The Co-operative Societies 

Panchayats and municipalities are government organisations that are established by the State governments, and which manage all the affairs of the area in which they are located. However, sometimes, a group of people with certain shared characteristics (for eg. the same occupation) may come together to manage the affairs of their community. This is called a co-operative society, and it is the third type of organisation we shall be discussing.

A co-operative society refers to an organisation of like-minded people who voluntarily come together to promote their economic, social or cultural interests. They invest their time, efforts and personal resources for this purpose.

Co-operatives may be of different types, like a co-operative housing society, a co-operative business society (which sells goods produced by its members), etc. One of the best examples of a co-operative society in India is Amul, which started as a small society of few dairy farmers in Gujarat and today runs as one of the main suppliers of dairy products in the country.

The Constitution (Ninety-Seventh Amendment) Act was passed in 2011 to make states facilitate the creation and working of co-operative societies in their territory. Let’s examine the provisions regarding co-operative societies, given in Article 243ZH to Article 243ZT under Part IX-B.

Definitions 

Article 243ZH defines a co-operative society as a society registered or deemed to be registered under any law relating to co-operative societies.

It also defines certain terms related to co-operative societies. The Board refers to the Board of Directors who govern, direct and control the management of the society. The members elected by this board as the President, Chairman, Treasurer, etc. are called the office bearers.

Further, a multi-state co-operative society has been defined as one which works not in one single state, but multiple states.

Incorporation of co-operative societies

Just like any other institution or organisation, co-operative societies to need a prescribed procedure for their incorporation. If we want to create a co-operative society today, what are the rules we must follow?

Well, these rules vary from state-to-state. Article 243ZI mentions that a State Legislature can decide the process of incorporation, regulation and winding up of co-operative societies in its territory, keeping in mind the major co-operative principles – democratic set-up, member participation, and autonomy.

Number and term of members of the board and its office bearers

The Constitution, under Article 243ZJ, has given the provisions related to the membership of the co-operative society. They have been briefly described below.

1. It states that the maximum number of directors on the board of a co-operative society can be 21. The exact number within this limit can be decided by the State.

Another thing that it says is that amongst these directors, one seat should be reserved for a person of Scheduled Castes or Scheduled Tribes and two seats should be reserved for women.

1. Further, the Article states that the term of board members and office members of the society shall be 5 years.
2. Lastly, provisions may be made by the State Legislature for appointing at most 2 persons to the society who have expertise in that particular field. However, these 2 members shall not vote or contest in elections.

Removal by a no-confidence motion 

In case a member of the co-operative society is found to be using unfair or corrupt practices, or is working against the general interest of the body, or occupies a managerial position whose functions he or she is not able to perform, the other members can pass a no-confidence motion against him or her to remove the said member. 

Since all states have their separate co-operative society laws, the circumstances in which a no-confidence motion can be passed as well as its rules and procedure vary from state-to-state.

Election of members of the board 

One of the fundamental principles of a co-operative society is a democratic set-up and member participation, which ensures that all members play a role in furthering the common interests of the entire body of members. Therefore, it is essential to conduct proper and timely elections in every co-operative society.

Article 243ZK says the State Legislature can decide the rules and procedure of co-operative society elections. The elections shall be conducted and supervised by the authority which the state government prescribes. However, it must be made sure that the elections to the board are conducted before the expiry of the term of the existing board, so that the new board is ready to take over after the expiry of the previous one and there is no gap between the two.

Supersession and suspension of board and interim management 

Sometimes, the board of directors of the co-operative society may be superseded or suspended by the Government in unfavourable circumstances. This can only be done when the Government has some shareholding in or has given as loan or financial assistance to the society. The circumstances in which the board may be superseded or suspended, as per Article 243ZL are:

1. When the board has persistently been defaulting
2. When it has neglected its duties
3. When it has committed any act against the interests of the co-operative society or its members
4. When there is a stalemate in the constitution of the board or its functions
5. When the authority or body prescribed by the State Legislature has failed to conduct elections in accordance with the provisions of the State Act.

