Cooperative Societies in India – UPSC Notes

A cooperative society is a type of business organization that is jointly owned & run by the people working for it. It is a kind of business where members of the organization or the persons belonging to the same class and similar profession work in cooperation. It is formed for the mutual benefit of all the members and aims to provide services to its members. According to the International Labour Organization (ILO), a co-operative is an association/organization of the persons who united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

Types of Co-operative Societies

  • Consumer Cooperative Society: These societies aim to protect the consumer’s interest. Those persons who want to buy the products at reasonable rates most likely joined these consumer cooperative societies. There is no involvement of middlemen, and consumers directly purchase from the producer. The consumers for such cooperative societies buy the goods in bulk to reduce the cost and set up stores for selling them under one roof at affordable prices.
  • Producer Cooperative Society: These societies play an important role in the development of medium and small enterprises. Producer cooperative society aims to protect the interest of the small producers. It helps producers in maintaining their profits and assists them in procuring items. As the produce is pooled together by the cooperatives themselves, there is no involvement of the middlemen. It establishes the direct producers-consumers relationship.
  • Credit Cooperative Society: These societies aim to help people by providing them credit facilities. Credit Cooperative society provides financial services to its members such as short-term loans, deposits, etc. It provides loans at a minimal rate of interest and flexible repayment tenure to its members. All those who deposit in the credit cooperative society are its members. The society raises the finance with deposits and provides financial services to its members. Thus, it protects against the high rate of interest charged by private moneylenders.
  • Housing Cooperative Society: These societies are formed to provide housing facilities to the members of the society. Housing in cities and town is a big issue for many people. In such a situation, these people formed cooperative societies to purchase the land, construct the houses and sell them to the members. Housing cooperative societies are beneficial for lower-income groups and allow their members to avail housing benefits at very reasonable prices.

Constitutional Provisions related to Co-operative societies

The 97th Constitutional Amendment Act of 2011 provides constitutional status and protection to cooperative societies. In this context, three changes made in the Constitution of India, which are as follow:

  • It amends Article 19(1)(c) under Part III of the Constitution by inserting the word “Co-operatives” after the words “Unions” and “Association’. The Right to form cooperative societies is made a fundamental right of citizens under Article 19.
  • It includes Article 43-B under Part IV of the Constitution as a new Directive Principle of State Policy. It deals with the promotion of cooperative societies. It laid out that the State shall endeavor to promote the voluntary formation, democratic control, professional management, and autonomous functioning of cooperative societies.
  • The amendment added Part IX-B in the Indian Constitution with entitle “The Cooperative Societies” ( from Article 243-ZH to 243-ZT).

The Seventh Schedule of the Indian Constitution mentions the “Cooperative Societies” as the State Subject. Part IX-B of the Constitution contains the following provisions regarding the Cooperative Societies:

  • Article 243-ZH under Part IX-B deals with the Definitions of an authorized person, board, cooperative society, multi-state cooperative society, office bearer, Registrar, State Act, and State level cooperative society.
  • Article 243-ZI of the Constitution deals with the Incorporation of Cooperative Societies.
    • The State legislature may make provisions for the incorporation, winding-up, and regulation of cooperative societies on the basis of principles of voluntary formation, member-economic participation, democratic-member control, and autonomous functioning.
  • Article 243-ZJ laid down the Numbers and Terms of Members of the Board and its Office Bearers.
    • The Board of the cooperative society shall have a such number of directors as may be provided by the State legislature. However, the maximum number of directors in a cooperative society shall not exceed twenty-one.
    • The Legislature of State shall further provide the reservation of one seat for the Scheduled Castes or Scheduled Tribes and two seats for the women on the board of every cooperative society, which has members from such a class and category of persons.
    • The State legislature may make the provision for the co-option of persons as Board members who have experience in the finance field, banking, management, and specification in any related field. However, the number of such co-opted members in the Board should not exceed two in addition to twenty-one directors. Further, the co-opted members have no right to vote in any of the elections of cooperative society.
    • The tenure of the elected Board members of the cooperative society and its Office Bearers shall be five years from the election date.
    • The functional directors of the cooperative society shall also be the Board members, and such members of the cooperative society shall exclude from the count of the total number of directors, that is, twenty-one.
  • Article 243-ZK of the Constitution deals with the Election of Members of the Board.
    • The superintendence, control of the preparation of electoral rolls, and conduct of elections of board members shall vest in such a body or authority, as may be provided by the legislature of the State.
    • The election of a Board shall take place before the expiry of the tenure of the existing board to ensure that the newly elected board members assume office immediately after the expiry of the term of office of outgoing board members.
  • Article 243-ZL laid down the provisions for the Supersession and Suspension of Board and Interim Management.
    • The Board of the cooperative society shall not be superseded or kept under suspension for a period exceeding six months.
    • The board may supersede or suspend in case of its persistent default, negligence in the performance of its duties, committing any act prejudicial to the interest of cooperative society and its members, the election body fails to conduct the election of the board under the provisions of the State Act, and the stalemate in the functions of the board.
    • However, if there is no government shareholding or financial assistance or any guarantee by the government, the board of any such cooperative society shall not be superseded and suspended.
  • Article 243-ZM of the Indian Constitution deals with the Audit of Accounts of cooperative societies.
    • The State legislature may make the provisions of the maintenance and auditing of the accounts of the cooperative societies. The accounts should audit at least once in each financial year. The audit report shall be laid before the State legislature.
  • Article 243-ZN provides for the convening of the General Body Meeting.
    • The annual general body meeting of every cooperative society shall convene within six months, as may provide by the State legislature.
  • Article 243-ZO laid down the Rights of a member to get information.
    • The members of the cooperative societies access the books, information, and accounts of the cooperative society may provide by the State legislature.
  • Article 243-ZP of the Constitution deals with the Returns by cooperative societies.
    • Every Cooperative society shall file returns such as an annual report of its activities, audited statement of accounts to the authority designated by the State legislature within the six months of the close of the financial year.
  • Article 243-ZQ deals with the Offences and Penalties relating to the cooperative society.
    • The provisions for the offences regarding the cooperative societies and penalties for such offences may provide by the State legislature.

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