be, and any creditor shall, during a period of thirty days from the date of service of notice upon him, have the option of withdrawing his shares, deposits or loans from the cooperative, as the case may be, subject to the discharge of his obligations to the cooperative.

(3) Any member or creditor who fails to exercise the

option within the period specified in sub-section (2) shall be deemed to have assented to the transfer or receipt of assets and liabilities as the case may be.

(4) The special resolutions passed under sub-section (1)

shall not take effect until :-

(a) all claims of the members and creditors of each cooperative who have exercised the option under sub-section (2) have been met in full or otherwise satisfied; and

(b) information of the intended transfer of assets and

liabilities and settlement of claims of members and creditors of cooperatives concerned is sent to the Registrar and his acknowledgement is obtained.



(5) When a cooperative transfers the whole of its assets and liabilities to any other cooperative, under this section, the registration of the cooperative transferring the assets and liabilities shall stand cancelled and it shall be deemed to have been dissolved and shall cease to exist as a corporate body, and the Registrar shall delete the name of such cooperative from the register of cooperatives.

12. Division of cooperative.


divide itself into two or more cooperatives.

(2) Where special resolution is passed under sub-section (1), the cooperative shall give notice thereof together with a copy of the resolution passed by it to all its members and creditors and any member other than those who voted in favour of the proposed division and any creditor shall, during a period of thirty days from the date of service of notice upon him have the option of withdrawing his shares, deposits or loans, from the cooperative as the case may be, subject to the discharge of his obligations to the cooperative.


option within the period specified in sub-section (2) shall be deemed to have assented to the division.

(4) The special resolution passed under sub-section (1)

shall not take effect until:-

(a) all claims of the members and creditors of the cooperative who have exercised the option under sub-section (2) have been met in full or otherwise satisfied;

(b) information of the intended division and

settlement of claims of members and creditors is



sent to the Registrar and his acknowledgement of receipt of the information is obtained; and

(c) the certificates of registration and the original

byelaws of the resultant cooperatives, signed and sealed by the Registrar, are issued under sub-section (6) of section 4.

(5) When a cooperative divides itself into two or more

cooperatives under this section, the registration of such cooperative shall stand cancelled and it shall be deemed to have been dissolved and shall cease to exist as a corporate body and the Registrar shall delete the name of such cooperative from the register of cooperatives.

(6) When a cooperative divides itself into two or more

cooperatives, each member who has assented or deemed to have assented to the division shall be deemed to have become a member of that newly formed cooperative to which his interests were transferred, in accordance with the scheme of division approved by the general body of such cooperative notwithstanding anything contained in this Act.

13. Amalgamation of cooperatives.

(1) Any two or more cooperatives may, by special

resolutions, decide to amalgamate themselves and form a new cooperative.


section (1), each cooperative shall give notice thereof together with a copy of the resolution passed by it to all its members and creditors and any member other than those who voted in favour of the proposed amalgamation and any creditor shall, during a period of thirty days from the date of service of notice upon him, have the option of withdrawing his shares,



deposits or loans from the cooperative, as the case may be, subject to the discharge of his obligations to the cooperative concerned.


option within the period specified in sub-section (2) shall be deemed to have assented to the amalgamation.



(a) all claims of the members and creditors of each cooperative who have exercised the option under sub-section (2) have been met in full or otherwise satisfied;

(b) information of the intended amalgamation and

settlement of claims of members and creditors is sent to the Registrar and his acknowledgement is obtained; and

(c) the certificate of registration and the original

byelaws of the cooperative which is formed as a result of amalgamation, signed and sealed by the Registrar, is issued under sub-section(6) of section 4.

(5) When two or more cooperatives amalgamate

themselves into a new cooperative under this section, the registration, of the cooperatives so amalgamated, shall stand cancelled and they shall be deemed to have been dissolved and shall cease to exist as corporate bodies, and the Registrar shall delete the names of the cooperatives so amalgamated from the register of cooperatives.

(6) When two or more cooperatives amalgamate

themselves into a new cooperative under this section, all the members of the cooperatives who



have assented or deemed to have assented to the amalgamation shall be deemed to have become members of the new cooperative notwithstanding anything contained in this Act.

14. Merger of cooperatives.


merge itself into any other cooperative, which, by special resolution, agrees to such merger.


section (1), each cooperative shall give notice thereof together with a copy of the resolution passed by it to all its members and creditors, and any member other than those who voted in favour of the proposed merger and any creditor shall, during a period of thirty days from the date of service of notice upon him, have the option of withdrawing his shares, deposits or loans from the cooperative, as the case may be, subject to the discharge of his obligations to the cooperative concerned.


option within the period specified in sub-section (2) shall be deemed to have assented to the merger.



(a) all claims of the members and creditors of each cooperative who have exercised the option under sub-section (2) have been met in full or otherwise satisfied; and

(b) information of the intended merger and settlement

of claims of members and creditors is sent to the Registrar and his acknowledgement is obtained.



(5) When a cooperative merges itself into any other cooperative under this section, the registration of the merged cooperative shall stand cancelled and it shall be deemed to have been dissolved and shall cease to exist as a corporate body, and the Registrar shall delete the name of such cooperative from the register of cooperatives.

(6) When a cooperative merges itself into any other

cooperative under this section, the members of the first cooperative who assented or deemed to have assented to the merger, shall be deemed to have become the members of the second cooperative notwithstanding anything contained in this Act.

15. Vesting of assets and liabilities in resulting cooperative. A resolution passed under sub-section (1) of

section 11 or sub-section (1) of section 12 or sub-section (1) of section 13 or sub-section (1) of section 14 shall be sufficient conveyance to vest the assets and liabilities of each affected cooperative in the resulting cooperative or cooperatives concerned, such vesting being subject only to the provisions of the scheme of transfer of assets and liabilities or of division of cooperative or of amalgamation of cooperatives or of merger of cooperative as the case may be.

Explanation - For the purpose of this section- (a) “affected cooperative” means a cooperative,

which decides in any of the manners specified in section 11,12,13 or 14;

(b) “resulting cooperative” shall have the meaning

assigned to it in section 17.



Commentary- Swayatta Sahkarita provides for effectively vesting the transfer of assets and liabilities of affected cooperative into the resulting cooperative at one place as against Referential Act 1997 providing in all clauses of division, amalgamation and merger separately. Thus sections 12, 13 and 14 derive their logical conclusions under this provision. 16. Conversion of a cooperative into cooperative

society A cooperative registered or a cooperative society converted as cooperative under this Act intending to convert into a cooperative society may apply to the Registrar in accordance with the provisions of cooperative societies Act. Commentary- It was being argued that the conversion should be possible both ways. There could arise a situation when a cooperative decides to get converted into a cooperative society itself or the situation so warrants, the exercise of the other option should be possible. This is a new provision other than the models available provided.

17. Saving of rights and obligation of resulting cooperative etc.

(1) The reorganisation of the cooperatives under section 11, 12, 13 or 14 shall not, in any manner whatsoever affect any right or obligation of the resulting cooperative or cooperatives or render defective any legal proceedings by or against the cooperative or cooperatives and any legal proceedings that might have been continued or commenced by or against the cooperative or cooperatives, as the case may be, before the reorganisation may be continued or commenced by or against the resulting cooperative or cooperatives.

(2) Every resulting cooperative shall have such

structure, property, powers, rights, interests,



authorities, duties and obligations as may be specified in the scheme of :-

(i) transfer of assets and liabilities under section 11; or (ii) division of cooperative under section 12; or (iii) amalgamation of cooperatives under section 13; or (iv) merger of cooperatives under section 14,

as the case may be, and such scheme may contain such consequential, incidental and supplemental provisions as may be considered necessary to give effect to such scheme.

Explanation - For the purpose of this section “resulting cooperative” means a cooperative -

(i) to which the assets and liabilities of a

cooperative transferring the assets and liabilities are transferred in whole under section11,or

(ii) which is formed as a result of division under section 12;

or

(iii) which is formed as a result of amalgamation under section 13 ; or

(iv) which is formed as a result of merger under section 14. 18. Fee for services .

(1) Registration fee amounting to one percent of the

authorised equity capital of the proposed cooperative, subject to the minimum of rupees one



hundred and maximum of rupees five thousand, shall be charged for registration of each cooperative.

Provided that the fee shall be rupees two hundred in

the case of such cooperatives which do not intend to have any equity capital.

Comment- With the concept of charging the cost of

service becoming important everywhere (including government mechanism) in the modern society of professionalism and open market competition, the relationship of the registering authority and the cooperative should also develop on the similar pattern. Where the cooperative after the payment of the cost of service becomes legally as well as professionally competent to expect early action, the registrar is also formally obliged to discharge his responsibility fastidiously.

(2) Subject to the provisions of sub-section (2) and sub-

section (6) of section 53 the Registrar may, by order, prescribe a scale of fee to be paid by cooperatives and others for various services rendered by him under this Act.

Comment- Registrar Cooperative Societies Chhattisgarh has since issued circular No.388 dated 12-5-2000 providing for a budgetary head no.0425-sahkarita-800 anya praptiyan(panjiyan shulk) for this purpose.

CHAPTER III

MEMBERSHIP 19. Eligibility for membership in cooperative.

(1) Any person who needs the services of a cooperative,

expresses willingness to accept the responsibilities



of membership, meets such other conditions as may be specified in the byelaws of the cooperative, and is in a position to use the services, may seek membership and if the cooperative is in a position to extend its services to the applicant, it may admit him as a member.

Comment- To give and take service is an important concept in a

cooperative of the present order. The nonuser or the non-stakeholder should no longer become important. Large, unwieldy, inactive and at times non-genuine membership should not be controlling the cooperative. Although cooperatives are a voluntary organisations but the extension of the concept of open membership to the universal does not well fit in the scheme as the control of the cooperative shall that way pass on to those to whom it is utility based rather being need based.

(2) Every applicant for membership and every member of

a cooperative shall keep each cooperative of which the person is a member, informed of membership in other cooperatives, and in case of conflicting membership, the board may, by resolution, refuse admission under section 21 or terminate from membership under section 24 as the case may be :-

Provided that no such resolution to refuse admission shall be passed without giving the applicant as the case may be, a reasonable opportunity to make representation to the board as to why he should not be refused admission.

Explanation :- For the purpose of this sub section the expression “conflicting membership” means the membership of the common objective cooperatives functioning within the jurisdiction of a cooperative of which the membership is sought. Commentary- It is important to note that in the old Act, it is the conflict of the cooperative society that has been tried to be avoided whereas in the present case, it is the conflict of



membership that becomes important. This is again trying to make cooperative need based and not important from the utilitarian point of view. This is also an effective way of directing the loyalty of members towards the cooerative of their concern.

20. Disqualification of member:

No person shall be eligible for admission as member and any member shall cease to be a member of a cooperative, if he incurs disqualification of membership prescribed in the byelaws.

Commentary – Byelaws may specifically prescribe the disqualifications of members. When there is a general prescription by way of the statute, there is a likelihood of outside interference with the intervention or interpretation of law. 21. Admission of member.

(1) The board may admit a person for membership in

accordance with the procedure laid down in the byelaws within sixty days from the date of receipt of application for membership if he is eligible for membership or refuse admission to the applicant if he is not eligible for membership and communicate the same to the applicant by registered post .

(2) Where admission is refused, the decision with the

reasons therefore shall be communicated by registered post to such applicant within fifteen days of the date of the decision. If nothing is communicated within the period of sixty days under sub-section (1) the admission shall be deemed to have been refused by the board.

Commentary- The deeming provision for the refusal of

admission along with the refusal in writing may actively involve an affected member in the process of seeking



redressal. This provision can well be invoked when the board does not want to admit any person who is eligible. As a matter of course the membership should be granted than refused. The reason for deviation in the present case owes its origin to the 'service' concept of the cooperative which is so important from either side!

(3) Where an applicant has been refused or deemed to

have refused admission by the board, the applicant may appeal to the Arbitration Council within thirty days of .

(I) the communication of such decision under sub-section(2); or

(ii) the expiry of the period of sixty days referred to

in sub-section(2); Provided that the Arbitration Council shall take

no decision of refusal of admission without giving an opportunity of being heard to the applicant.

Commentary-Referential act had suggested empowering Annual General Body for hearing appeal against the refusal of membership. Swayatta Sahkarita provides for the constitution of the Arbitrary Council which a smaller body available for meeting as and when due as against the AGM meeting just once in a year. 22. Withdrawal of membership.

(1) Subject to the provisions of sub-section (2) of section 48, a member may at any time withdraw from membership in a cooperative in accordance with the procedure laid down in the byelaws,

(2) The withdrawal from membership shall nonetheless

require the person to fulfil such obligations as were undertaken or assumed as a member, under the provisions of this Act, the byelaws or any agreement.



23. Cessation of membership.

(1) If any person having been admitted as a member of a cooperative dies or subsequently becomes subject to any of the disqualification specified in the byelaws shall cease to be a member of the cooperative.

(2) Every cooperative shall inform, in the event of the death of the member, the nominee of the member, and in every other instance, the member, about the cessation of membership, for the settlement of accounts.

24. Termination of membership.

(1) The board may, by a resolution passed by three

fourth majority of the directors present and voting at a meeting held for the purpose, terminate the membership of a member if he -

(a) intentionally does any act likely to injure the

credit of the cooperative or bring it to disrepute; or

(b) wilfully deceives the cooperative ; or

(c) has acted adversely to the objects or his act is detrimental to the interests of the cooperative; or

(d) persistently makes default in payment of his dues or fails to comply with the provisions of the byelaws; or

(e) having been admitted as a member subsequently becomes a

member of any other common objective cooperative functioning within the jurisdiction of the cooperative of which he is a member:



Provided that no such resolution shall be passed without giving the member concerned a reasonable opportunity to make representation at the board meeting.

(2) Any member aggrieved by the resolution passed

under sub- section(1) may appeal to the Arbitration Council within thirty days of the communication of such resolution;

(3) No member of a cooperative whose membership has been

terminated under sub-section(1) shall be eligible for re-admission as a member of the cooperative for a period as may be specified in the resolution but not exceeding five years.

Commentary-The grounds for the termination of membership are quite exhaustive. However the only authority exercising powers is the Board. The resolution to be passed in this regard is also very qualified. There are thus necessary inbuilt safeguards for the protection of the rights of the members. The appeal against the decision of the Board is to lie before the Arbitration Council. This may bring faster relief to the affected members. 25. Register of members

(1) Every cooperative shall maintain a register of

members. The name of every person admitted as a member of the cooperative shall be entered in the register along with such particulars as may be deemed necessary by the board.

(2) The name of a person –

(i) whose admission is refused under section 21; or (ii) who has withdrawn from membership under section 22; or



(iii) who ceased to be a member under section 23; or (iv) whose membership has been terminated under section 24 shall be deleted from the register of members:

Provided that the name of a person referred to in clause (i) or clause (iv) shall not be deleted from the register of members till the decision of the Arbitration Council in appeal preferred under sub-section (3) of section 21 or under sub-section (2) of section 24 as the case may be.

(3) The register maintained under sub-section (1) shall be prima facie evidence of the date on which any person was admitted to the cooperative as a member and of the date on which he ceased to be a member.

Commentary- The rights of the members are further protected in the proviso of this Section. 26. Education of members etc.

(1) Every cooperative shall include in its budget

annually, provision for expenses on member and potential member, education and training of staff and directors for the development of their cooperative in accordance with the cooperative principles specified in Schedule A and practices of cooperation.

(2) Any balance under the budget head provided for

under sub-section (1) shall be taken at the end of the year into a cooperative education fund, and may be used only for the purpose of educating and training, of staff and directors in according with cooperative principles specified in Schedule A and practices of cooperation.



Commentary- The importance of education and training is well recognised in the age-old cooperative structures. There are cooperative Unions either with a federal or decentralised system everywhere for cooperative societies registered under existing laws. The existing laws also provide for a compulsory contribution by these societies to the unions. It has, however, come to be experienced of late that the paucity of funds apart, the cooperative unions are neither able nor equipped to meet the growing necessity of the advance education and training.

Cooperatives have been thus required to take care of this necessity themselves and attend to the need of the existing as well as potential individuals likely to be seeking membership.

27. Exercise of rights.

(1) No member of a cooperative shall exercise the right of a member, including the right of vote, unless he has made such payment to the cooperative in respect of membership or has acquired and continues to have such interest in the cooperative, as may be specified in the byelaws.

