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Multi State Cooperative Societies Act, 2002

March 18th, 2017

Since ‘Cooperative Societies’ is a State Subject (Entry 32 of List II of Seventh Schedule to Constitution, i.e. State List), the cooperative societies formed under State Acts have to restrict their activities to only one State.  This hinders growth of cooperative societies. Hence, Multi State Cooperative Societies Act was passed in 1942. It was later replaced by 1984 Act. This 1984 Act is now being replaced by 2002 Act. The 2002 Act has already been passed but has not yet been made effective. The 2002 Act makes special provision for registration and functions of Federal Cooperative Societies.

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Object of the Act – As per preamble to the Act, the Act is consolidate and amend the law relating to cooperative 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 cooperatives 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 financial autonomy and for matters connected therewith and incidental thereto.

Multi-State Cooperative Society can be formed under Multi State Cooperative Societies Act. Multi-State Cooperative Societies Act, 2002 has received President’s assent. The Act will supersede 1984 Act when brought into force. Under the Act, there will be a Central Registrar overseeing and regulating multi-state cooperative societies. Under the Act, a quasi-judicial authority titled the Cooperative Disputes Settlement Authority will be set up to replace existing system of such settlement by Central Registrar. This is intended to ensure quicker and more judicious settlement of disputes.

The Act applies to all cooperative societies with objects not confined to one State. It includes societies which were incorporated under Cooperative Societies Act 1912 & earlier Muti-Cooperative Societies formed under 1942 or 1984 Act.

Which society can be registered – No multi-state cooperative society can be registered under the Act unless – (a) its main objects are to serve interests of members in more than one State and (b) Its bye-laws provide for social and economic betterment of its members through self-help and mutual aid in accordance with the cooperative principles. [section 5(1)]. The word ‘limited’ or its equivalent in any Indian language shall be affixed to the name of every multi-State cooperative society registered under the Act with limited liability. [section 5(2)].

Cooperative Principles – Cooperatives work on basic concept of ‘mutual assistance’ and ‘one man one vote’. – – The bye-laws of multi-state cooperative society should provide for cooperative principles, as given in  First Schedule to the Act.

Society is a body corporate – Every multi-state cooperative society is a body corporate with name under which it is registered. It will have common seal and perpetual succession. It can acquire and dispose of property (movable as well as immovable), enter into contracts, institute and defend suits by the name it which it is registered. [section 9(1)].

Federal Cooperative – ‘Federal Cooperative’ means a federation of cooperative societies registered under this Act and whose membership is available only to a cooperative society or a multi-state cooperative society. [section 3(k)].

Registration of multi-state cooperative society  – Central Government will appoint a Central Registrar of Cooperative Societies.  He will register the multi-state cooperative society. [section 4(1)]. Some of his powers can be delegated to other officers of Central or State Government, but powers of registration cannot be delegated. Powers in relation to a national cooperative society cannot be delegated to State Government. [section 4(2)].

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Bye-laws of societyEach multi-state cooperative society must have bye-laws for its internal management. The ‘bye-laws’ are comparable to ‘Articles of Association of a company’.

Conversion, amalgamation or division of society The Act makes provisions for conversion, amalgamation etc. in certain cases.

Duties, rights and liabilities of members Cooperative Principle is based on the concept of mutual assistance. Hence, provisions have been made for rights, duties and liabilities of members.

Duty of every member – It is duty of every member of multi-state cooperative society to promote and protect interests and objects of the society. [section 25(5)].

Voting by members – Every member, including member who is employee shall have one vote, irrespective of his shareholding. An employee is not entitled to vote in respect of elections to members of board or amendment to bye-laws. Chairperson will have casting vote in case of equality. If person other than individual are members (e.g. Government, other cooperative society, NCDC etc.) voting power to its nominee will be one vote only. [section 31].

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No voting by proxy – Voting must be done in person. Proxy is not permitted. A multi-state cooperative society or cooperative society which is a member can appoint its representative to vote on its behalf. [section 32].

Management of SocietyManagement of a multi-state cooperative society will be a three tier structure. General body will consist of all members. A smaller body consisting of delegates of members can be formed and some powers can be delegated to the small body. They will elect Board of Directors to exercise overall control over operations. Day to day control will be exercised by ‘Chief Executive’ who will be employee of the multi-state cooperative society.

Chairperson/President of society – A multi-state cooperative society can have Chairperson/President and Vice Chairperson/Vice President. [It appears that his election will be made by Board of Directors]. A person who is Minister in central or State Government cannot be elected  to the post.  – – A person can be elected as Chairperson/President only for two consecutive terms, full or part. However, after a gap of one full term, he can again be elected as Chairperson/President. [section 44]. – – Each full term is of five years.

Office bearer only in two societies – A person can be Chairperson/President or Vice Chairperson/Vice President of at the most two multi-state cooperative societies at a time. [section 46].

Election of directors – Election of directors will be responsibility of existing Board. [section 45(1)]. Only a person who is member of society can contest elections. [section 45(7)]. Elections will be held at the time of general meeting and by secret ballot. Elected members are eligible for re-election, if bye-laws permit. Term of elected members shall be five years at a time. However, the Board will continue till successors are elected or nominated as per provisions of the Act and bye-laws. [section 45(5)]. If Board does not hold elections, same will be held by Central Registrar. [section 45(6)].

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Powers and functions of Board – The Board of Directors may exercise all powers as may be necessary to carry out its functions under the Act. [section 49(1)].

Chief Executive – Each multi-state cooperative society will have Chief Executive (by whatever name called).he will be full time employee. Chief Executive will be appointed by Board. [section 51(1)]. He will be member of Board and of executive committee and other committees of Board. [section 51(2)].  – – If Central/State Government holds 51% or more equity capital of multi-state cooperative society, his salary and service conditions will be as prescribed by rules. [section 51(3)].

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Privileges of multi-state cooperative society  – Certain privileges are granted to multi-state cooperative society so that it can function effectively.

Winding up of society – Winding up can be ordered by Central Registrar after audit, inquiry or inspection, after giving opportunity of hearing to society. [section 86(1)]. Winding up can also be ordered if number of members fall below 50 or where society has ceased to function or has not commenced business within 6 months. [section 86(2)]. Cooperative Bank cannot be wound up without previous sanction of RBI. [section 86(5)]. Cooperative Bank will be wound up if RBI so directs. [section 87].

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