This article is written by Ishita Manot pursuing Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting from Lawsikho.
Co-operative Societies can be defined as 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. India is an agricultural country that has built the groundwork for the world’s largest co-operative movement. The requirement for profitability is balanced by the requirements of the members and the community’s broad interest.
Co-operatives in our nation will not only remain but will also develop in the future. Despite the difficulties encountered in the operation and administration of co-operative societies, they have favourably contributed to the national economy’s growth and development. The essential ideas of co-operatives are the promotion of thrift, self-help, and mutual aid. In addition to the three elements of co-operatives listed above, the primary goals are to make goods and services available to its members in sufficient quantities, of higher quality, and at a fair price.
The Maharashtra Co-operative Societies Act of 1960 establishes the framework and rules for the development of co-operative societies in the state of Maharashtra. This Act was enacted by the Maharashtra legislative on 26th January 1962. It applies to the entire state of Maharashtra, providing comprehensive laws for registration, membership, and liability of members, as well as the incorporation of duties and privileges of co-operative societies throughout the state.
History of Co-operative Societies in Maharashtra
The co-operative movement in India began in 1904 with the passage of the first co-operative law in India due to the exploitation of money lenders. The Maharashtra anti-capitalist movement was founded by disgruntled farmers. This movement began in 1875, and the principal hotspots of disturbance were in South India, Pune and Ahmednagar. Maharashtra has played a significant role in fostering India’s co-operative movement.
The Maharashtra State Co-operative Bank founded as The Bombay Central Co-operative Bank Limited in 1911, is the best example of the origin of co-operative movement in Maharashtra. Previously, the principal promoter and promoting members of India’s first rural co-operative credit company, formed in1889, were from Maharashtra.
According to the Maclagan Committee’s report from 1915, citizens were encouraged to create co-operative credit societies or banks in the non-agricultural sector in addition to the agricultural sector.
Following the formation of the Maharashtra State in 1960, the Maharashtra Co-operative Act was approved and implemented.
Few modifications were made in the co-operative legislation as a result of the provisions in the constitution and the policy of plan development, which has provided a specific growth-oriented direction to the co-operative sector of various states. Maharashtra has taken the lead in the formation of co-operative societies in the state’s rural districts.
Karmavir Bhausaheb Hiray, Dr Dhananjayrao Gadgil, Padmashree Vikhe Patil, Shri. Vaikunthlal Mehta, Yashwantrao Chavan, Balasaheb Vikhe Patil, Sahakarmaharshi Bhausaheb Thorat, and many others were instrumental in establishing the co-operative movement in Maharashtra’s rural and urban districts.
More than 1481 rural co-operative societies were founded as a result of their impacts up to the end of June 1961, demonstrating the quick expansion of the co-operative movement in Maharashtra, which culminated in the formation of co-operative banks under the control of the Reserve Bank of India. Co-operative banks arose from co-operative societies, and the qualitative and quantitative expansion of these urban banks has been boosted by the Reserve Bank of India’s regulation since 1966.
Growth of Co-operative Movement in Maharashtra
The development of the co-operative movement in Maharashtra, as well as the supportive measures that have been put in place to encourage and govern it from time to time, has been distinguished by certain well-defined stages of evolution. These stages may be classified into six stages, as follows:
Pre – co-operative State (1870-1903):
This is marked with the Deccan Agriculturists’ Relief Act 1879, the Land Improvement Loan Act 1883 and the Nicholson Report (1895).
The Initial Stage (1904-1911):
From the Co-operative Act 1904 until the establishment of the Bombay Central Co-operative Bank.
The Evolution Stage (1912-1924):
Following the Co-operative Act of 1912, the movement went through a period of reform. Co-operative finance agencies, co-operative educational programmes, and non-credit societies were also being formed.
The Stagnation Stage (1925-1947):
The Bombay Co-operative Societies Act, passed in 1925, broadened the reach of the movement in the Bombay Province, both vertically and horizontally. The Bombay Co-operative Insurance Society was founded in 1930, as was the Co-operative Land Mortgage Bank, which provided long-term finance for debt payment, property development, and land purchase.
By 1945-46, the proportion of non-agricultural credit societies to the overall number of non-agricultural societies had risen from 27 per cent to 49 per cent. The consumer co-operative also made significant strides. The number of consumer societies increased from 25 in 1938-39 to 465 in 1945-46. There was also significant success in marketing and industrial co-operatives.