In case the board is superseded, the administrator appointed by the state to look over the affairs of the co-operative society should take the necessary steps to conduct elections for the board.

Audit of accounts of co-operative societies

Audit of accounts of co-operative societies is necessary to ensure that they are being managed professionally and are not suffering from inexpertise, neglect or corruption. The Indian Constitution has provided the rules for audit of accounts of co-operative societies. Upon reading Article 243ZM, the main rules can be understood as follows:

1. The State Legislature may make provisions for regular maintenance of accounts by co-operative societies and their audit at least once a financial year.
2. It may also decide the minimum qualifications for the auditors.
3. The audit of the accounts of every co-operative society should be completed within 6 months of the end of each financial year.
4. These audit reports should be produced before the State Legislature in the manner prescribed by it.

Convening of general body meeting 

Article 243ZN of the Constitution gives freedom to the State Legislature to make provisions for co-operative societies to convene their general body meetings within 6 months of the end of every financial year.

Right of a member to get information 

The Constitution has made certain provisions for the Right to Information of a member of a co-operative society. Article 243ZO says that the State Legislature may:

1. Provide for access by a co-operative society member to its books, accounts, etc. 
2. Provide for participation of members in the management of the society by ensuring a minimum attendance by members.
3. Provide for co-operative education and training for the members.

Filing of Returns

Co-operative societies possess a great degree of autonomy to manage and control their affairs. However, they are still subject to State scrutiny, in order to check that they are functioning smoothly and no corrupt practices are being undertaken.

Every co-operative society is required to file returns to the authority prescribed by the State government. Certain matters that these returns must include are given in Article 243ZP, explained below:

1. An annual report of its activities
2. An audited statement of accounts
3. A plan for using surplus as approved by consensus of the members of the society
4. A list of amendments to the bye-laws of the co-operative society (if any)
5. A declaration as to the date of its general body meeting as well as elections
6. Any other information required by the State.

Offences and penalties 

Due to their autonomous nature, there is a chance of unscrupulous activities by some co-operative societies or their members. Article 243ZQ says that the State Legislature may decide what constitutes as an offence with reference to a co-operative society, and how those offences are to be punished.

It has also given certain situations which must be included in the offences, which are as follows:

1. A society or its member intentionally filing false returns, giving false information, or not furnishing information at all to a State-authorised person.
2. A person intentionally or without reasonable justification ignoring summons or orders issued by the state.
3. An employer not paying the money to the co-operative society which has been deducted by him from his employee, within 14 days.
4. A custodian of records, documents, cash, etc. of a co-operative society failing to hand them over to an authorised person.
5. Any person adopting a corrupt practice before, during or after the election of board members or office bearers.

Application to multi-State co-operative societies

Article 243ZR states that all the provisions of Part IX-B apply in the same way to multi-state co-operative societies as to the single state ones. The only difference is that in the case of the former, the words ‘Legislature’, ‘State Act’ and ‘State government’ would be replaced by ‘Parliament’, ‘Central Act’ or ‘Central government’.

Application to Union territories 

The Constitution states that the provisions related to co-operative societies shall apply to Union Territories in the same way as in the case of the states, but the President may, by public notification, make any modifications in this provision.

Continuance of existing laws

Even before the enactment of the 97th Amendment in 2011, there may have existed certain laws and provisions relating to co-operative societies in various states. Article 243ZT, therefore, provides that any such laws and provisions would continue to be in force even if they were inconsistent with Part IX of the Constitution unless they were specifically repealed or amended by a competent Legislature or any other competent authority.

Conclusion 

The Constitution has given us elaborate and thought-out provisions that determine the meaning and functions of local self-government and management bodies i.e. panchayats, municipalities and co-operative societies. This has been done to render greater decentralisation to the governance mechanism, which enables better decision-making and faster development. Thus, these institutions play a very important role in improving the quality of life of citizens in rural areas and urban centres.

Through this article, we studied in detail these provisions of the Constitution to gain more insight into the world of local self-governments.