A STUDY ON CO-OPERATIVE SOCIETY AND ITS

ROLE IN THE FINANCIAL MARKET IN INDIA

A Project submitted to
University of Mumbai for partial completion of the degree of
Master of Commerce
Under the Faculty of Commerce

By

Roll No.

Under the Guidance of

Prof.Shraddha Shukla

Studying at

1
 CERTIFICATE

This is to certify that Khoja Amrin Ramzanali student of Master of Commerce

Part 2 Accountancy class, Roll no. 49 of the academic year 2020-2021 studying at
K.P.B Hinduja College Of Commerce, has successfully completed the project
entitled “ A STUDY ON CO-OPERATIVE SOCIETY AND ITS ROLE IN THE
FINANCIAL MARKET.”

Prof.Shraddha Shukla Prof.Jagruti Darji

(Project Guide) (M.Com Co-ordinator)

External Examiner Dr. Minu Madlani

(Principal)

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 DECLARATION

I,Khoja Amrin Ramzanali student of Master of Commerce Part 2 Accountancy

class,Roll no. 49 of the academic year 2020-2021 studying at K.P.B. Hinduja
College of Commerce, hereby declare that the work done o the project entitle “A
STUDY ON CO-OPERATIVE SOCIETIES AND ITS ROLE INTHE
FINANCIAL
MARKET” is true and original to the best of my knowledge and any reference is
duly acknowledged

Date: (Signature of Student)

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 ACKNOWLEDGEMENT

The satisfaction that accompanies the completion of any task would be incomplete
without mentioningthe people who made it possible, whose consistent guidance and
encouragement crowded myefforts with success.

I consider as privilege to express my gratitude and respect to all those who guided me
in completionof the project.

I express my sincere gratitude to the principal for providing the facilities and the
guidance. I extendmy profound thanks to my project guide Prof Shweta Pandey for
giving me opportunity toundertake this project. I convey my regards to untiring
support and encouragement. I am verythankful to for guidance and support during my
project work.

Finally I give immeasurable thanks to my parents and to all those who extended their
support and co-operation in bringing out this project work successfully.

KHOJA AMRIN RAMZANALI

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 INDEX

CHAPTER TITLE OF THE CHAPTER PAGE NO.

NO.

- CERTIFICATE i.

- DECLARATION ii.

- ACKNOWLEDGEMENT iii.

- CONTENTS iv

- LIST OF TABLES vi

- LIST OF CHARTS Viii

1 INTRODUCTION 8

2 RESEARCH METHODOLOGY 68

3 REVIEW OF LITERATURE 71

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 4 DATA ANAYSIS AND INTERPRETATION 75

5 FINDINGS AND CONCLUSION 83

6 SUGGESTION AND RECOMMENDATION 85

7 BIBLIOGRAPHY AND REFERNCES 88

ANNEXURE

LIST OF TABLES
SR.NO TITLE PAGE NO.
5.1 List of registered societies from 1986 75
under MCSC
5.2 List of registered societies from 1986 77
under MCSC state wise
5.3 List of registered society type wise 80

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 LIST OF CHARTS
SR.NO TITLE PAGE NO.
5.1 List of registered societies from 1986 77
under MCSC
5.2 List of registered societies from 1986 79
under MCSC state wise
5.3 List of registered society type wise 81

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 CHAPTER 1
INTRODUCTION
Think win-win

A man died and he was asked if he would like to go to heaven or hell. The man asked
if he could see both before deciding. he was taken to hell first and the man saw a big
hall containing a long table, laden with many kinds of food. he also saw rows of
people with pale sad faces. they looked starved and there was no laughter and he
observed one more thing. their hands were tied to four-foot forks and knives and they
were trying to get the food from the center of the table to put into their mouth. but
they could not.
then he was taken to heaven. there he saw a big hall with a long table with lots of
food .He noticed rows of people on both the sides of the table with their hands tied
with four-foot forks and knives also. but here people were laughing and were well fed
and happy looking. the people were feeding one another across the table. the result
was happiness, prosperity, enjoyment and gratification because they were not thinking
of themselves alone, they were thinking win-win.
The same is true for our lives.
and for Co-Operative Societies

1.1 Introduction
A co-operative society is a voluntary association of individuals having common needs
who join hands for the achievement of common economic interest. Its aim is to serve
the interest of the poorer sections of society through the principle of self-help and
mutual help. The main objective is to provide support to the members. Nobody joins a
cooperative society to earn profit. People come forward as a group, pool their
individual resources, utilize them in the best possible manner, and derive some
common benefit out of it.

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A Co-operative Society can be formed as per the provisions of the Co-operative
Societies Act, 1912. At least ten persons above of 18 years, having the capacity to
enter into a contract with common economic objectives, like farming, weaving,
consuming, etc. can form a Co-operative Society. Cooperative Societies Act is a
Central Act. However, ‘Cooperative Societies’ is a State Subject (Entry 32 of List II
of Seventh Schedule to Constitution, i.e. State List). Though the Act is still in force, it
has been specifically repealed in almost all the States and those States have their own
Cooperative Societies Act. Thus, practically, the Central Act is mainly of academic
interest and as per preamble to the Act, the Act is to facilitate formation of
cooperative societies for the promotion of thrift and self-help among agriculturists,
artisans and persons of limited means.

1.2.History of Co-operative Societies

Co-operation is a worldwide phenomenon. Experiments in co-operation have been
carried on for over a century. In India the phenomenon came a little later. This section
deals with the history of co-operation movement.
Co-operative Movement in the World The earliest co-operatives were set-up among
the weavers, who were the first and the hardest hit by the development of the
mercantile economy and the industrial revolution. So the weavers, in order to gain
access to the market in the tools o f their trade or to the market in foodstuffs set up the
first co-operative in Scotland (Fenwick, 1761; Govan, 1777; Darvel. 1840), in France
(Lyons. 1835). in England (Rochdale. 1844) and in Germ any (Chem nitz, 1845).
Though co-operation and mutual enterprise has been an essence of human-society
ever since it evolved, the real co-operative movement can be credited to the Rochdale
Pioneers who established a co-operative consumer store in North England. This store
can be called as first in the co-operative consumer movement.
The "Rochdale Pioneers", made their first aim to establish co-operatives where the
members would not only be their own merchants but also their own producers and
their own employers. Around this time the co-operative movement was more at a
utilitarian level. The concept though old was just being implemented and was growing
slowly. Many great thinkers, far-sighted men and visionaries were applying their
minds to find practical solutions to the new problem s and to work out better system s
o f social organization In Great Britain Robert Owen (1771-1858) conceived and set
up self-contained semi-agricultural, se i-industrial com m unities. In France Charles
Fourier (1722-1837). a commercial clerk published in 1822 his main work, a Treatise
on Domestic Agricultural Association. This could be one of the first works on co-
operation.

In France Saint-Simon (17 6 0 -1865) worked on various theories of "associations".

But it was Proudhon (1796-1865) who advocated mutual aid and "tree credit" for free
access to the money market and Buchez (1796-1865) who championed the idea of
inalienable collective capital and workers’ production co-operative societies. Schulze-
Delitzsch (1808-1883) was the apostle of urban credit co-operatives and cooperatives
in handicrafts, while F.W .Raiffeisen (1818-1888) did the same for rural credit co-
operatives. Though all these visionaries had articulated the philosophy of co-operation
it was not until the World-War II that an Authoritative Commission was appointed.
The historical social, cultural and geographical dimensions of co-operatives are so
vast that it is difficult to encompass the 'whole' of the Co-operatives movement. In
fact it is as vast and complex as natural and cultural diversities in which human beings
operative from North America. Latin America, Europe East and West. Asia, Middle
East. South East and Far East. Asia diverse Africa and other parts of the world- each
in some way different from the other, And yet despite this complex diversity of hum
an situations in which Cooperatives ideology is practiced, there is - there must be-
common thread flowing everywhere.

Co-operatives in India:
In 2004 we completed HUNDRED YEARS o f co-operative societies in India. ’
Beginning of Co-operative societies in India:
Co-operation indicates the association of individuals to secure a common
economic end by honest means. In India the idea o f using co-operation for fighting
rural indebtedness came from the suggestion o f Mr. Fredric Nicholson, a madras
civilian, who after the studies o f co-operative societies o f Europe-especially o f
Germany- strongly recommended the establishment of co-operative credit societies in
India. In his opinion, co-operative societies offered the solution for bringing to the
peasant that continued over -fluctuating credit, which he needed. On the basis o f his
recommendations, the co-operative credit societies Act of 1904 was passed.
The Act allowed the formation of credit societies on. Any ten or more persons of
the same village or o f the same tribe or o f the town might apply for forming a co-
operative society.
A distinction was made between rural and urban societies. In the case of rural
societies, the liability was unlimited. To encourage the movement, the governm ent
granted some concessions and privileges to the societies, registered under the act.
such as exemption from income tax, stamp duties and registration fees, priority over
other creditors and free audit etc. The registrar o f co-operative societies exercised the
supervision and control over the movement.
The Act gave a fillip to the co-operative societies, which began to develop rapidly
beyond expectation. As the movement developed, need was felt for non-credit
societies, which would deal with purchase and sale. There was also the need for
central agencies to finance and control the primary credit societies.
The history o f co-operative societies in India can be divided in two parts
1. Co-operative societies before independence (1947)
2. Co-operative societies after independence

C o -o perativ e societies before 1947

The division between ‘have’ and "have not' like in any other country has persisted
in India for centuries and was more prom inent in rural India. The situation was more
glaring during the turn o f the century when the colonial rule was at it's peak and the
demand for the self rule was fast gaining momentum. Historically India has been an
agricultural country, with m ajority o f its population dependent on agriculture and
allied activities for survival. The subsistence village economy was a balance o f
demand and supply and was sustained by the self-sufficient villages. The concept of
export and import was absent and so was the motivation for profiteering. Villages
generated demand o f goods and services and also 155 endeavored to meet them.
Farmers owed cultivable land and grew whatever they wanted to or were required by
the village, paid a certain share o f the harvest as tax and retained the balance to meet
their own requirem ents. Since the rate o f tax was the share o f the harvest, it did not
adversely affect the farmers when crops failed or the harvest was poor. The village
industry met the demand o f the other goods and services within the village in lieu o f
food gains produced. The caste system allowed by inheritance o f profession by
successive generations. There was no lateral change in profession except in case o f
extrem e emergency like war. Thus the villages were self sufficient in meeting their
demand and autom atically the whole country was self-sufficient.
This was the situation when India passed under the colonial rule. Britishers brought
with them the land ownership pattern that existed in their country and went all out to
establish the same in India. They created a class o f landlords through permanent
settlement, who owned but did not till the land and collected the revenue directly or
indirectly on behalf o f the government. Farmers did not have ownership right over
the land. The ownership right provided for sale or mortgage o f land, hitherto
unknown in India. Farmers were allowed to cultivate land on paym ent o f certain pre-
determined tax to the landlord, which had no bearing with the success or failure o f
crop in a year. Often the rate o f taxation was so oppressive, that after paym ent o f tax
very little was left for the peasant's family to keep their body and soul together. A
lienation to the ownership right also took away from the farmers right to decide what
crops were to be grown; the governm ent or the landlords decided it.
Industrial revolution, which was sweeping Europe, made Britain hub o f
international industrial activity. To meet the requirements of raw m aterials for it’s
industrial units. Britain looked towards it's colonies all over the world and India was
no exception. More and more agricultural land was brought under cultivation o f those
crops, which provided raw m aterials for the British industries, so that the latter could
earn more profits. Jute and indigo cultivation replaced cereals and pulses and the
character o f agriculture changed from subsistence to profiteering. Agricultural
practices remained prim itive and no effort was made to increase the production. The
British policy o f converting the colonies as market for cheap British goods resulted in
destruction o f the village and cottage industries and millions becoming jobless. All
this had a telling effect on the food grain production in the country. With less
production and increase in population, prices o f food grain rose. Famine and 156
starvation became a common feature. India villages, which were earlier self-sufficient
in m eeting their demands, became impoverished.
Failure o f crops coupled with oppressive revenue system provided the m
oneylenders with the opportunity to exploit the sim ple village peasantry. Absence o f
ay-easy credit, particularly for the purpose o f agricultural operations forced the farm
ers to go to the m oneylenders. Since the new ownership rights allowed the sale or m
ortgage o f land, loan was easily forthcoming. Though the am ount o f loan in most
cases rem ained very low, it was the high rate o f interest, which was unm anageable
and put the peasant into trouble. In the event o f failure o f crop, which was frequent,
peasants failed to repay the loans received. They often restored to further loans to
repay the earlier loans, with the principle remaining unpaid as they were trapped in
the vicious circle o f debt. Often they w ere uprooted from their own land. M any
became hom eless and moved to towns and cities in search o f jo b s and carried with
them the burden o f debt o f their fore fathers. Few were lucky to get jo b s to repay
their debts but most o f them barely m anaged to keep their life and soul together and
in passing o f their debt to their children. This exploitation o f the rural m ass as well
as to a great extent o f urban poor, which was not known in pre-British India, gave
rise to unrest and disturbed the law and order situation in the country. The situation
further aggravated as m oneylenders were *banias’ an upper caste Hindu where as the
peasants w ere primarily from the lower castes o f M uslims. This sparked the riots
involving the tw o com m unities in many places. Occurrence o f frequent famines
forced the British governm ent to set up com m ission to study the reasons behind
them . Shortage or absence o f agriculture credit in absence o f land to be offered as
security was cited as the most important reason for unrest by those com m issions.
Though the findings o f the com m issions were significant, not much was done to
relieve the situation till the report o f the Famine Com mittee o f 1901 appeared.
This report precipitated the m atter and the Co-operative Credit Commission Bill was
passed in 1904 paying the path fo r the growth o f the Co-operative societies in India.
The new act provided for the form ation o f small co-operative societies for m
aking small short tim e loans on easy terms for productive purposes, the implication
clearly being to bring the small farmers and the rural entrepreneurs outside the hold o
f the m oneylenders. The act also provided for encouragem ent o f thrift among people
by way o f saving and mobilizing deposits for the society as well as providing them
with a training ground for selfmanagement. These societies were to function within
the framework o f certain rules and regulations, as was em bodied in the acts and rules.
The co-operative credit societies act 157 provided for the Registrar o f the Co-
operative societies, who was responsible for spreading the co-operative societies
within the province. He was required to tour the province, explain the salient features
o f the act and encourage formation o f new societies. In this the ‘honorary organizers'
who were non-oftlcials but recognized, helped the registrar. They lived in rural areas,
w ere educated and possessed some social standing in their com m unity and provided
voluntary service by overseeing the functioning o f these societies. It was the governm
ent which through it's machinery, was responsible for the birth, growth and blossom
ing o f the co-operative societies in India.
Co-operative societies were like any other governm ent scheme whose
implementation and success depended on the extent to which the governm ent was
serious in im plementing the same. Like most other governm ent-sponsored
programmers, co-operative societies depended heavily on governm ent's direction in
term s o f policy and involvem ent o f its officials for its im plementations. The early
reports on co-operation in India is full with the details o f how the registrar o f co-
operative o f a province and his officials toured the districts with the sole objective o f
forming new co-operative societies.
Co-operation in India as we see today, was not because o f Indians realized the
‘strength’ o f co-operation in m itigating their sufferings but was an instrum ent
provided by the rulers to reduce their sufferings. It was more a kind o f adm inistrative
relief measure for the peasants to reduce their sufferings. Had there not been
destruction o f self-sufficient Indian rural set up, that, possibly co-operation as we see
today, would not have existed, though it is a fact that co-operation in some other form
s did exist in India and was responsible for the existence o f the self sufficient Indian
villages for centuries. The cooperative societies therefore in India, are the creation o f
the state and not by the people, for the people, o f the people. Consequently a large
number o f societies failed to take off. The spontaneity among the m em bers in
participating in the events o f the society was one o f their own program mers, their w
hole-hearted support for its success, was absent. M atters were, by and large, either
directly adm inistered by the R egistrar’s office or through the ‘honorary organizers’
and one or two prom inent local members. The beginning o f the century saw
nationalist m ovem ent in the country gaining m omentum and pervading into every
activit\ in the country and co-operative societies was no exception. N ationalist took
active part in the m atters connected with co-operatives. This was not to further the
cause o f co-operative, but to further the cause o f independence, by 158 using such
forum to highlight the dem and for independence. Co-operative societies provided an
opportunity for the nationalists to engage in public activity and to prove to the masses
as well as to the alien rulers their capacity and capability in self-governm ent and
thereby could throw challenge to the colonial rule. The governm ent closely
monitored the program m e to ensure that the fall out o f the programme did not
challenge their very existence and authority.
O ne o f the objectives o f the co-operative societies was to provide training ground
for self-reliance through self-government. Societies were to be autonom ous and self
governed on the principles o f democracy and w ere expected to develop disciplined,
self-reliant citizens capable o f taking independent decisions for them selves. Though
the aim o f the cooperative societies remained so, in practice its im plementations
rested heavily on governm ent support. Britishers perceived Indians as too sim ple to
look after their own interests and therefore took upon them selves the task o f guiding
them by setting the ground rules for the co-operative societies in the country.
An important feature o f the pre-independent India was its feudal character with
rigid caste system. Co-operative societies w ere m eant for those who were poor and
invariably either from the lower castes or were M uslims. Rigid caste system had such
an effect on them that they had little faith and confidence in them selves. Self-reliance
and selfgovernm ent were alien concepts to them . For generations they had depended
upon the upper caste for guidance and help. Under such a social set up it was essential
that someone takes up the guardian’s role and this accounts for the protective and
paternalistic control exercised by the officials while launching the m ovem ent in
India. There was a conscious effort on the part o f the governm ent to foster co-
operation from the top. This led to the framing o f the Rules. Acts and Guidelines,
which robbed the co-operative societies from its basic objectives. A retrospective
study o f the developm ent and spread o f the co-operative societies in India during the
British rule lend credence to the extent o f control lend supervision, to which the m
ovem ent was subjected to. W hatever may have been the lofty ideals behind the
starting o f the co-operative societies, we cannot wish away the fact that it was one o f
the many program m ers o f the alien rulers. M oreover, as discussed earlier, the very
concept o f starting co-operative societies in this country was first to cover the fall out
o f the policy o f exploitation o f the government and then to achieve other objectives.
Further, co-operative 159 societies provided a little ground for the nationalist forces to
rally around the suffering masses tor demand o f self-rule. N aturally the governm ent
had to keep a close watch and therefore devised means accordingly.
At the time o f independence, there was large num ber o f co-operative societies
all over the country with mem bership running into thousands, yet the movement was
bereft o f co-operative spirit. People who were extremely poor and had alm ost no
education and little faith and understanding o f the true nature o f co-operative
principles, constituted the cooperative scenario in the country. For them self-reliance
had no meaning. They had to slog the whole day for two square m eals for their
family and therefore could not bother who actually managed the co-operative
societies as long as it provided them some economic relief. Co-operative societies
therefore in the pre independence era were devoid o f true spirit and character, which
symbolized in the western world.