The Growth Stage (1948-1961):
During the two decades after India’s independence from British rule, there was overall development. The movement expanded, particularly in rural areas where sugarcane was cultivated. The agriculturists adopted the principle of self-help and made the most use of the financial facilities made available to them in order to increase productivity.
Examples such as the Pravaranagar Sugar Co-operative prompted many to form sugar co-operatives with long-term aims in mind. Significant behavioural shifts had happened at the grassroots level. This was also the time when rural leadership emerged through the co-operative movement. In addition, the Apex Bank began to enhance its organisation and the operations of secondary level central funding agencies. This was also the period when the institutional foundation was solidified.
The Diversification Stage (1962 onwards):
The expansion was followed by substantial vertical and horizontal heterogeneity, including all spheres of socioeconomic activity, with profits ranging from 2 to 6 times. The state government developed rules and initiatives to bolster the collaborative effort.
Among the notable elements of this period was the enhanced mobilisation of resources, the strengthening of co-operative efforts in agricultural output, and the development of rural leadership. The State Co-operative Bank also grew in size to assist the government’s initiatives of intense production and acquisition of food grains, as well as the financing of sugar plants and other new co-operative sectors.
Co-operatives have greatly aided Maharashtra’s rural economy. It has been successful in developing grassroots leadership, bringing about stable socioeconomic improvements, and helping to institutionalize the rural economy to a significant extent.
Types of co-operative societies in Maharashtra
The objects of a society are used to classify it. The Act under which it is registered allows for the formation of numerous sorts of societies. The following types of Societies can be registered under the Maharashtra Co-operative Societies Act, 1960:
Primary Agricultural Credit Societies (PACS)
At the grassroots level, Primary Agricultural Co-operative Credit Societies are striving to help the rural poor. PACS are important in the distribution of short-term agricultural loans, primarily for seasonal agricultural businesses. These institutions support diverse agricultural activities by providing required input tools such as credit for seeds, herbicides, fertilisers, and so on. Co-operative institutions are the backbone of rural Indian society.
There are a number of urban co-op credit organisations that provide credit to its members. These societies are grassroots in nature. There are Urban Co-operative Banks that conduct normal banking operations. These banks and credit unions are affiliated with the District Central Co-operative Banks. There are other co-operatives that are part of the co-operative credit system, such as the Salary Earners Co-op Societies.
Industrial societies are formed by craftsmen and employees in order to get employment and to provide suitable facilities for their profession. The government provides assistance to such organisations through a variety of programmes. In the state, around 310 societies have been formed as block Level Village Artisans Multipurpose Co-operative Societies. The government provides a contribution to share capital, financial help for tool and equipment ents, loans and subsidies for the development of godowns, workshops, and so on. This category includes power loom and handloom co-operative societies.
Housing societies are primarily an urban phenomenon and can be classified into four types:
In the instance when the Society owns the land and the members own the structure on the plot. The co-operative assigns plots to individual members for the construction of their homes. The society builds infrastructure and may also provide financial assistance to its members.
The society owns the land and the erected structure, and members who have been assigned flats have easement rights.
Where the builder floats a housing scheme and sells the flats. The purchasers of the units then form a housing society. Such groups are just service or maintenance societies.
House Mortgage Society:
The House Mortgage Society provides loans to persons who own land anywhere in its region of operation for the construction of residences. For this reason, the House Mortgage Society borrows money from a variety of sources.
Labour Contract Societies
Labour contract societies are formed mostly by labourers whose primary source of income is manual labour, as well as small farmers, to provide gainful employment and an equitable sharing of profits among themselves.
The government has also encouraged the formation of particular interest-group co-operatives, such as women’s co-operatives, in order to support women’s economic progress. The government provides up to a hundred thousand rupees as share capital, operating capital, and subsidies to newly founded women’s co-operatives under the financial support initiative.
The framework of the Act
Co-operatives in Maharashtra are controlled by the Maharashtra Co-operative Societies Act 1960, which is supplemented by the Maharashtra Co-operative Societies Rules, 1961. The legal structure of Maharashtra’s registered co-operatives is intricate. Furthermore, each co-operative should have its own bylaws, which serve as the guiding principles of the co-operative. These bylaws must be adopted by the Society by a resolution.
