ARMY INSTITUTE OF LAW, MOHALI

COOPERATIVE LAWS IN INDIA

HISOTRY OF COOPERATIVE MOVEMENT IN INDIA

PROJECT FOR X SEMESTER

IN PARTIAL FULFILMENT OF B.A.L.L.B. 5 YEAR DEGREE

SUBMITTED BY SUBMITTED TO
ANIMESH PUNEET GUPTA MS. UPAGYA SHARMA
1710 ASST. PROF. OF LAW
 ACKNOWLEDGEMENT

This project consumed a huge amount of work, research, and dedication. I would like to
express my deepest appreciation to all those who provided me with the possibility to
complete this project work. Sincere gratitude to our Professor, Ms. Upagya Sharma whose
superior knowledge and contribution in stimulating suggestions helped me to coordinate my
full effort in achieving the project.

ANIMESH P. GUPTA

Roll No. – 1710

 INDEX

S. NO. PARTICULARS
1. Introduction
2. History of Cooperative Movement
3. Cooperatives in India
4. Informal
5. Formal
6. Conclusion
INTRODUCTION

The concept of Co-operation envisages a group of persons having one or more common
economic needs, who voluntarily agree to pool their resources-both human and material and
use them for mutual benefit through an enterprise managed by them on democratic lines.

The term co-operative finds its origin in Latin and is derived from the Latin words- ‘co’
meaning ‘with’ and ‘operari’ meaning ‘work’. Co-operatives aim to provide self-help as well
as mutual help. It is joint enterprise of those who are not financially strong and cannot stand
on their own and therefore, come together not with a view of getting profits but to overcome
disability arising out of want of adequate financial resources and thus better their economic
condition.

The term ‘co-operative’ has been defined by H. Calvert as "A form of organization in which
persons voluntarily associate together as human being on the basis of equality for the
promotion of the economic interests of themselves"

The International Cooperative Alliance defines the term ‘co-operative’ as “an autonomous
association of persons united voluntarily to meet their common economic, social, and
cultural needs and aspirations through a jointly-owned and democratically-controlled
enterprise.”

HISTORY OF COOPERATIVE MOVEMENT

Cooperation is a basic human instinct and examples of co-operatives can be traced as far back
as to the ancient Greek society. However, the modern Co-operative Movement was founded
by the Rochdale Pioneers in 1844 at Lancashire, England. The Movement aimed to provide
an affordable alternative to poor-quality and adulterated food and provisions, using any
surplus to benefit the community.

FW Raiffeisen is known as the founding father of credit coops and is credited with the
establishment of the first cooperative lending bank in 1864 with the aim of tackling
widespread rural poverty and to thwart the debt traps laid by loan sharks in rural Germany. In
1866, he wrote a handbook on the establishment and governance of credit coops which
served as the global blueprint for creation of credit unions and cooperative banks.
COOPERATIVES IN INDIA

INFORMAL

Even before formal cooperative structures came into being through the passing of a law, the
practice of the concept of cooperation and cooperative activities were prevalent in several
parts of India.

Some of them were named as Devarai or Vanarai, Chit Funds, Kuries, Bhishies, Phads. In the
Madras Presidency were organised ‘Nidhis’ or Mutual-Loan Associations. In Punjab, a
society on cooperative lines was started in 1891 for controlling the common land of the
village for the benefit of the co-sharers. All these efforts were purely voluntary and strictly
non-official.

The Indian Cooperative Movement was also a result of distress of the rural, debt-ridden
population suffering at the hands of local moneylenders or ‘Mahajans’. The Cooperative
Movement in India can be traced back to the Deccan Riots of 1875 which were led by
farmers in Pune and Ahmednagar who revolted against increasing agrarian distress. The
rioters targeted the debt bonds, decrees and documents held by the moneylenders, which had
been signed by the distressed rioters under duress or ignorance.

FORMAL

This led the British Government to form the Deccan Riots Commission, 1875 and the Famine
Commission, 1880. Based on the recommendations of the Commissions, the British
Legislature passed three laws to ease the unrest amongst farmers:

1. Deccan Agricultural Relief Act, 1879

2. Land Improvement Loan Act, 1883
3. Agriculturists Loan Act, 1884

Subsequently, in 1892, the Governor of Madras deputed Sir Fredrick Nicholson to study the
problems of the farmers as well as the organisation of agricultural movements in Europe.
After extensive travel and study, Sir Fredrick Nicholson submitted his Report in 1895 in
which he recommended the formation of Rural Cooperative Credit Societies on similar lines
as Raiffeisen. Due to his contributions, Sir Fredrick Nicholson is known as the father of
cooperative movement in India.

PRE-INDEPENDENCE
Initial Stage: Based on the Report of 1895, the British Government setup the Indian Famine
Commission in 1901 under the presidency of Sir Edward Law, and its recommendations were
adopted in the form of the Cooperative Credit Societies Act, 1904. This marked the beginning
of the initial stage of the Cooperative Movement in India and led to the development of
cooperatives in various states across the country.

Salient Features of the Act:

 Any ten persons living in the same village or town or belonging to the same
class or tribe could form a cooperative credit society.