(2) Every financial year, within twenty days of closure of

the previous financial year, the chief executive shall prepare a list of members with the right of vote, and a list of members without the right of vote, valid for the current financial year. The list shall be affixed on the notice board of the head office of the cooperative for information of all members, and any member, not satisfied with the specific instances of inclusion or non-inclusion of members in the lists, may appeal to the board within ten days from the date of the affixation of the lists on the notice board, for re-examination of the records, and the board shall, within forty five days of closure of the previous



financial year, review the lists, finalise it, and have it affixed on the notice board of the head office of the cooperative.

Commentary- This provision basically aims at enabling a cooperative to identify its stakeholders on a regular basis' and also to make sure that only stakeholders control the cooperatives. 28. Votes of members and manner of exercising

vote. (1) In primary cooperatives, members shall have equal

voting rights (one member, one vote),Similarly in case of secondary

cooperatives, the representative of such cooperatives shall have same

voting rights (one representative one vote). Every member of a

cooperative or the representative referred herein shall exercise his vote in

person and in the manner specified in the bye-laws and no member

or representative shall be permitted to vote by proxy:

Provided that a person shall have been a member for at least

one full financial year, before being eligible to vote; Provided further that the condition of one-year membership

shall not apply to the members who join at registration or at any time after the registration of a cooperative but before the first financial year ending;

(2) Every member of a cooperative shall exercise his vote in

the manner specified in the byelaws.

Commentary- An argument often forwarded is that since

other forms of business provide for voting rights and profit



distribution in proportion to the shares held by each person, cooperative should give voting rights and distribute surplus in proportion to the use by each member of the services of the cooperative. A cooperative also believes in distributing the surplus based on an analysis of how the surplus was created by giving equal decision-making rights to all share- holders. It has been therefore been suggested in various models that the while the cooperatives may not be expected to distribute to members the surplus created out of non-member use of services, they do distribute the rest of the surplus to each member in proportion to the members use of service because the surplus was created out of the use of services. The Referential Act's model therefore forwarded the provision of minimum service availability made mandatory and also link up voting rights at least in secondary cooperative to it. The M.P. model does follow a yearlong membership necessary for voting rights, but other concepts are still being debated. They are therefore not incorporated.

29. Liability of member.

(1) A cooperative may be registered with limited or

unlimited liability:

Provided that unless the State Government, by a general or special order otherwise directs, the liability of a cooperative of which another cooperative is a member shall be limited.

Explanation - For the purpose of this sub-section-

(a) "cooperative with limited liability" means a

cooperative in which the liability of its members for the debts of the cooperative is limited by its byelaws, to such form and extent as they may undertake to contribute to any deficit in the assets of the cooperative, in the event of its being wound up; and



(b) "cooperative with unlimited liability" means a cooperative the members of which are, in the event of its being wound up, jointly and severally liable for and in respect of all its obligations, to contribute to any deficit in the assets of the cooperative.

(2) Where a cooperative by special resolution amends

its byelaws to change the form and extent of liability, of its members, it shall give notice thereof together with a copy of the amendment to its members and creditors and any member other than those who voted in favour of the proposed change of liability and any creditor shall, within a period of thirty days from the date of service of notice upon him, have the option of withdrawing his shares, deposits or loans from the cooperative as the case may be subject to the discharge of his obligations to the cooperative.


option within the period specified in sub-section (2) shall be deemed to have assented to the change of liability.

(4) An amendment passed under sub-section (2) shall

not take effect until - (a) all claims of the members and creditors of the

cooperative who have exercised the option under sub-section (2) have been met in full or otherwise satisfied; and

(b) notice of the amendment of the byelaws of the cooperative and information of settlement of claims of members and creditors is sent to the Registrar and his acknowledgement is obtained.

(5) Subject to the provisions of sub-section (6), the liability of

a past member or of the estate of a deceased member of a cooperative for the debts of the cooperative as they stood :-



(a) in the case of a past member, on the date on

which he ceased to be a member; and (b) in the case of a deceased member, on the date of

his death; shall continue for a period of two years from such date.

(6) Where a cooperative is ordered to be dissolved under

any provision of this Act, the liability of a past member or of the estate of a deceased member, who ceased to be a member or died during the period of two years immediately preceding the date of order for dissolution, shall continue until completion of the entire liquidation proceedings, but such liability shall be limited only to the debts of the cooperative as they stood on the date of cessation of his membership or his death, as the case may be.

CHAPTER IV

MANAGEMENT

30. General body.

(1) There shall be a general body for every cooperative

consisting of all the members of such cooperative. (2) Where the general body of a cooperative decides that

the size, spread or types of its membership requires a representative body of delegates for more effective decision-making, its byelaws shall provide for a smaller body called delegate general body elected from the members, in the annual general meeting in accordance with the byelaws to exercise such powers and to discharge such



duties of the general body as may be specified in the byelaws.

(3) Unless the context otherwise requires, any reference in this Act to the general body shall apply to the delegate general body where it exists: (4) Subject to the provisions of this Act and the byelaws, the ultimate power of a cooperative shall vest in the general body .. (5) Any power, function or responsibility, falling within the scope of a

cooperative as a corporate body, which has not been specifically entrusted by this Act or the byelaws, to any authority of the cooperative, may be dealt with by the general body, on a reference by the board.

31. Functions, responsibilities and powers of general body

(1) The following matters, among such other matters as

are considered necessary by the board, shall be dealt with by the general body at its annual general meeting, namely:-

(a) election, if fallen due, of the directors or

delegates; Explanation - Election of the directors or delegates shall be deemed to have fallen due, if the term of such board or delegate general body comes to an end within



a period of three months from the date of the annual general meeting.

(c) consideration of the long term plan and budget,

when required; (c) consideration of the annual operational plan and

budget for the current financial year;

(d) consideration of the annual report of activities for the previous financial year;

(e) consideration of the audited financial statements

of accounts, and the auditor's report relating to the previous financial year;

(f) consideration of the report on deviations, if any,

from the approved budget relating to the previous financial year;

(g) disposal of surplus, if any, of previous financial

year; (h) management of deficit, if any, of previous

financial year; (I) creation of specific reserves and other funds; (j) review of actual utilisation of reserves and other

funds; (k) review of the report on the attendance at

meetings by directors; (l) review of the use of the cooperative's services

by the directors; (m) review of remuneration paid to any director or

member of any committee or internal auditor in



connection with his duties in that capacity or his attendance at concerned meetings;

(n) review of quantum and percentage of services

provided to non- member's vis-à-vis services provided to the members;

(o) report of activities and accounts related to

member education and director and staff training.

(p) consideration of any other matter, which may be

brought before the meeting of the general body in accordance with the byelaws.

(2) The following matters, among such other matters as

considered necessary by the board, or which are specifically assigned to the general body under any other provision of this Act, may be dealt with by the general body at its annual or any general meeting, namely:- (a) amendments of byelaws; (b) removal of directors; (c) membership of the cooperative in secondary

cooperative; (d) partnership with other cooperatives; (e) amalgamation, division, merger, transfer of assets

and liabilities; (f) dissolution of the cooperative; (g) consideration of the Registrar's report of inquiry

or reasons for the non-completion of the inquiry.

(3) If the byelaws of a cooperative provide for election of all or more directors on territorial basis, such director shall be elected from the areas, in a meeting of the members of that area in accordance with the provisions of the byelaws on a date prior to that of annual general meeting. The result thereof shall be affixed on the



notice board of the head office of the cooperative and also at the place of the annual general meeting prior to the commencement of the proceedings of the annual general meeting. Commentary- The functions, responsibilities and powers of the general body are much wider in the scheme of this Act. These have necessary linkages with the relevant provisions made at appropriate places. The functions related to hearing of appeal against the decision of the Board in respect of membership or employment, separate remedies have been provided since a big body like general meeting may not find it expedient to go into the legalities of such matters in necessary details.

32. General meetings.

(1) The board may, at any time, call a general meeting of

the members of the cooperative: Provided that one such meeting known as

annual general meeting shall be held within one hundred and fifty days of the closure of the financial year to consider or to approve, among other matters, the returns to be filed with, and the information to be furnished to, the Registrar.

Commentary- The annual meeting of the general body has

been linked with the closure of the financial year and the finalisation of the annual accounts. There are practices of holding these meetings basically for getting approved the budget of the ensuing years. The finalisation of the old accounts and the submission of statutory returns should become the larger compulsions of the cooperatives. This provision may also act uniformly for all cooperatives to complete their annual general meeting generally by the end of May every year.



(2) The board shall call a special general meeting and shall be bound to do so within thirty days of the date of receipt of a written requisition -

(a) signed by not less than twenty five percent of the

members having right to vote; or (b) from the Registrar;

(3) Such requisition shall contain the reasons why the

meeting is felt necessary and the proposed agenda, and no subject other than the subjects included in the proposed agenda shall be discussed at the special general meeting.

(4) If the board fails to hold an annual general meeting

under sub- section (1) or a special general meeting on requisition under sub- section (2) within the period specified therein all directors shall cease to be directors on the date of expiry of the said specified period.

(5) All directors shall cease to be directors on the date of

the annual general meeting, if the audited annual financial statements of accounts and annual report of activities for the previous financial year were not sent to each member along with the notice to attend the annual general meeting under the certification of posting at which the report and accounts are to be considered by the general body.

Commentary- Annual general body is the only forum where the individual member's rights are best expressed and it therefore required such strictly provision to call it in right earnest. Any failure in this regard has to be viewed just not a serious lapse but a violation as such and it should therefore penalises the board at large for not being constantly watchful in this matter.



(6) Any meeting of the general body may, with the consent of the

majority of the members present, be adjourned from time to time to a later hour on the same day or to any other date, but no business other than that left over at the adjourned meeting shall be transacted at the next meeting :-

A notice of such adjournment posted in the head office of the

cooperative on the day on which the meeting is adjourned shall be deemed sufficient notice of the next ensuing meeting.

(7) The quorum for a general meeting shall be specified in the byelaws, but shall not be less than ten percent of the members eligible to vote at the general meeting. (8) If at any time in a meeting there is no quorum the presiding authority shall adjourn it to such time or date as it thinks fit and announce the same at once; and the business set down for the meeting shall be brought forward at the subsequent meeting whether at such meeting there is a quorum or not. (9) No business other than the business fixed for the original meeting shall be transacted at such subsequent meeting. (10) A notice of such adjournment posted in the head

office of the cooperative on the day on which the meeting is adjourned shall be deemed sufficient notice of the next subsequent meeting.



(11)The quorum for a delegate general body meeting shall not be less than twenty five percent of the delegates eligible to vote at the delegate general meeting. If at any time in the meeting of delegate general meeting, there is no quorum, the procedure laid down in subsection (6) to(10) shall be followed.

Commentary- A cooperative to emerge as a strong,

genuine, member-used, member-controlled, member-sensitive business cooperative, the percentage of members for quorum purposes is fixed as 10 for individual and 20 for delegate representation.

(12) At the meeting of the general body, the President, if

present, shall preside. If the President is absent from the meeting of the general body the Vice President shall preside. If both the President and Vice

President are absent from the meeting of the general body, the members present shall choose one of them to preside.

33. Board of directors .

(1) There shall be a board of directors for the management of every cooperative registered under this Act. The directors shall be elected in accordance with the provisions of the byelaws. Subject to the provisions of sub-section(4) of section 30 the management of every cooperative constituted in accordance with the provision of this Act and the byelaws shall vest in a board; Provided that in the case of a cooperative newly registered under this Act, the persons who have signed the application for the registration of the cooperative may appoint a promoter board, for a period not exceeding one year from the date of registration, to direct the affairs of the cooperative and it shall cease to function as soon



as a regular board is constituted in accordance with the provisions of this Act and the byelaws; Provided further that in the case of a cooperative societies registered under the Cooperative Societies Act and the elected members of its board, whose term has not expired at the time of registration of cooperative under section 5 shall be deemed to be the promoter board, with the same term and responsibilities as in the first proviso for a period not exceeding one year from the date of registration. Commentary- Since a cooperative is an autonomous unit, it should arrange and manage for its management needs, the byelaws should be providing for the size, the manner, the tenure and the office bearers to be elected. Prescribing elections on a uniformity basis or on the basis of reservation etc. does not conform to the scheme of this Act.

(2) The promoter board appointed under the first

provision to sub-section (1) or deemed to be promoter board under the second proviso thereto as the case may be, shall conduct the election of directors within the period mentioned therein;

(3) Every director while exercising the powers and

discharging duties shall ; (a) act honestly and in good faith and in the best

interests of the cooperative; and (b) exercise such due care, diligence and skill as a

reasonably prudent person would exercise in similar circumstances.

(4) A director who is guilty of misappropriation,

breach of trust or



dishonesty resulting in loss or shortfall in revenue of the

cooperative shall be personally liable to make good that loss

or shortfall, without prejudice to any criminal action to which the

director may be liable under any law. Commentary- It could well be an expectation in the

case of any director of the Board to be prudent and honest but when powers have been specifically provided, there is every case of making them aware of their specific responsibilities as well. It is also necessary from the legal point of view since a violation of these duties would make them liable for action stipulated in the Act. Furthermore, for the protection of the rights of the members and in order to make the cooperative truly member oriented, these added responsibilities are placed well. The Referential, The A.P. Mutually Aided Act, The Bihar Self supporting Act and the J&K Self Reliant Act- all incorporate this provision correspondingly.

34. President and Vice President of cooperative (1) There shall be a President and a Vice President in

a cooperative to be elected by the board from amongst its directors in accordance with the provisions of the byelaws. The term of President and Vice President elected by the board shall be coterminous with the term of the Board. The board shall at the time of election of ,President and Vice President , also elect representative who shall represent it in other cooperative and the representative so elected shall not be withdrawn by the board till the next elections of the board.



(2) Any casual vacancy in the office of the President or Vic-President or representative shall be filled in by the board in accordance with the provisions of the byelaws and the President or Vice-President or representative so elected shall hold office for the unexpired term of his predecessor.

(3) The Vice-President may resign his office at any

time by notice in writing to the President and the President may resign his office at any time by notice in writing to the Vice-President.

(4) The board may by a resolution passed by three fourth majority

of the directors present and voting at a meeting held for the purpose, remove the President or Vice-President on any of the

grounds mentioned in sub-section(1) of section 24. Such meeting shall not be presided by the President or Vice President against whom such resolution is to be considered.

(5) The President or Vice President, as the case may be, aggrieved

by the resolution passed under sub-section (4) may appeal to the Arbitration Council within thirty days from the date of

passing of such resolution whose decision thereon shall be final.

(6) In the event of the occurrence of any vacancy in the office of the President by reason of his death, resignation or removal, or

otherwise, the Vice-President shall act as President until the date



on which a new President is elected in accordance with the provisions of this Act and the byelaws to fill such vacancy.

(7) When the President is unable to discharge his

functions owing to absence, illness or any other cause, the Vice-President shall discharge the functions of the president until the date on which the President resumes his duties.

(8) The Vice-President shall, during and in respect of, the

period while he is so acting as, or discharging the functions of, President, have all the powers of the President. Commentary- The posts of the two office bearers as defined in the definition clause have been provided with specific objectives. As a matter of fact, the byelaws of cooperatives could also take care of it, but this uniform regulation is more in fitness of things when the annual general body and the boards of the cooperatives have been entrusted with wide ranging responsibilities. In order to enable the cooperatives take correct decision in right perspective and plan, there should be a democratic authority to observe that the procedure of calling of these meetings, the conduct of the proceedings and the due compliance of the decisions is in order and as per scheme of the Act.

35. Functions, responsibilities and powers of board.

The board shall discharge such functions, perform such duties and responsibilities and exercise such powers as may be specified in the byelaws and in accordance with the terms, conditions and procedure laid down therein and in particular the board shall



have the following powers functions and duties, namely :-

(a) to interpret the organisational objectives, to set

up specific goals to be achieved towards such objectives, and to make periodic appraisal of operations;

(b) to nominate, elect or appoint and remove the

chief executive; (c) to make provisions for the matters mentioned in

section 44 in respect of the staff of a cooperative;

(d) to finalise long term perspective plan, annual

plan and budget, and to direct the affairs of the cooperative in accordance with the plan and budget approved by the general body;

(e) to arrange for funds; (f) to authorise acquisition and disposal of

immovable property; (g) to frame, approve and amend regulations relating

to services, funds, accounts and accountability, and information and reporting systems.

(h) to elect President, Vice President and representative in

accordance with the provisions of the byelaws; (I) to prepare the annual financial statement of accounts. 36. Eligibility for directorship in cooperative.



