What is a Cooperative Society? What is the Jurisdiction of a Cooperative Society? What are the Proposed Amendments to Cooperative Societies? What are the Criticisms of the Proposed Bill? Read further to know more.
Cooperatives are member-owned businesses that put the needs and goals of their members first. They are jointly owned and democratically operated by and for their members.
Societies with operations in multiple states are referred to as multi-state cooperatives. These MSCSs are governed by the Central Registrar and registered under the Multi-State Cooperative Societies Act of 2002.
What is a Cooperative Society?
- Cooperatives are grassroots organizations created by individuals to leverage the power of collective bargaining in the marketplace.
- This can refer to a variety of arrangements, such as the use of a shared resource or money, to create a common gain that would otherwise be challenging for a single producer to achieve.
- Cooperative dairies, sugar mills, spinning mills, and other agricultural processing facilities are created when farmers combine their resources. The cooperative society Amul may be the most well-known in India.
Jurisdiction of Cooperative Society
- The Constitution designates cooperatives as state subjects, placing them under the control of the state governments, yet many of these organisations have members and operational areas that are dispersed throughout multiple states.
- For instance, the majority of sugar mills in the areas near the border between Karnataka and Maharashtra get their cane from both states.
- The Multi-State Co-operative Societies Act (MSCS) of 2002 Act requires cooperatives from multiple states to register.
All the states in which they do business are represented on their board of directors.
- The law clearly states that no state government official can have any authority over these societies and that the central registrar has administrative and financial control over them.
What is the Need for Amendment of Cooperative Society?
- In the realm of cooperatives, a lot has changed since 2002. Cooperation was a division of the Ministry of Agriculture at the time. However, the government established a separate Ministry of Cooperation in July 2021.
- By way of the 97th Constitutional Amendment Act of 2011, Section IXB was added to the Constitution.
- It is now necessary to revise the Act in light of the addition of Part IXB.
- The ability to establish cooperative societies is a part of the right to freedom under the 97th Amendment (Article 19(1)).
- As one of the DPSPs, the promotion of cooperative societies was added (Article 43-B).
- Moreover, modifications to the Act were required as a result of developments throughout time to enhance the cooperative movement in multi-State cooperative organizations.
What are the Proposed Amendments to Cooperative Society?
Only multi-state cooperative societies are permitted to merge and create new multi-state cooperative societies, according to a law that was passed 20 years ago.
The merger of Cooperatives:
- A resolution adopted by a majority (at least 2/3rds) of the members present and voting at a general meeting of such society is required by the Bill for “any cooperative society” to merge into an existing MSCS.
- Currently, only an existing MSCS can merge to create a new MSCS.
Co-operative Election Authority:
- The bill aims to create a “Co-operative Election Authority” to implement “electoral reforms” in the cooperative industry.
- The Authority will have a Chairperson, a Vice-Chairperson, and up to three other members who will be chosen by the Center.
- All of the members will be available for reappointment after serving for three years or until they turn 65, whichever comes first.
- The Bill aims to raise the fines associated with specific offenses.
- If the board of directors or officials receive any illegal gains while conducting business on behalf of this society, they will be punished with either a fine or imprisonment for a time that must be at least one month long but may go up to one year.
- The government has suggested appointing one or more “Co-operative Ombudsman” positions with geographical jurisdiction to look into member complaints.
- The Co-operative Ombudsman will have civil court-like authority over summoning and interrogation.
Rehabilitation and Development Fund:
- The Bill also seeks the “establishment of the Co-operative Rehabilitation, Reconstruction and Development Fund” for the revival of “sick MSCS”.
- It also proposes to insert a new section 70A relating to “concurrent audit” for MSCSs having an annual turnover or deposit of more than the amount as determined by the Central Government.
- The bill proposes to insert a new Section 70A relating to concurrent audits for such multi-state societies with an annual turnover or deposit of more than the amount as determined by the Centre.
Fund for sick cooperative societies:
- The Bill has a provision to establish the Co-operative Rehabilitation, Reconstruction and Development Fund for the revival of sick multi-state co-operative societies. A sick multi-state co-operative society has accumulated losses equal to or exceeding the total of its paid-up capital, free reserves, and surpluses, and has suffered cash losses in the past two years.
- The Fund will be financed by multi-state co-operative societies that are in profit for the last 3 financial years. They will deposit either one crore rupees or 1% of the net profit into the Fund, whichever is less.
Specified cooperative societies:
- According to the original Act, the Union government may give directions and supersede the boards of specified multi-state co-operative societies where the Union government has a shareholding of at least 51%.
- The new Bill amends this provision and added that the Union government may give directions and supersede the boards of any multi-state co-operative society where the government has any shareholding or has extended any loan, financial assistance, or guarantee.
Composition of the board of directors:
- Under the original Act, the board of a multi-state co-operative society has a maximum of 21 directors. The board may co-opt two additional directors.
- The Bill amends the composition of the board of directors to mandate the inclusion of; one Scheduled Caste or Scheduled Tribe member, and 2 women members.
- The co-opted members must have experience in the field of banking, financing, co-operative management, or specialization fields related to the functioning of the multi-state co-operative society.
What are the Criticisms of the Proposed Bill?
The new fund will put an additional burden on MSCSs and affect their autonomy.
Against the federal structure:
- The bill seeks to take away state governments’ rights and is against the country’s federal structure.
- The Bill seeks to amend Section 17 of the principal act to allow the merger of any State cooperative society with an existing MSCS.
- Opposition members argued that this was beyond the Centre’s legislative competency as State cooperatives are not its domain.
Mismanagement and corruption:
- Government and legislative control of cooperatives increased over the years, there were increasing reports of mismanagement and corruption.
More than 1500 multi-State cooperative organizations exist in India, and they are a significant resource for advancing the economic and social well-being of their members.
The amendment includes provisions for the establishment of the Cooperative Election Authority, Cooperative Information Officer, and Cooperative Ombudsman to make the governance of these multi-State Cooperative societies more democratic, open, and responsible.
Changes to the current Act were required as a result of developments throughout time to boost the cooperative movement in multi-state cooperative societies. As a result, the administration suggested changing the Act.
The constitutional domain of States in regulating cooperative societies was upheld by the Supreme Court last year when it struck down a part of the 97th Constitution Amendment.
The court held that the Centre required the ratification of the Amendment by 50% of the state legislatures as it sought to give a framework for State legislation on cooperative societies.
SC upheld only the part of the amendment that related to MSCSs, for which Parliament was competent to enact laws.
Article written by: Aseem Muhammed