Co-operative societies- after 1947

With the independence, a different and a new form o f government came to rule. It
was the government o f the people, by the people and for the people. The new
governm ent consisted o f those luminaries who had struggled hard for the liberation o
f the country, politically as well as economically. They dreamt o f India as one o f the
leaders in the group o f nations and why not? India was one o f the most naturally
endowed countries o f the world. It had immense resources as well as potential, what
was required was only to guide the potentials so that maximum benefit could be
obtained by exploiting country’s vast economical resources. Accordingly the governm
ent adopted the developm ental policies based on five-year plan and mixed economy.
It was also felt that there was need for a conscientious drive to promote peoples
voluntary participation in planning and implementation o f all programmers, which
were connected with the economic developm ent, so that economic power is
decentralized and econom ic developm ent and social justice can take place sim
ultaneously. To achieve these objectives and also to train the vast population, two
thirds o f which lived in villages, in the matters o f self-governm ent, the only course
left upon was to adopt co-operatives.
Co-operation, therefore, occupied a significant place in the five-year plans o f the
country and every plan, from the first till today, had accorded priority to this sector,
recognizing the need for the upliftment o f the poor section o f the society. Co-
operation was 160 to provide economic growth, reduce income inequality, alleviate
poverty, reduce regional disparities, increase em ploym ent and attain social Justice
through the process o f democracy, equality, solidarity, honesty and openness, in
which self-help, social and self responsibility and caring for others were the ideals.
Once perception o f the role o f co-operatives in the developm ent o f the country was
identified, development of co-operatives became a matter of state policy. Every state
government had the Department of Co-operation in which the Registrar of Co-
operative Societies was the main functionary. Several policy level as well as
administrative and institutional changes was brought in. New laws and rules were
enacted and supportive infrastructures were created for the purpose of registration,
supervision and inspection of co-operative societies, in other words, for close
monitoring of the development of co-operative societies within the state. In search of
co-operative identity, a floodgate was opened allowing formation of co-operative
societies.
The government support and recognition flowed and the mushrooming of
cooperative societies started all over the country. The co-operative societies enjoyed
preferential treatment in term s o f getting license for manufacturing, distribution of
products, marketing of essential consumer articles etc. The government financial
support became order of the day and gradually co-operative societies became
appendages of the government. The office of the Registrar of Co-operative Societies
became an all-powerful and all preamble phenomenon. The Registrar of Co-operative
Societies was the Brahma (Creator), Vishnu (preserver) and Maheshwer (destroyer) of
co-operative societies in the country. His authority determined a co-operative
societies registration, its area of operation, membership enactment of byelaws; he
inspected and audited the activities of the society and at his whims, the elected board
of co-operative societies survived. Authority exercised by the Registrar of Co-
operative Societies had its share of political commitment too. Since the Registrar of
Co-operative Societies is a government servant, and government, often-political
designs were manifested through Registrar of Co-operative Societies action.
Politicians of various levels found their way into the co-operative societies. They
were nominated as government nominee in the Board of Directors and were often
appointed as chairman of the societies.
With co-operation becoming an instrument of state planning process, it became
prerogative of the government to decide the area of operation for the co-operative
societies. Their number, process of business and the extent of government aid became
a part o f the state plan and targets were fixed, which were tor the governm ent
officials to achieve. In 161 pursuit o f these targets new rules and regulations were
framed to which co-operative societies were subjected to. This snuffed away the
independent and voluntary character o f the co-operative societies and the
co-operative m ovem ent was transform ed into a program me o f the government, by
the government but for the people. Voluntary involvement o f the people got
marginalized and the role o f the government and its official increased.
In 1959, Indian Co-operative Union had conducted a seminar in New Delhi to take
stock o f the situation and address the state o f affairs as far as co-operative thought
and actions were concerned and the conditions prevailing in the movem ent all over
the country.
Observations o f the sem inar were:
1. Psychologically co-operation was identified more with the governm ent grants and
loans rather than with self-help and mutual aid.
2. State was the main sponsor o f the co-operative societies with political and partisan
objectives.
3. Co-operative societies lacked popular initiatives and therefore no proper planning
and assessm ents were made while form ing them. Formation o f co-operative
societies was more o f a target achievem ent exercise heavily dependent upon the
initiatives o f the concerned officials.
4. O rganization o f societies were more dependent upon the initiatives o f those who
are socially and econom ically more organized, as a result the objectives o f forming
them were mainly non-co-operative in nature leading to formation o f large scale
spurious societies.
5. M anagem ent and supervision o f societies were overwhelm ingly in the hands o f
governm ent machinery.
6. The role o f Registrar o f Co-operative Societies was supreme. He exercised the
power to suspend, remove or change the managem ent o f co-operative societies
arbitrarily.
7. Cliques and vested interests made deep inroads in the co-operative societies and in
those politicians, governm ent officials all are involved.
Since 1959. forty-five years have passed, and experience o f this period have further
fortified the observations that were made in 1959. In fact in these years co-operative
societies come to be known as ’Government Co-operative societies or "Sarkari
Sahakari 162 and became a hot topic for discussion am ong the co-operative experts
and the co-operators. Though many recommendations com e up to facilitate
development o f co-operative societies free from the governm ent control, nothing
actually happened and co-operative societies continued to survive under the
 government patronage. Nothing was done in term s o f governm ent policies to make
the co-operative societies stand on their own. In fact the people who were actually m
anaging the show rather encouraged governm ent's involvem ent and thrived there
under.
The year 1991 saw a paradigm shift in the policy o f the governm ent with regard to
econom ic developm ent o f the country. The new economic policy envisages
restricted involvem ent o f the government in the economic developm ent o f the
country. By allowing market forces to act freely the econom y has been liberalized
and private sector has been given a w ider role to play. The governm ent control and
restrictions have been withdraw n to a great extent and flow o f governm ent funds in
term s o f aid and subsidy is being progressively reduced. This paradigm shift in the
governm ent’s policy has posed a new challenge for the survival o f co-operative
societies; they were left to fend them selves.
After years o f government’s support in the form o f aid and subsidy, control and
supervision was not an easy task for the co-operative societies to give them up and
assume autonomy all o f a sudden. Co-operative societies have to reorient their
activities so that they can face the challenges posed by the market forces under the
liberalized economy. For this it is required that the co-operative societies com e out o
f protective shell o f State patronage, be autonomous in their functioning and strive to
survive on their own. This is only possible when the membership base o f the co-
operative societies is strong and committed, have faith in the co-operative societies
philosophies and above all feel that there is a need for a cooperative society in solving
their problems, be it economic, social or political. The cooperative societies hold the
potential and the promise to help the people who w ant to help them. Co-operation
presents an alternate way o f organizing and carrying out business activities and
demonstrates that values o f carrying and sharing, democracy and participation, do
indeed work for the benefit o f the individuals and thereby for the society as a whole.
Out o f the possible ways to meet the challenges, one is to innovate ways, which can
serve the m embers most faithfully, plan and implement activities, which will help
them in 163 building their comparative strengths.This will provide them competitive
edge to fight the market forces. Co-operative societies have to become m ore
professional and entrepreneurial in their thought and action, and in their approach and
in behaviour.
 The co-operative societies are essentially commercial enterprises should be the
most important consideration to be born in the mind and should be given such play
field, which is given to any other commercial enterprise. To face these challenges, co-
operative societies will have to make appropriate changes, both in term s o f their
policy as well as in their functioning. This change in policy and functioning will
depend upon the perception o f the weakness and threat faced and strengths and
opportunities provided by the co-operative societies.

DEFINITIONS

Some selected definitions of co-operatives

1. "A form o f organization in which persons voluntarily associate together as human
beings on the basis o f equality for the promotion o f the economic interest o f them
selves" H Calvert.
2. "An association for the purpose o f joint trading, originating am ong the weak and
conducted alw ays in an unselfish spirit on such terms that all who are prepared to
assum e the duties o f m em bership may share it's rewards in proportion to the degree
in which they make use o f the associations" C R Fay
3. "Co-operation is only one aspect o f a vast movement which prom otes voluntary
associations o f individuals having common needs who com bine tow ards the
achievem ents o f common economic ends". V L Mehta.
4. "Co-operation is som ething more than a system. It is a spirit, which appeals to the
heart and the m ind. It is a religion applied to business. It is gospel o f self sufficiency
and service". M L Darling.
5. "Co-operation is self help as well as mutual help. It is a joint enterprise o f those
who are not financially strong and can not stand on their own legs and therefore come
together not with a view to getting profits but to overcom e disability arising out o f
want o f adequate financial resources and thus better their economic conditions". K N
Katju.
6. "The theory o f co-operation is, that an isolated and powerless man, by association
with others and by moral developm ent and mutual support, obtain in his degree, the
material advantage available to the wealthy and powerful persons, and thereby
develop him self to the fullest extent o f his natural abilities". The M aclagan
Committee.
7. "The act o f persons, voluntarily united, for utilizing reciprocally their own forces,
resources or both under their arrangem ent to their common profit or loss". M T
Herrick. 144
8. "Co-operative society" means a society registered or deemed to be registered under
any law relating to co-operative societies for the tim e being in force in any State,
under section 3(g) o f the Central Act or under section 3(h) o f the new Act. A "co-
operative society" is not defined under the State Act.'

AREA OF OPERATION OF CENTRAL AND STATE ACTS

While a co-operative society in each State is generally formed and registered
according to the laws o f that State and its area o f operation is confined to that State
or any part thereof; a m ulti-State co-operative society is an inter-State society, which
has its area o f operation in more than one State. According to the Co-operative
Societies Act o f each state a co-operative society registered within any State under
the law o f that State is not allowed to operate in other States without the permission o
f the G overnm ent or Registrar o f C ooperative Societies o f that State. In case o f m
ulti-State co-operative society, it can operate in more than one State as a m atter o f
right.

What is a co-operative concept?