These bylaws can be revised at the General Body Meeting of the co-operative. The sole condition of the bylaws is that they do not violate the Maharashtra Co-operative Societies Act and are authorised by the Registrar. The legal framework of the Act essentially covers the following aspects:
Registration of co-operative society
- A co-operative society can be registered with the Registrar of Co-operative Societies in Maharashtra State.
- Anyone who is qualified to contract under the Indian Contract Act of 1872 may participate in the creation of a co-operative.
- A group of 10 people who live in the proposed organization’s operating region and come from different families can apply for the registration of a society.
- A society can be registered with the sole purpose of advancing the economic interests or general welfare of its members.
- No society that violates the State’s policy guidelines may be registered.
- Registration can be received from the registrar after completing the application form and paying the required costs, as well as signing the bylaws.
- Division/Amalgamation, transfer and conversion of a co-operative is allowed.
- A Co-operative Society may enter into commercial cooperation with any Government Enterprise or any other undertaking with the previous approval of the State Government.
- A Co-operative Society can also enter into a partnership with other co-operatives.
Rights of members
- The legislation provides for open membership.
- If the society rejects an eligible person’s membership application, he or she may file an appeal with the Registrar.
- A member has voting privileges in the election of the Managing Committee and the members’ general meeting. Every member has one vote, regardless of the number of shares he owns. Proxy voting is not permitted.
- A member may inspect and request copies of the society’s books of account.
- Society has three sorts of members: Nominal, Associate, and Sympathiser. A Nominal or Sympathiser member cannot own shares in the society and so lacks the rights of an associated member.
Privileges & duties of societies
- A Society is a Body Corporate by the name with perpetual succession and a Common Seal.
- It has the authority to purchase, retain, and dispose of the property in its name.
- It can enter into a contract.
- Bring and defend lawsuits and other legal proceedings.
- Under the Indian Registration Act of 1908, it is free from obligatory registration of instruments related to shares and debentures of the Society.
- Only the property and interests of the borrowing members are subject to the society’s claim next to the government.
- The society has a claim on the sale price of the borrowing member’s agricultural output.
- It is required for the employer to collect from the employee’s salary the dues of the Society if decided upon by the member.
- The Society may accept deposits and loans from members and other individuals within the range of the Society’s operations and subject to the Registrar’s approval.
- Loans can only be advanced to members. Loans can be advanced to other Societies with the Registrar’s prior approval.
- The Society is required to keep and maintain accurate records in the appropriate format.
- Transactions with non-members are subject to limitations.
Management of societies
- The General Body of the Society, comprised of all members, has final authority over the Society.
- Every Society shall hold an Annual General Meeting within three months after the date set for completing or drawing up its annual accounts.
- The Managing Committee should present before the Annual General Meeting a report of loans made to members of the Managing Committee and their family members, an Income and Expenditure Account, a Balance Sheet, and a Report by the Managing Committee on the Society’s business. Failure to do so may result in the disqualification of Managing Committee members as well as additional consequences.
- The Chairman of the Co-operative or a majority of the members of the Managing Committee can summon a Special General Meeting. Members may also request such a gathering if one-fifth of the Society’s total membership supports the request. The Registrar has the authority to summon a Special General Meeting.
- Every Managing Committee shall plan to organise elections for its members before the end of its tenure.
- Election to a Specified Society shall be overseen by the Collector, and election to a Notified Society shall be conducted by the Registrar.
- The Society’s management is delegated to a fully formed Managing Committee.
- The Managing Committee has granted reservation for the weaker section, women, and scheduled castes/tribes.
- No committee is duly constituted until the Registrar publishes the names and addresses of the members of the Managing Committee.
- If a Society’s Managing Committee is not duly established, the Registrar may appoint an Administrator.
- If the Managing Committee is dismissed for negligent performance under Co-operative Law, the Registrar may appoint an Administrator (for a period of six months). The Registrar may also dismiss a member of the Managing Committee for poor performance.
- The Managing Committee has the right to file an appeal against its removal/dismissal.
- A No-confidence motion can be used to dismiss a Society’s office-bearers. A no-confidence resolution must be backed by at least one-third of the Managing Committee members. Only after a simple majority vote in the Managing Committee can a resolution to remove someone from office become effective.
Property & funds of the co-operative society
- Except for the net profits produced by the Society, no funds shall be distributed to its members.
