What are the amendments to the Co-operative Societies Act?

The Bill is aimed at overhauling the existing law, which was enacted 20 years ago.

But first, what is a cooperative society, and who governs them presently?

Cooperatives are organisations formed at the grassroots level by people to harness the power of collective bargaining in the marketplace. This can mean different kinds of arrangements, such as using a common resource or sharing capital, to derive a common gain that would otherwise be difficult for an individual producer to get.

In agriculture, cooperative dairies, sugar mills, spinning mills etc. are formed with the pooled resources of farmers who wish to process their produce. Amul from Gujarat is perhaps the best-known cooperative society in India, but the numbers show their prevalence: there are nearly 2 lakh cooperative dairy societies and 330 cooperative sugar mill operations across the country.

Cooperatives are a state subject under the Constitution, meaning they come under the state governments’ jurisdiction, but there are many societies whose members and areas of operation are spread across more than one state. For example, most sugar mills along the districts on the Karnataka-Maharashtra border procure cane from both states.

The existing law — the Multi-State Co-operative Societies Act (MSCS) of 2002 — was enacted by the then Atal Bihari Vajpayee government for their management. Cooperatives of more than one state are registered under the MSCS Act. Their board of directors has representation from all states they operate in. Administrative and financial control of these societies is with the central registrar, with the law making it clear that no state government official can wield any control over them.

Why amend the existing law?

The Multi-State Co-operative Societies (Amendment) Bill, 2022, piloted by Home and Cooperation Minister Amit Shah, was introduced by his deputy, BL Verma, in Lok Sabha. Since 2002, many changes have taken place in the field of cooperatives.

At that time, Cooperation was a department under the Ministry of Agriculture. However, on July 6, 2021, the government carved out a separate Cooperation Ministry and Shah became the first Cooperation Minister of the country. Soon after taking charge of the Ministry, he announced the bringing in of a new National Cooperative Policy.

The Statement of Objects and Reasons of the Bill said, “The Multi-State Co-operative Societies Act, 2002 (the Act) was enacted to consolidate and amend the law relating to co-operative societies, with objects not confined to one State and serving the interests of members in more than one State, to facilitate the voluntary formation and democratic functioning of co-operatives as people’s institutions based on self-help and mutual aid and to enable them to promote their economic and social betterment and to provide functional autonomy and for matters connected therewith or incidental thereto.”

“Part IXB was inserted in the Constitution, vide the Constitution (Ninety-seventh Amendment) Act, 2011. In view of insertion of the said Part, it has become imperative to amend the Act. Further, developments over the years also necessitated required changes in the Act so as to strengthen the co-operative movement in the multi-State co-operative societies,” it added.

New rules for merger

The Bill provides for the merger of “any co-operative society” into an existing multi-state co-operative society. “Any co-operative society may, by a resolution passed by majority of not less than two-thirds of the members present and voting at a general meeting of such society, decide to merge into an existing multi-State co-operative society,” it read. At present, only multi-state cooperative societies can amalgamate themselves and form a new multi-state co-operative society.

Co-operative Election Authority

Also, the Bill seeks to establish a “Co-operative Election Authority”, with a view to bring “electoral reforms” in the co-operative sector. As per the proposed amendment, the authority shall consist of a Chairperson, a Vice-Chairperson and members not exceeding three to be appointed by the Centre.

Who can be appointed the chairperson of the authority?

As per the proposed amendments, a person shall not be qualified for appointment as Chairperson of the Authority unless he has held the post of Additional Secretary to the Government of India or equivalent rank; Vice-Chairperson of the Authority unless he held the post of Joint Secretary to the Government of India or equivalent rank; and Member unless he fulfils such qualification and experience as may be prescribed.

The Chairperson, Vice-Chairperson or Member of the Authority will hold office for three years or until they attain the age of 65 years, whichever is earlier, and they shall be eligible for re-appointment, according to the proposed Section 45(4).

What was the Constitution (Ninety Seventh Amendment) Act, 2011?

Through the 97th constitutional amendment, Part IXB (The Co-Operative Societies) was inserted into the Constitution. The right to form cooperative societies was included as Right to Freedom under article 19 (1), Part-3 of the Constitution.

In addition to this, Article 43-B (Promotion of Cooperation societies) was also inserted as one of the Directive Principles of State Policy under Part 4 of the Constitution of India.

Stricter punishments

Clause 37 of the Bill seeks to amend section 104 of the Act to increase the amount of penalty for certain offences.

“Where the board of directors or officers of the multi-State co-operative society receive any unlawful gains while transacting matters related to such society or utilise any assets of the society for personal unlawful gains, such directors or officers concerned shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to one year or with fine which shall not be less than five thousand rupees but may extend to one lakh rupees or with both and the proceeds of such unlawful gains shall be recovered from them and deposited in such manner as may be prescribed,” said the proposed sub section (6) of the Section 104 of the principal Act.

Ombudsman to have powers like Civil Court

The government has proposed to insert a new Chapter IXA relating to “redressal of complaints”. Under this new chapter, the government has proposed to appoint one or more “Co-operative Ombudsman” with a territorial jurisdiction for inquiring into the complaints made by the members. For this, a new section 85 will be added to the law.

The complaints can be “made by any member of the multi-state co-operative societies regarding their deposits, equitable benefits of society’s functioning or any other issue affecting the individual rights of the concerned member, in such manner, as may be prescribed,” the proposed section 85 A (1) said.

According to the proposed amendments, the Co-operative Ombudsman shall, on receipt of a complaint, complete the process of inquiry and adjudicate within three months. The Ombudsman may issue necessary directions to the society during the course of inquiry and the society shall be bound to comply with the same within a period of one month.

As per the proposed provisions, a multi-state co-operative society can appeal an Ombudsman decision within one month before the Central Registrar, who shall decide on it within 45 days. The Central Registrar may entertain the appeal after the expiry of a month if he is satisfied that the society was prevented by sufficient cause from preferring the appeal in time.

The Co-operative Ombudsman will have the powers of civil court in summoning and examination.

Fund for the revival of sick co-operative societies

The Bill also seeks to insert a new section 63A in the principal Act, relating to “establishment of the Co-operative Rehabilitation, Reconstruction and Development Fund” for revival of “sick multi-State co-operative societies”. It also proposes to insert a new section 70A relating to “concurrent audit” for multi-state co-operative societies having an annual turnover or deposit of more than the amount as determined by the Central Government.

Cooperative Information Officer

The Centre has also proposed to make provisions for “appointment of a Co-operative Information Officer” to provide information relating to affairs and management of the multi-state co-operative society to the members of such society.

Cooperative societies are state subjects

Some of the Opposition’s objections to the Centre’s Bill were based on the fact that cooperative societies are a state subject.

The subject ‘cooperative societies’ is mentioned in the entry 32 of the State List under the Seventh Schedule of the Constitution. “Incorporation, regulation and winding up of corporations, other than those specified in List I, and universities; unincorporated trading, literary, scientific, religious and other societies and associations; co-operative societies,” reads entry 32 of the State List.

Besides, Entry 43 of the Central List under the Seventh Schedule of the Constitution also makes clear that co-operative societies do not come in the Centre’s domain.

“Incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations, but not including co-operative societies,” states entry 43 of the Central List.