In addition to such other conditions as may be specified in the

byelaws, a member of a cooperative shall be eligible for being chosen as a director of the cooperative, if :-

(I) such member has the right to vote in the affairs of the

cooperative; and (ii) such member has patronised the services of the

cooperative during the previous financial year to the extent and in the manner specified in the byelaws; and

(iii) such member has no pecuniary interest in any

subsisting contract made with, or work being done for, the cooperative except as otherwise specified in the byelaws; and

(iv) the period of three years has lapsed from the date

such member ceased to be a director for the following

reasons :-

(a) non-conduct of annual general meeting or special general

meeting under sub-section (4) of section 32;

(b) non-submission of annual report of activities, audited annual

financial statement of accounts or auditor's report to the

general body under sub-section(5) of section 32; or

(c) non-conduct of elections of the directors, or the delegate or



representative under sub-section (3) of section 37;

(d) absence from board meetings under sub-section (7) of section 39.

37. Elections.

(1) It shall be the responsibility of the incumbent board to conduct elections of directors, delegates to the delegate general body and representatives if fallen due within the meaning of Explanation to clause (a) of sub-section (1) of section 31.

Commentary- It has been traditionally the institution of Registrar, which is responsible for holding the elections of cooperatives. Of late the elections have come to be held on uniformity basis at one stretch and more often than not they get delayed and postponed indefinitely. Other voluntary organisations such as a society, a trust, a trade union, a political party, a company, a club or any other association registered under any law (including unregistered ones) does not have its elections conducted by any outside agency. This issue came to be discussed at length in the conference of the Cooperative Ministers held in New Delhi on 18-5-2001. In response to the proposal of having an independent agency for the conduct of cooperative elections, barring a few states most of the states were opposed to this idea. It was reported that Kerala has issued a notification for appointing an authority to hold 'free and fair' elections of the cooperatives. The issue has been in discussion and demand for long . The Government has been in touch with the State Election commission with a request to agree to hold elections of cooperative societies along with panchayats and other local bodies. The commission got this matter examined legally and advised the government that it can take over this



function only when there is a constitutional amendment made for this purpose. The Chief Minister of Madhya Pradesh accordingly wrote in March 2000 to the Prime Minister of India to initiate the action accordingly. With the idea figuring in the draft National Policy of Cooperatives, a consensus may be expected to be building up in this direction. But it still remains to be assessed if this step can be treated to be a progressive one or not. The above analysis pertains to the state of the cooperative societies covered by the original Act. As regards the cooperatives of the parallel legislation, the present incorporation should demonstrate in time to come the efficacy for the purpose.

(2) The elections shall be conducted in the manner

specified in the byelaws. before the expiry of the term of office of the outgoing directors, delegates or representatives as the case may be.

(3) Where a board fails to conduct elections of the

directors or delegates or representatives, as the case may be before the expiry of the term of their office in accordance with the byelaws, all directors shall cease to be directors on the date of the annual general meeting at which the elections were due.

(4) The elections of directors, and delegates shall take

place at the annual general meeting. (5) Where a board fails to conduct elections before the

expiry of the term of the directors or delegates or representatives, or, where there are no directors remaining on the board, a minimum of 25% of total members of the cooperative may jointly convene a general meeting, or request the Registrar to convene a general meeting, for constituting an ad-hoc board for the specific purpose of conducting elections and to perform all functions of the board



during the interregnum except those functions as prescribed by the general body.

(6) The term of the ad-hoc board so constituted shall

not exceed three months and the ad-hoc board shall cease to function as soon as a regular board is constituted in accordance with the bye-laws.

(7) The directors shall hold office for the period for

which they were elected and the newly elected directors shall assume office on the date of expiry of said period.

(8) The director shall not be eligible, if so specified in

the byelaws, for re-election. (9) Where there are vacancies in the office of the

directors and where there are not sufficient number of directors to constitute a quorum for board meetings, the remaining directors shall, notwithstanding anything contained in this Act or the byelaws, call a general meeting for the purpose of electing directors to fill the vacancies for the unexpired term of the board.

38. Term of directors. (1) The term of office of the directors or, where the

byelaws provide for retirement of director by rotation, the tern of office of the individual directors shall be for such period as specified in the byelaws, which shall not exceed five years from the date on which first meeting of the board is held.

Commentary-The Model Act initially suggested a term to be provided in the byelaws, which should not be exceeding three years. The Referential Act leaves it to be decided by the byelaws only. While Bihar and



Kashmir borrow the Model Act pattern in this regard, Andhra and M.P. have the corresponding provisions. The five years' maximum limit seemed necessary to the law makers since the three years' term in respect of cooperative societies was extended to five in 1994.

(2) The term of representative elected by the board shall be co-terminus with the term of the board for which representative is elected:

Provided that the representative of a

board shall continue to hold his office only till the expiry of the term of the board of which he is a member.

(3) For removal of doubt it is hereby declared that

where the term of office of the director is changed by mending byelaws, the changed term shall apply only to the director elected after such amendment for the constitution of new board.

(4) Any casual vacancy in the office of the director

shall be filled in accordance with the provisions of the byelaws and the director so elected shall hold office for the unexpired term of his predecessor.

39. Board meetings.

(1) A meeting of the board may be called at any time

by the President and in the event of his being incapable of acting then by the Vice President but at least four meetings of the board shall be held in a financial year, and the period between two consecutive meetings shall not exceed one hundred and twenty days.

(2) The President and in the event of his being

physically incapable of acting then the Vice President may, whenever he thinks fit, call a special meeting of the board and shall be bound



to do so within fifteen days of the date of receipt of a written requisition:

(a) signed by not less than one-third of the

directors on the board; or

(b) from the Registrar; or (c) from the Auditor; Such requisition shall contain the reasons why the

meeting is felt necessary and the proposed agenda and no subject other than the subjects included in the proposed agenda shall be discussed at the special meeting of the board.

(3) If the President or Vice President, as the case may

be, fails to hold the meeting of the board under sub-section (1) or the special meeting of the board under sub-section (2) within the period specified therein, he shall cease to be President or Vice President, as the case may be on the date of expiry of the said specified period.

(4) A person who ceases to be the President or Vice President, under sub-section (3) shall not be eligible to hold the office of President or Vice President, as the case may be, for a period of three years from the date of such cessation.

Commentary- The Board and directors in general and the office bearers in particular have been expected very high in the scheme of this Act. The leadership evolved in the field of cooperative places a high premium on such reputation necessary for a democratic leader. Therefore for failure of in accountability, along with such other penalties that may follow, one immediate penalty is the ineligibility to contest election for a period of three years.



(5) The quorum for a meeting of the board shall be such as may be specified in the byelaws but shall not be less than fifty percent of the total number of directors on the board.

(6) Subject to the provisions of this Act, the

procedure to convene and conduct the meetings of the board shall be such as may be specified in the byelaws.

(7) If a director fails to attend three consecutive

meetings of the board without the permission of the President he shall cease to be a director, from the date of the third meeting.

Commentary- It is the primary responsibility of a

director to attend Board meetings. Only this course can help a cooperative evolve democratically strong. Any wilful absence on the part of a director from the meetings may sometimes be because he is either shirking from his responsibility or is not aware enough of his duty. In both cases, the proposed penalty falls within the scheme.

40. Decision by majority of votes. Except as otherwise provided by this Act, or the

byelaws, all questions brought before any meeting under this Act shall be decided by majority of the votes of the members present and in the case of an equality of votes the presiding authority of the meeting shall have a second or casting vote :

Provided that in the case of equality of

votes at the election of the President, Vice President, Director, delegate or representative - the presiding authority shall not exercise his casting vote and the result shall be decided by lot.



41. Minutes of proceedings of meetings. (1) Every cooperative shall record, in Hindi or in any

other language prescribed in the byelaws the minutes book, minutes of all proceedings of every general meeting, delegate general body meeting and board meeting and the names of the members/delegates/directors present thereat and shall be confirmed at the same or the next ensuing meeting and send the copy thereof within fifteen days of the conclusion of every such meeting to all delegates or members or directors as the case may be.

(2) The minutes so recorded shall be signed - (a) in the case of a general meeting or delegate

general body meeting, by the person who presided the said meeting, or in the event of his death or incapacity to sign the minutes within the time required, by the person who presides the following meeting wherein the minutes are confirmed; and

(b) in the case of a board meeting, by the person

who presided the said meeting or by the person who presides the following meeting, wherein the minutes are confirmed.

(3) The minutes of a general meeting shall be deemed

to have been confirmed on the thirtieth day of its dispatch to all members, if no comments are received from members within that time;

Provided that where comments have been

received from members, corrections, if any, may be made to the minutes by the President, and the revised minutes shall be confirmed by the person



who presides the following meeting of the general body.

42. Vacancies etc. not to invalidate

proceedings. No act or proceeding of the cooperative or of

board or of any officer constituted or appointed under this Act shall be questioned on account of any vacancy in the membership or any defect in the election or qualification of the President, Vice President, Director, Delegate or representative or any defect or irregularity in such act or proceeding not affecting the merit of the case.

43. Proceeding of meeting to be deemed to be

good and valid. Unless contrary is proved every meeting of the

general body or the board shall be deemed to have been duly convened and held and, all members of the meeting shall be deemed to have been duly qualified when the minutes of the meeting have been signed in accordance with the provisions of this Act.

Commentary- Section 41, 42 and 43 are incorporated

in the Chhattisgarh model with a view to cover the procedural voids and provide cooperative a forum free of disputes and controversies on these tender issues.

44. Staff. Subject to other laws regulating employer,

employee relations all employees of a cooperative shall be appointed regulated and removed by and be accountable to authorities within the cooperative in accordance with the service conditions approved by the board.



Commentary- In order to make the staff and the

employees fully accountable to the cooperative, the board or any authority determined by the board should determine the terms and conditions of its employment. Registrar finalising the pattern, terms, wages and conditions of employment can neither make employees totally accountable to the cooperative nor bring a sense of self reliance in the cooperatives themselves. This may also result in bad performance of the cooperative affecting its democratic texture adversely. It is therefore necessary in all fitness of things that the cooperative should be solely responsible and its board accountable to all staff matters.

CHAPTER V

FINANCE

45. Mobilisation of funds. (1) A cooperative may raise funds in shape of equity

capital, deposits and loans from its members to such extent and under such conditions as may be specified in the byelaws.

(2) A cooperative may borrow funds from non-member/individuals and institutions to such extent and under such conditions as may be specified in the byelaws.

Commentary- Model cooperative Act suggested deposits to be raised from members in all ways. External sources covered debentures, deposits, loans, grants not to exceed ten times of the sum of member funds and organizational reserves less accumulated deficit. The cooperative could also borrow from government as per MOU with a condition to nominate one director on the board.



Referential Act suggested a cooperative to be able to borrow from institutions including government ensuring that its autonomy shall not be affected that way as propounded in cooperative principle number 4. The issue was debated at length . The technical question raised was to fix up this responsibility on some authority as, it was argued, the cooperative alone cannot decide issues affecting outside agencies as well. Therefore it does not incorporate the provision for taking assistance from the government.

46. Deployment of funds and profits. (1) The funds mobilised by a cooperative shall be

primarily for the furtherance of its objectives. (2) No part of the funds of a cooperative other than

the net profits shall be paid by way of bonus or dividend or otherwise distributed among its members.

(3) A cooperative may out of its net profits in any

year, pay on the paid up share capital of members a dividend at a rate fixed by the general body in the annual general meeting.

(4) Such of its funds as are not needed for use in its

business, a cooperative may invest or deposit, outside its business, in any non-speculative manner.

Commentary- While cooperatives have been allowed

to utilise funds in non-speculative manner, since the primary charge on its profit lie from members and employees by way of dividend and bonus that has been provided specifically. A cooperative is essentially an agent of cooperative. The divided is their claim. Bonus being a statutory liability, the cooperative should also be providing for it.



47. Disposal of surplus. (1) The surplus, if any, arising out of the business of

a cooperative in a financial year may be used in one or more of the following purposes:-

(a) towards a deficit cover fund ; (b) to be distributed as surplus refund among its members;

(c) to develop its business; (d) towards reserves and funds constituted in

accordance with the byelaws ; (e) to provide common services to its

members; (f) to provide rewards or incentives to staff: (g) towards payment of bonus under the

Payment of Bonus Act, 1965 (No.21 of 1965) to the employees.

(h) towards payment of taxes; (I) towards writing off bad debts and losses

not adjusted; (j) towards, such purposes as may be

specified in the byelaws: Commentary- a cooperative is expected to hold back

for itself only such margins as are needed to meet its cost of operation or for further improvement and development of services to its members. The rest of the surplus should be returned to its members for striking its clear-cut distinction with other form of economic activity.

Even good functioning cooperative societies often tend to set aside huge reserves each year returning very little to their members by way of patronage refund. There is no provision in this Act to carry forward its unallocated and undistributed surpluses into the next year. It should begin each new year with



a clean sleight. A cautious cooperative should therefore keep appropriate margin for itself in case of unexpected shortfall etc. initially to be disposed of at the end of the year as provided.

(2) Surplus arising out of the business cooperative

shall be fully disposed of at the annual general meeting in which the audited annual financial statement of accounts for the year in which the surplus arose is presented for the consideration of the general body.

48. Management of deficit. (1) The deficit, if any, arising out of the operation of

the business of a cooperative during any given financial year, shall be fully settled by debiting a part or whole of the deficit to the deficit cover fund, if any, or as charge, among its members;

Provided that nothing in this sub-section

shall preclude a cooperative from also proceeding against its directors or staff for recovery of amounts contributing to the deficit, where such deficit is the result of deviation from the approved plan or budget, and where such deviation does not receive the approval of the general body, or is the result of gross negligence or mismanagement;

Provided further that where such amounts

are recovered, the general body may resolve to credit a part or whole amount to the deficit cover fund or to the account of each member in propor-tion to the deficit charge levied on him.



(2) No member shall be permitted to withdraw from the membership of the cooperative without paying his share towards clearing the deficit, if any.

Commentary- It is argued that if the organisational

gain is to lead to member gain, then the organisational loss too should lead to a member loss. It is therefore suggested that organisational gain or loss should belong to its members only. It is only in such situation that the members will understand their responsibilities as owners that they will value their vote and take seriously their participation in the cooperatives affair. It was even argued and debated at the time of finalisation that it should be only mode of the management of the deficit. The law, however aptly provides for making good the loss by board or the staff in case it has been caused by gross negligence or mismanagement.

49. Operation of special funds. (1) A cooperative may create reserves and such other

funds as are in the interest of members or the cooperative and which are specified in the byelaws.

Provided that where a contributory

provident fund is created for the benefit of employees, such fund -

(a) shall not be used in the business of the

cooperative; (b) shall not form part of the assets of the

cooperative; (c) shall not be liable to attachment or be

subject to any other process of any court or other authority; and

(d) shall be administered in such manner as may be provided in the byelaws.



(2) The funds so created may be used in the business

of the cooperative, but in any financial year if the fund is not applied in part or whole for the purpose for which it was created, the cooperative shall credit to the account of such fund an annual interest on the amount of balance of such fund at a rate not less than the rate paid by scheduled banks on long term fixed deposits, debiting such interest as operational expenditure.

Commentary- In order that members have an

accurate picture of the financial condition of the cooperative, the Act requires that the reserves and other funds be costed annually. It should also not tend to make management feel that a cooperative can exist in spite of its members, since the earning on reserves and other funds are enough to meet salary and other expenditure.

CHAPTER VI

ACCOUNTABILITY

50. Accounts, records and documents

to be maintained. . (1) Every cooperative shall keep at its head office, the

following accounts, records and documents, namely:-

(a) a copy of this Act, with amendments

made therein from time to time; (b) copies of other laws and regulations to

which the cooperative is a subject; (c) a copy of its byelaws, with amendments

made therein from time to time;



(d) a copy of the Regulations framed under

clause (g) of section 35 and amendments made therein from time to time.

(e) the minute's books; (f) account of all sums of money received

and expended by the cooperative and their respective purposes;

(g) account of all purchases and sales of

goods by the cooperative; (h) account of the assets and liabilities of the

cooperative; (I) a list of members, their fulfilment of

responsibilities over the previous financial year, their eligibility to exercise their rights for the current twelve month period updated within sixty days of closure of the financial year; and

(J) all such other accounts, records and

documents as may be required by this Act or other laws and regulations or byelaws of the cooperative.

Provided that where a cooperative

has branch offices, summarised statements of accounts relating to such branch office, shall be available at the head office for each quarter of financial year, within fifteen days of the end of that quarter.

(2) The books of account and records shall be

opened to inspection by any director during office hours of the cooperative.



(3) The copies of this Act, byelaws, regulations, minute’s book of the general body, voters list and such accounts and records of transactions that relate to a member shall be made available to any member during office hours of the cooperative.