A Co-operative is a distinct form o f organization in contrast to any other of
different hues and colours. While there may be something in it o f this or that, it has
its own district philosophy o f hum an society where men will be the happiest.
While the capitalist system has a lot to dem onstrate its success resulting in econom
ic advancem ent achieved by mankind in some sections o f the present world, it is
difficult to accept that it has resulted in unstinted happiness o f mankind. 1 need not
dilate on the unique success and its ghastly face resulting in imperialism, wars,
pathetic, inequality, and its other ugly demonstrators. The present generation has w
itnessed m iserable failure o f the capitalist system also.
 Despite various laudable achievem ents o f Co-operatives in different parts o f the
world - Co-operatives system or Co-operatives com m onwealth has yet to em erge to
make the full impact on social developm ent and human relations.
The Co-operatives movement believes that in a Co-operatives system human
character will change from conflict and cacophony to co-operation and cam araderie,
equality will not be slogan but a reality, equity and not profit m aximization will be
the guiding force for conducting enterprise and men and women will be endowed w
ith virtues that behave a ’good persons'. Ancient Indian system is believed to have had
such characteristics. While 's elf may be the cause o f progress in capitalist system it is
the 148 extension o f self to his fellows - 'mutuality' which is the motivating force for
human action in a Co-operatives. M erging o f his self with his fellows and instead o f
'o n e self working together o f ‘several selves’ is surely a unique trait for human
action. There will be no chicanery, no deceit, and no calculation o f benefit to his self
only in a Co-operatives system. 'I'for 'you' and 'you for me" is surely a superior human
state than o n e's own 's e lf only. Thus, mutuality destroys many o f the ’m ean’
motives, which dom inate men in acting for his self only. Once this becomes a
pervading quality for all human actions, conflict disappears and men are happy
together:
This is not a dream picture o f man. it is God-given virtue in m ankind even in a
society based on individualism where men work together for many things. Co-
operation harm nesses this instinct o f mankind for all its actions and a society
based on this belief will be surely better than a society based on individual self
interest. Thus ‘m utuality’ is essence o f Co-operation. Once this happens other ‘good’
things autom atically e m e ijw ^ 5 ^ '' honest in dealings, equity in distribution,
equality in behavior etc. A Co-operatives society cannot function without each
member being honest.
Since the motivating factor is mutual interest feeling of dishonesty in dealings will
have no place in dealing with his fellows and if the Co-operatives gets dam aged he
will also suffer and his purpose will be defeated. Honesty is not an imposed virtue for
him but is an inherent requirem ent in the very structure o f the Co-operatives system.
Equality is not a slogan in co-operative but is an ingrained attribute. Co-operative
starts with equality- a group o f sim ilarly situated persons with the same purposes. It
is a union o f equals and it is given in the very structure o f Co-operation. Likewise
equity too is given in the Co-operatives structure itself The members o f the
Co-operatives produce goods or services to be shared by each. The m otive for
production is not profit maximization and each member is satisfied with satisfaction
of his wants. It is to seek such a ‘steak’ that International Co-operatives A lliance
(ICA) had been engaged for several years from Stockholm to Tokyo to
Manchester culm inating in reform ulation o f a new set o f co-operative principles-in
different phraseology than in 1937 or 1966.
The ICA has taken great pains to contain the whole thought in 'C o-operative
Identity". SVAN Eke Book brought out many issues in search o f the values o f co-
operation. 149 He has raised many issues, which need clarity o f perception. The M
anchester congress did not address itself to each o f those issues. To the best o f my
understanding, the M anchester Congress failed to locate that streak o f light, which
makes co-operation a ’C o-operation'. Free enterprise is a noble idea and perhaps the
‘best’ way for releasing human energy for m axim ization o f national wealth.
However, everybody is not endowed with the same talent to succeed in free enterprise
and. as is out experience, many are left behind and they cannot achieve the desired
object by their "self-help". Free enterprise is not solace to many who are so weak that
"self-help’' becomes ‘non-functional’. We need not dwell at length on various im
perfections o f the market system to create a society where peace and happiness is
within the reach o f every living person in the society. To get the system going ‘free
enterprise' is interfered with, giving birth to hybrid system - some call it mixed
econom y - where production, distribution and many more things are directed and
controlled by the state. Man has been yearning for a system where all have
opportunity and m eans o f satisfying their needs, and there is peace, happiness and
harmony in the society instead o f conflict and elbowing the other out for o n e's ‘ow
n' gain. The Co-operatives provided that answer and though it sounds so simple, it is
great ‘idea; Co-operation shows the way. It does not interfere with m arket system but
works within the fram ework o f the m arket economy and thus retains the ‘virtues’ o f
market system. In fact the co-operative improves the market system. Ancient Indian
villages practiced co-operation in the true spirit. Thus in those days Indian villages
had ’idyllic' life. Co-operation is thus, not merely a way o f conducting business but
improving the quality o f life - ‘I for your and you for m e’ syndrome. Co-operative
ideologues had a dream, vision o f changing the rife-strewn, com petitive, exploitative
society to one w here humanness, harmony, equality, fatality, dem ocracy prevailed,
where instead o f conflict co-operation was the basis o f inter-personal relations and
peace and happiness prevailed. It is the predom inance o f the ‘s e lf, which creates
conflict and elbowing out o f his fellows for self-gain. Co-operation changes the
quality o f men by m erging o f the selves. Co-operation releases many hidden
qualities o f 150 m an-sense ot honesty, equality, and dem ocracy. These are inherent
in co-operation based on ’m utuality'. Contrasted with the working for the self,
mutuality is a great idea. Carried to its logical conclusion ‘m utuality’ encom passes
entire humanity irrespective o f any differences o f geographical location, religion,
colour and num erous other traits which divide human beings. One can imagine how
peaceful and idyllic such a society would be, where debasing trait o f man cheating,
chicanery selfishness, greed-vanish or are m inim ized and each contributes to the
other’s happiness. Co-operation is a great invigorative force to mankind - it provides
hope and confidence and spirit o f action to those who are helpless and despondent,
who suffer because they cannot do on their own. Co-operation provides new life to
the hopeless; he achieves what he could not have achieved. It thus release new vigour
for social developm ent. Indeed a new society, a new man is created. This is the force
o f C ooperation based on ‘m utuality’. The true merit o f co-operation is "m utually"
If this urge o f man is truthfully and energetically nurtured and devotedly proliferated,
a new social order will em erge for the happiness o f the entire mankind. It is a pity
that it was conceived as a ‘m ovem ent’ but it never became a m ovem ent - whatever
structure exists today is a result o f sporadic action here and there, or a program me o
f som e agency. In reality Co-operatives, by and large, has become a form o f
economic enterprise, and is one method for conducting econom ic activity. True, even
w ithout that mystique vision and value, co-operative form o f organization possesses
m any virtues. W hich neither public nor private enterprise has. such that helpless
people are activated and the have-nots attain the status o f "heaves'? Co-operation is,
as contrasted to self-seeking com petition and elbow ing out o f others for personal
benefits, sublimation o f inter-personal relations. When such a knowledge daw ns in
the minds o f many in society it contributes to the well being o f the society. Human
beings then look upon each other as sparks o f the same self and perform actions
unselfishly. Co-operation is an attitude o f mind and its essence is o ne's inclination to
co-operate. The highest attainm ent o f man is in "giving" or extending co-operation,
which provides a venue for progress. It transcends all distinctions in m an-thus raising
the level o f humanity.
PRESENT SITUATION
To day the world co-operative scene presents a mixed picture. On the one hand, the
co-operative movem ent has grown, m em bership has increased, it has become more
diversified, there has been great deal o f regional dispersal and there are num erous
exam ples o f co-operatives in w orld’s landscape where it has made spectacular
achievements. On the other hand, a large num ber o f Co-operatives are languishing,
and considering the num ber o f ‘Weak Elem ents’ in the society, such elem ents
cannot legitimately be said to belong to the co-operative fold.
One marked change in the Co-operative m ovem ent that has surfaced in recent
years in that several Co-operatives have become big and m ore Co-operatives have
started making departures from the practice o f Co-operative principles enunciated by
International C ooperative Alliance (ICA), particularly in raising capital by use o f
joint stock com pany methods. They had challenged the relevance o f the existing
principles, particularly ‘Limited interest on capital which they considered as the devil
o f the peace hampering the growth o f the movement.
At the global level concern has also been expressed at increasing governm ent
intervention in the m anagem ent o f Co-operative societies in many developing
countries. G overnm ents in these countries are using Co-operatives as a tool o f
planned program me for achievem ent o f planned targets. Such C o-operatives do not
have autonomy and dem ocratic management. Co-operators have to a stance regarding
correct relationship with the state in order to function effectively as a Co-operative.
And there are Co-operatives in the erstw hile com m unist countries, w hich are
undergoing transition to privatization. Co-operatives in these countries have to re-
defm e their identity.
Thus the world Co-operative movement today presents a variety o f hues and
shades. This raises some basic questions and clarity in perceptions called for. Must all
C ooperatives be alike? Could we comprehend ’different’ colour and shades o f Co-
operatives? O r what is it that flows through all Co-operatives all over the world? The
task is to find the essence o f ‘C o-operative’ in all existing and prospective Co-
operatives in the Co-operative movement.
Today the Co-operative movement is in search o f its true identify. It is cross roads
and Co-operatives are not sure which way to go. The crisis is because doctrinaire
coThe present situation operates assail many o f the practices, which Co-operatives in
many countries o f the world have adopted in recent years in the conduct of their
business. There are several issues, which have deeply disturbed co-operators, and they
are looking out for unam biguous answers to them . It must be admitted that there
have been far reaching changes within the Co-operative movem ent and there are Co-
operatives with num erous shades and nuances.
It is alleged that many C o-operatives have deviated from the pursuit o f values,
which the m ovem ent had cherished. There is no unanimity am ong co-operators
what these values are.
It is fortuitous that today Co-operators are keen and are frantically searching for w
iser m eans for organizing and m anaging Co-operatives. Our search for 'true values'
will not be in vain. Let us admit that in spite o f all the errors, which some C o-
operatives might have com m itted, they are not doomed. It will not be wrong to say
that Co-operatives have done well. Let them do better. W hat Co-operators need today
is to have clearer light so as to see the path and the goal more clearly. There is no
cause for despair, as things have not gone out o f hand. We are not too late. The harsh
truth is that the tide o f Co-operative m ovem ent cannot be reverse

THE VARIOUS STAGES OF CO-OPERATIVE DEVELOPMENT IN INDIA

“ Co-operative movement in India had not fulfilled the hopes and expectations o f
the people. ”

In the pre-independence era, co-operative movement started with installation o f the

Co-operative Credit Societies Act o f 1904 by the government. The Act o f 1904 was
later on amended in 1912 to permit the formation o f societies for the purpose larger
than the rural lending. The movement developed with slower speed till the
development o f co-operatives became the responsibility o f the provincial
governments. Thereafter it saw an "unplanned expansion" which finally forced the
provinces to examine the possibilities o f restructuring and reorganizing the societies
into a planned manner. Thus the pre-independence cooperative movement was more
or less developed in four stages- initiation, modification, and expansion and
restructuring.

Initiation Stage (1904-1911)

 In olden days when Mahajans and Sahukars were lending money to peasants on
high interest rates, peasants were suppressed and indebted so badly that sometimes
they even lost their valuable belongings and land in order to pay debts. In some parts
o f the country peasants started revolting against the Mahajani or Sahukari Pratha. The
peasants o f Poona and Ahmadnager made hard revolting sounds against the
moneylenders who w ere charging the interest that increased or accumulated the
burden o f repayment. Riots, those that took place at that tim e attracted the attention o
f the government and as a consequent Deccan Agriculture R elief Act (1879). Land
Improvement Loan Act (1883). and A griculturist’s Loan Act (1884) were framed.
166
Land Im provement Loan Act (1883). and A griculturist’s Loan Act (1884) are
generally known as the Taccavi (or Takavi) Laws. Due to their limitations both o f
these laws failed to make agriculture a vast economic activity. Consequently the
attention diverted to apply co-operative methods in agriculture practices.
During 1892, the Madras Government appointed Frederick Nicholson to study the
village Banks organized in Germany on co-operative lines. He was also supposing to
advice the possibility o f a parallel system in India. He gave a vast report in 1895 and
1897 and recommended to introduce co-operative credit societies. Indian Famine
Com mission in 1901 repeated the words o f Frederick Nicholson and recommended
for the formation o f mutual credit associations. In 1901, another committee under the
presidency o f Sir Edwards Law also suggested to form co-operative credit societies.
This recom m endation pawed the way for the formation o f co-operative Credit Act o
f 1904 and the m odern co-operation m ovem ent actually started in India.

Act of 1904:

Important Characteristics
1. Rural Urban Classification
Rural urban classification was com pleted and societies having four fifths o f their
agriculturist members were classified as rural and those having four fifths o f their m
em ber’s non-agriculturist were classified as urban. Liabilities o f rural societies were
limited and o f urban societies were limited or unlimited. Rural societies were not
allow ed to distribute their profits but urban societies were allow ed to distribute their
profits after carrying over one fourth o f annual profit to the reserve fund.
2. Powers to organize control and audit
Act had provisions to create the post o f Registrar, who was supposed to organize
and control the societies. Annual audit o f the societies also cam e under this.
3. Encouragem ent Benefits
❖Societies were exempted from registration fee, stamp duty and income tax
❖Free audit by the Registrar o f Co-operative Societies
❖Small and restricted field o f operation to encourage self-help, mutual aid and
economic management.
4. Advancing the Loan:
loans could be given to members on personal or real (immoveable or ornament)
security. Provisions were m ade to have prior approval o f Registrar o f Co-operative
Societies in order to advance loans to other credit societies.
5. Reservation for Principles o f Co-operation: Fundamental principles o f "limited
interest in the share capital" and "one man one vote" were reserved in the Act.

Modification Stage: (1912-1918)

The rural urban classification o f societies done in Act o f 1904 appeared as

unscientific and unfitting. The restriction to register non-credit and federal institutions
forced to make significant amendments in it. Consequently government of India
passed an improved version as Co-operative Societies Act o f 1912, which expedited
the co-operative movement in India. The movem ent enlarged itself to non-credit
forms o f cooperation and non-agricultural credit societies.

Act of 1912:
Important Characteristics
1. Provision for non credit societies:
It facilitated the provision o f other societies ready to work on co-operative lines or
ready to ease the operation o f co-operative societies. The liability o f central societies
was to be limited and that o f rural societies was to be unlimited.
2. Empowering the Registrar o f Co-operative Societies:
Registrar was empowered to set up inquiries, inspect, liquidate and wind up the
societies.
3. The condition to carry 25% o f the net profit to a statutory reserve fund was
imposed and it provided the permission to receive deposits and loans from non-m em
bers.
The healthy expansion o f co-operative societies that took place due to the Act o f
1912 attracted the government, which in 1915 appointed a committee under the
Chairmanship o f Sir Edward Maclagan to study and report on the progress o f the m
ovement. Com mittee gave its report in 1915. The Maclagan Com m ittee’s recom m
endations and Act o f 1912 introduced co-operative planning process In India.

Expansion Stage: (1919-29)

Prior to real implementation o f M aclagn C om m ittee's views by the then Central

Government, the political reforms, named as M antagu-Chelm sford Constitutional
Reforms o f 1919 took place, ender w hich co-operative movem ent becam e the
responsibility o f the 168 provincial government. Various provinces started passing
the legislations on co-operatives, retaining the important features o f Act o f 1912.
Bombay took the lead in passing the Cooperative societies Act o f 1925. Subsequently
M adras passed its Act in 1932. Bihar and Orissa in 1935. Coorg in 1936 and Bengal
in 1940. The other provinces followed the Central Act o f 1912.
Though the movement expanded significantly during 1919 to 1929^ yet a steady
increase in the over dues emerged as set back. As a result various provincial com m
ittees were framed to examine the working o f the movement. Notables among them
are the Okaden Com mittee o f U.P., King Com m ittee o f C.P.. Townsend Com m
ittee o f Madras, Calver Com m ittee o f Burma, The Royal Com m ission on
Agriculture and Indian Central Banking Enquiry Committee (1931). On the recom m
endations o f the Central Banking Enquiry Com mittee, Reserve Bank o f India was
formed in 1934 and A griculture Credit Departm ent o f RBI took birth on 1935.

Restructuring Stage: (1930-46)

The abrupt economic depression o f early thirties o f the century and abnormal fall
in the prices o f agricultural commodities grieved the movement. In various provinces
the m ovem ent alm ost collapsed. Provinces to examine the possibilities o f
reconstruction and reorganization o f societies to restrict to be called unplanned
expansion fram ed various enquiry com m ittees. Few names may be mentioned as; V
ijayraghavacharya C om m ittee in M adras, Rehabilitation Enquiry Com m ittee o f
Travancore and Mysore, Kale Com m ittee in Gwalior, M ehta and Bhansali Com
mittee on the reorganization o f co-operative m ovem ent in Bombay and Wace Com
mittee in Punjab.
The m ovem ent developed greatly during the period o f Second W orld W ar when
agricultural produces prices shot up. This resulted in faster recovery o f over dues, and
im proved financial conditions o f the co-operative societies. Rem arkable developm
ent took place and the m ovem ent diversified to various consum ers and producers
societies.
The Agriculture Finance Com mittee (1944) under the chairm anship o f Professor
D R Gadgil and the co-operative planning com m ittee (1945) under the chainrm
anship o f R G Saraiya gave their recom m endations particularly relating to
agricultural finance. ' Shri Ramdas Pantulu named this period as “Period o f
Unplanned Expansion" 169 Recom m endations o f Saraiya Com mittee were
preferred and accepted in the thirteenth conference o f the Registrar o f Co-operative
Societies, 1947.

