A co-operative society is a voluntary association of
individuals having common needs who join hands for the achievement of common
economic interest. Its aim is to serve the interest of the poorer sections of
society through the principle of self-help and mutual help.
The main objective
is to provide support to the members. Nobody joins a cooperative society to
earn profit. People come forward as a group, pool their individual resources,
utilise them in the best possible manner, and derive some common benefit out of
it.
A Co-operative Society can be formed as per the
provisions of the Co-operative Societies Act, 1912. At least ten persons above
of 18 years, having the capacity to enter into a contract with common economic
objectives, like farming, weaving, consuming, etc. can form a Co-operative
Society. Cooperative Societies Act is a Central Act. However, ‘Cooperative
Societies’ is a State Subject (Entry 32 of List II of Seventh Schedule to
Constitution, i.e. State List). Though the Act is still in force, it has been
specifically repealed in almost all the States and those States have their own
Cooperative Societies Act. Thus, practically, the Central Act is mainly of
academic interest and as per preamble to the Act, the Act is to facilitate
formation of cooperative societies for the promotion of thrift and self-help
among agriculturists, artisans and persons of limited means.
If object of the society is creation of funds to be
lent to its members, all the members must be residing in the same town, village
or group of villages or all members should be of same tribe, class, caste or
occupation, unless Registrar otherwise directs. The provision of minimum 10
members or residing in same town/village etc. is not applicable if a registered
society is member of another society. The Statement of Objects and reasons
states as follows:
(a) Cooperative Society can
be established for purpose of credit, production or distribution.
(b) Agricultural credit
societies must be with unlimited liability.
(c) Unlimited society is not
best form of cooperation for agricultural commodities.
(d) Unlimited society can
distribute profits with permission of State Government.
A society which has as its object the promotion of
economic interests of its members in accordance with cooperative principles can
be registered as a Society. Similarly, a society established with the object of
facilitating operation of such a society can also be registered under the Act.
The society can be registered with limited or unlimited liability. However,
unless State Government otherwise directs, (1) Liability of a society of which
a member is a registered society shall be limited. (2) Liability of a society
of which object is to creation of funds to be lent to members, and of which
majority of members are agriculturists and of which no member is a registered
society shall be unlimited. Thus, a registered society can be member of another
society, but liability of such other society must be limited, unless State
Government otherwise directs.
The last word in name of society should be
‘Limited’, if the Society is registered with limited liability. If a society
has limited liability, any individual member of such society cannot have share
capital more than one-fifth of total capital. An individual member cannot have
interest in shares exceeding Rs 1,000. This restriction of 20% shares or Rs
1,000 shares value is not applicable to a registered society which is member of
another society. Thus, if a registered society is member of another society, it
can hold shares exceeding 20% or exceeding Rs 1,000 in value.
A registered cooperative society can hold property,
enter into contracts, institute and defend suit and other legal proceedings and
to do all things necessary for the purposes of its constitution. A registered
society can give loans only to its members. However, it can give loan to
another registered society with permission of Registrar. A society with
unlimited liability cannot lend money on security of movable property without
sanction of registrar. State Government, by issuing a general or special order,
can prohibit or restrict lending of money on mortgage of immovable property by
any registered society or class of registered society.
Registrar, after inspection or inquiry, or on
application received from 75% of members of society, may cancel the
registration of society, if in his opinion, the Society should be dissolved.
Any member can appeal against the order of Registrar within two months to State
Government or other Revenue Authority authorised by State Government. If no
appeal is filed within two months, the order of dissolution shall become
effective. If appeal is filed, the order will become effective only after it is
confirmed by appellate authority. Although all types of cooperative societies work
on the same principle, they differ with regard to the nature of activities they
perform. Followings are different types of co-operative societies that exist in
our country:
Consumers’ Co-operative Society: These societies are formed
to protect the interest of general consumers by making consumer goods available
at a reasonable price. They buy goods directly from the producers or
manufacturers and thereby eliminate the middlemen in the process of
distribution. Kendriya Bhandar, Apna Bazar and Sahkari Bhandar are examples of
consumers’ co-operative society.
Producers’ Co-operative Society: These societies are formed
to protect the interest of small producers by making available items of their
need for production like raw materials, tools and equipments, machinery, etc.
Handloom societies like APPCO, Bayanika, Haryana Handloom, etc., are examples
of producers’ co-operative society.
Co-operative Marketing Society: These societies are formed
by small producers and manufacturers who find it difficult to sell their
products individually. The society collects the products from the individual
members and takes the responsibility of selling those products in the market.
Gujarat Co-operative Milk Marketing Federation that sells AMUL milk products is
an example of marketing co-operative society.
Co-operative Credit Society: These societies are formed
to provide financial support to the members. The society accepts deposits from
members and grants them loans at reasonable rates of interest in times of need.
Village Service Co-operative Society and Urban Cooperative Banks are examples
of co-operative credit society.