(4) The books of accounts relating to a period of at

least eight years before the current financial year together with supporting records and vouchers shall be preserved unless otherwise require for a longer period.

Commentary - The maintenance of records and

documents has been made obligatory. It is important for theory as well as the practice both. While there is sanctity of keeping cooperative law and the related literature for the constant awareness of the cooperative identity and the principles, the updated account books and the accounts are necessary for the members to depose their confidence in the working of the cooperative.

Most laws are silent how long a cooperative should hold on to old books of accounts. It is a harrowing experience for small cooperative to set aside precious space just for storing old books of accounts.

51. Audit. (1) A cooperative shall get its accounts audited by a

chartered accountant as defined meaning of the Chartered Accountants Act, 1949 (No 38 of.1949) or by any other auditor authorised by the Registrar.

(2) A cooperative, at its annual general meeting, shall

resolve to appoint an auditor. The resolution shall



be valid for the period ending on the close of the next succeeding annual general meeting.

(3) The remuneration of an auditor may be fixed by

the general body or, if not so fixed, by the board. (4) An auditor shall cease to hold office- (a) on his resignation; or (b) on his removal from office under sub-

section (6); or (c) on completion of his term of office. (5) The resignation of an auditor becomes effective

on the date the resignation in writing is received by the cooperative, or on the date specified in the resignation whichever is later.

(6) The general body may, by special resolution,

remove an auditor from office. (7) An auditor, who - (a) resigns; or (b) receives a notice or otherwise learns of a

general meeting called for the purpose of removing him from office; is entitled to submit to the general body a written statement giving the reasons for his resignation or the comments on the proposed removal, as the case may be.

(8) A vacancy occurred on account of death,

resignation, and removal or otherwise shall be filled in by the general body. An auditor appointed to fill a vacancy shall hold office for the unexpired term of his predecessor.



(9) The auditor shall be given notice of every general meeting and, at the expense of the cooperative, shall be entitled to attend and be heard thereat on matters relating to his duties as auditor and their exercise as auditor.

(10) Where one-tenths of members of a cooperative

give written notice, of not less than ten days before a general meeting to the auditor or a former auditor, to attend the meeting at the expense of the cooperative and answer questions relating to his duties and their exercise as auditor. A copy of the notice shall concurrently be given to the cooperative.

(11) It shall be the duty of the board to ensure that

annual financial statements of accounts are prepared and presented for audit within forty-five days of closure of the financial year.

(12) Upon the reasonable demand of the auditor, the

present or former directors, members, managers or employees of the cooperative shall -

(a) provide access to such records, documents,

books, accounts, vouchers, papers, securities, cash and other properties belonging to or in the custody of the cooperative; and

(b) furnish such information and explanations, as are, in the opinion of the auditor, necessary

to enable him to make the examination and report, and as the present or former director, members, managers or employees are reasonably able to furnish.

(13) It shall be the duty of the auditor to ensure that

audited annual financial statements of accounts and his audit report are furnished to the



cooperative within forty five days of the submission of annual financial statements of accounts to him by the board.

(14) The auditor's report shall - (a) state whether the auditor has obtained all

the information and explanations, which to the best of his knowledge and belief were necessary for the purpose of the audit;

(b) state whether the balance sheet of

cooperative and income and expenditure account dealt with by the report are in agreement with the books of accounts;

(c) indicate the basis on which each asset

and liability was valued, and mention specifically any change in the manner in which such valuation was done in the financial year under examination and its effect on surplus or deficit;

(d) indicate the amount of surplus earned or

deficit incurred from provision of services to non-members as distinct from surplus earned or deficit incurred because of services to members or in normal course of business;

(e) indicate every deviation in actual

expenses and income from the estimated expenses and income, in the approved budget;

(e) state whether or not any of the directors had at

any time during the financial year under review, become ineligible under this Act to continue in office as a director; and



Commentary- The expression "under this Act" includes "under the byelaws".

(g) state whether the decisions on disposal of

surplus or assessment of deficit, of the general body, at its previous annual general meeting were implemented correctly and completely or not.

Commentary- Model Act suggested that the audit of

the cooperatives may be entrusted to the federal cooperatives. This suggestion was more in tune with the concept that federal cooperatives may have a supervisory function for the regulation and growth of their affiliate’s primaries in place of the Registrar. Most of the cooperative laws entrust the responsibility of audit to the Registrar and not the society. The auditor in this way is accountable to the Registrar and not to the society he is auditing. This result in pushing a cooperative into a passive role and the audit work keeps going in arrears. The fees of the government auditor is also very high and it is levied and recovered at the prescribed high rate unconcerned with the fact that the society may be put to great loss in this manner.

There is thus now a universal shift for the cooperatives to get their audit done by the chartered accountants. This Act, however, provides for the cooperative to opt for a government auditor for change to come over gradually.

52. Returns to be filed with Registrar. (1) Every year, within thirty days of the holding of the

annual general meeting, the board shall file the following returns with the Registrar, namely:-

(a) annual report of activities;



(b) annual financial statements of accounts as audited with auditor’s report, thereon;

(c) statistical statement indicating name of the cooperative; core services offered by the cooperative to its members; total number of members as on the last day of the financial year; total liabilities expressed as (i) funds from members, and surpluses, (ii) funds from other external sources as on the last day of the financial year; quantum in rupees of services provided (i) to members, and (ii) to non-members; and surplus or deficit at the end of financial year; and

(d) annual disposal of surplus or management

of deficit. (2) Along with the returns specified in sub-section (1),

every cooperative shall furnish the following information to the Registrar, namely:-

(a) the date of the annual general meeting at

which the returns to be filed with the Registrar were considered or approved;

(b) the total number of members on the rolls

of the cooperative who were eligible to vote on the date of such annual general meeting;

(c) the number of eligible members present at

such annual general meeting; (d) list of names of directors, their addresses

and their terms of office; (e) name and address of the auditor

appointed for auditing the current financial year's accounts; and



(f) any other relevant and specific

information required by the Registrar to enable him to decide whether the cooperative has conducted its affairs in accordance with the cooperative principles mentioned in Schedule A and the provisions of this Act and the byelaws.

(3) If the returns and information, as specified in sub-

sections (1) and (2), are not filed with or furnished to the Registrar within the period specified in sub-section (1) it shall be treated as an offence under this Act and the board shall be penalised in accordance with the provisions of this Act.

Commentary- The returns and information to be

submitted by the cooperative to the Registrar is basically concerning the fulfilment of the objectives of the cooperative in service of its members. The M.P. law does not require the information to be further passed on to the government in order for not making the chain endless while also additionally introducing the role of government at the first place. As regards the, the availability of information provided by the Referential Act in this context, there is the separate provision made in section 69 of the this Act.

53. Inquiry. (1) The Registrar shall on the application of a

secondary cooperative to which the cooperative concerned is affiliated, or of a creditor to whom the cooperative is indebted, or of not less than one-third of the directors, or of not less than one-tenth of the members, hold an inquiry or cause an inquiry to be made into any specific subject or



subjects relating to any violation of any of the provisions of this Act or byelaws.

(2) The Registrar shall order an inquiry only after the

receipt of a fee, as determined by him from the applicant or the applicants. The fee should be sufficient to meet the costs of the inquiry to be conducted.

(3) The inquiry shall be completed within a period of

sixty days from the date of order of the inquiry: Provided that where the inquiry cannot be

completed within a period of sixty days the reasons there of shall be recorded in writing.

(4) The Registrar shall, (I) within a period of thirty days from the date

of the completion of the inquiry, communicate the report of the inquiry;

(ii) within a period of fifteen days from the

date of expiry of the period mentioned in sub section (3) communicate the reasons for the non-completion of the inquiry along with the period not exceeding thirty days which is likely to be taken for completion of inquiry in case the inquiry cannot be completed within the period mentioned in sub section(3) -

(a) to the cooperative concerned; and (i) to the applicant secondary

cooperative, or (II) to the applicant-creditor, or

(III) to the person designated by the applicant- directors, or



(Iv) to the person designated by the applicant-

members, as the case may be. (5) The cooperative concerned shall, on receipt of

the report, place it before the next general meeting to take such action thereon as the general body may think fit.

(6) A copy of report shall be supplied to any

person, on payment of fee as determined by the Registrar. Commentary- In consonance with the provision of the

Model Act, the Mp. Act provides for the enquiry on demand. The Registrar is not supposed to start any enquiry at his/her own motion. The M.P. law further takes such report to a logical legal conclusion by prescribing it to be necessary to be placed before the Annual General Body. The period of the completion of the enquiry is also only sixty days as against the general pattern of four months.

CHAPTER VII

OFFENCES 54. Prohibition of use of word “Cooperative”. (1) No person other than a cooperative registered

under this Act and a person or his successor in his interests of any name or title under which he traded or carried on business at the date on which this Act came into force, shall without the permission of the State Government, function, trade or carry on business under any name or title



of which the word “cooperative” or its equivalent in any Indian language forms part.

(2) Every person who is a member of a cooperative formed in contravention of sub-section (9) of section 4 and every person contravening the provisions of sub-section (1) shall be punishable with a fine which may extend to five hundred rupees and in the case of a continuing offence with further fine of two hundred rupees for each day on which the offence is continued after conviction therefore.

55. Offences. (1) A person who makes or assists in making a

report, return, notice or other document required by this Act to be sent to the Registrar or to any other person that -

(a) contains an untrue statement of a material

fact; or (b) omits to state a material fact required in

the report or necessary to make a statement contained in the report not misleading in the light of the circumstances in which it was made.

shall be guilty of an offence and shall on

summary conviction, be punishable-

(i) in the case of an individual, with a fine which may extend to rupees one thousand or with imprisonment for a term which may extend to three months or with both.

(ii) In the case of a person other than an

individual, with a fine which may extend to rupees ten thousand.



(2) (a) If the person commits an offence under sub-section (I) is a cooperative which is a body corporate, the cooperative as well as every person in charge of, and responsible to, the cooperative for the conduct of its business at the time of commission of the offence shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

(b) Notwithstanding anything contained in clause

(a) where an offence has been committed by a cooperative and it is proved that the offence has been committed with the consent or connivance of, or that the commission of the offence is attributable to any neglect on the part of any director, manager, secretary or other officer of the cooperative, such director, manager secretary or other officer shall also be deemed to be guilty of that offence and shall be punishable with a fine of one thousand rupees or with imprisonment for a term which may extend to ninety days or with both.

Commentary- The cooperative gets the status of body corporate by virtue of the provisions of section 6. If the penalty provided is imprisonment, a specified provision relating to the prosecution of cooperatives is called for because a cooperative cannot be sentenced to a term of imprisonment for the best of all reasons that it is not endowed with a physical body that can be confined. Hence special provision.

(3) No person shall be guilty of an offence under

subsection (1) or sub-section (2) where the untrue statement or omission -

(a) was unknown to him; and (b) in the exercise of reasonable diligence,

could not have been known to him.



(4) Every person who - (a) without reasonable cause, contravenes a

provision of this Act for which no penalty is otherwise provided; or

(b) fails to file or furnish return or to give any

notice, or to send any document required by the provisions of this Act;

shall be guilty of an offence and shall, on

summary conviction, be punishable with a fine which may extend to one thousand rupees.

(5) Where a person is convicted of an offence under

this Act, the Court may, in addition to any punishment imposed, order the person to comply with the provisions of this Act for the contravention of which he has been convicted.

(6) No prosecution for an offence under this Act shall

be commenced after five years from the date when the subject matter of the complaint arose.

(7) No civil remedy for an act or omission under this

Act is suspended or affected by reason that the act or omission is an offence under this Act.

Commentary- The scope of offences is broad based

in this Act as in section 54 the unauthorised use of the word cooperative shall also constitute an offence. Most of the cooperative Societies Acts recognise only such offences as are committed by cooperative societies alone. This Act requires directors and employees act with diligence. It in fact converts the position of directors/office-bearers from being one of privilege, to one of serious responsibility.



CHAPTER VIII

DISPUTES 56. Disputes. (1) If any dispute touching the constitution,

management or business of a cooperative arises- (i) (a) among members, past members or

persons claiming through member, past member or

deceased member; or (b) between a member, past member or a

person claiming through a member, past member

or deceased member and the cooperative, its board,

director, office- bearer or liquidator, past or present; or

(c) between the cooperative and its board

and any past board, any director, office-bearer, or any

past director, past office-bearer, or the nominee, heir, or

legal representative of any deceased director or

deceased office-bearer of the cooperative, shall be referred to the Arbitration Council; (ii) between the cooperative and any other cooperative or



between a cooperative and liquidator of another

cooperative or any other Individual or institutions shall be referred to the Cooperative Tribunal.

Explanation: For the purposes of this sub-

section, a dispute shall include-

(a) a claim by a cooperative for any debt or

other amount due to it from a member, past member, the nominee, heir or legal representative of a deceased member, whether such debt or other amount due be admitted or not;

(b) a claim by surety against the principal

debtor where the cooperative has recovered amount from the surety in respect of any debtor or other amount due to it from the principal debtor as a result of the default of the principal debtor whether such debt or other amount due be admitted or not;

(c) a claim by a cooperative against a

member, past member or the nominee, heir or legal representative of a deceased member for the delivery of possession to the cooperative of land or other immovable property resumed by it for breach of the conditions of assignment or allotment of such land or other immovable property.

(d) any dispute arising in connection with

the election of directors or delegates or representatives or

President or Vice President of the cooperative:



Provided that no dispute under this clause shall be

entertained during the period commencing from the announcement of the election programme till the declaration of the results.

(2) If any question arises whether a dispute referred

to the Arbitration Council under this section is a dispute touching the constitution, management or business of the cooperative, such question shall be decided by the Arbitration Council.

(3) The Arbitration Council shall on deposit of fees

prescribed in the byelaws decide the dispute in accordance with the provisions of this Act and the byelaws,. Pending final decision on the dispute, the Arbitration Council may make such interlocutory orders as it may deem necessary in the interest of justice.

(4) Every order or decision made under this section,

shall be executed by the Civil Court having jurisdiction, as

if such order is a decree of that Court, on a certificate issued by

the Arbitration Council. (5) Notwithstanding anything contained in sub-

section (4), and without prejudice to any other mode of recovery which is being taken or may be taken, the Arbitration Council may, on the application made by the cooperative for the recovery of arrears of any sum advanced by the cooperative to any of its members, and on its furnishing a statement of accounts in respect of the arrears and after making such inquiry as such Council deems fit, issue a certificate for the recovery of the amount stated therein to be due as arrears.



(6) A certificate issued by the Arbitration Council

under sub-section (5) shall be final and conclusive proof of the arrears stated to be due and the certificate shall be executed by the chief executive in the manner specified in the byelaws.

(7) A person aggrieved by the order of the Arbitration

council may appeal to the Cooperative Tribunal within forty-five days from the date of passing of the order.

Provided that no appeal under this sub-

section shall be admitted unless twenty five percent of the decreed principal amount is deposited in such manner as the Cooperative Tribunal may prescribe by regulations.

Commentary- All internal and primary disputes of a

cooperative are to be decided by the Arbitration Council. Cooperative Tribunal shall be prescribing the detailed regulations for the working of it. The Registrar or any outside agency has no role in deciding these disputes of a cooperative. When the process of decentralisation in every field (including the deliverance of justice) is on, the cooperative like a village Panchayat can well take care of such internal disputes.

57. Constitution of Arbitration Council. (1) The byelaws shall provide for the constitution of

an Arbitration Council consisting of three members, possessing such qualifications as may be prescribed by byelaws appointed by the general body from among its members or others,



whose term of office shall be of the same duration as that of the directors.

(2) The Arbitration Council shall follow such

procedure and exercise such powers for settlement of disputes as may be prescribed by the Cooperative Tribunal.

Commentary- The Model Act suggested first the

Cooperative Tribunals to hear the appeals. These Tribunals were suggested to be headed by the judicial officers not below the rank of the District Judge. The Referential Act modified its original concept of the Arbitration Council to the Arbitral Tribunal for hear the primary disputes of the cooperatives. The M.P. Act retains the original idea of the Arbitration Council. There is no material difference between the two as the difference lies in the name and number only. The Arbitration Council consists of three members in place of five of the Arbitral Tribunal.

CHAPTER IX

DISSOLUTION 58. Dissolution of Cooperative by members (1) A cooperative may, by special resolution,

authorise its own dissolution; A notice of the general meeting called for the purpose shall also be sent by registered post with an invitation to attend, to the Registrar, to creditors, if any, to any secondary cooperative to which the cooperative is



affiliated, and to any cooperative with which a partnership contract has been entered into.