The following is the list o f co-operative acts in India:

Co-operative Acts in India

To start and develop, an economic activity requires an organized society in which
people collaborate with others to achieve their collective and individual goals. There
are various examples in Indian history when people cooperate or collaborate to
strengthen their econom ic and social conditions. The Hindu Sanyunkt Parivar Pratha
(Hindu Joint Family System) is one o f the glaring examples o f co-operative life in
India. Panchayat System is another typical exam ple o f co-operation or self help
groupism . Thus it can be said that the co-operative movem ent in India is not a new
concept, rather it has evolved and developed into its modern m anagerial form

Taccavi Loan Act

As per the recom m endations o f the Famine Com m ittee (1880), G overnm ent o f
India passed two acts namely; Land Improvement Act o f 1883 and A griculturist's
Loan Act o f 1884 for providing long term and short-term loans respectively.
Financial assistance was made available to the farm ing com m unity under the acts to
redeem their prior debts as well as to do agricultural operations.

Edward Law Committee 1901

Sir Frederick Nicholson was deputed by the M adras Province in 1892 to study the co-
operative in European countries especially Germ any to find out the possibility o f
introducing agricultural banks in M adras. He subm itted tw o reports in 1895 and in
1897 to the government, and stated in his report "Find Raiffeisen" and thereby recom
m ended organization o f banks on Raiffeisen model. Mr. D upem ix, the then
collector o f Utter Pradesh subm itted an interesting report based on his experim ent
entitles, "People’s Bank for N orthern India”. On the basis o f these two reports, a
com m ittee was constituted under the chairm anship o f Sir Edward Law in 1901 to
make proposal for the consideration o f the government. This com m ittee was in
favor o f organizing co-operative societies on Raiffeisen Model. Consequently a new
act was passed in 1904. 170
This was the first co-operative society act passed in India. The highlights o f the act.
inter alia, were establishm ent o f only primary credit societies by any ten persons;
classification o f rural and urban co-operative societies, appointm ent o f Registrar o f
C ooperative Societies, rural societies with limited liability and urban societies with
their own discretion. There was no provision for forming o f non-credit societies.

Co-operative societies Act 1912

This Act came into existence to over come the defects o f 1904 Act. The prom inent
feature were that only society with the object o f prom oting econom ic interests o f its
members on a co-operative basis could be established; provisions for establishing
federal societies/banks with limited liability; classification o f societies as limited and
unlimited; banning the non co-operatives to use the word "co-operation" and one
fourth o f the net profit o f a co-operative society to be carried to reserve fund were
made.

Edward Maclagan Committee 1914-15

 The governm ent o f India in 1914 to study the general w orking o f co-operative
societies and to suggest suitable m easures for their successful working constituted
this com m ittee.
It stressed importance o f the following aspects Loans to be given for productive
purposes only
❖Knowledge o f co-operative principles and proper selection o f m em bers
❖Careful scrutiny before granting loans and proper vigilance after words
❖Punctual repaym ent o f loans; recall o f loans in the event o f m isapplication and
encouragem ent o f thrift am ong the members.

Co-operation - A state subject 1919

With the introduction o f M ontagu Chelm sford Reforms Act in 1919, the M
aclagan Com m ittee recom m ended co-operation as a provincial subject. Provincial
governments were allowed to pass their own acts to adm inister the co-operatives in
their respective provinces. Bombay took the lead and passed the new act in 1925 and
was followed by Madras. Bihar. Orissa and Bengal etc.

Co-operative Credit Societies Act 1904

It was constituted under the chairm anship o f H Calvert to examine the working o f
agricultural co-operative societies. It observed. " If co-operative societies fail, the last
hope o f rural India will also fail’’. The highlights o f the report o f the com m ittee
were: cottage industries to be established on co-operative basis; agricultural m
arketing to be strengthened through co-operative m arketing societies and setting up o
f Indian Council for Agricultural Research to plan and m onitor agricultural
programmers.

Co-operative Planning Committee 1945-46

R G Saraiya headed it and it dealt with the respect o f drawing up a plan to

cooperative developm ent. It stressed importance o f converting rural societies into m
ultipurpose co-operatives; provision o f cash credit accom m odation for societies with
good perform ance; introduction o f controlled credit system and fixing credit limit for
every m ember by credit co-operative societies so as to lend m oney in time.

All India Rural Credit Survey Committee 1951-54

The most im portant m ilestone in the history o f co-operative societies was the
publication o f the report o f All India Rural Credit Survey Committee. It conducted a
vast survey covering about 75 districts, 600 villages and 1,27.343 heads o f families.
It found out that only 3.1 o f the total credit requirem ents were supplied by co-
operatives w ith 50 years o f their existence. The com m ittee subm itted its report
under the title o f “Integrated System o f Rural Credit". The recom m endations were;
state partnership, linking o f credit with marketing, training o f co-operative personnel,
crop loan system, long tern operations, fund establishm ent o f State Bank o f India,
large sized societies, effective supervisions, audit and creation o f special funds.

National Development Council’s Resolution 1958

National Developm ent Council adopted a policy resolution on the co-operative

legislation fram ework. It had observed, "M any o f the existing procedures im pede
the developm ent o f co-operation as a popular m ovem ent in which small groups and
com m unities can function freely and organize their activities along with the co-
operative lines without excessive official interference". cherefore the restrictive
features o f the existing co-operative legislations should be removed and both the
present co-operative laws Royal Commission on Agriculture 1926-28 172 and model
legislation and rules, which have been under consideration o f the states, should be
modified in accordance with the approach outlined in the resolution.

All India Credit Review Committee 1966-69

The RBI under the Chairm anship o f B Venkatappaiah constituted this committee.
Adoption o f the multi agency approach in the field o f agricultural credit, creation o f
Rural Electrification Corporation, setting up o f small farmers developm ent agency,
streamlining the credit policies and procedures, em phasizing the need for establishing
viable co-operative societies and formation o f Agriculture Refinance Corporation
were the highlights o f the recom m endations.

Committee on Integration of Co-operative Credit Institutions 1975-76

RBI appointed a com m ittee under the chairm anship o f Dr. R K Hazari, for
studying the possibilities o f integrating the two wings o f the co-operative societies. It
recommended single window approach.

Craficard 1979-81

The RBI appointed a com m ittee on March 1979 headed by B Sivaraman, to

review' the arrangem ents o f institutional credit for agriculture and rural developm
ent (CRAFICARD). Its main recom m endations were setting up o f the National
Bank for A griculture and Rural Development (NABARD), professionalization o f co-
operative managem ent, setting up o f "Evaluation and M onitoring Cell" and “
Recovery CelT' in each state land developm ent bank.

Multi-State Co-operative Act 1984

This act was passed to overcom e the deficiencies o f the M ulti-State Co-operative
societies Act o f 1942. The M ulti-State co-operative societies Act was enabling
legislation facilitating the incorporation, regulation and winding up o f M ulti-State
co-operative societies under the provisions o f the co-operative societies act o f the
state concerned. But the M SCS act is a com prehensive central legislation with a
central authority for prom oting regulating and supervising the co-operative societies
whose area o f operation is beyond one state. Though this act is similar to state co-
operative act (SCA), but many o f the restrictive provisions o f the SCA like
compulsory am endm ent o f byelaw s and reorganization o f co173 operative
societies, pow er o f governm ent nominees to veto the decisions o f the com m ittee
are deleted. The special features o f the act are appointm ent o f central registrar for
registration, definem ent o f co-operative principles (which are undefined in many
state acts) registration o f m ulti-state co-operative societies within six months from
the date o f receipt o f application, admission o f em ployees as m embers barring
voting power in case o f election to board m anagem ent and the am endm ent o f bye-
laws; restricting any person to be the president or vice-president o f more than one
m ulti-state co-operative societies at the same time, restricting persons holding office
o f president or vice-president o f m ulti-state cooperative societies for m ore than two
years.

Agricultural Credit Review Committee 1986-89

The RBI constituted on August P* 1986, an expert committee under the

chairmanship o f Prof. A M Khusro. to make a com prehensive review o f the credit
system in India. The highlights o f the recom m endations o f the com m ittee were
evolving business developm ent plans for each and every primary co-operative bank;
setting up o f a National Co-operative Bank o f India; stressing on developm ent area
approach; strengthening the short term and long term credit structure and
strengthening o f co-operative banks by evolving viability norms.

Mode! co-operative societies Act 1991

The approach o f the model law is to give a genuine character to co-operative

societies, to facilitate building o f an integrated co-operative structure so as to evolve
a cooperative system, m ake a federal organization at various levels more responsive
and responsible towards their members, to minim ize the government control and
interference to enable cooperators and co-operative societies to develop self reliance
and self confidence with authority o f decision making and to elim inate politicization.
The draft law meets the norms o f governance o f a dem ocratic autonom ous
enterprise in the country so deeply com m itted to dem ocratic values.

Co-operatives and the government: The Third Path

After the attainm ent o f independence, the question o f economic ideology

inevitably cropped up directly or indirectly, consciously or unconsciously, patently or
latenth . India had two alternatives to consider- the path o f capitalist developm ent
based on laissez -taire. 1 the path followed by the United Kingdom and United States,
and the path o f the com m unist developm ent followed by USSR. India decided to
mix the two and developed the third path called dem ocratic socialism, it is a com
bination o f both, the public sector and the private sector. The third factor was co-
operative, which was the closest to the dem ocratic socialism.
The objectives o f the planned developm ent, which were decided for India's
progress, were very close to that o f co-operative movement.
Some o f the objectives o f the plans were:
1. Increased agricultural production through supplies and services to millions o f
farmers
2. Creation o f em ploym ent opportunities.
3. Support to the increasing lot o f small and marginal farmers
4. Helping to the rural artisans
5. Encouraging cottage and sm all-scale industries.
6. Setting up good public distribution system Such objectives o f the national planning
could be fulfilled by the co-operative societies only. So the private sector started
developing in urban areas and the co-operative societies in the rural areas. The com m
ercial banks lent money mostly to the traders and cooperative banks to the landless
farmers and small farmers. This process generated lots o f em ploym ent opportunities
in the rural areas. The consum er's co-operative societies controlled the prices o f the
food grains in case o f scarcity.

The role of the government in the co-operative societies

1. It supports in the share capital o f the co-operative societies by way o f margin

money loans and guarantees.
2. The Registrar o f Co-operative Societies help in formation and registration o f the
cooperative societies.
3. The office also guides the m em bers in the routine functioning o f the society.
4. The officers also do the visit to the society and inspection o f the activities.
5. The governm ent from time to time formulates various financial support schemes
for the co-operative societies.
6. The governm ent spares its officers o f Indian A dm inistrative Services and other
services to the deputation to work for co-operative societies.
7. It also helps in closure and liquidation o f the co-operative societies.
8. It represents in the board o f directors o f the co-operative societies.
9. The governm ent fram es the policies for the co-operative societies. The
government starts various co-operative schools and colleges for the spread o f co-
operative education.

After the independence in 1947. the Planning Commission was set up by the
governm ent o f India in March 1950.Thus the democratic planning o f five-year
periods started and the planning com m ission prepared its First Five Year Plan (1951)
which emphasized to ensure large scale involvement o f public (Public Cooperation)
and "transparency and co-ordination between various levels o f adm inistration".
Consequently co-operative societies em erged as instrum ent/m edium to im plement
National Plan.
"There is no co-operative movem ent in India, there is only the co-operative policy o
f governm ent" said Sir Horace Plunkett, the great pioneer o f co-operative movement
in Ireland, in spite o f considerable quantitative expansion o f the co-operative
societies, this observation has not lost its validity. Indeed it has become all the more
pertinent. Functions of the Government Chart 4.2: Role of Government M inimal
Functions Addressing Market Failures Providing pure public goods Defense Law and
Order Public Health M acroeconom ic M anagem ent Improving equity Protecting the
poor: Anti poverty program m es D isaster relief Interm ediate Functions A ddressing
externalities: Basic education Environm ental protection R egulating M onopoly:
Antitrust policy Utility regulation O vercom ing im perfect information; Insurance
Financial regulation C onsum er protection Providing social Insurance: R edistribute
pensions Fam ily allow ances U nem ploym ent insurance A ctivities Functions
Coordinating private activity Fostering markets Cluster initiatives Redistribution A
sset redistribution Source: The World Bank, World Development Report 1997 (New
York; Oxford University Press 1997), Table 1.1 Page 27 The above chart clearly
indicates that protecting poor people is the minimal function o f the state. Creating
favorable atm osphere for formation o f co-operative societies can do this. Let the
poor weavers o f pow er loom co-operative societies in M alegaon make collective
efforts by forming the co-operative societies, which not only increased their buying
pow er but also enables them to com pete in the global com petitive markets.
Recommendations of 4*'' Indian Cooperative Congress (Selected Points)

The 4th Indian Cooperative C ongress was convened in 2001 at N ew Delhi.

The Congress resolved the following recommendations:

1. NABARD should organize/undertake specific and need-based studies by

formulating appropriate Term s o f Reference, extend assistance for Development o f
Common Software and other identified areas o f im portance to the Cooperative
Credit Sector. 177
2. The Congress to study the Credit System and Suggest M easures for Strengthening
the Cooperative Credit Sector.
3. The Congress resolves that the recom m endations o f High Power Com mittee o f
RBI in respect o f am endm ents in Cooperative Societies Acts be taken up by the
States and Central G overnm ent at the earliest.
4. The Congress strongly denounces the practice o f suppression o f cooperative
managem ent on political consideration since it is highly undemocratic.
5. The Congress notes with great concern the growing tendency at the level o f State
G overnm ents to reduce the budgetary support to the training and education activities
for the cooperative institutions by the Coop. Unions at the State & D istrict levels.
Congress strongly recom m ends and urges the State Governm ent. To provide for
adequate budgetary support to training and education program mes for the
cooperatives.
6. N CU I/N CCT should take into account training needs o f different sectors o f
cooperatives in the context o f changing environm ent and design and conduct
appropriate training in consultation with sectoral federations/user organizations.
7. Cooperative Law should provide for reservation o f at least 10% for women in the
M anagem ent Com m ittees o f the Cooperatives at all levels.
8. Intensive education/aw areness program mers for em powerm ent o f women
through cooperatives should be worked out and implemented through cooperative
unions, training institutions, panchayati raj institutions and educational institutions.
9. The cooperatives have g ro w n in number, size and volume; a large num ber o f
them particularly at the base level are weak and non-viable. Cooperatives should be
revitalized by drawing institution specific plans and implemented as a package in a
time bound manner. Federal Cooperative organizations should take initiative in this
direction and ensure support from various quarters including State Governm ents.
 10. Cooperative Law needs com prehensive changes to make the cooperatives m
ember driven, dem ocratically m anaged with functional autonom y. Removing all the
restrictive provisions should elim inate govt, control and interference.
11. That the area o f operation o f A pex/Regional/Prim ary weavers cooperative be
clearly dem arcated and there should be no overlapping. Develop strong business
linkages between these cooperatives for smooth m arketing enabling them to face the
challenges o f powerloom /liberalisation & WTO.
12. To face the challenges o f market-oriented economy, cooperatives should promote
professionalisation at various levels by adopting modern m anagem ent and
information technology
ADVANTAGES AND DISADVANTAGES OF COOPERATIVE
SOCIETIES

ADVANTAGES

1. Voluntary organization

The membership of a cooperative society is open to all. Any person with common
interest can become a member. The membership fee is kept low so that everyone
would be able to join and benefit from cooperative societies. At the same time, any
member who wants to leave the society is free to do so. There are no entry or exit
barriers.