- The finances of the society may not be used to defend any action brought by or against any office-bearer of the Society in his capacity under sections 78, 96, or 144-T of the Maharashtra Co-operative Societies Act, 1960.
- Members of the Managing Committee may be compensated for services rendered to the Society.
- The Society’s net profit may be appropriated by the members with the consent of the Annual General Meeting.
- The Society shall maintain a reserve fund.
- Investments of Funds should be done in accordance with the rules outlined in the Maharashtra Co-operative Societies Act, 1960.
Audit, inquiry inspection and supervision of societies
- The Registrar of Co-operative Societies requires every Government-aided Co-operative Society to audit its finances at least once a year (i.e., April – March).
- All Societies are also required to have their accounts audited by a Certified Auditor once a year.
- On an application by society or otherwise, if the Registrar determines that it is necessary or desirable to re-audit any of the society’s accounts, the Registrar may, by order, arrange for such re-audit.
- The Registrar has the authority to inspect the operation of the Society on his own or at the request of a creditor of the Society.
- Based on the audit or inspection report, the Registrar may commission an investigation into the Society’s affairs. He has the authority to appoint an Inquiry Officer and conduct an investigation via him. Similarly, he can audit a Society just to ensure that all Books of Accounts are correctly maintained and that the Managing Committee is conducting the Society’s activities in a reasonable manner.
- If it is discovered that any individual has misapplied or kept any property or money of the Society, or has created a breach of trust, the Registrar may issue an order for compensation.
Dispute settlement & grievance redressal
- Disputes about the election of a Managing Committee or the Officers may be made by any member. Disputes might also be brought over the General Meeting’s behaviour and the Society’s administration or operations. Such disagreements can be resolved in special courts that solely deal with co-operative issues. These are known as Co-operative Courts.
- In the event of a dispute arising from the recovery of sums spent by the co-operative society. If a member’s property is about to be disposed of, the Co-operative Court can seize it. A certificate issued by the official assignee, an authorised person, or the Co-operative Court itself shall thereafter be executed as a Civil Court decision and also executed as land revenue arrears. Any subsequent private transfer of the property shall be null and invalid against the claim Society.
Liquidation of societies
- A Society can be wound up following an investigation and audit, or on an application or by the Registrar on his own, if it is discovered that the Society did not begin and/or has ceased to function.
- Members may file an appeal against the decree of liquidation.
- The Society registration can be cancelled on receipt of the final report from the liquidator.
- The Society can also be cancelled if its affairs are wound up, or if it is de-registered, or its assets and liabilities are transferred.
Offences & penalties
Following are the offences, which are punishable under the Maharashtra co-operative
- Transfer of property subject to a charge by the Society;
- Failure to take Society dues from an employee’s salary
- Failure to invest Society funds
- Failure to deposit the Society’s share money with the bank.
- Carry out personal business in the name of the Society
- Collecting share money through deception
- Knowingly issuing fraudulent share certificates
- Failure to convene a General Body Meeting
- Failure to provide required assistance to authorised people in accordance with the Co-operative Law
- Failure to turn over records and property to the administrator or liquidator
- Failure to follow the Registrar’s instructions
- Wilful failure to provide any information requested by the Registrar or the Auditor
- Failure to abide by any decision, award, or order
- Fraudulent disposition of any property over which society has a previous claim
- Destroying, mutilating, interfering with, modifying, or forging the Society’s documents.
Penalties of up to Rs.5000/- and/or imprisonment for up to three years may be imposed.
Appeal, review & revision
- An appeals procedure is provided for refusal of registration or amendment of bylaws, division, amalgamation, conversion, cancellation, de-registration, transfer of shares, refusal and expulsion of membership, removal of the managing committee, directives to Society, cost of inquiry and inspection ordered by the Registrar, imposing liability on delinquent promoters, winding up or rejection of nomination in election of the committee.
- The Registrar’s orders can be reviewed and revised against any other order by higher authority.
- The Maharashtra State Co-operative Appellate Court was established to hear appeals against or seek revision/review of Co-operative Court rulings.
- An appeal against the order of Assistant Registrar/ Deputy Registrar lies with the Joint Registrar (Appeals). If an order is issued by the Joint Registrar/Additional Registrar or the Registrar, the aggrieved party may file an appeal with the State government.