(2) The invitee under sub-section (1) shall

have the right only to make a presentation to the general body, if he wishes to do so, on the issue of the proposed dissolution.

(3) Within fifteen days of such authorisation

for dissolution, the cooperative shall send to the Registrar a copy by registered post of the authorisation to dissolve the cooperative.

(4) The authorisation approved under sub-

section (1) shall set out: (a) the assets and liabilities of the

cooperative; (b) the claims of creditors; (c) the number of members; (d) the nature and extent of the members'

interest in the cooperative; (e) the name and address of the liquidator

appointed by the cooperative. (5) When the Registrar receives the special

resolution passed under sub-section (1) - (a) where he is satisfied that the

cooperative has no assets or liabilities, he shall dissolve the cooperative, delete its name from the register of cooperatives and issue a certificate of dissolution of such cooperative; or



(b) he shall, within thirty days of the date of receipt of such resolution, cause at the expense of the cooperative a notice of the special resolution to be published once in the Gazette and once a week for two consecutive weeks in a newspaper published or distributed in the district where the head office of the cooperative is located,

(6) In the case of dissolution, the

Registrar may require, till the certificate of dissolution is issued by him, from the liquidator appointed by the cooperative or from any other person who is required to furnish information, a periodical return showing:-

(a) the progress of dissolution; (b) the distribution of any undistributed

surplus or reserve; and (c) any other relevant information. Commentary- A cooperative to be dissolved has

to be the first choice of its members. If the members feel that the cooperative is defunct and can no longer serve the members, they can initiate dissolution of the cooperative in the prescribed manner.

59. Dissolution of cooperative by Registrar. (1) Where the Registrar has reason to believe

that a cooperative - (a) has not commenced business

within two years after the date



shown on its certificate of registration; or

(b) has not carried on business for two

consecutive years; he shall send to the cooperative a letter by

registered post, inquiring whether the cooperative is carrying on

business. (2) Where the Registrar - (i) does not, within thirty days of the

date of sending a letter under sub-section (1), receive a reply to the letter, he shall, within fifteen days after the expiry of said thirty days, send to the cooperative a letter stating that:

(a) a letter was sent to the

cooperative under sub-section (1); (b) no reply to the letter has

been received by him within thirty days from the date of sending it;

(ii) receives a reply from the

cooperative that it is not carrying on business; or

(iii) does not, within thirty days from

the date he sent a letter under this sub-section, receive a reply to that letter;

he shall publish the notice in the news

paper and send to the cooperative a notice that, at the expiry of thirty days



from the date of the notice, the cooperative shall , unless cause is shown to the contrary, be dissolved and have its name deleted from the register of cooperatives.

(3) On the expiry of thirty days from the date of issue

of the letter under sub-section (2), the Registrar shall, unless cause to the contrary is previously shown by the cooperative:-

(a) where he is satisfied that the cooperative

has no assets or liabilities, dissolve the cooperative, delete its name from the register of cooperatives and issue a certificate of dissolution of such cooperative ; or

(b) appoint a liquidator under section 60 to

wind up the affairs of the cooperative. (4) Where a cooperative fails to file returns and

furnish information, as required by section 52, even after a lapse of two hundred and forty days from the close of the financial year, the Registrar shall send a requisition under sub-section (2) of section 32 to the board to call a special general meeting for the purpose of considering the annual returns to be filed with, and the information to be furnished to, the Registrar.

(5) Where the board fails to call a special general

meeting within the period specified in sub-section (2) of section 32, the Registrar may at the cost of the cooperative call the special general meeting notwithstanding anything contained in this Act:-

(a) to review the affairs of the cooperative;

and



(b) to ascertain whether the general body desires to continue the cooperative.

(6) Where: (a) a quorum of members is not present at a

special general meeting called under sub-section (4) or sub-section (5); or

(b) the general body fails to pass a resolution

to the effect that:- (i) the cooperative is to carry on

business; (ii) the board shall present, within sixty

days from the date of the special general meeting, to the general body the annual returns to be filed with ,and the information to be furnished ,to the Registrar; and

(iii) the cooperative shall file the

returns with, and furnish the information to the Registrar within ninety days from the date of the special general meeting; or

(c) the cooperative fails to file the returns

with, and furnish the information to, the Registrar within ninety days from the date of the special general meeting;-

the Registrar shall:

(i) If he is satisfied that the cooperative has no assets or liabilities, dissolve the cooperative, delete its name from the register of cooperatives and issue a certificate of dissolution of such cooperative; or



(ii) appoint a liquidator under section 60 to wind up the affairs of the cooperative.

Commentary- When a cooperative has

become defunct and it is not rendering any service to its members, there is a likelihood of members losing interest in it altogether. In such case the intervention of Registrar in the larger interest of the people is necessary. This task could also be assigned to a court (may be this switch over is possible gradually), but the Registrar being aware of the state of affair of the cooperatives by way of return, enquiry or audit, this responsibility become important.

60. Appointment of liquidator. Where a cooperative is to be dissolved and no

liquidator is appointed by the general body, the Registrar shall appoint any person as a liquidator to wind up the affairs of the cooperative.

61. Duties of liquidator. A liquidator on his appointment shall:- (a) immediately give notice of his

appointment:- (i) in the case of a liquidator not appointed

by the Registrar, to the Registrar; and (ii) to each claimant and creditor known to

the liquidator; (b) immediately publish notice of his

appointment in the Gazette and once a week for two consecutive weeks in a newspaper published or distributed in the district where the head office of the



cooperative is located and take reasonable steps to give notice of the liquidation in every jurisdiction where the cooperative carries on business;

(c) include in the notice mentioned in clauses

(a) and (b) a provision requiring any person:-

(i) indebted to the cooperative, to render an account and pay to the liquidator at the time and place specified in the notice any amount owing;

(ii) possessing property of the

cooperative, to deliver it to the liquidator at the time and place specified in the notice; and

(iii) having a claim against the

cooperative, whether liquidated, unliquidated, future or contingent, to present particulars of the claim in writing to the liquidator at the time and place specified in the notice within the period specified in such notice which shall not exceed sixty days from the date of first publication of the notice.

(d) take into his custody and under his

control all the property and actionable claims to which the cooperative is or appears to be entitled and shall take such steps as he may deem necessary or expedient to prevent loss or deterioration of, or damage, to such property, effects and claims.

(e) open and maintain a trust account for the

moneys of the cooperative;



(f) keep accounts of the moneys of the

cooperative received and paid out by him; (g) maintain separate lists of the members,

creditors and other persons having claims against the cooperative;

(h) where at any time he determines that the

cooperative is unable to pay or adequately provide for the discharge of its obligations, apply to the Registrar or general body as the case may be, for directions; and

(I) deliver to the Registrar or general body, as

the case may be, periodically as the Registrar or general body may require, financial statements of the cooperative in such form the liquidator considers proper or that the Registrar or general body may require.

62. Powers of liquidator

(1) The whole of the assets of a cooperative in respect of which an order for winding up has been made shall vest in the liquidator or appointed under section 60 from the date the order takes effect.

(2) The liquidator may -

(a) retain lawyers, accountants, engineers,

appraisers and other professional advisors;

(b) institute and defend suits and other legal

proceedings



on behalf of the cooperative by the name of his office;

(c) carry on the business of the cooperative

so far as may be necessary for the beneficial winding up of the same;

(d) sell by public auction or private sale any

property of the cooperative; (e) do all acts and execute any documents in

the name and on behalf of the cooperative;

(f) borrow money on the security of the

property of the cooperative; (g) settle or compromise any claims by or

against the cooperative; and (h) do all other things that he considers

necessary for the liquidation of the cooperative and distribution of its property.

(3) Where a liquidator has reason to believe that any

person has in his possession or under his control, or has concealed, withheld or misappropriated any property of the cooperative, he may apply to the Court for an order requiring that person to appear before the Court at the time and place designated in the order and to be examined.

(4) Where the examination under sub-section (3)

discloses that a person has concealed, withheld or misappropriated property of the cooperative or has in possession or under his control the property of the cooperative, the Court may order that person to restore the property or pay



compensation to the liquidator on behalf of the cooperative.

(5) No liquidator shall purchase, directly or indirectly,

any part of the stock-in-trade, debts or assets of the cooperative.

Where an order of winding up of cooperative is set-

aside in appeal the property, effects and actionable claims of the

cooperative shall revest in the cooperative. 63. Disposal of surplus assets of liquidated

cooperatives. After all the liabilities including the paid up share

capital of a wound up cooperative have been met, the surplus assets shall not be divided among its members but they shall be applied to any object described in the byelaws and when no object is so described to any object of public utility determined by the general body meeting.

64. Bar of suits or legal proceedings When an order to wind up the cooperative has

been made or the liquidator has been appointed no suit or other

legal proceeding relating to business of such cooperative shall be

proceeded with or instituted against the liquidator as such or against the cooperative or any member thereof except with the leave of the Registrar and subject to such conditions as he may impose.

65. Final accounts



(1) A liquidator shall pay the costs of liquidation out of the property of the cooperative and shall pay or make adequate provision for all claims against the cooperative.

(2) Subject to the provisions of section 63 after

paying or making adequate provision for all claims against the cooperative, the liquidator shall apply to the Registrar for approval of his final accounts and for permission to distribute in cash or in kind the remaining property of the cooperative in accordance with the byelaws.

(3) Where the Registrar approves the final accounts

rendered by a liquidator under sub- section (2), he shall:-

(a) issue directions with respect to the custody

or disposal of the documents and records of the cooperative; and

(b) discharge the liquidator. (4) Where the Registrar discharges a liquidator under

sub-section (3), the Registrar shall dissolve the cooperative, issue a certificate of dissolution and delete its name from the register of cooperatives.

(5) The cooperative ceases to exist on the date shown

in the certificate of dissolution, which shall not be later than two years after the appointment of the liquidator.

Commentary- The process of liquidation is rather

slow as there may be interferences, hindrances and the liquidator may be having his own choice of completion. In section 62, 63 and 64 these problems have been identified and sought to be removed. The time limit for the completion of the liquidation has also been fixed for two years.



CHAPTER X

MISCELLANEOUS 66. Previous sanction of Reserve Bank of India

or NABARD in certain matters. Notwithstanding anything contained

in section 5,11,12,13,14,58 and 59 of this Act, in the case of a co-operative bank or an urban co-operative bank, no, transfer, division, amalgamation, conversion, merger or dissolution shall take place save with the previous sanction in writing of Reserve Bank or National Bank for Agriculture and Rural Development as the case may be.

Commentary- Vide Act No.24 of 2001 published in

official gazette on 17th October, 2001 in Section 66 of the word, "conversion" has been omitted.

Banks, especially urban cooperative banks have been pressing hard in the state that the condition of the previous sanction of Reserve Bank or the Nabard at least for the conversion purposes should not be necessary. The matter was taken up with the Nabard and Reserve Bank of Indiaalso. Since the Banks have been complaining about their proposals pending for long for the concurrence, the amendment has been made with a view to expedite the conversion. It is however expected that the Banks seeking conversions shall necessarily comply and fulfil the Requirement of the Reserve Bank or the Nabard, as the case may be, for licensing as well as other regulatory purposes of the Banking Regulation Act 1949(No. 10 of 1949).

67. Certain provisions of cooperative societies

Act to apply.



The provisions of section 17 A and 17 B of the Chhattisgarh cooperative Societies Act, 1960(No.17 of 1961) shall mutatis, mutandis apply to all cooperative banks.

Explanation- For the purposes of

this section a “Cooperative Bank means a cooperative registered under this Act, which is doing the business of banking as defined in clause (b) of Sub-Section(1) of Section 5 of the Banking Regulation Act, 1949.”(No.10 of 1949)

Commentary- 1.This is a referential legislation. It is now

settled that the provision incorporated by reference, if repeated, the same shall be read as bodily incorporated in the Act in which it was incorporated by reference.

2. Cooperative society doing banking business does not cease to be cooperative society and is within entry 32 of State List. (Supreme Court Notes Vol.1 XXII (No. 17 15th Sept. 1980; AIR 1971 SC 365 )

68. Removal of difficulty. (1) If any difficulty arises in giving effect to

the provisions of this Act, the State Government may pass such order not inconsistent with the provisions of this Act, as it may deem necessary to remove such difficulty.

Provided that no such order shall be

passed after the expiry of the period of two years from the date of coming into force of this Act.

(2) The order passed under sub-section(1)

shall be laid on the table of the legislative assembly.



Commentary- It has been debated time and again in the context of this provision to seek to issue some directives from the government. More often than not, it was the demand pertaining to the relaxation or providing in place of the existing provision with the result that this provision remained unutilised till its expiry.

69. Right to Information. Any member or creditor having interest in the

affairs of the cooperative may seek information relating to any transaction of the cooperative and for that purpose may be provided a certified copy of any document within one month from the date of receipt of the application relating to such transaction on payment of such fee as may be specified in the byelaws,

Commentary- The provision has been in great

demand all over. After prolonged discussions and consultations, the law provided for the information to be made available to the members and the creditors of the cooperative only.

70. Bar of Jurisdiction of Courts. (1) Save as provided in this Act, no Civil or

revenue court shall have any jurisdiction in respect of –

(a) the registration or conversion of a

Cooperative or of an amendment of a byelaw;

(b) any matter concerning the winding up and the dissolution of a Cooperative.

(2) While a Cooperative is being wound-up, no suit or other legal proceedings relating to the



business of such Cooperative shall be proceeded with, or instituted against, the liquidator as such or against the Cooperative or any member thereof except by leave of the Registrar and subject to such conditions as he may impose. (3) Save as provided in this Act, no order,

decision or award made under this Act shall be questioned in any court on any ground whatsoever.

71. Indemnity for acts done in good faith. No suit, prosecution or other legal proceedings

shall lie against the Registrar or any person subordinate to him or acting under his authority, in respect of anything done or purporting to have been done by him in good faith under this Act.

Commentary- Before the passing of the M.P.

General Clauses Act, 1957, the protection contemplated in this section was available in the Acts repealed by the Act of 1957 but such protection was withdrawn as it was opposed by the select committee. It is, therefore, necessary to provide for such protection expressly.

******

Schedule A The Statement of Cooperative Identity 1. Definition: A cooperative is an autonomous

association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.



2. Values: Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibilities, and caring for others.

3. Principles: The cooperative principles are guidelines

by which cooperatives put their values into practice. 1st Principle: Voluntary and Open Membership Cooperatives are voluntary organisations, open to all

persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.

2nd Principle: Democratic Member Control Cooperatives are democratic organisations controlled

by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to membership. In primary cooperatives members have equal voting rights (one member, one vote), and cooperatives at other levels are also organised in a democratic manner.

3rd Principle: Member Economic Participation Members contribute to, and democratically control, the

capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed to as a condition of membership. Members allocate surpluses for any of the following purposes:



Developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

4th Principle: Autonomy and Independence Cooperatives are autonomous, self-help organisations

controlled by their members. If they enter into agreements with other organisations, including Governments or, raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.

5th Principle: Education, Training and Information Cooperatives provide education and training for their

members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public - particularly young people and opinion leaders - about the nature and benefits of cooperation.

6th Principle: Cooperation among Cooperatives Coope

7th Principle: Concern for Community Cooperatives work for the sustainable development of

their communities through policies approved by their members.