2. Ease of formation

Cooperatives can be formed much easily when compared to a company. Any 10

members who have attained majority can join together for forming a cooperative
society by observing simple legal formalities.

3. Democracy

A co-operative society is run on the principle of ‘one man one vote‘. It implies that all
members have equal rights in managing the affairs of the enterprise. Members with
money power cannot dominate the management by buying majority shares.

4. Equitable distribution of surplus

The surplus generated by the cooperative societies is distributed in an equitable
manner among members. Therefore all the members of the cooperative society are
benefited. Further the society is also benefited because a sum not exceeding 10 per
cent of the surplus can be utilized for promoting the welfare of the locality in which
the cooperative is located.

5. Limited liability

The liability of the members in a cooperative society is limited to the extent of their
capital contribution. They cannot be personally held liable for the debts of the society.

6. Stable existence

A cooperative society enjoys separate legal entity which is distinct from its members.
Therefore its continuance is in no way affected by the death, insanity or insolvency of
its members. It enjoys perpetual existence.

7. Each for all and all for each

Co-operative societies are formed on the basis of self help and mutual help. Therefore
members contribute their efforts to promote their common welfare.

8. Greater identity of interests

It operates in a limited geographical area and there is greater identity of interest

among members. Members would be interacting with each other. They can cooperate
and manage the activities of the society in a more effective manner.

9. Government support

The government with a view to promote the growth of cooperative societies extends
all support to them. It provides loans at cheap interest rates, provides subsidies etc.

10. Elimination of middlemen

Cooperatives societies can deal directly with the producers and with the ultimate
consumers. Therefore they are not dependent on middlemen and can save the profits
enjoyed by the middlemen.
11. Low taxes

To promote the co-operative movement and also because of the fact that it is a non-
profit enterprise, government provides various exemptions and tax concessions.

12. Rural credit

Co-operative societies have contributed significantly in freeing villagers from money

lenders. Earlier, money lenders used to charge high rates of interest and the earnings
of the villagers were spent on payment on interest alone.Co-operatives provide loans
at cheaper interest rates and have benefited the rural community. After the
establishment of co-operatives, the rural people were able to come out of the grip of
money lenders.

13. Role in agricultural progress

Co-operative societies have aided the government’s efforts to increase agricultural

production. They have improved the life of the people in rural areas. They serve as a
link between the government and agriculturists. High yielding seeds, fertilizers, etc.
are distributed by the government through the cooperatives.

14. Own sources of finance

A cooperative society has to transfer at-least one-fourth of its profits to general

reserve. Therefore it need not depend on outsider’s funds to meet its future financial
requirements. It can utilize the funds available in the general reserve.

15. Encourages thrift

Cooperative societies encourage the habit of savings and thrift among their members.
They provide loans only for productive purposes and not for wasteful expenditure.

16. Fair price and good quality

Co-operative societies buy and sell in bulk quantities directly from the producers or to
the consumers. Products are processed and graded before they are sold. Bulk
purchases and sales ensure fair prices and good quality.

17. Social benefit

Co-operative societies have played an important role in changing social customs and
curbing unnecessary expenditure. The profits earned by the co-operatives have been
used for providing basic amenities to the society.

DISADVANAGES

1. Limited funds

Co-operative societies have limited membership and are promoted by the weaker
sections. The membership fees collected is low. Therefore the funds available with the
co-operatives are limited. The principle of one-man one-vote and limited dividends
also reduce the enthusiasm of members. They cannot expand their activities beyond a
particular level because of the limited financial resources.

2. Over reliance on government funds

Co-operative societies are not able to raise their own resources. Their sources of
financing are limited and they depend on government funds. The funding and the
amount of funds that would be released by the government are uncertain. Therefore
co-operatives are not able to plan their activities in the right manner.

3. Imposed by government

In the Western countries, co-operative societies were voluntarily started by the weaker
sections. The objective is to improve their economic status and protect themselves
from exploitation by businessmen. But in India, the co-operative movement was
initiated and established by the government. Wide participation of people is lacking.
Therefore the benefit of the co-operatives has still not reached many poorer sections.

4. Benefit to rural rich

Co-operatives have benefited the rural rich and not the rural poor. The rich people
elect themselves to the managing committee and manage the affairs of the co-
operatives for their own benefit.

The agricultural produce of the small farmers is just sufficient to fulfill the needs of
their family. They do not have any surplus to market. The rich farmers with vast tracts
of land, produce in surplus quantities and the services of co-operatives such as
processing, grading, correct weighment and fair prices actually benefit them.

5. Inadequate rural credit

Co-operative societies give loans only for productive purposes and not for personal or
family expenses. Therefore the rural poor continue to depend on the money lenders
for meeting expenses of marriage, medical care, social commitments etc. Co-
operatives have not been successful in freeing the rural poor from the clutches of the
money lenders.

6. Lack of managerial skills

Co-operative societies are managed by the managing committee elected by its

members. The members of the managing committee may not have the required
qualification, skill or experience. Since it has limited financial resources, its ability to
compensate its employees is also limited. Therefore it cannot employ the best talent.
Lack of managerial skills results in inefficient management, poor functioning and
difficulty in achieving objectives.

7. Government regulation

Co-operative societies are subject to excessive government regulation which affects

their autonomy and flexibility. Adhering to various regulations takes up much of the
management’s time and effort.

8. Misuse of funds

If the members of the managing committee are corrupt they can swindle the funds of
the co-operative society. Many cooperative societies have faced financial troubles and
closed down because of corruption and misuse of funds.
9. Inefficiencies leading to losses

Co-operative societies operate with limited financial resources. Therefore they cannot
recruit the best talent, acquire latest technology or adopt modern management
practices. They operate in the traditional mold which may not be suitable in the
modern business environment and therefore suffer losses.

10. Lack of secrecy

Maintenance of business secrets is the key for the competitiveness of any business
organization. But business secrets cannot be maintained in cooperatives because all
members are aware of the activities of the enterprise. Further, reports and accounts
have to be submitted to the Registrar of Co-operative Societies. Therefore information
relating to activities, revenues, members etc becomes public knowledge.

11. Conflicts among members

Cooperative societies are based on the principles of co-operation and therefore

harmony among members is important. But in practice, there might be internal
politics, differences of opinions, quarrels etc. among members which may lead to
disputes. Such disputes affect the functioning of the co-operative societies.

12. Limited scope

Co-operative societies cannot be introduced in all industries. Their scope is limited to

only certain areas of enterprise. Since the funds available are limited they cannot
undertake large scale operations and is not suitable in industries requiring large
investments.

13. Lack of accountability

Since the management is taken care of by the managing committee, no individual can
be made accountable for in efficient performance. There is a tendency to shift
responsibility among the members of the managing committee.

14. Lack of motivation

Members lack motivation to put in their whole hearted efforts for the success of the
enterprise. It is because there is very little link between effort and reward.
Co-operative societies distribute their surplus equitably to all members and not based
on the efforts of members. Further there are legal restrictions regarding dividend and
bonus that can be distributed to members.

15. Low public confidence

Public confidence in the co-operative societies is low. The reason is, in many of the
co-operatives there is political interference and domination. The members of the
ruling party dictate terms and therefore the purpose for which cooperatives are formed
is lost.

FEATURES OF CO OPERATIVE SOCIETY

1. Voluntarily Organisation:

Co-operative Organisation is a voluntarily association of individuals seeking to

improve their economic conditions through joint efforts. There is no legal binding or
coercion from any corner for a person to become a member. A member is also free to
quit the organisation at any time.

2. Common Interest:

Unlike a Joint Hindu Family where membership is by – birth or by marriage into the
family, a common interest brings members of a cooperative society together. The
prime objective of the cooperative would be to this common interest.

3. Open Membership:

Membership of the organisation is open to everybody. There is no restriction or time

limit for enrolling as a member. Members can join anytime by paying a small
membership fee or by subscribing to share capital of the co-operative. However, a
minimum of 10 members are required to start a cooperative.

4. Democracy:

The Co-operative Organisation is run on democratic lines. Members elect a board of

Directors, who manage the affairs of the society on behalf of the members and are
answerable to the members of the society. Thus, cooperative societies are truly
democratic organisations.

5. Equality of Vote:

In all matters requiring an opinion of members, a vote is taken. Each member,

irrespective of his position in the society or the number of shares held by him, is
entitled to only one vote. There is no provision for voting by proxy. This ensures that
the opinions all members of the society are given equal weightage.

6. Limited Return on Capital:

The unique feature of a cooperative society is that its objective is to ensure the
wellbeing of its members, and not profit. Thus, capital contribution does not enjoy the
same importance as in case of other forms of business. However, capital rewarded
with a small rate of interest. Profit distribution is not based on capital contribution.

7.Distributive Justice:

Profits earned by the society are distributed amongst its members according to the
extent of business transacted by the member with the society. A specified portion of
profits is transferred to Statutory Reserve Fund and then a fair rate of interest is paid
on capital subscribed by the members. Remaining Profits are distributed based on
dealings of members with the society.

8. Limited Capital:

Co-operative Societies are largely formed by people with limited economic means.
Moreover, there is no incentive to contribute more capital as it earns limited returns
and is not considered for distribution of profits. Thus, the amount of capital with the
society is very small. Bulk of the funds is raised in the form of loans and grants.

9. Cash Transactions:
A distinctive feature of cooperative societies is that almost all transactions are in cash.
There is no trading in credit, as liquidity and -safety of funds is very crucial. The risk
of bad debts is eliminated to protect the small capital base.

10. Legal Status:

A cooperative society must be registered under the Cooperative Societies Act, 1912,
or respective state cooperative laws. On registration, it becomes and independent
entity of its own, distain it from its members. It can enter into contracts on its own. It
can also sue other people and organisation in a court of law.

11. Privileges:

A registered cooperative society enjoys certain privileges and exemptions granted by

the Central and State Governments. It is exempt from payment of Income Tax, Stamp
Duty, Registration Fees etc. A cooperative society has prior claim over the property of
its debtors compared to other creditors.

12. State Control:

Cooperative societies are governed by provisions of relevant laws and are subject to
state supervision and control. One of the reasons is the amount of grants received by
the societies from the government.

13. Morality and Ethics:

The objective of cooperative society is not profit, but mutual gain, based on mutual
trust. The society mainly deals with its members. The transactions of the society are
above board; “the moral element in its aims is as important as the material.”

14. Transfer of Shares:

There is no provision for sale or transfer of shares held by a member of the society in
the capital of the society. However, there is a possibility of withdrawal of capital. The
member can quit the society and take back his capital contribution after giving due
notice
FORMATION OF CO-OPERATIVE SOCIETY

A Co-operative Society can be formed as per the provisions of the Co-operative

Societies Act, 1912. At least ten persons above of 18 years, having the capacity to
enter into a contract with common economic objectives, like farming, weaving,
consuming, etc. can form a Co-perative Society. Cooperative Societies Act is a
Central Act.However, ‘Cooperative Societies’ is a State Subject (Entry 32 of List II of
Seventh Schedule to Constitution, i.e.(State List). Though the Act is still in force, it
has been specifically repealed in almost all the States and those States have their own
Cooperative Societies Act. Thus, practically, the Central Act is mainly of academic
interest and as per preamble to the Act,the Act is to facilitate formation of cooperative
societies for the promotion of thrift and self-help among agriculturists, artisans and
persons of limited means.

If object of the society is creation of funds to be lent to its members, all the
members must be residing in the same town, village or group of villages or all
members should be of same tribe, class, caste or occupation, unless Registrar
otherwise directs. The provision of minimum 10 members or residing in same
town/village etc. is not
applicable if a registered society is member of another society. The Statement of
Objects and reasons states as
follows:
(a) Cooperative Society can be established for purpose of credit, production or
distribution.
(b) Agricultural credit societies must be with unlimited liability.
(c) Unlimited society is not best form of cooperation for agricultural commodities.
(d) Unlimited society can distribute profits with permission of State Government.
 A society which has as its object the promotion of economic interests of its
members in accordance with cooperative principles can be registered as a Society.
Similarly, a society established with the object of facilitating operation of such a
society can also be registered under the Act.

CONDITIONS OF REGISTRATION
As per section 6(1) No society, other than a federal society, shall be registered under
this Act, unless it consists of at least ten persons [or such higher number of persons as
the Registrar may, having regard to the objects and economic viability of a society
and development of the co-operative movement, determine from time to time for a
class of societies](each of such persons being a member of a different family), who
are qualified to be members under this Act, and who reside in the area of operation of
society:
[Provided that, a lift irrigation society consisting of less than ten but of five or more
such persons may be registered under this Act.]
(2) No society with a limited liability shall be registered, unless all persons forming
the society reside in the same town or village, or in the same group of villages.
[(2-A) No crop protection society shall be registered, unless the Registrar is satisfied,
after such inquiry as he thinks necessary, that a draft of the proposal made by the
society for protecting crops, structures, machinery agricultural implements and other
equipment such as those used for pumping water on the land, was duly published for
inviting all owners of land likely to be affected by the proposal and all other persons
likely to be interested in the said lands to join the proposal or to send their objections
or suggestions and that the objections and suggestions received , if any, have been
duly considered by the society and that the owners in possession of not less than 66
percent in the aggregate of lands included in the proposal have given their consenting
writing to the making of the proposal and that the proposal made is feasible. For this
purpose, the society shall submit to the Registrar:
(a) a plan showing the area covered by the proposal and the surrounding land as
shown in the map or maps of the village or villages affected;
(b) an extract from the record of rights duly certified showing the names of the
owners of lands and the areas of the lands included in the proposal;
(c) Statements of such of the owners of the lands as consented to the making of the
proposal signed by owners before two witnesses;
(d) a detailed estimate of the cost of implementing the proposal; (e) a detailed
statement showing how the cost is proposed to be met.
When such society is registered, the cost of implementing the proposal shall be met
wholly or in part by contribution to be levied by the society from each owner of the
land included in the proposal, including any such owner who may have refused to
become a member of the society. The owner of every land included in the proposal
shall also be primarily liable for the payment of the contribution liable from time to
time in respect of such land].
(3) No federal society shall be registered unless it has at least five societies as its
members.
(4) Nothing in this Act shall be deemed to affect the registration of any society made
before the commencement of this Act.
(5) The word “limited” or “unlimited” shall be the last word in the name of every
society with limited or unlimited liability, as the case may be which is registered or
deemed to be registered under this Act.
If a society has limited liability, any individual member of such society cannot have
share capital more than onefifth of total capital. An individual member cannot have
interest in shares exceeding Rs 1,000. This restriction of 20% shares or Rs 1,000
shares value is not applicable to a registered society which is member of another
society. Thus, if a registered society is member of another society, it can hold shares
exceeding 20% or exceeding Rs 1,000 in value.

Explanation: For the purpose of this section and section 8, the expression “member of
family” means wife, husband, father, mother, [son, or unmarried daughter]

Thus, a registered society can be member of another society, but liability

of such other society must be limited, unless State Government otherwise directs.