 Societies were classified as Rural and Urban depending if the majority of

the total membership (80%) was agricultural or non-agricultural.

 Rural society was not permitted to distribute profits, but in the case of
urban societies, profits could be distributed after carrying 25% of the net
profits to the Reserve Fund.

o Drawbacks of the Act:

 The act provided no legal protection to non-credit societies.

 It also made no provision for mobilising urban savings for financing

agricultural operations.

 The classification of societies into urban and rural was found to be arbitrary,
unscientific, and highly inconvenient.

 Many provisions of the Act of 1904 became a hindrance to the further spread
of the movement.

Modification Stage: The drawbacks in the Act of 1904 were rectified to a certain degree with
the enactment of the Cooperative Credit Societies Act, 1912.

Salient Features of the Act:

o The defects of the 1904 Act were remedied when the Cooperative Societies Act, 1912
was enacted.
o Salient Features:
  Any society, credit or otherwise, could be registered which had as its
objective, the promotion of the economic interest of its members.
 A federal society like the Central Bank or union could be registered.
 No member could have more than 1/5 of the total share capital or hold share
exceeding Rs. 1,000 in such a society.
 The societies were granted exemption from compulsory registration and
from the payment of income tax and stamp duties.

In 1915, the British Government appointed a committee under the leadership of Sir Edward
Maclagan to study the progress of the Cooperative Movement in India and to assess whether
the objectives of the movement were being met. The Committee observed several glaring
defects in the Cooperative Movement including- illiteracy, ignorance, rampant corruption,
unwarranted delays etc. and made key recommendations which could not be enforced due to
the outbreak of the First World War.

The Committee made the following recommendations:

 All members should be made aware of the cooperative principles.

 Honesty should be the main criterion for taking a loan.

 Dealings should be strictly confined to the members only.

 Applications should be carefully scrutinized before advancing loans and there

should be careful follow up for effective utilization of loans.

 One member-one vote should be strictly followed

Expansion Stage: The Chelmsford-Montague Reforms of 1919 further supported and

encouraged cooperatives by placing cooperatives under the Provincial List. This allowed the
various provinces to take a more grass-roots approach to encourage cooperatives and led to a
significant increase in the membership of cooperatives. During this time, an unprecedented
expansion was observed in the Cooperative Movement and various provinces passed their
own laws to suit specific needs. These include the Cooperative Societies Act of Bombay
passed in 1925, Madras in 1932 and Orissa in 1935. While these acts were based on the
Cooperative Societies Act, 1912, they were able to better support and promote the needs of
the respective Provinces.

Consolidation and Re-structuring Stage: Between 1930 and 1938, different committees were
appointed in provinces such as Madras, Punjab, Bombay, Travancore etc. to determine the
possibility of restructuring cooperatives. Furthermore, in the aftermath of the Great
Depression of 1929, the Reserve Bank of India established an Agricultural Credit
Department.

Recovery Stage: The Second World War and the All India Cooperative Planning Committee
in 1945 further boosted the growth of the Cooperative Movement which led to widespread
adoption of the Cooperative Movement in India. Between 1939 and 1947, the Indian
Cooperative Movement witnessed a number of Consumer Cooperative Stores being setup and
also witnessed Industrial Cooperatives being setup to produce war material.

POST-INDEPENDENCE

After Independence, India adopted a Mixed Economy consisting of three sectors- Private,
Public and Cooperative. Cooperatives were visualized as the balancing factor between the
Private and Public Sectors. The Indian Government recognized the importance of
cooperatives in India, and accordingly, made cooperatives an integral part of the Five-Year
Plans formulated by the Planning Commission.

In 1958, the National Development Council recommended the formulation of a national

policy on cooperatives, training personnel and setting up cooperative marketing societies.
The National Policy on Cooperatives was finally announced in 2002 with the objective of:

a. Providing support for promotion and development of cooperatives

b. Reducing regional imbalances
c. Strengthening cooperative education, training and human resource development

In the Constitution of India, the responsibility of the State to foster cooperative societies has
been enshrined as part of the Directive Principles of State Policy under Art. 43. Additionally,
the Right to Form Cooperatives has been recognized as a Fundamental Right under Article 14
as well as under Article 19 (1) (c). There have been subsequent amendments to the
Constitution of India vide The Constitution of Indian (Ninety-Seventh Amendment) Act,
2011, which amended Article 19 (1) (c) to specifically include cooperative societies and
introduced Article 43B and Part IXB to the Constitution.

Post-Independence India has been significantly impacted by the Cooperative Movement and
cooperatives have been a critical reason behind the success of the White Revolution and
Green Revolution. In 2021, the Government of India has launched a new ministry called the
‘Ministry of Cooperation’ which has been tasked with streamlining the processes to promote
‘ease of doing business’ and enable the development of multi-state cooperatives in India.
CONCLUSION

Cooperative societies can play a huge role in making people familiar with advanced and
emerging technologies. The cooperative movement has the capacity to solve people’s
problems as its principle focuses on uniting everyone, even while remaining anonymous.
Strict rules need to be implemented to check the irregularities in cooperatives. There is a need
to strengthen the cooperatives by providing market linkages for agricultural farmers as well
as cooperative societies.