- x -



Schedule B Subject matter for specific consideration when framing

byelaws 1. Identity of the cooperative (a) the name of the cooperative (b) the village/ town/ city where the head office of

the cooperative is to be located (c) the custody and use of the common seal (d) the area of operation from where the

membership is to be drawn 2. Aim and services (a) the aim of the cooperative explicitly stated as

a common need of the members, which the cooperative aims at fulfilling

(b) key service and support services to members to fulfil the common need stated in the aim

(c) the conditions under which services may be provided to non-members

3. Membership (a) eligibility, ineligibility for obtaining

membership (b) eligibility, ineligibility for continuing

membership (c) procedure for obtaining membership (d) procedure for withdrawing membership (e) procedure for termination of membership (f) circumstances under which membership

ceases (g) procedure for cessation of membership 4. Member rights and obligations (a) the rights of members



(b) manner of fixation of minimum performance expected annually of each member vis-à-vis use of services, financial commitment, participation in meetings, and adherence to byelaws, in order to be eligible to exercise the rights of membership including the right to vote

(c) the consequences of performing below the minimum

level fixed (d) the consequences of default in payment of

any sum due by a member 5. General body (a) the role of the general body, and of the

delegate general body, if any, and subjects which must be dealt with by the general body, and by the representative general body, if any

(b) the manner and frequency of convening general meetings, the mode of communication of the intimation of these meetings and quorum required

(c) the minutes of proceedings of general meetings

6. Board of directors (a) the size and composition of the board of

directors (b) eligibility, ineligibility for becoming director (c) eligibility, ineligibility for retaining directorship (d) the procedure for election including the

appointment of election officer removal of directors, the election of the President, Vice President , and representative and filling of casual vacancy



(e) the terms of office of the directors (f) the frequency of board meetings (g) the manner of convening board meetings,

and quorum (h) the functions, responsibilities and powers of

the board (i) the minutes of proceedings of board meetings (j) the functions, responsibilities and powers of

the directors 7. Chief executive and staff (a) the person to sue or be sued on behalf of the

cooperative (b) the manner of appointment and removal of chief

executive (c) the functions, responsibilities and powers of

the chief executive 8. Finances (a) the financial year, which the cooperative

wishes to adopt (b) the manner of appointment of auditors and

their duties (c) the manner of appointment of internal

auditors and their duties (d) the nature and amount of equity capital, if

any, of the cooperative (e) the maximum capital, which a single member

can hold (f) the types and extent of funds to be raised (g) the purposes for which the funds raised by

the cooperative may be applied (h) the debt-equity ratio that the cooperative

wishes to maintain at all times, and the maximum external debt that a cooperative wishes to permit itself at any point of time



(i) procedure for transfer of shares or interest by a member

(j) procedure for redemption of shares by the cooperative

(k) procedure for transfer or payment of interest on death of member

(l) the nature and extent of the liability of the members for the debts contracted by the cooperative

(m) the nature and extent of the liability of the directors for the debts contracted by the cooperative

(n) the manner of disposal of funds if under liquidation

9. Secondary cooperatives (a) the rights, if any, which the cooperative

wishes to confer on any secondary cooperative of which it is a member, and the circumstances under which these rights may be exercised by such secondary cooperative

(b) the procedure for appointing and changing representative to secondary cooperative

10. Other matters

(a) the manner of making or amending byelaws: (b) the manner of constitution and functioning of

arbitration council along with the qualifications of the members for settlement of disputes:

(c) the manner of dissolution of the cooperative (d) the language in which the affairs of the

cooperative are to be conducted (e) refunding of loan, guarantee, share capital,

grant or subsidy received from Government. (f) other matters which the provisions of this Act

requires to be provided by byelaws.



- x -

Bhopal:

Dated the ................1999

Member-in-Charge



Appendix-1

Views and Opinions: -

Times of India, Ahmedabad - “Cooperative Panel urges State to adopt M.P. Model which seems to be in acknowledgement of the appreciation the M.P. Model has been receiving. The paper stated according to CIP sources the Chhattisgarh Government is one step ahead of the Mutually Aided Cooperative Societies Act of Andhra Pradesh which was the first state to take the initiative to free cooperatives for government interference.” Dr.V. Kurien, Panel Member Cooperative Initiative Panel, IRMA Campus Anand wrote, “I am happy to know that the new law for the self reliant cooperatives has come into force in Chhattisgarh. This should no doubt be the turning point for the cooperatives of the State and perhaps a guiding light for other states to emulate."

Shri Mohan Dharia, CIP Panel Member had congratulated the State Government in following words in his letter dated Dec. 10, 1999. "We are sure that the Chhattisgarh self-reliant Co-operative Act will help in strengthening Co-operative movement in your state and also in the country, based on Chaudhary Brahma Prakash Model Act. I am happy that the Act passed by your state, has given due recognition to the recommendations of the Chaudhary Brahma Prakash Model Act which



was approved by the Planning Commission of the Govt. of India while I was the Dy. Chairman."



Appendix-2

(Copies of Important letters and comments)

OBSERVATION ON THE CHHATTISGARH SWAYATHA COOPERATIVE VIDHEYAK

BY DR. S.S.SISIODIA, PRESIDENT NATIONAL COOPERATIVE

UNION OF INDIA AND NATIONAL FEDERATION OF URBAN COOPERATIVE BANKS

AND CREDIT SOCIETIES LTD., DELHI. The Cooperative, which is self-reliant mainly, constitutes the credit cooperatives i.e. the Urban Cooperative Banks and Cooperative Credit societies. Since the proposed new Act is intended for all self reliant cooperatives, the needs of the credit cooperatives i.e. cooperative banks and credit societies should be particularly kept in mind while finalising the Act. Need for the proposal to have a separate chapter or separate Act has arisen basically because the provisions of Banking Regulation Act largely govern cooperative banks and the excessive control of Registrar Cooperative Societies has resulted into unaccountable problems before them. Hence every section of the new act needs to be studied and formulated keeping in view the operational angle of the cooperative banking institutions. The urban cooperative banking institution, in particular are closer to commercial banks in their operations and in order for them to grow well in the competitive commercial banking environment, they should not be subjected to any additional restrictions other than those required by the Banking Regulations Act for their operation purposes. Ideally the Cooperative Societies Act should provide only for their registration, amalgamation and dissolution. Other matters of operations, audit and inspections, etc. should be left to be controlled by the Reserve Bank of India. The provisions of the proposed new Act should take care to meet the needs of the urban cooperative banks.



Appendix-3

Co-operative Development Foundation Hyderabad

Comments on

Chhattisgarh Swayatta Sahakarita Vidheyak of 1999

The draft Chhattisgarh Swayatta Sahakarita Vidheyak of 1999(CSSV) is a great improvement on the Andhra Pradesh Mutually Aided Cooperative Societies Act of 1995, and it has also dealt with a number of issues not addressed by the subsequent Referential Act of 1997. That is as it



should be, since we are all wiser by a few more years! CDF would like to appreciate the tremendous effort that has gone into the CSSV draft, and hopes very much that the CSSV will be enacted at the earliest. CDF feels that if CSSV is enacted with some changes, it will be the most liberal new cooperative law in the country, and will become a model for others to follow. CDF very much hopes that the Government will introduce the Bill and ensure its smooth passage in the legislature, at the earliest.



Appendix-4 Cooperative Initiative Panel

V.Kurien Panel Member

CIP-313/4/13 THURSDAY, APRIL 01,1999

Shri Mahendra Singh, Minister of Co-operation, Government of Madhya Pradesh Bhopal Dear Shri Mahendra Singhji, I am very pleased to know that the Chhattisgarh Department of Co-operation under your leadership has decided to introduce a parallel legislation- "The Chhattisgarh Swayatta Sahakarita Vidheyak, 1999", for self reliant co-operatives on lines of the Andhra Pradesh 1995 legislation. Indeed the need of the hour for the co-operatives is to be able to compete and survive in a level playing field. Thus it is most timely that co-operatives too are liberalised and keep pace with the private sector and the multi-nationals. I am told by the CIP Secretariat, which has been closely associated with the drafting of the proposed legislation, that you have ensured that it is landmark legislation, seeking to give back to the co-operatives the right to be the masters of their own destiny. It has been my experience that any change for a progressive legislation almost always encounters opposition, particularly from several vested interests. I know, however, that you are a man of commitment and principals who will not be deterred by the few, when the change is important to the many. Should you feel that the CIP Secretariat could be of any assistance in



the process, I shall be most happy to ask our officers to be available accordingly.

I also take this opportunity to reiterate my oft mentioned stand that autonomy alone is not the answer to all problems. It must be accompanied by a great measure of accountability. The two are but two sides of the same coin. Thus any new legislation must ensure that even while liberalising the legislation, there are adequate and strong measures for any breach of trust by the leadership. In fact, I would strongly recommend that particularly for any fiduciary breach the guilty should be committed to the common laws of the land, and strongly punished, so as to serve as an example for all others.

On behalf of the CIP in particular and the co-operative movement in general, I wish you all the success, and hope that Madhya Prad4esh Co-operatives will soon rejuvenate to a new era of co-operation in all aspects affecting the rural economy.

With regards,

Yours sincerely,

(V. Kurien)



Appendix-5

SONIA GANDHI D.O.No. 109/Lop/LSVIP/200 Leader of Opposition 44, Parliament House (Lok Sabha) New Delhi August 14,2000

Dear Prime Minister, I have recently written to the Congress Chief Ministers requesting them to amend and modernize the laws governing cooperative societies. The Chief Ministers are already actively looking into the matter and it is my belief that the Congress governed States will soon have progressive laws giving autonomy as the best vehicles for promoting a more equitable sharing of benefits of economic growth and capturing the gains of economic liberalization for the poor. In this context I would like to draw your attention to two matters which have been pending with the Government of India for a long time. I refer to:

(a) Amendments in the Multi State Cooperative Act of 1984 to incorporate fully the basic principles of cooperation of open membership, democratic member control, autonomy and independence as enunciated by the international Cooperative Alliance, the Committee on a Model Cooperative Act and other expert bodies. This matter lies with the Minister of Agriculture.

(b) Appropriate amendment in the Banking Regulation Act, already approved by the Reserve Bank of India, to enable the setting up of a National Cooperative Bank of India. This issue has been pending with the Finance Minister.



In the interest of strengthening the cooperative movement for the benefit of the poor, I request you to look into both the matters personally so that there is no further delay.

Shri Atal Bihari Bajpayee Yours sincerely,

Prime Minister of India

7, Race

New Delhi Course Road (Sonia Gandhi)



Appendix-6

Text of the Letter of Shri Digvijaya Singh Chief Minister of Madhya Pradesh addressed to all State M. Ps and M. L. As

for the popularisation of Madhya Pradesh Swayatta Sahkarita Adhiniyam 1999

Subject- The Enforcement of the Swayatta Sahkarita Adhiniyam 1999

Chhattisgarh has been a leading state in the decentralisation of powers in order to strengthen democratic institutions and the local bodies. Swayatta Sahkarita Adhiniyam 1999 is yet another step in this chain of allowing more autonomy to the cooperative institutions. It has become a law after it publication in the official gazette on 4-1-2000. It has also been brought into force on 15-2-200 as per specific provision of it and the powers of the registration of cooperatives under this Act are being delegated to the officers of the cooperation Department.

You are all aware of theses developments. I simply intend through this letter to underline the need of making people aware for taking more advantage of this Act. As against some restrictive provisions of the old Act, with the empowerment of the Annual General Bodies and the Board of Directors of these cooperatives, new cooperatives will come to be organised and the cooperative societies preferring conversion into it. Cooperative institutions that have not availed assistance from government in the form of share capital, loan or government guarantee will definitely like to come under the new progressive fold. This Act is just like a boon to the urban credit cooperative institutions. I am sure that your role as a leader of the masses will encourage them for this purpose. Many new self-reliant cooperatives will also be getting organised in this manner that shall render effective service to their members. In the present age of economic liberalisation, cooperatives that are autonomous, democratic and having capacity to compete shall have a distinct place in the market. The cooperatives of today have a 'concern for society' as well.



We shall thus be improving the economic state of our society in this manner. I am confident that you will be taking a lead now for the formation of cooperatives that shall bring economic revival by joint efforts. You shall be receiving all necessary support and cooperation from the administration in this regard. Digvijaya Singh

Appendix-7

Mahendra Singh Minister for Agriculture & Cooperation, M.P. D.O. No. Bhopal, Dated:00-01-2000 You would be aware that the Madhya Government has enacted the Chhattisgarh Swayatta Sahakarita Adhiniyam, 1999 for providing complete autonomy to cooperatives on the lines of Model Act, Andhra Pradesh Mutually Aided Act, 1955 and Referential Act, 1977. I have great pleasure in this context in acknowledging the inspiration and guidance received from Padma Vibhushan Dr. M.V. Kurien, Anand, and Gujarat in this direction. As eminent co-operator and as a custodian of this movement in you own capacity, I am enclosing a copy of the Act



for your perusal. I would be happy to receive your comments in this regard to act. As we look forward to the unfolding millennium, I am of the view that such Act will replace the existing one. Since, governmental assistance to them is gradually shrinking and cooperatives are now striving for greater autonomy and independence from the government to cooperatives in the global zing scenario. May, I wish you a very happy New Year for prosperous cooperative movement all over the country. Yours Sincerely, (1) Shri Nitish Kumar, Central Minister for Agriculture

& Cooperation, Govt. of India, New Delhi. (2) All State Cooperative Ministers. (3) Dr. Kurien, Anand, Gujarat (4) Ms. Amrita Patel, Anand (5) Shri Rama Reddi, CDF Hyderabad (6) Shri L.C. Jain, CIP, Anand (7) Shri Mohan Dharia, CIP, Anand (8) Shri Vimal Jalan, Governor, RBI, Bombay (9) Dr. S.S. Sisodiya, Chairman NCUI, New Delhi (10) All Chairman, MP State Cooperative Federations,

M.P.Bhopal (11) All Chairman, National Level Cooperative Federations,

New Delhi

Appendix-8

Mahendra Singh



Minister for Agriculture & Bhopal- March, 2000 Cooperation, M.P. I have great pleasure in forwarding you a copy of Chattisgarh Swayatta Sahkarita Adhiniyam, 1999 enacted in our State as a parallel legislation for the un-aided cooperatives. This is particularly worth attention in context of your speech made while presenting the Budget on 1st June 1998 where you had following remarks to make "the system of agriculture cooperatives in our country is plagued by bureaucracy and political interference at many levels. As part of the concerted programme to revise the cooperative sector, Government will shortly bring forward a model cooperative law to replace the Multi state Cooperative Societies Act of 1984 and will encourage the states to make similar amendments in their own Acts". While we are still awaiting the Multi-state Cooperatives Societies Act, 1984 to be amended by the Centre, you will surely welcome a moderate attempt in the required direction by Chhattisgarh in consonance with your budget speech in the Parliament made while presenting budget on 29th February this year. Enclose: Swayatta Sahkarita Act, 1999 Yours Sincerely, Shri Yashwant Sinha, Union Minister for Finance, Government of India New Delhi



Appendix-9 An English Rendering of the Forwarding Note of the Report of the Expert Group Constituted By Government of Madya Pradesh. In order to allow more autonomy and provide a democratic structure

to the cooperatives to operate, Government of Madhya had constituted a committee of experts vide its order dated 16-1-97

and30-1-99. The committee held its meetings on following dates- 1. 24-2-97 2. 4-5-97 3. 17-5-97 4. 16-7-97 5. 29-8-97 6. 14-10-97 7. 24-12-97 8. 24-8-98 9. 10-2-99 10. 25-2-99 11. 13-2-99 12. 10-4-99 As decided in some of these sittings, the members of the committee visited Andhra towards the end of May 97. The group met Honourable Minister Cooperation, Principal Secretary Cooperation, Registrar Cooperative Societies, Office bearers of State level Cooperative Institutions and Cooperative Development Foundation Hyderabad. In the second week of June 1997, the committee members visited Anand Gujarat where they had meetings with Chairman N.D.D.B. Dr.M. V. Kurien and the office bearers of Cooperative Initiative Panel. In the last meeting of the committee held on 10-4-99, representatives of various state level cooperative Institutions of such as Shri Subhash Yadava, Chairman M.P.State Cooperative Bank, Dr. Sawai Singh Sisodia, Chairman Urban Bank Association, Shri Bhagwan Singh Yadava, Chairman M.P. State Oilseed Growers Federation and Shri Bhagwati Prasad Mishra Chairman M.P. State Cooperative Union were present. These special invitees forwarded many important suggestions, which have been incorporated in the draft at appropriate places. In this concluding meet, the then Executive Trustee (at present Chairman) Shri Rama Reddi was specifically invited. Shri Reddi in his exhaustive written note forwarded from Hyderabad as well



as his explanatory comments made towards the end of this meeting made rich contributions in the contents. He was hopeful that the proposed draft would serve as a better model in the whole country. In the preparation of this draft of a parallel draft for the unaided cooperatives, the committee has exhaustively borrowed from the contents of the following- 1. Chhattisgarh Cooperative Societies Act, 1960. 2. Model Cooperative Societies Act 1990 3. Andhra Pradesh Mutually Aided Cooperative Societies Act

1995 4. Bihar Self Supporting Cooperative Societies Act 1996 5. Referential Act (C.D.F.) 1997 6. Comments Forwarded by National Dairy Development Board,

Anand 7. Literature provided by Cooperative Initiative Panel Anand,

Gujarat, and 8. Comments provided by Shri V.W. Umrekar, former Draftmen-

in-Chief of the Law Department, Governement of Madhya Pradesh

2. The members of the committee jointly as well as severally

had purposeful meetings and discussions with various groups and people connected with different field of cooperatives, which have necessary bearing on the conclusions drawn. The committee has definitely borne into mind the present situation and the prospective plans of the state of Chhattisgarh while finalising these recommendations. As the very name “Autonomous Cooperative Act" suggests the Act is to be a parallel legislation for those cooperatives that have not received any assistance from the Government. The draft is that way different from the one circulated by C.D.F. Hyderabad because it was suggested in it that all future cooperatives need to be registered under the new Act only. Some of the noticeable features of this Act are as follows-

1. Words and phrases not defined in it separately shall carry the meaning assigned to them in the Mdhya Pradesh Cooperative Societies Act 1960.