A registered cooperative society can hold property, enter into contracts, institute
and defend suit and other legal proceedings and to do all things necessary for the
purposes of its constitution. A registered society can give loans only to its members.
However, it can give loan to another registered society with permission of Registrar.
 A society with unlimited liability cannot lend money on security of movable property
without sanction of registrar. State Government, by issuing a general or special order,
can prohibit oor restrict lending of money on mortTgage of immovable property by
any registered society or class of registered society.
Registrar, after inspection or inquiry, or on application received from 75% of
members of society, may cancel the registration of society, if in his opinion, the
Society should be dissolved. Any member can appeal against the order of Registrar
within two months to State Government or other Revenue Authority authorised by
State Government. If no appeal is filed within two months, the order of dissolution
shall become effective. If appeal is filed, the order will become effective only after it
is confirmed by appellate authority

ROLE OF CO-OPERATIVE SOCIETY

1.Creation of unity

“Unity is strength” is the guiding principle of a cooperative society. In this purpose

cooperative united the weaker and guide them to go ahead with mutual cooperation
which helps to endure social relationship.,

2. Awaking working zeal

Co-operate society helps to awake a new working spirit in the mind of those people
who are defeated and spiritless in the struggle of life.
Cooperative society encourages people to dream a new dream and work with new
inspiration.

3. Bringing welfare for the members

A cooperative society is established just for bringing the economic and social welfare
for its members. In this purpose, cooperative society develops thinking working
attitude as well as the mental condition of the constituents.
Besides by self retirement opportunity and giving dividends. It ensures economic
development.

4. Reducing inequality of wealth

Capitalism creates inequality of wealth, and cooperative society helps to reduce this
as well as helps the equal distribution of wealth.
It creates self-employment opportunities and encourages the members to compete
with others.

5. Establishing equal rights

To establish equal rights, cooperative society fixed the limitation of purchasing shares.
Besides this, democracy and equal voting rights are also followed. Equal right
contributes to establishing social order and justice.

6. The teaching of moral principles

Cooperative society plays an important role in mental improvement by teaching moral
principles like unity, trust, honesty, order, cooperation, which ensure social order.

7. Improving skill
Cooperative society leads a great role by providing a training program for improving
the skill of uneducated poor and unskilled members.

8. Removal of middle man

The cooperative society helps to protect the lower and middle-class people of the
society who have fixed income, from the greedy clutch of profiteering, capitalist, and
the middle man.

This society produces or collects goods from the manufacturer and supplies these
goods to the members at a cheap rate. In this way, it achieves its objectives.
9. Loan facilities
Poor producers suffer from capital problems. Cooperative credit society, multipurpose
cooperative society lend money to these people at a very low-interest rate.

10. Economic development

By developing agricultural and irrigation systems and to give loans and counseling for
small industries and cottage. It also helps to remove poverty and ensure economic
development of the country

ACT & RULES APPLICABLE

A Co-operative Society functions as per the provisions of

1. Co-operative Societies Act under which the same is registered.

2. Co-operative Societies rules made there under

3. Bye-laws approved by the registrar at the time of registration and amendments

made from time to time and approved by the registrar.

4. Notification and Orders

1. Co-operative Societies Act

We have a number of Co-operative Societies Acts functional in different states like
– Maharastra Co-operative Societies Act, 1960,
– Pondicherry Co-operative Societies Act, 1972,
– Karnataka Co-operative Societies Act, 1959,
– Delhi Co-operative Societies Act, 1972,
– Kerala Co-operative Societies Act etc.
When the area of operation is restricted to one state, the State Co-operative Act &
Rules, under which the society is registered will be applicable.
In a particular state, if Co-operative Act and Rules is not enacted, the Central Act
which is known as The Co-operative Act, 1912 and its rules will be applicable.
When the area of operation of Society is spread in two or more states. The Multi-State
Co-operative Societies Act, 2002 and its rules shall be applicable.

2. Co-operative Societies Rules

A set of rules is also framed under the respective State Co-operative Act for
procedural aspects.

3. Bye-laws
Each society also registered with the bye-laws for internal management of the
societies duly approved by the registrar at the time of registration of the society. The
bye-laws of a society constitute a contract between a member and the society and it
provide for the management of the society. The bye-laws are framed within the
provisions of the Act and the rules made there under.
Bye-laws include the objects of the society and completely define and restrict the
society’s activities, but the rights and liabilities of members are determined by the Act
and Rules and not by the bye-laws as such.

4. Notification and Orders issued from time to time by the Government, or any other
Authority as prescribed under the Act, Rules there under

TYPES OF CO-OPERATIVE SOCIETIES

1. Consumer Cooperative Society

These societies are primarily for consumers who wish to buy household goods at
lower prices. The society buys goods or products in bulk amounts directly from the
producer on wholesale rates and sells them to the members, thus eliminating the need
for a middleman. The purchased goods are sold to members and non-members in cash.
Capital is raised by issuing low denominational shares to the members who also get
dividends on the shares. Consumer co-operatives do not use advertising but rely on
word-of-mouth. They ensure a regular supply of goods at reasonable rates. They set
up stores or outlets to sell goods and avail huge trade discounts from producers. Some
of the best examples of a consumer co-operative society are Super Bazar and Apna
Bazar.

2. Producer Cooperative Society

Also known as industrial co-operatives, these types of societies look out for the small-
scale producers in a cut-throat market scenario. Production and distribution are
handled from within the co-operative. These producers could be farmers, ayurvedic
herbal medicine producers, organic produce sellers, handicraft or handloom producers,
artisans, etc. Raw materials, ingredients, tools, processing units, etc. needed for the
manufacturing or producing the goods are obtained by the members directly, provided
to the producers and the final output is distributed to the buyers/non-members without
a middle link. Producers pool in their resources, increase production volumes and
minimise risk in the face of the competitive capitalistic markets. Best examples are
dairy, fish farmers, weavers and artisans and tribal co-operatives.

3. Co-operative Credit Societies

These are urban and rural financial societies that provide loans to members at low
rates of interest, protecting the members from massive debts to traditional
moneylending agencies. They serve a basic but highly personalised banking role in a
sense. They have deposit schemes in forms of saving accounts, FD, RD, pension
schemes, etc. The money procured is then given on loans to members as personal
loans, agricultural loans, housing or vehicle loan, etc. These societies are regularly
aided by state and national government subsidies and funding. Some examples are
Teachers Co-op Credit society, State Electric Board Employee Co-op Credit Society.

4. Marketing Cooperative Society

Mostly for the benefit of farmers, these societies function to market the produce
profitably at the best possible prices, increase the bargaining strength of the farmers
and protect them from the trials of individual selling and market exploitation. The
profits are distributed on the basis of the contribution of produce made. They also
educate the farmers on market prices, stabilise supply against demand, help them get
loans, and help with grading, pooling, processing and procurement of produce and
provide safe storage and reliable transportation facilities. Some good examples are
Milk Co-operatives in Gujarat, Maha Grape, Cotton Marketing Co-ops.

5. Housing Cooperative Society

Housing co-ops are a type of society that provides affordable housing to the middle
and low-income groups. One becomes a member by purchasing shares in the co-
operative. Instead of owning the real estate, the members own a share in the entire
corporation, which in turn gives them a house to reside in. Such societies are
commonly found in urban and semi-urban cities. They construct the residences or
flats and provide them to the members to live in and collect the money in instalments.
In other cases, they provide the land to the members who themselves construct their
own residences.

6. Co-operative Farming Societies

The financially challenged farmer may not be able to maximise his agricultural output
individually and earn optimum profits. Farming co-ops are a way for farmers to retain
the right to their land, yet pool together and consolidate land, livestock and equipment
while earning a share in the total output as per the contribution made. In better
farming co-ops, members co-operate for pre-sowing, seeds, fertilisers and equipment,
and joint selling, but cultivate the land separately. In joint farming, they pool in the
land as well. Co-op tenant farming is the type in which the society leases the land to
the farmers and collects the rent. In collective farming co-ops, farmers are members
for life and cannot remove their land but can transfer the land rights to another.

CONSUMER COOPERATIVE SOCIETIES - DEFINITION

The consumer cooperative societies are formed to protect the interests of consumers.

The members comprise of consumers desirous of obtaining good quality products at

reasonable prices.
The society aims at eliminating middlemen to achieve economy in operations.

It purchases goods in bulk directly from the wholesalers and sells goods to the
members, thereby eliminating the middlemen.

Profits, if any, are distributed on the basis of either their capital contributions to the
society or purchases made by individual members.

GOVERNANCE AND OPERATION

Consumer cooperatives utilize the cooperative principle of democratic member

control, or one member/one vote. Most consumer cooperatives have a board of
directors elected by and from the membership. The board is usually responsible for
hiring management and ensuring that the cooperative meets its goals, both financial
and otherwise. Democratic functions, such as petitioning or recall of board members,
may be codified in the bylaws or organizing document of the cooperative. Most
consumer cooperatives hold regular membership meetings (often once a year). As
mutually owned businesses, each member of a society has a shareholding equal to the
sum they paid in when they joined.

Large consumers' co-ops are run much like any other business and require workers,
managers, clerks, products, and customers to keep the doors open and the business
running. In smaller businesses the consumer/owners are often workers as well.
Consumers' cooperatives can differ greatly in start up and also in how the co-op is run
but to be true to the consumers' cooperative form of business the enterprise should
follow the Rochdale Principles.

CONSUMER COOPERATIVES OFFER THE FOLLOWING ADVANTAGES:

1. Consumers get goods of good quality

2. Goods are sold without adulteration

3. Goods are sold in correct measurement. Irregularities found in measurement of

goods are avoided.

4. Middlemen are eliminated

5. Prices are comparatively cheaper

6. Regular supply of goods is assured.

7. No credit is allowed. So, there is no fear of bad debts.

8. Consumer cooperatives are located conveniently in residential areas, thus they are
quite accessible.

PRODUCER'S CO-OPERATIVE SOCIETIES - DEFINITION

These societies are set up to protect the interest of small producers.

The members comprise of producers desirous of procuring inputs for production of

goods to meet the demands of consumers.

The society aims to fight against the big capitalists and enhance the bargaining power
of the small producers.

It supplies raw materials, equipment and other inputs to the members and also buys
their output for sale.

Profits among the members are generally distributed on the basis of their
contributions to the total pool of goods produced or sold by the society.

Advantages of Producer’s Cooperative Society

A few small industrialist, labor, or producers establish a cooperative society to gather

their limited capability in order to get huge production facilities and this kind of
organization is called producers’ cooperative society. As they can’t produce huge
products as well as they can’t exist in the competition of selling, so they accumulate
their limited ability to establish such kind of organization.

The owners of the small and cottage industry and producers establish this cooperative
society to use their limited ability to consume large production facility. More
production and increase the ability of distribution is the main goal of this organization.
From the viewpoint of different nature, the advantages of producer’s cooperative
society are given below:

1. Increase income
Large production facility can be gained as each labor or producers produce combined.
It increases the volume of income as well. No single person has to set up the business
themselves; they have the support and money of other workers.

2. Elimination of middlemen

To refurbish the interest of small producers to eliminate the exploitation of

middlemen. That’s why products purchase and direct marketing collectively.
Consequently, it is not needed to depend on others. A cooperative society has a divide
legal entity. Hence, the death, bankruptcy, retirement, lunacy, etc., of the members do
not distress the perpetual existence of a cooperative society.

3. Removing the unemployment problem

This inventive society not only saves guard of the producers and labors but also it
takes new projects and enlarges its activities in accordance with increase the financial
ability. It creates employment and removes the unemployment problem. The proxy is
not allowed in cooperative societies. Thus, the management in cooperatives is
democratic.

4. Marketing facility

The blind competition is declined among small produces due to establishing such kind
of cooperative society. Production can be increased to measure the demand of the
market. As a result, marketing becomes easier.

5. Safeguarding existence

Producer cooperative society is essential in order to safeguard existence various kinds

of disadvantages as well as to exist in the market in comparison with prosperous
industrialists. Compared to the formation of a company, the formation of a
cooperative society is simple. Formation of a cooperative society also does not
involve long and difficult legal formalities.

6. Establishment of good industrial relations

The owners operate the activities labor in this kind of organization. As a result, the
disparity between owner and labor is naturally abolished. It creates a good
relationship between them. Like company form of ownership, the liability of members
is limited to the coverage of their capital in the cooperative societies. Government has
adopted cooperatives as an effective instrument of socio-economic change.

7. Using advanced technology and product

It is a goal of producers’ cooperative society that produces various kinds of developed

goods; takes various kinds of new projects, as well as to invest in introducing new
products. So, members can’ learn the technique of new entrepreneurship. A
cooperative society has a divide legal entity. Hence, the death, bankruptcy, retirement,
lunacy, etc., of the members do not distress the perpetual existence of a cooperative
society. Thus, cooperatives foster fellow feeling among their members and inculcate
moral values in them for a better living.

8. Reduction of cost

The owners perform just like the labor in this organization. Generally, the production
cost is reduced, because of huge purchase and production. Besides combine market
reduces the cost as well. Besides, it is also exempted from stamp duty and registration
fee.

At last, we can say that a lot of advantages of producers’ operative society. These
advantages make the producers’ cooperative society more demandable. Each producer
wants to gather willingly to be members of this organization to establish their rights.
Because they want to survive in society depending on their own status and contribute
to the national economy.

CREDIT CO-OPERATIVE SOCIETIES - DEFINITION

A credit co-operative society is an independent group of people belonging to the same

class, come together voluntarily to tend to they're common economic, social and
cultural agendas and requirements through an enterprise which is jointly-owned and
controlled democratically by such people. It reflects the willingness of the society to
be able to help each other while balancing the principles of social responsibility and
mutual help for the benefit of members and profit earning to be able to operate
efficiently for the long term. The Co-operative Societies Act, 1912, provides for credit
co-operative society registration.
 ADVANTAGES OF CREDIT CO-OPERATIVE SOCIETIES

The credit co-operative societies have played a major role in promoting economic
welfare and a sense of self-sufficiency among the rural community and the less stable
sections of the society. Unlike banks and other financial organizations which are
aimed at the creation of profits, co-operative societies balance the business durability
of the unit with the principle of helping the members honestly to attain financial
stability. Welfare thus remains the primary motto of such organizations.

CO-OPERATIVE MARKETING SOCIETIES: DEFINITION

It was first termed in European countries. It is defined as an organization or a form of

organization that consists of people voluntarily participating.

Along with the other human beings to promote the economic activities among the
group. There are many benefits of co-operative marketing in India.

Many of these benefits can be associated more with farmers than other people. Below
are the benefits listed in particular order.

BENEFITS OF THE CO-OPERATIVE MARKETING SOCIETIES

i Direct contacts with final buyers

ii Increase in the bargaining

strength iii Credit provision

iv Storage opportunities

v Market information

vi Transport

vii Standardizing and grading

viii Influencing the market prize

DEFINITION OF HOUSING SOCIETY:

As per section 2(16) of MCS Act, 1 960,”Housing society” means a society, the
object of which is to provide its members with open plots for housing, dwelling
houses or flats; or if open plots, the dwelling houses or flats are already acquired, to
provide its members common amenities and services.

TYPES OF CO-OP.HOUSING SOCIETIES

here are different types of Co-op.Housing societies such as:

(1) OPEN PLOT SOCIETIES: Societies in which members desire to purchase or

take on lease land on which building or buildings are proposed to be constructed,
known as OPEN PLOT SOCIETIES. The Building is constructed by the Society
themselves.