Co-operative Farming Society: These societies are formed
by small farmers to work jointly and thereby enjoy the benefits of large-scale
farming. Lift-irrigation cooperative societies and pani-panchayats are some of
the examples of co-operative farming society.
Housing Co-operative Society: These societies are formed
to provide residential houses to members. They purchase land, develop it and
construct houses or flats and allot the same to members. Some societies also
provide loans at low rate of interest to members to construct their own houses.
The Employees’ Housing Societies and Metropolitan Housing Co-operative Society
are examples of housing co-operative society.
A co-operative society is a special type of business
organisation, its characteristics are as under:
Open membership: The membership of a Co-operative Society is
open to all those who have a common interest. A minimum of ten members are required
to form a cooperative society. The Co operative societies Act do not specify
the maximum number of members for any co-operative society. However, after the
formation of the society, the member may specify the maximum number of members.
Voluntary Association: Members join the
co-operative society voluntarily, that is, by choice. A member can join the
society as and when he likes, continue for as long as he likes, and leave the
society at will.
State control: To protect the interest of members, co-operative
societies are placed under state control through registration. While getting
registered, a society has to submit details about the members and the business
it is to undertake. It has to maintain books of accounts, which are to be
audited by government auditors.
Sources of Finance: In a co-operative society
capital is contributed by all the members. However, it can easily raise loans
and secure grants from government after its registration.
Democratic Management: Co-operative societies are
managed on democratic lines. The society is managed by a group known as “Board
of Directors”. The members of the board of directors are the elected
representatives of the society. Each member has a single vote, irrespective of
the number of shares held. For example, in a village credit society the small
farmer having one share has equal voting right as that of a landlord having 20
shares.
Service motive: Co-operatives are not formed to maximise
profit like other forms of business organisation. The main purpose of a
Co-operative Society is to provide service to its members. For example, in a
Consumer Co-operative Store, goods are sold to its members at a reasonable
price by retaining a small margin of profit. It also provides better quality
goods to its members and the general public.
Separate Legal Entity: A Co-operative Society is
registered under the Co-operative Societies Act. After registration a society
becomes a separate legal entity, with limited liability of its members. Death,
insolvency or lunacy of a member does not affect the existence of a society. It
can enter into agreements with others and can purchase or sell properties in
its own name.
Distribution of Surplus: Every co-operative society
in addition to providing services to its members also generates some profit
while conducting business. Profits are not earned at the cost of its members.
Profit generated is distributed to its members not on the basis of the shares
held by the members (like the company form of business), but on the basis of
members’ participation in the business of the society. For example, in a
consumer co-operative store only a small part of the profit is distributed to
members as dividend on their shares; a major part of the profit is paid as
purchase bonus to members on the basis of goods purchased by each member from
the society.
Self-help through mutual cooperation: Co-operative Societies
thrive on the principle of mutual help. They are the organisations of
financially weaker sections of society. Co-operative Societies convert the
weakness of members into strength by adopting the principle of self-help
through mutual co-operation. It is only by working jointly on the principle of
“Each for all and all for each”, the members can fight exploitation and secure
a place in society.
A joint application along with the bye-laws of the
society containing the details about the society and its members has to be
submitted to the Registrar of Co-operative Societies of the concerned state.
After scrutiny of the application and the bye–laws, the registrar issues a
Certificate of Registration. Requirements for Registration are
(1) application with the
signature of all members and
(2) Bye-laws of the society containing the
information on
(a) Name, address and aims and objectives of the
society;
(b) Names, addresses and occupations of members;
(c) Mode of admitting new members;
(d) Share capital and its division.
A Co-operative form of business organisation has the
following advantages:
Easy Formation: Formation of a co-operative society is very
easy compared to a joint stock company. Any ten adults can voluntarily form an
association and get it registered with the Registrar of Co-operative Societies.
Open Membership: Persons having common interest can form a
co-operative society. Any competent person can become a member at any time
he/she likes and can leave the society at will.
Democratic Control: A co-operative society is
controlled in a democratic manner. The members cast their vote to elect their
representatives to form a committee that looks after the day-to-day
administration. This committee is accountable to all the members of the
society.
Limited Liability: The liability of members of
a co-operative society is limited to the extent of capital contributed by them.
Unlike sole proprietors and partners the personal properties of members of the
co-operative societies are free from any kind of risk because of business
liabilities.
Elimination of Middlemen’s Profit: Through co-operatives the
members or consumers control their own supplies and thus, middlemen’s profit is
eliminated.
State Assistance: Both Central and State governments provide
all kinds of help to the societies. Such help may be provided in the form of
capital contribution, loans at low rates of interest, exemption in tax,
subsidies in repayment of loans, etc.
Stable Life: A co-operative society has a fairly
stable life and it continues to exist for a long period of time. Its existence
is not affected by the death, insolvency, lunacy or resignation of any of its
members.