2. There is no provision in the Act for Government to frame Rules. All the procedural requirements are expected to be met by the cooperative after making provisions in their byelaws.

3. The condition of the minimum membership from twenty different families has been retained from the M.P. Cooperative Societies Act 1960.

4. The term 'Byelaws' from the old Act has been retained in place of Referential Act's suggestion that 'Articles of Association' would be appropriate.

5. It has been carefully kept in view while preparing this draft that the enactment of it should cause no financial burden on the State Government. It therefore would not require clearance from the Finance Department.

6. The Cooperative Tribunal formed under Chhattisgarh Cooperative Societies Act 1960 has been empowered to hear appeals and some disputes directly.

7. The Annual General Body will take final decision about the selection of the auditor. It can opt for an auditor from the government along with the chartered Accountant.

8. If the A.G.M is not called, audit is not got done, and the elections are not held in due time, the Board has been proposed to be vacating its office.

9. It has been provided that some of the provisions of the Chhattisgarh Cooperative Societies Act will be mutatis mutandis applicable in this Act.

10. The State Government has been empowered in the Act to remove difficulties for two years after the Act comes into force.

11. A member as well as a person connected with a credit cooperative has been proposed the right of information.

12. The Act proposes to have due consultations with Nabard or the Reserve Bank in matters pertaining to Cooperative Banks.

13. As the concurrence of Government of India regarding subjects relevant in the Chhattisgarh



Cooperative Societies Act has been available, the concurrence of Government of India for the enactment of the present Act does appear to be necessary.

3. This committee has closely noted that the Present

Chhattisgarh Cooperative Societies Act 1960 requires be rationalising and updating also. This committee will make suggestions for its amendment in the next part. This is the first part of its recommendations. In the finalisation of the draft, the contribution of the former law drafting Officer Shri V.V. Umrekar is commendable. He had proposed in Section 45 that the Registrar should have been empowered to ensure the 'autonomy of the cooperative' as required by the fourth principle enunciated in Schedule A. Shri Rama Reddi of C.D.F Hyderabad was of the view that only the byelaws framed by cooperatives should ensure such protection and not any outside authority. But Shri Umrekar still felt that from the point of view of logical ending and from the legal point of view some provision could well be there in the Act itself otherwise complete autonomy might make cooperatives arbitrary.

4. The committee expresses its gratitude towards former cooperative Ministers Shri B.R. Yadava and Shri Hajarilal Raghuvanshi, present Home Minister of State Dr. Govindsingh, former members Shri Nanhelal Dhruve, Ganesh Prasad Soni, Advocate, Shri M.M. Batra and the former Registrar Shri Suraj Prakash for their outstanding contribution in the making of this Act.

5. The committee hopes that the government will readily accept this 'Document of Transition'.

Signed by-

1. Shri Mahendra Singh, Minister Cooperation Chairman 2. Shri Laxman Prasad Bhargava Member 3. Shri Narendra Singh Purohit 4. Shri Surendra Singh Sisodia 5. Shri Nathuram Ahirwar 6. Shri Rajendra Singh Gautam 7. Shri Mankuram Sodhi



8. Shri Yadvendra Singh

9. Shri Radhey Shyam Sharma

10. Shrimati Harshraj Deora

11. Shri V.W. Umrekar

12. Shri Hoshiyar Singh ,Secretary cooperation

13. Shri Dilip Raj Singh Chaudhari, Commissioner cooperation

Special Invitees

1. Shri Tanvant Singh Keer

2. Shri Bhagwati Prasad Mishra

3. Shri Mohammad Shahid

4. Shri P.D. Mishra Addl.R.C.S

5. Shri Neeraj Shrivastava Deputy Secretary Cooperation.



Appendex-10 LEGAL TRENDS AND NEW ACTS

Mr. PD Mishra, Chairman,Mr. T Srinivasulu, Mr. GK Fakir, Mr. SK Srivastava, Mr. MD Pal, Mr. YD Khawale, Mr. BB Sengupta, Mr. PS Thirugnanam, Mr. KS Dhaulta

Main Issues Challenges before Co-operatives

• Options - Amendment of existing Acts or Enactment of a Parallel Act

• Experience of the Parallel Act by the States having enacted it

• Role of Registrar, State Government and other external agencies, like federal bodies, financial institutions and NGOs

Challenges Internal-

Weaknesses

A. Conceptual

1. Lack of Awareness in members 2. Co-operative Principles not imbibed 3. Co-ops being considered as State tools

B. Structural

(a) Co-ops being imposed from outside (b) Politicisation and

bureaucratisation, (c) Lack of Professional Management C. Financial



(a) No Self-reliance (b) Dependence on Govt. Aid (c) Erosion of internal resources (d) Overdues

External Forces

• Market Competition

• Globalisation, Liberalisation and Privatisation

• Changing co-operative laws in some States and other countries

• Financial crunch in the State

• Trends of disengagement of govt.



OPTIONS / STRATEGIES • Amendments in the existing Acts • Scope and the flexibility available in the existing Acts • Experience with the New Generation Co-ops in not that

encouraging • Reluctance of State Govt. • Internal weaknesses of the Parallel Acts Model • Governmental financial stake in existing societies

Enactment of Parallel Act

Favourable Points • Better scope for New Generation Co-operatives • More emphasis on Principles of Co-operation • Providing a level playing field for co-ops in the free market

economy • Transparency, Accountability and Autonomy

Experiences of Parallel Legislations • Andhra Registered 2228 and Bihar about 3000 Co-operatives • Exclusion of Primaries (Agri. Credit co-ops) - the backbone of

the co-op movement • Problems with co-op development agencies like NABARD, RBI,

NCDC and also NCUI • Multi-state Co-op Societies Act of 1984 not amended • Multiplicity of Acts posing problems

Changing Role of the Registrar / Govt. & other Agencies

• Regulatory Registrar to be a Facilitator • Co-ops to have a distinct place in govt. mechanism • Autonomy of Co-ops to be safe guarded • Co-ops not to be dependent on any outside agency at the cost

of their Principles • Self-sufficiency is the ultimate goal • Restoration of the Primacy of Primary Co-ops (Redefining the

Federal - Primary relationship)

Recommendations • State Govt. open for amendment in the existing Act or going for

Parallel Legislation • Within Two Years State Govt. should act on above • Central Govt. should also amend or replace the Multi-state Co-

op Societies Act within a year • Central and State Govt. should declare the Policy on Co-

operatives with in a year



• Independent Agency for Audit, Election and Arbitration



Appendix -11 SPEECH OF HON'BLE Dr. GOVIND SINGH, MINISTER OF STATE FOR COOPERATION (INDEPENDENT CHARGE) GOVERNMENT OF CHHATTISGARH DELIVERED IN THE

CONFERENCE OF STATE MINISTERS OF COOPERATION ON 18th MAY, 2001

TO DISCUSS THE DRAFT NATIONAL POLICY ON CO-OPERATIVES AT VIGYAN

BHAWAN, NEW DELHI.

Honorable Central Minister for Agriculture and Cooperation, Shri Nitish Kumarji, other distinguished Ministers, Guests, Representatives of various National Organizations, ladies and gentlemen, I am thankful to Honourable Central Minister for Agriculture and Cooperation, Shri Nitish Kumarji to have convened this important Conference to finalize the National Policy on Cooperation. I am particularly happy since I could not be present in the Conference held on 30th June 2000. It gives me satisfaction that some of the points raised by me have been incorporated in the proposed draft. Hon'ble Sir, we are formulating a National Policy on Cooperation after more than half a century of our independence. It may be questioned in what direction we have been moving so far and if we are a loser for having been directionless, how are we going to make it up? Even this issue of the formulation of a national policy has been pending for more than a decade now and the amendments based on the Model Act as suggested by Chaudhary Brahmaprakash Committee in the Multi-State Cooperative Societies Act, 1984 have still not materialised. I am sure this house and most of the distinguished participants share my concern when I voice another note of anxiety regarding the threats before cooperatives by the free-market economy under World Trade Organisation. I am aware



that Honourable Shri Nitish Kumarji in his speech on 24th Feb.2001 at NCUI in New Delhi on "Impact of WTO agreement on Indian Agriculture and on Marketing Cooperatives" had stated the "National Policy for cooperatives is being finalised with a view to facilitate all round development of the cooperatives and their economic viability. Under the policy, the cooperatives would be provided necessary support, encouragement and assistance so as to make them economically viable, self-reliant and democratically managed institutions accountable to their members. It ensures to achieve the revitalisation of the cooperative sector particularly in the area of agriculture credit, marketing and agro-processing through human resource development and by evolving a suitable legislative and policy framework for the cooperatives". I am afraid the draft policy put up before us for approval and the measures suggested to meet the above challenge are inadequate. Cooperatives are just not any other enterprise, controlled and managed by profit making people. They are certainly superior in the sense that the participation in their working, management and functioning is broader and their concern for the whole community is expressed, Since cooperatives have so far not been involved in entering into an agreement like this, it is government's responsibility now to provide them due protection against all such threats posed by the multi-nationals in the near future. The revised draft policy circulated now incorporates basic cooperative principles pronounced in the declaration of the Manchester International Cooperative Alliance (ICA) Congress 1995 and strives to ensure the functioning of the cooperatives based on the basic cooperative values and principles enshrined in it. It now underlines the significance of the endeavour of cooperatives to reach the poorest section of the society and to encourage the participation of such section of women in management of cooperatives. Item No.13 of this policy should particularly draw the attention of the participants since it underscores the significance and necessity of an independent Agency like the State Election



Commission for the conduct of free and fair election of the cooperative societies. Sir, I want to draw the attention of Honourable cooperative Ministers of various states towards a reference of Government of Chhattisgarh made to Government of India as early as March 1999. The Honourable Chief Minister of Madhya Pradesh, Shri Digvijaysingh had then written to Honourable Prime Minister in his D.O. letter dated 30th March 99 that a constitutional amendment in this respect is the need of the our. To quote briefly from his letter the Chief Minister wrote, "The state is of the view that election to these bodies should be conducted by the State Election Commission. The Commission was approached and consulted for conducting elections of these institutions. The State Election Commission is of the opinion that suitable amendments in Article 243(k) or 243(z) (a) are necessary for empowering it to conduct elections of these institutions." The Prime Minister did acknowledge the receipt of this letter vide his letter dated April 7, 1999 but no progress has since been made in this direction. I am happy that this Conference provides me an opportunity to bring this important point to the notice of all concerned here and I am pleased that some tangible steps will now be taken in this regard. I hope that it will not be out of place here to bring to the notice of this august gathering briefly some other important issues related to the health of cooperative societies and the cooperative movement in the country. The case of the largest concern is the necessity of the strengthening of the cooperative credit system in the country, which has been reviewed and recommended by Shri Jagdish Capoor Committee already. The recommendations of the Committee were discussed and deliberated in the conference of Ministers held in New Delhi on 15th and 16th Dec. 2000 but the outcome of it is still unknown. On our part we have done a thorough exercise and are now prepared to submit proposals for the assistance. I will only stress on just one point in this respect that the Govt. of India must appreciate the view of State Governments in general that cooperatives are not solely the babies of State Governments. It is, however, worthwhile to suggest that the mechanism of bonds for assistance suggested in it would not afford adequate liquidity to the system to come out of financial morass. It is pertinent to note that commercial banks with



a credit deposit (CD ratio) of 45% got all the assistance from Government of India and cooperative banks with CD ratio more than 100% are being made to mobilise resources from their poorer members.

I once again place my thanks and regards for this very useful meeting and endorse the draft national policy along with the changes/suggestions, I have made in my speech



Appendix-12 ANAND DECLARATION 2000, A NEW DAWN1 It has been the endeavour of CIP, as an integral part of its constituency building efforts, to put in place a common charter for co-operatives and policy makers, To deliberate the future of co-operation in India, 45 co-operators representing various sectors of the movement, met at Anand on 8th and 9th November 2000. 9th of November thus marks a new dawn for the co-operatives movement in India as on this day for the first time co-operators in one voice expressed their ideology and values in the "Anand Declaration". The "Anand Declaration" is the voice of all the 45 co-operative leaders and the thousands of others whom these people represent. It is a declaration of values; a declaration of expectations from the policy makers; and a declaration of the yardstick with which all-future laws and policies will be measured. We are sure that co-operatives and co-operators in India will take positive steps to introduce the initiatives proposed in the "Anand Declaration" and thereby take co-operatives forward to even greater achievements in the millennium. In this report we present we present to you the text of the "Anand Declaration". An in-depth analysis of the resolutions is provided towards making the document operational. The "Anand Declaration" forms a valuable framework for the status review of the various legislative reforms – enacted and proposed. ANAND DECLARATION 2000 We the undersigned, have considered the current status of co-operatives and co-operative legislation, with the conviction that co-operatives must better meet the needs of their members in today's emerging economic environment, and having deliberated on the importance of our identity,

1 An Extract from the 2000-2001 publication (State of Co-operation in India) CIP



values and principles in relation to law, do hereby declare that in all forums we will advocate and support such laws as fully conforms with co-operatives principles and which are faithful to the characteristics described below. Recognizing that more than five decades have been spent in advocating reform of co-operative law and, further, that nine years have passed since the Chaudhari Brahma Prakash Committee recommended a Model Act, we urge the Union State Governments to set and meet a time-bound schedule to enact laws that meet the criteria herein set forth. To delay is to jeopardize the role of co-operatives, their members' economic interests as also the national economy. It is our unanimous view that good co-operative law: • Must directly incorporate the ICA Statement of Co-

operative Identity and Principles of Co-operation; the provisions of the law should be wholly consistent with these principles.

• Defines the Registrar of Co-operatives" role solely as certification of registration and liquidation of co-operatives.

• Allows co-operatives to avail of such financing as is an available to other forms of enterprise but does not allow them to accept Government equity.

• Must require the active patronage and participation of members.

• Must include specific provision to ensure the accountability of boards to members and of employees to the boards.

• Must guarantee full autonomy of democratic governance by making co-operatives responsible for conduct of their own elections and the appointment of Chartered Accountant as auditors.

• The law must provide for co-operative bylaws to specify the arrangements for members to appoint an interim committee to carry out the functions of the board for such limited period specified in the event a board does not fulfil its obligation to conduct elections.



• Must provide that law takes its normal course in the case of misappropriation, defalcation, embezzlement or any other illegal act, without requiring permission of the Registrar or other authority.

• Must encourage professionalism in the management of co-operatives

• Must place the responsibility for the rules of governance with the bylaws, with the co-operative's board subject to strict penalties should they fail to comply with the bylaws.

• Must ensure that settlement of disputes is arbitrated or adjudicated by an independent authority, which may include an authority constituted by co-operatives themselves.

• Must enable and facilitate, not restrict or prescribe.

We recognize that good laws are necessary, but are not a sufficient condition for the success of co-operatives. To best serve their member's co-operatives must enhance their efficiency, effectiveness and economy as well as quality. We therefore commit ourselves to:

* Revamp, redesign and revitalize training and education programs for members, boards and employees, to meet today's needs while remaining true to co-operative principles.



Appendix-13 National Policy on Cooperatives

THE NEED FOR A NATIONAL POLICY The role of cooperatives has acquired a new dimension in

the changing scenario of globalisation and liberalisation of Nation's economy. Internal and structural weaknesses of these institutions combined with lack of proper policy support have neutralised their positive impact. There are wide regional imbalances in the development of the cooperatives in the country. This has necessitated the need for a clear-cut national policy on cooperatives to enable sustained development and growth of healthy and self-reliant cooperatives for meeting the sect oral/regional aspirations of the people in consonance with the principles of cooperation. In this connection, it is also imperative to address the issues which require to be attended to by evolving a suitable legislative and policy support to these institutions.

The proposed National Policy on Cooperative, as follows, is

a part of the concerted efforts of the government to provide appropriate policy and legislative support to cooperatives with a view to revitalizing them.