(2) FLAT OWNERS SOCIETIES: Societies consisting of purchasers of flats

under agreements entered into with builders under Section 4 of the Maharashtra
Ownership Flats (Regulation of the Promotion of Construction,Sale, Management and
Transfer) Act, 1963, known as FLAT OWNERS SOCIETIES. Here the Builder or the
Developer constructs the building and sells the individual flats to different persons.
Later, all the flat purchasers come together and form the societies.

(3) TENANTS SOCIETIES: Societies formed by tenants of the landlords who

had constructed the building/buildings and had let out the flats therein, known as
TENANTS SOCIETIES.

(4) HOUSING BOARD SOCIETIES : Societies formed by allottees of flats in

buildings constructed by the Bombay Housing and Area Development Board known
as HOUSING BOARD SOCIETIES.

PROCEDURE FOR FORMATION OF HOUSING SOCIETY

In all these four types of societies, the procedure to be followed for formulation of
registration proposals slightly differs. The requirements in respect of each type of co-
operative housing societies needs to be properly understood by every promoter or the
professional, charged with the responsibility of getting the society registered

The Chartered Accountants can undertake the responsibility of formation of Societies.

For the purpose of registration of the Societies the City of Mumbai has been divided
as per the Municipal Wards. There is a Deputy or Assistant Registrar of Co-operative
Societies for each Ward who is the Registration Authority for the Co-operative
Societies in that Ward. Normally the office of such Registering Authority (RA) is
situated within the limits of such Ward. However if no space is available for the office
of the RA in any ward the office of RA of such

Ward is at the office of Deputy Registrar Co-operative Societies India House 6th floor
opposite GPO Mumbai. In other places in each taluka a Deputy or Assistant Registrar
of Co-operative Societies is assigned the duties of registration and supervision of Co-
operative Societies.

(I)MEETTING OF PROMOTORS AND APPOINTMENT OF CHIEF

PROMOTER:

The first step to registrar a Housing Society is that minimum 10 adult individuals
from independent families desiring to form a Society should gather and hold a
meeting to (a)select a provisional committee and elect a Chief Promoter for formation
of a society and (b) select a name for such Society with three alternatives and to pass
appropriate resolutions in that behalf. In case of an Open Plot Society, the Chief
promoter should be authorised at such meeting to

(a) appoint architects and building contractors

(b) Negotiate and acquire a plot and

(c) get the plans and estimates prepared for such society. The specimen forms of
resolutions to elect a Chief promoter and to give him authority as aforesaid are
available with the Registrar office or at the Federations office.

(II) NAME RESERVATION:

The second step would be to apply to the registration authority (RA) for reservation of
name for the society and obtain letter from the RA in that connection. The resolutions
passed at the promoters meeting as above should accompany such application for
reservation of name as aforesaid. These forms are available at the District Co-
operative Housing Federation office.The letter reserving the name of the society
shall be valid for 3 months. The validity of the name is normally extended on an
application for 1 or 2 further terms of 3 months each.

(III) BANK ACCOUNT AND DEPOSITS:

The third step would be to (a) open a bank account in the name of the proposed
Society as per the RA’ s directions in that behalf that shall contained in the letter
reserving the name and (b) deposit therein the entrance fee share money and the
amount recovered for preliminary expenses from the promoters and obtain the
certificate from such bank in respect of such deposits. Normally the directions of the
RA are to open account with a proximate branch of the District Central Co-operative
Bank or any other urban Co-operative bank.

(IV) REGISTRATION FEE:

The fourth step is to deposit the registration fee with the Reserve Bank of India and to
obtain the receipted challan in that behalf. The registration fee for Housing Society is
Rs.2500/- and for general Society is Rs.1250/-.

(V) REGISTRATION PROPOSAL:

The fifth and final step is to prepare and to submit to RA the proposal for registration
of the society. he Chief Promotor has to submit the following documents along with
registration proposal.

a) FORM ‘A’ : Under Rule 4 of Maharashtra Co-operative Societies Rules an

application for registration of a society should be made in form ‘A’. The specimen of
Form ‘A’ is given in M.C.S. Rules,1961 and available in federation and leading
stationery shops..The application for registration in quadruplicate should be signed by
at least 60% of the promoters members and their signatures should be attested by
Chief Promoter.

b) Statement ‘A’: The prescribed Statement in form ‘A’ a requires particulars of

promoters members and tenements allotted to them, such as the name age occupation
current residential of the promoter member the cost of share amount etc.

c) Statement ‘B’: The prescribed Statement in form ‘B’ requires particulars of the
Proposed Society.
d) Statement ‘C’: Prescribed statement in form ‘C’ requires further information
regarding each of the promoters.

e) Four copies of bye-laws duly signed by all the Promoter members.

f) Statement of Account containing the preliminary income and expenditure of the

proposed society duly signed by Chief Promoter

g) Bank balance certificate for share capital & entrance fees.

h) Certificate of the title of the land by Advocate of good standing,

i) Specimen of agreement to acquire the land in case of open plot society and
specimen agreement for sale of tenements in case of Flat Owners Society,

j) Scheme showing viability of the society signed by Chief Promoter supported by

an Architect’s certificate

k) Declaration by at least ten promoter members including the Chief Promoter stating
that their residence is within the area of operation of the society. and

l) Undertaking of the Chief Promoter in X Y or Z the specimen whereof is

available in Federation or leading book stall.

m) A challan showing the deposit of the registration fees with the Reserve Bank
Of India, and n) Copy of the approved plans.

Thereafter pursue and get the same processed and obtain from RA the certificate of
registration with registered bye-laws etc.

In all the four types of housing societies the procedure to be followed for
formulation of registration proposals differs. Apart from the aforesaid
general requirements certain additional documents are required depending on the type
of society sought to be registered @

(a) Declarations in the prescribed form by the builders in case of Flat Owners Society

(b) In case of Society of Tenants, the detailed particulars of tenants

(c) In case of Housing Board Society a certificate from the Housing Board certifying
the list of allottees of the flats and a letter of confirmation from the Housing Board
that they will execute the agreement on the society being registered.

The proposal for registration of a society as submitted, should be complete in all

respects and the RA should be satisfied that

(a) the proposed society has complied with the provisions of the Act and the rules or
any other Laws for time being in force

(b) the proposed society has complied with the policy directly decisions issued by the
State Government under section 4 and

(c) the bye-laws being proposed are not contrary to the Act or Rules. Upon the
proposal being complete and upon RA satisfied, as aforesaid, he is under an
obligation under section 59(i) of the Act , to register such society within 2 months
from the date of lodging of application with RA. If the registration is not completed
within 2 months as aforesaid, then and in that event within a period of 15 days from
the expiration of the time limit, the RA is under an obligation to forward the proposal
for registration to the Government for further action.

Upon registration of a society under section 9(i) of the Act, the RA should grant to the
society a Certificate of its registration together with a certified copy of approved
byelaws. The order registering or refusing registration of the society is appeal able.

CO-OPERATIVE FARMING SOCIETIES: DEFINITION

Co-operative farming can be defined as an association of like minded farmers with

the sole aim of pooling their resources together for agricultural production.
Membership is voluntary and the idea is to help each other since they all individually
have very limited resources to start with.

ADVANTAGES

1. Reduces the cost of production

Co-operative societies are able to easily acquire machines for the use of individual
members so it reduces the time used in clearing the land for example. This also helps
the individual farmer to increase what he gets from the acreage under cultivation.
2. Easy access to farm inputs

As a co-operative, farm input suppliers are able to deal with them than would
otherwise have been the case if they approached the suppliers individually. The effect
is that they are able to get the needed supply of equipment and input on timely bases.
Inputs such as seeds and fertilizers arrive on schedule.

3. Increased production

One other advantage of co-operative farming is that the farmers are able to increase
their level of production. This is because the individual farmers now use improved
methods like tractor ploughing, improved seedlings, better pest control and better and
faster harvesting methods.

4. Increases farmers’ bargaining power

Another advantage of co-operative farming is that they are able to get a fair price for
their produce. This is because, as a group, they are able to properly bargain with the
buyers and or middle men. They could also hold on to their products to be able to sell
at the highest price possible.

5. Creates social links

The membership of the farmer in a co-operative group helps him or her to develop
social and business links that can become useful in the maximization of their
production. Apart from that it brings about brotherly feeling and everybody becomes
his brother’s keeper.

6. Opportunity for training

Co-operative societies are able to invite experts in their field to come and give them
education on new trends in the business or improvement upon the old methods of
doing things. Such training opportunities help the individual farmers to improve upon
their farming activities.
 RESEARCH AND METHODOLOGY

INTRODUCTION

Research methodology is a methodology for collecting all sorts of information and

data pertaining to the subject in question. The objective is to examine all the issues
involved and conduct situational analysis. The methodology includes the overall
research design, sampling procedure and fieldwork done and finally the analysis
procedure. The methodology used in the study consistent of sample survey using both
primary and secondary data.

RESEARCH METHODOLOGY OF THE STUDY

Under this section, the sources from which data are collected, the number of sample
size drawn, statistical tools to be used in the study for analyzing and interpreting the
data has been given. Sources of data For the purpose of the study the data has been
collected from secondary data to meet the objectives of the study and to learn about
various concepts related to the study.

Secondary data
The secondary data is the second hand data already processed by someone else and
used in the study by the researcher. The secondary data in this study has been used for
gaining knowledge about the different concepts related to the study. For this study,
secondary data regarding co-operative society is gathered from books, journals,
magazines as well as e-journals, newspaper articles.

OBJECTIVES OF THE STUDY

The present study has two fold objectives.

Firstly, to analyze the study about the cooperatives in India.

Secondly, to examine the role of cooperatives as it affects financial

inclusion in India.
SCOPE OF THE STUDY
This Study deals with co-operative society
The Study is limited to co-operative society in India only.The scope of the study is
that a swe all know co-operative society are growing day by day so it is very effective
to have a handful of data and knowledge which will give an idea of its operation and
its place in the market.

LIMITATION OF THE STUDY

The limitation of the study is that the time period was short so the data collected are
limited.
As the data collected is the secondary data which means it is historical data it is the
data of last year and so on.
The area of study is also limited as it only focus on co-operative society which is only
one aspect of variety of options.
Another limitation encountered by the researcher was that majority of people do not
have much knowledge of the co-operative society and what are their function and role
in the financial market
As due to the shortage of time the study is only confined to some of the aspect of
cooperative society and their role in financial market.

IMPORTANCE OF THE STUDY

We all are familiar with the word co-operative society but when it come to the part of
how much we know is comparative low as compare to that of private and public
sector bank .Only some are keen to know what exactly is co-operative society what
are their functions how do they operate. The study is being conducted so that the
students and other should have some knowledge about the co-operative and start
taking interest in that field. As the co-operative sector is also growing day by day so it
is somewhere must to know about everything .For that purpose the researcher has
thrown some light on it and has brief us upon what is co-operative society and what
are their role in the financial market.

DATA ANALYSIS
 The data can be collected from primary and secondary sources. The basic premises of
my study is secondary data.
Further the data has been interpreted and represented using following tools such as
1. Tables
2. Bar Graph

CONCLUSION
In this chapter the methodology of the empirical study was described.An appropriate
and sound research methodology is essential to the reliability and validity of the
conclusion drawn and for the recommendations made from the result of the study.
 CHAPTER 3
LITERATURE REVIEWS

INTRODUCTION

A review of literature is an evaluation report of information found in the literature

related to the study. The review should describe, summaries, evaluate and clarify this
literature. It should give a theoretical base for the research and help to determine
nature of research. A literature of review is more than the search for information and
goes beyond being a descriptive annotated bibliography. It is not just a descriptive list
of the material available or a set of summaries. The researcher requires to study the
available literature on the topic which may be found in books, periodicals, journals,
government reports and newspapers etc. this is called review of literature. In this
chapter researcher has outlined the literature related to consumer’s perception towards
virtual transactions.

REVIEW OF LITERATURE OF THE STUDY

(Dighe, and Gupte, 2011)This commentary is the eleventh edition of “The MCS Act,
1960 published in the year 2011”.According to the authors, the Co-operative
Movement represents a new spirit of association, self-reliance and harmony animating
the impulse towards the economic betterment, upward striving and better living.The
authors state that the co-operation by itself is not a separate activity but a method by
which several activities of the individual and group are organized taking the people
and the country to the goal namely the establishment of Commonwealth. Section 88 is
also discussed with the aid of a High Court judgment reg. Tejas Construction,
Chalisgaon vs. VandanKohade. The Hon’ble High Court had interpreted Section 88 as
inquiry by invoking provisions of Section 88 cannot be proceeded against person who
has nothing to do with the management of the society. Also the powers of the
Registrar to assess the damages against the delinquents have been confirmed. A
verdict given by the Hon’ble Supreme Court in Pundalik vs. District Deputy Registrar,
Chandrapore is discussed in relation to Section 73-FFF wherein it was held that once
it is found that the person has committed default, he shall cease to be a member of the
committee and his seat shall fall vacant. Section 74 was discussed regarding the
powers and jurisdiction of the Registrar being exercising statutory power.So far as the
allied laws incorporated by the author are concerned, I am of the strict view that
except a consolidated MCS Act with consolidated Rules there should be no other law
which a member of a society, a society, an Advocate or any other person should be
required to look into. This will save time, energy and efforts required to find out a
suitable provision in a given situation.

(Dighe,2014)Maharashtra Co-operative society Act, 1960.This act in a nutshell as

follows,This Act consists of 14 chapters.Chapter I consists of Sections 1 and 2
relating to short title, extent and commencement of the Act and definitions.vChapter
II consists of Sections 3 to 21A relating to the Registration of Society including
classification of society, by-laws, name of society, amalgamation of society, de-
registration of society, etc.Chapter III relating to the rights and liabilities, kinds,
transfer, expulsion insolvency,, with incorporation, duties and privileges of the
societies.Chapter V consistsvoting powers, restriction on holdings, shares, transfers,
etc. Chapter IV deals with state aids to the societies etcand
theirrelevantprovisions.Chapter VI ideals with property and funds of the
societies.Chapter VII management of the societies.,Chapter VIII audit, inquiry,
inspection and supervision.,Chapter IX deals with the settlement of disputes including
recovery of the amount due to certain societies.,Chapter X deals with liquidation
which includes winding-up, appointment of Liquidator, etc.Chapter X- Insured Co-
operative Bank.,Chapter XI working of Co-operative Agriculture and Rural
Multipurpose Development Bank.,Chapter XIII deals with Appeals, Review and
Revision preferred to the Co-operative Appellate Court and the State
Government.,Chapter XIII-A consists of one Section 154-A relating to the
Maharashtra State Co-operative Council.,Chapter XIV relates to the miscellaneous
provisions such as bar of jurisdiction of courts, notices in suits, rules, recovery of
sums due to government, Registrar’s powers to recover amounts by attachment and
sale of property, delegation of power of Registrar to certain authorities and officers,
etc.
(Hussain,2014)This research is based on the issue of effective rural development,
build economic self reliance,and development vehicle. The main object of the co-
operative study is to produce goods and deliver services to satisfy legitimate needs of
members. It is an essential tool for development of economically underdeveloped.Co-
operative organizations in the world an instrument of social and economic
transformation. The Nigerian societies have inadequate government to the
observation.,lack of member’s commitment. (L.Z.,2015)This decision taken by this
author,for conducting a study on meeting is to focus importance of common decision.