Problems of Co-operatives in Maharashtra And Their Remedial Measures
Poor performance and loss of financial feasibility
REMEDY: Co-operatives will need to look into non-traditional routes for generating the funds needed to modernise their operations and satisfy their working capital needs. Two such options are the issuance of non-voting shares and borrowing from financial institutions and the general public. There is also a need for revisions in co-operative law to address the inherent vulnerability of co-operative financial structures. Co-operatives’ organisational structures, bylaws, rules, regulations, operational processes, and practises will all need to be reformed and reengineered.
Lack of professionalism in management
REMEDY: Reorienting and equipping existing co-operative management institutes and junior level training centres to teach barefoot managers. Management institutes can assist in the development of acceptable curriculum for the purpose of training teachers/trainers, as well as the provision of acceptable teaching and training materials.
Excessive government control and political interference
REMEDY: Co-operatives must be given a fair playing field in order to compete in the new era. Dr. Verghese Kurien, L.C.Jain, and Mohan Dharia, among India’s leading co-operators, argue that only private companies are reaping the benefits of liberalisation, thanks to a corporate-friendly government that has modified existing legislation, administrative and financial rules and procedures at an unprecedented rate in India’s recent history to remove various controls on the corporate sector.
Poor board management relations
REMEDY: The most important task of the board of directors of a co-operative is the recruitment, guidance, and surveillance of its management, as well as their removal and replacement if required. If the board is unwilling or unable to perform this function, the co-operative is destined to collapse or, at best, becomes manager-controlled and hence susceptible to personal interests.
Lack of performance-based reward systems and poor work environment
REMEDY: Co-operatives must begin to recognise the worth of their human resources. It must recognise the significance of its members and management. To acquire better results from individuals, there is a critical requirement for strong human resource (HR) procedures and a good work environment. Higher office facilities, as well as an open and free atmosphere, can assist offering better results.
Amendment of Maharashtra Co-operative Societies Act, 1960
Following the 97th Amendment to the Indian Constitution, states were mandated to revise their respective co-operative legislation within one year of the amendment to the constitution. On February 13, 2013, the Maharashtra government enacted an Ordinance amending the Maharashtra Co-operative Societies Act, 1960.
The modifications went into effect from February 14th, 2013. Later, an amendment act to amend the Maharashtra Co-operative Societies Act, 1960, was presented and approved in the Maharashtra assembly. The Maharashtra Co-operative Societies Act, 1960, was amended as follows:
- Each member of a co-operative housing society must attend at least one General Body Meeting every five years and use the services specified in the society’s By-laws. Failure to do so will mark the member as inactive, and he or she will be unable to vote. However, if the non-active member meets the qualifying conditions, they might be reclassified as an active member. This will empower the co-operative societies to discharge a latent member.
- The elected members of the Management Committee and its Office Bearers will serve for a period of five years.
- The Management Committee shall not have more than 21 members, with two seats designated for women, one for tribes and Vimukta Jati, one for SC, and one for other backward classes.
- The State Government should establish the State Co-operative Election Authority as the authority in charge of supervising, electing, and controlling the preparation of electoral rolls for all societal elections.
- The General Body Meeting must be convened within six months after the conclusion of the fiscal year.
The amendments to the Act were primarily intended to combat increasing corruption, governmental involvement, and politics in Co-operative societies.
Impact of the Act
The co-operative movement in our nation will not only survive but will also thrive in the future. These societies have favourably contributed to the country’s economic development and prosperity. Co-operatives provide over 60% of Maharashtra’s GDP. Depending on the items with which they are created, there are almost 54 different sorts of co-operatives. According to rough estimates, Maharashtra has 1.80 lakh societies. Following the 97th amendment, which included the freedom to form co-operative societies in Article 19 of the Constitution, establishing co-operative societies became a fundamental right of an Indian citizen. Thus, societies have been granted the status of local self-government and, as a result, fall under the purview of the RTI Act.
A co-operative is a system of thought, emotions, and action shared by a group of people in comparable situations that are founded on mutuality and provide all of its members with an aim and a code of conduct. The movement has played an important role in the state’s social and economic growth, particularly in rural regions. The co-operative movement in Maharashtra has played an important role in the state’s social and economic development, particularly in rural regions. Although at first this movement was focused on agricultural credit, it moved fast to other domains like agro-processing, agro-marketing, rural industries, consumer shops, social services and so on. Over the previous four decades, the co-operative movement has grown more than fourfold. It is Maharashtra’s most significant contribution to the country.
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