6. OBJECTIVE

The Objective of the National Policy is to facilitate all round development of the cooperatives in the country. Under this Policy, cooperatives would be provided necessary support, encouragement and assistance, so as to ensure that they work as autonomous, self-reliant and democratically managed institutions accountable to their members and make a significant contribution to the national economy, particularly in areas which require people's participation and community efforts. This is all the more important in



view of the fact that still a sizeable segment of the population in the country is below poverty line and the cooperatives are the only appropriate mechanism to lend support to this section of the people. The National Policy on Cooperatives to this end would seek to achieve: Ensuring functioning of the cooperatives based on basic cooperative values and principles as enshrined in the declaration of the International cooperative Alliance Congress, 1995; Revitalization of the cooperative structure particularly in the sector of agricultural credit; Reduction of regional imbalances through provision of support measures by the Central Government, particularly in the underdeveloped and cooperatively undeveloped States/regions; Strengthening of the cooperative Education and Training and Human Resource Development for professionalisation of the management of the cooperatives; Greater participation of members in the management of cooperatives and promoting the concept of user members; Amendment/removal of provisions in cooperative laws providing for the restrictive regulatory regime; Evolving a system of integrated cooperative structure by entrusting the federations predominantly the role of promotion, guidance, information system, etc, towards their affiliate members and potential members; Evolving a system of inbuilt mechanism in cooperative legislation to ensure timely conduct of general body meeting, elections and audit of cooperative societies;



Ensuring that the benefits of the cooperatives endeavour reach the poorer sections of the society and encouraging that participation of such sections and women in management of cooperatives.

7. POLICY

The Government of India in consultation and collaboration with the State Government hereby enunciates the following;

(i) While unfolding the values and principles of cooperation, If recognizes the cooperatives as autonomous associations of persons, united voluntarily to meet their common economic, social and cultural needs and aspirations through jointly owned and democratically controlled enterprises;

(ii) upholds the preservation of the distinct identify of

cooperatives, its values and principles by providing an appropriate environment and taking the required administrative and legislative measures;

(iii) recognizes cooperatives as a distinct economic sector and integral component of the socio-economic system of the country and an effective and potential instrument of socio-economic development, It considers them as essentially commonly initiatives for harnessing people's creative power autonomous, democratically managed, decentralized, need-based and sustainable economic enterprises. Cooperatives will, however, remain the preferred instrument of execution of the public policy especially in the rural area;



(iv) The regulatory role of the Government will be mainly limited to the conduct of timely elections, audit of the cooperative societies, and measures to safeguard the interest of the members and other stakeholders in the cooperatives. There shall, however, be no interference in the management and working of the cooperatives. The Government recognises the apolitical nature of cooperatives;

(v) reiterates and reinforces its commitment to the

cause of the SC/ST, women and other weaker sections of the Society and their development through the cooperatives. Wherever members belonging to women or Scheduled Castes encouragement and assistance will be provided by the Government cooperative societies, if they so decide, can provide for the representation of such category of persons in their bye-laws which they are competent to frame;

(vi) accepts the need to phase out its share

holdings/equity participation in the cooperatives. It shall, however, endeavour and extend appropriate support for improving financial viability and resource mobilization by harnessing local saving and adequate refinance facility, and to the possible extent providing a policy framework to ensure that there is no discrimination against the cooperatives in the matter relating to resource mobilisation to attain financial viability. The cooperatives shall be enabled to set up holding companies subsidiaries, enter into strategic partnership, venture into futuristic areas like insurance, food processing and information technology etc, and shall be independent to take financial decisions in the interest of the members and in furtherance of their objects;



(vii) recognises the role of the Government in ensuring the benefits of the liberalization and globalisation in the emerging economic environment are extended to the cooperatives in equal measure through the suitable fiscal politics and pledges to provide support and protection to the cooperative movement through suitably designed investment programmes with a view to providing the cooperatives a level playing field vis-à-vis other competing enterprises especially in the field of agro-processing and marketing;

(viii) recognizes the need for more effective regulation

of cooperative operating in the financial sector and accepting public deposits;

(ix) also recognises the need for incorporating

special provision in the Cooperative Societies Acts with regard to banking, housing, real estate development, processing, manufactures` co-operatives, infrastructure development, etc.;

(x) recognizes the need to provide preferential

treatment, as far as possible, to the cooperatives engaged in areas such as credit, labour, consumer,, services, housing, development of SC/ST and women and development of emerging areas as well as sectors requiring people's participation especially in rural areas;

(xi) undertakes to devise and execute suitable

programmes and schemes to build and develop cooperative institutions in the cooperatively under-developed states/regions with particular reference to the North Eastern States including Sikkim;

(xii) recognizes the need to support the cooperative

movement to develop human resources, cooperative education and training, appropriate



technologies and infrastructure facilities so as to promote professional management in cooperative particularly at the primary level, for their greater functional and operational efficiency. It may also include the introduction of cooperatives as a curriculum vitae as school level;

(xiii) Undertakes to initiate structural reforms in order

to improve the functioning of the cooperatives at various levels to ensure greater efficiency and viability. These may include steps to activate idle membership, enhance member participation and involvement, provision of multi cooperatives approach, ensure timely conduct of general body meetings and elections, provide for effective audit, devise suitable mechanism for rehabilitation of the sick societies particularly in the processing sector, expedite winding up of defunct societies; and providing legal framework for voluntary winding up of cooperatives;

(xiv) undertakes to bestow autonomy to cooperatives

to follow appropriate personnel policies including those relating to recruitment, promotions and other such matters with due emphasis on quality and transparency;

(xv) undertakes to introduce the required electoral

reforms through legislative measures. Elections to the cooperative societies should be held through an independent authority like the State Election Commission; and

(xvi) also undertakes to lake other such measures as

would be required for efficient and healthy growth of the cooperative movement.

8. PLAN OF ACTION



A plan of action for implementation of the policy shall be formulated and pursued with adequate budgetary support by the Government of India, state government and other concerned agencies including federal/national level cooperative organizations in a time bound manner.

9. CONCLUSION The Government of India trusts that the enunciation of this statement of Policy on cooperatives aimed at professionalsation and democratisation of their operations will facilitate the development of cooperatives as self-reliant and economically viable organizations, providing their members improved access to the economics of scale, offsetting various risk elements, safeguarding them against market imperfections and bestowing the advantages of collective action. And further trusts that the above statement of policy would ensure enduring autonomy and lasting viability to them as democratically owned, self-reliant enterprises, responsible and accountable to their members and to a largest public interest.



Annexure 14

List of amendments needed to be made in the Act

2. In clause (X) of sub-section (1) of section 2, for the words"in accordance with the byelaws "the words in accordance with the byelaws. the words in accordance with the provisions of the Act and the byelaws" shall be substituted.

3. in section 4 - (a) in sub-section(6) for the words" to such person specified" the words "to such person as specified" shall be substituted; and (b) in sub-section (7) for the words "the person", the words" such person" shall be substituted. 4. In clause (b) of sub-section (4) of section 13, after

the word "acknowledgement", the words "of receipt of the information" shall be inserted.

5. In clause (b) of sub-section (4) of section (14), after the word "acknowledgement", the words "of receipt of the information" shall be inserted.

6. In the proviso to sub-section (1) of section 24, the words "as to why the membership should not be terminated" shall be added at the end.

7. In sub-section (1) of section 28, the words "in the manner specified in the byelaws" shall be omitted.

8. In section 32-



(i) in sub-section (2) for the words "general meeting", the words "general meeting at any time" shall be substituted;

(ii) in sub-section (3), for the words "at the specified general meeting", the words " at such specified general meeting" shall be substituted;

(iii) in sub-section (4), after the brackets and figure " section (i)", the words "within the period specified therin" shall be insereted; and

(iv) in sub-section (5), for the words " the audited annual financial statement of accounts" the words " the audited annual financial statement of accounts, auditor's report" shall be substituted.

8. In sub-section (4) of section 34, after the words, "for the purpose", the words "of removal of President or Vice President" shall be inserted.



Annexure 15

Salient features of the Multi-State Co-operative Societies Bill, 2000 passed by the Parliament on

May 13, 2002

1.The registration process has been simplified. 2.Prior consultation of Central Registrar not required for amalgamation or transfer of assets and liabilities or division of multi-state co-operative society. 3. Promotion of subsidiary institution under any law allowed by multi-state co-operative society for the furtherance of its stated objectives. 4. Election of members of board shall be the responsibility of the existing board. 5. Non-eligibility to be elected as member of board for failure a) to conduct elections of board (b) to call the annual general meeting (c) to prepare the financial statement and present the same in the AGM.

6. Supersession of board in case of default or negligence in the performance of duties etc. only in multi-state co-operative society in which not less than 51% of the paid up share capital or of the total shares is held by the Central Government .

7. Nomination of Central Government or State Government on the board restricted to (a) one member in case where share capital held by the Government is less than 26% (b) two members where share capital is 26% or more but less than 51% (c) three members when share capital is 51% or more.

8. Audit to be done at least once a year and the auditor to be appointed from a panel of auditors approved by the



Central Registrar or from the panel of auditors if any prepared by the multi-state co-operative society.

9. Disputes to be settled by arbitration and the arbitrator to be appointed by the Central Registrar.

10. Power of the Central Government to exempt co-operatives from any of the provisions of the Act or Rules has been removed.

11. Central Government’s powers to give directions in public interest restricted to those co-operatives which have 51% or more share capital held by Government.



Appendix-16 A comparison of the Swayatta Sahkarita Adhniyam with other sources acts

S. No.

Swayatta Sahakarita Act 1999

MP Cooperative Societies Act, 1960

Referential Act, 1997

Model Act, 1991

Andhra Act, 1995

Deviation from tPradesh MutualCooperative Soc1995/Referenti-a

Preamble Preamble

Preamble

1 Preamble

Based on Refere1997

1. Short title, extent and commencement

1 1 4 1 Do

(a) -

(b) The term byeplace of articles association prefe

(c) In place of "thCivil Court of orijurisdiction in a dincluding the Higexercise of the ooriginal civil juris

(d) Delegate merepresentative o

(e) Substituted f"representative gbody".

(f) New definition (g) New definitio



S. No.




Model Act, 1991

Andhra Act, 1995


(h) In place of, 'aassociation' the 'byelaws' used. "includes a memcooperative" om

(I) President andPresident includ

(j) "And includescooperative" om

(k) "Whose memindividual"

(l) Individual appsuch under the Coperative Societ

2. Definition 2 2 5 2 ---

3. Registrar and other officers.

3 -- -- -- Provisions borrothe existing Act.

4. Registration of cooperative

9 5 -- 4 (a) May be regisunder this Act.

(b) --

(c) 75 days repldays.

5. Conversion of a cooperative society into cooperative.

-- 4 -- -- (a) Referential Aonly for, the refucapital. AP Act pan evidence of tclearance of shaloans and guara



S. No.




Model Act, 1991

Andhra Act, 1995


(b) Requirementevidence of cleaprovided.

(c) Referential Afor MOU for the loan or guarante

6. Cooperative to be body corporate

31 5 6 6 --

7. Byelaws -- 6 11 9 Articles of assocreplaced by the byelaws.

8. Amendment of byelaws

11, 12 7 12 10 (a) Referential Aprovide for the re

(b) --Do-- (c) Referential A

"the Registrar shrecord the amenimmediately on the notice, Provisuch action shalpreclude the Rechallenging the of the amendmethe court after gcooperative fair to consider the amendment."

9. Name of a cooperative

- 8 - - (a) Referential Afor a proviso.



S. No.




Model Act, 1991

Andhra Act, 1995


10. Location of head office

- 9 - - -

11. Transfer of assets and liabilities

15 10 - 11 (a) "The resolutisufficient conveyvest the assets aliabilities in transany further assu

12. Division of cooperative

- 11 - 11 (a) The vesting oassets and liabilin Referential Ac

13. Amalgamation of cooperatives

- 12 - 11 (a) Vesting of asliabilities provide

14. Merger of cooperatives

- 13 - - -

15. Vesting of assets and liabilities in resulting cooperative

- - - - -

16. Procedure for reorganisation of cooperative

16 - - - New Section

17. Saving of rights and obligation of resulting cooperative etc.

- - - - -

18. Fee for - 15 - 45 -



S. No.




Model Act, 1991

Andhra Act, 1995


services 19. Eligibility for

membership in cooperative

19 16 25 19 -

20. Disqualification of member

19-A - - - -

21. Admission of member

19 17 - - Appeal to lie befArbitration counc

22. Withdrawal of membership

- 18 - - -

23. Cessation of membership

19-A 19 - - -

24. Termination of membership

- 20 26 - Borrowed from M

25. Register of members

33 21 - - -

26. Education of members etc.

- 22 - - -

27. Exercise of rights

- 24 - - -

28. Votes of membership and manner of exercising vote

22,23 25 - - No material charephrasing of su

29. Liability of member

- 26 - - -



S. No.




Model Act, 1991

Andhra Act, 1995


30. General body

49 27 28 20 No material charephrasing of su

31. Function, responsibilities and powers of general body

49 28 - - No material chaPowers, which huse under MP Aincorporated. .

32. General meetings

- 29 33 - Provision for adjmeeting made frsection 6 to 11 apresident to presmeeting has beefrom sub-section

33. Board of directors

48 31 29 21 No material charephrasing of suand 3.

34. President and Vice-President of Cooperative

48 - - - New provision

35. Functions, responsibilities and powers of board

48-C 32 - 22 -

36. Eligibility for directorship in cooperative

- 33 - - -

37. Elections 49 34 32 23 25% of total memconvene or requconvene genera

38. Tenure of 49(7-A) 35 31 - The term provide



S. No.




Model Act, 1991

Andhra Act, 1995


directors years as per MPprovision. Suitabfor the election orepresentative aof casual vacancbeen made.

39. Board meetings

- 36 33 24 No change. Excproviding for PreVice-President tmeeting.

40. Decision by majority of votes

- - - - New provision amajority decision

41. Minutes of proceedings of meetings

- 37 35 - No major changrephrasing of the

42. Vacancies etc. not to invalidate proceedings

- - - - New provision - etc. not to invalidproceeding.

43. Proceeding of meeting to be deemed to be good and valid

- - - - New Provision- of meeting to bebe good and val

44. Staff - 38 34 25 - 45. Mobilisation

of funds - 39 17 - -

46. Deployment of funds and profits

- 40 - - Appropriation ofadded.

47. Disposal of surplus

- 41 20 - Sub-clause fromadded in accord



S. No.




Model Act, 1991

Andhra Act, 1995


the scheme of th48. Management

of deficit - 42 - - -

49. Operation of special funds

- 43 - - -

50. Accounts, records and documents to be maintained

- 44 36 26 -

51. Audit 58 45 37 27 Registrar may aauthorise Auditomay be availableservices should utilized.

52. Returns to be filed with Registrar

- 46 - - -

53. Inquiry 59 47 39 29 The enquiry repoplaced before A

54. Prohibition of use of word "cooperative"

73 - - - Brought from SeMP Act.

55. Offences 74 48 42 - - 56. Disputes 55 49 40 37 No change exce

arbitration councconstituted in plaarbitral tribunal. provided to be mthe Cooperative

57. Constitution of Arbitration

- 50 4 32 Procedure to beby Cooperative T



S. No.




Model Act, 1991

Andhra Act, 1995


council 58. Dissolution

of cooperative by members

- 51 45 39 -

59. Dissolution of cooperative by Registrar

- 52 46 - The court replacRegistrar.

60. Appointment of liquidator

70 54 48 41 Registrar to appLiquidator even has not appointe

61. Duties of liquidator

- 55 49 42 -

62. Powers of liquidator

71 56 50 - -

63. Disposal of surplus assets of liquidated cooperative

72 - - - New provision - surplus assets.

64. Bar of suits or legal proceedings

- - - - New provision - or legal proceed

65. Final accounts

- 57 51 - -

66. Previous sanction of Reserve Bank of India or NABARD in certain matters

17(A) 53 - - - New provision. amendment in Arecently In regarNABARD's conc



S. No.




Model Act, 1991

Andhra Act, 1995


67. Certain provisions of cooperative societies Act to apply

- - - - ---

68. Removal of difficulty

- - - - New provision

69. Right of information


70. Bar of jurisdiction of courts

82 - - - New provision

71. Indemnity for acts done in good faith


Schedule A. - Schedule A

- - -

Schedule B. Schedule B

- - -



The Author

After joining the Department of Cooperation, Government of Madhya Pradesh as Assistant Registrar Cooperative Societies in 1971, Shri P.D. Mishra is working as Additional Registrar Cooperation from 1989. Apart from serving the cooperative movement of the State in several capacities, Mr Mishra has worked in various cooperative organisations as the Chief Executive. His contribution in the field of cooperative credit, audit, housing, marketing and agro-processing in the state is worth mentioning. Mr Mishra has special interest in the philosophy and the legal framework of Cooperation. He played an active role in the evolution and the framing of the Chhattisgarh Swayatta Sahakarita Adhiniyam 1999.

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