(Dighe,2013)This book is based on the 97th amendments to the Constitution of India.

The review of this book is as follows. The types of members are not framed
properly.So far as the insertion of active member is concerned, again, the definition is
so vague. It neither makes any sense nor does it confer any right in specie. By these
amendments communication of any correspondence by the Registrar and/or his office
bearersis mandatory but no provision for ascertaining acknowledgement or receipt is
made. Its helping manipulation. Generally, active members are less in number as
compared to non active members. In most of the cases, the flats are purchased for the
purpose of investments or a member does not reside in the premises as he is gainfully
employed elsewhere or maybe a senior citizen. Therefore, it is practically not possible
that active members would be available all the time. Consequently, such an active
member would lose his right. Therefore, this provision is unconstitutional and against
principles of natural justice.The establishment of State Co-operative Election
Authority is absolutely not of any help as the purpose of election authority is not
served. Further, any person found guilty of discharging his function under the State
Co-operative Election Authority shall be punished with a fine uptoRs. 500/- only that
means any person would commit or omit to discharge his official duty and by paying
fine of Rs. 500/- is scot free. Section 78 is deleted in to qua the regular societies and is
made applicable only to aided societies. Thereby leaving no
provisions/measures/checks on the illegalities which may be committed by non aided
societies.
(Memane,2011)Thepaper of this author has revealed the importance of the co-
operative society in Agriculture economy and its growing awareness, it’s benefits
which are useful for the progress and development. This paper is also evaluating the
objective of the society which is limited to its village and the proportion of loan
issued and loan outstanding which is indicating the good progress of co-operative
society in village.
(Patel,2014)research Scholar Mr. Patel has conducted research on selected c-
operative society of Gujrat to analyze the comparative financial efficiency of
performance. This study has revealed the advantages and disadvantages of co-
operatives. The disadvantages are mentioned in this study are limited resources,
inefficient management, lack of secrecy, absence of motivation which need to be
worked out. In this study comparative chart of Asia pacific and European countries
are also given.This study has also revealed information regarding different types of
societies and even for the selected co-operative societyin Valsad district.The
importanceand the significant functions of co-operative Banking society in India is
also studied by this scholar.

(Goyel,2012)The assumption in this research work is on the gradual change in the co-
operative of governance literature. The focus of this paper is to provide additional
rigour to the intellectual framework on the topic. In social exchange in study of co-
operation is stressed. It is evident that individuals are diverse from engaging in social
exchange.This exchange will give positive effect on economic gains.

3.3 Conclusion
It can conclude that from the review of literature related to the topic. It provided a
wide and extensive knowledge about the topic to the researcher. The review of
literature is an assessment of a body of research question. This chapter helps to
identifies what is the area of the study. This chapter helps to deeply understand the
problem and also suggestions provided by them helps to fill the gap between the
earlier and current research.
 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

Data Analysis
After data collection, it is analyzed according to consumer views, ideas and opinions
related to perception towards virtual transaction

Data Interpretation
It is done by using statistical tools like Tables, Bar graphs, and also using quantitative
techniques (by using these techniques) accurate information is obtained.

Table no.5.1:Year wise registered societies from 1986 onwards under MSCS, 2002

S.No Year No. of Societies

1 1986 1
2 1987 1
3 1988 4
4 1989 3
5 1990 2
6 1991 10
7 1992 8
8 1993 8
9 1994 12
10 1995 7
11 1996 7
12 1997 8
13 1998 5
14 1999 20
15 2000 15
16 2001 20
17 2002 15
18 2003 16
19 2004 35
20 2005 28
21 2006 15
22 2007 16
23 2008 31
24 2009 34
25 2010 53
26 2011 95
27 2012 247
28 2013 194
29 2014 250
30 2015 83
31 2016 19
32 2017 7
33 2018 8
34 2019 9
35 2020 3

1289
* Note : 167 No. of registered societies under MSCS, 2002 before 1986 and 9
Societies had been deregistered after 1986
Secondary data
SOURCE:https://mscs.dac.gov.in/
Interpretation:
According to the report from the year 1986 the number of registered societies kept on
increased and decreased.From the year 2008 the number of societies registered kept
on increasing.In the year 2012 it was 247 and then in 2013 it decreased.The highest
number of registered society was mark in the year 2014 with 250 number of societies
registered under MCC gradually it keep kept on decreasing and increasing by one or
two and in the last year it was 3.

Table no.5.2:List of Registered Societies from 1986 onwards under MSCS, 2002
STATE WISE

S No State / UT Name No. of Societies

1 ANDHRA PRADESH 19

2 ARUNACHAL PRADESH 1
3 ASSAM 5
4 BIHAR 18
5 CHANDIGARH 1
6 CHHATTISGARH 8

7 DADRA AND NAGAR HAVELI 1

8 GOA 2
9 GUJARAT 36
10 HARYANA 14

11 HIMACHAL PRADESH 1
12 JHARKHAND 8
13 KARNATAKA 28
14 KERALA 21

15 MADHYA PRADESH 26

16 MAHARASHTRA 566
17 MANIPUR 1
18 NAGALAND 1
19 NEW DELHI 133
20 ODISHA 19

21 PONDICHERRY 6
22 PUNJAB 24
23 RAJASTHAN 72
24 SIKKIM 1
25 TAMIL NADU 89
26 TELANGANA 6

27 UTTAR PRADESH 140

28 UTTARAKHAND 4

29 WEST BENGAL 47

Total: 1298

Societies under MSCS, 2002 before

1986 : 167

Grand Total : 1465

 Deregistered Societies : 9

Total Societies as on 31.07.2019 : 1456

Secondary data
SOURCE:https://mscs.dac.gov.in/

Interpretation:
According to the report the State with the highest number of registered society under
MCSC 2002 in India is Maharashtra with 566 registered society followed by New
Delhi with 153 following by Uttar Pradesh with 142.The lowest number of of
registered society under MCSC 2002 is one from the States Nagaland, UT Dadar and
Nagar Haveli,Assam,Chandigarh etc
Table no.5.3:List of Registered Societies from 1986 onwards under MSCS, 2002
TYPE WISE

S.No TYPE OF SOCIETIES No. of Societies

1 Co-operative Bank 65
2 Marketing 34
3 Tourism 8
4 Agro 234
5 Others 56
6 National Federation 22
7 Construction 8
8 Welfare 17
9 Credit 84
10 Handloom 30
11 Handicraft 4
12 Technical 4
13 Consumer 10
14 Industrial 31
15 Housing 140
16 Multipurpose 101
17 Fisheries 5
18 Dairies 95
19 2004 35
20 2005 28
21 2006 15
22 2007 16
23 2008 31
24 2009 34
25 2010 53
26 2011 95
27 2012 247
28 2013 194
29 2014 250
 30 2015 83
31 2016 19
32 2017 7
33 2018 8
34 2019 9
35 2020 3

2075
Types of societies (It also includes Cooperatives Bank/National Federations)

Secondary data
SOURCE:https://mscs.dac.gov.in/

Interpretation:
The highest number of cooperative society registered is under Credit type of
cooperative society with 584 registered society followed by Aagro cooperative society
with 234 numbers then Housing with 140 registered society and then Multi purpose
with 101 register society. Handloom,Handicraft,Technical have the least number of
registered society with 4 registered society.
ANALYSIS AND DISCUSSION

Cooperatives in India

Cooperative Society in India has celebrated its centenary year of service recently.
Indian cooperatives are unique as they were initiated and supported by the
government. Elsewhere it had always been organized only by volunteer members with
least or no government intervention. In India it was introduced in 1904, as theplanners
of the country firmly believed that it could serve for national development and also
could serve as a shied in protecting the vulnerable section of populace,especially the
farmers from certain social evils like agricultural backwardness, poverty and rural
indebtedness. Indian cooperatives today tirelessly serve inen dless areas of services.
They serve in credit and non credit areas. They deliver credits for agriculture as well
as non agriculture purposes. Agricultural cooperatives have played a major role in
India‟s Green and White (dairy) Revolutions, providing income and employment for
tens of millions of rural poor. There are over 150,000 primary agricultural and credit
cooperatives serving over 157 million agricultural/rural producers. They operate their

businesses in numerous non credit phases too. They work for milk producers,
agricultural producers, weavers,consumers, fishermen, coir makers, employees,
students of universities and colleges, and for many others.Agricultural cooperatives
have played a major role in India‟s Green and White (dairy) Revolutions, providing
income and employment for tens of millions of rural poor.

There are over 150,000 primary agricultural and credit cooperatives serving over 157
million agricultural/rural producers.
 CHAPTER 5
FINDING AND CONCLUSION

5.1NTRODUCTION
After data analysis and interpretation the next chapter that come is finding and
conclusion which are derived with the help of the survey conducted that is through the
data analysis.Findings are statement of fact and figures base on the in formation
collected.

FINDINGS
 There are various types of cooperative societies,Mainly in all type of field.
 The highest number of growing type of cooperative society is Credit Society
followed by Housing Society.
 Co-operative society is not a new concept but less people are aware of it
 Co-operative society is design to help the people
 Indian government supported the Cooperative movement due to which the
cooperative societies are growing
 The impact of cooperative society on small and rural people is more
 Agro Co-operative Societ plaed a major role in the Green and White Revolution
 Cooperative societies is growing in all state
 Developed State has more no. of co-operative Society
 They serve in credit and non credit areas.

CONCLUSION
The traders, professionals, small scale businessmen, salary earners are found to come
together and form a society to get their economic needs fulfilled. The directors
represent all the classes of people like professionals, traders, social workers,
politicians agriculturists, servicemen and women (housewives) also.
The directors have started Cooperative Society with an object of catering of the,
financial heeds of common man i.e. for economically backward and middle class of
the society but however they are financing to the big businesses also.
The Cooperative Society are found to be helpful for every class of society. While
allotting shares to the applicants, the directors gave priority to good relationship with
directors, social status, goodwill and type of profession in society. For the avoidance
of undue political interference, the political factors, so far have been kept at a safe
distance.
The Cooperative Society are providing finance to traders, small businessmen,
merchants, hawkers, women, artisans, salary earners, tiny units, cottage industries.
These classes of society are neglected by nationalized and cooperative banks because
of their uncertain income.
The directors of Cooperative Society give the highest preference to reason of loan as
well repayment capacity and credit worthiness of applicant while sanctioning loan.
The Cooperative Society have provided loan to small scale, cottage and female
entrepreneurs to some extent. Many of loanees use the loan amount to purchase shop
Galas, cows, agriculture land etc. It means the loanee use loan amount for purposes
other than those mentioned in the loan applications. When the loan amounts are used
for nonproductive purposes, it is difficult to repay the loan. It has also increased the
percentage of bad debts. Cooperative Society faces several difficulties in recovery of
loans such as debtors low repaying capacity, their mentality to avoid instalments of
loan, high rate of interest and non availability of recovery officer in the office and
increase in famine - stricken area.
 CHAPTER 6
SUGGESTION
INTRODUCTION

Suggestions are the idea or plan put forward for consideration. It is

something that implies or indicates a certain fact or situation. After
findings and drawing conclusions the researcher has put forward some
suggestions and recommendation drawn on the basis of the finding and
conclusions of the study. Hence these suggestions will help in the further
study in this topic. The researcher had listed out some suggestions and
recommendations under this chapter which will be helpful further

SUGGESTION

After drawing findings and conclusions the researcher has drawn

suggestions which are as follows:
Cooperatives today are viewed as failed institutions encircled by inefficiency and
corruption. This should be changed. People do not believe what you intent to do,
rather they judge you only by the things you have done. If cooperatives can give
successful products, sure they will believe cooperatives are kick and alive. But can
cooperatives give such products? Yes they can. All they need is morphing into new
design of working so that these weaknesses can be managed effectively:
Raise your share capital: Cooperatives in general, collect very nominal contribution
(as low as Rs10) from members towards share capital with a view to enable even the
poor to become a member. This liberal approach is jeopardized. It has neither helped
the business to grow nor has empowered the members. Rather it has eroded their
bindings with the business. Since the money investment is very meager, their real
involvement in business operations has become a question mark. So raising share
value will result both in increased member involvement as well as business soundness.
For example, Oneota a successful consumer cooperative store in England collects
$150 per share from their members so as to make sure their financial stature is strong
and healthy. Since the money invested is higher, members showed real involvement in
business operations and also receive higher dividend.
1. Make your shop attractive: Cooperatives banks attract very limited deposits
whereas the local commercial banks could attract a lot. The products in consumer
cooperative stores are quality assured and honestly priced; still their sales curve falls
lower than the sales curves of the local private shops, why? The answer is their
location and infrastructure. If you really want to be successful, be near to your
customer and present yourself in an attractive way. Unless their infrastructure gives a
sense of safety and quality in the minds of their customers, cooperative businesses can
not attract the modern day customers. So designing your location in an easily
accessible area is essential.
1. . Alter your working pattern: Cooperative business houses especially the consumer
stores and marketing cooperatives whose business is selling something to consumers,
can not run their businesses as government offices. They should be available to their
customers at the place and time convenient to them. Sometimes they may need to start
their business so early in the morning or stay late in the nights. In order to keep their
response positive and continuous, cooperatives should offer them a wonderful
shopping experience by introducing self service systems, computerized billing,
packing and door delivery for bulk buying etc. Member‟s feed back related to non
availability of certain goods, quality complaints, price variations, service complaints
etc. should be viewed and followed up seriously. In short the customer should be
made to believe that „whatever product the customer names, he will get it from
cooperatives at a fair price with reasonable quality‟.
2. . Be professional: The managers of cooperative businesses should be more
professional in their market operations. They should be vigil enough to trace new
marketing opportunities as at when they appear and make use of them for their further
growth. They should make brilliant purchase decisions by studying the market trends,
for example investing more in fast moving products may increase the returns. Quality
should be the watchword in cooperatives and steps should be taken to reduce the
wastages and cost of goods sold. In short, the manager or secretary of a cooperative
store should deliver his service in a professional way to prove himself competent and
his business successful.
4. Educate them the reality: Cooperatives are perceived as government institutions by
many. Even the members 50 Int. NGOJ. do not understand them as their own business
units. This ignorance or myopia is the reason why the members of the cooperative
themselves are not loyal to the business, the worst part of it is that most time they
readily enjoy the benefits and willfully refuse to pay back their liabilities. All this is as
a result of wrong understanding of the system. Unless they are educated on the
original nature of the business, the need for their own active participation in the
business operations and understanding the meaning of patronage and dividend all
other efforts will remain only futile. Publicizing the movement among people,
cultivating its values and characters in the tender minds of children can help introduce
the great movement to all concern in a constructive way.
 CHAPTER 7
BIBLIOGRAPHY& REFERENCES

The source from which we have collected the data or gathered the information for
purpose of our need it can be either websites,newspapers magazine, article, journals
or from the work of other which we have referred to complete our research.

https://mscs.dac.gov.in/
www.shodhganga.com
www.resarchnet.com
www.wikipedia.com
HUCS magazine
The Economic Time

REFERENCES

1.(Dighe, and Gupte, 2011)This commentary is the eleventh edition of “The MCS
Act, 1960 published in the year 2011”.
2.(Dighe,2014)Maharashtra Co-operative society Act, 1960.
3. (Dighe,2013)This book is based on the 97th amendments to the Constitution of
India.
4. (Goyel,2012)The assumption in this research work is on the gradual change in the
co-operative of governance literature.
And so on…