Co-operative Societies | Indian Polity for UPSC CSE PDF Download

Introduction

• Cooperative Societies are a voluntary group of people sharing common economic, social or welfare goals, coming together for mutual commercial, economic & developmental support.
• 97th Const Amd of 2011 gave Constitutional status & protection to cooperative societies.
  ≫ Made the right to form cooperatives a fundamental right (Article 19).
  ≫ Included a new Directive Principle of State Policy on promotion of Cooperatives (Article 43-B).
  ≫ It added a new Part IX-B entitled as “The Co-operative Societies” (Art 243-ZH TO 243-ZT.

Constitutional Provisions

• State Leg may make provision for Incorporation, regulation & winding-up of Cooperatives based on principles of voluntary formation, democratic control, member-economic participation, autonomous functioning.
• Strength : Board member strength decided by State Legislature (max 21). 1 seat reserved for SC or ST & 2 seats for women for Co-ops in which there are members from such categories. Term of Office is 5 years.
  ≫ There can be 2 co-opted members, without right to vote, from fields of banking, management, or other related fields(in addition to 21 directors)
  ≫ Additionally, Functional directors shall also be members of board.
• Election : Election to the board must take place before expiry of term of current board. Electoral powers to be vested in a body of choice by State Leg.
• Supersession & Suspension of Board : no board shall be superseded or kept under suspension for longer than 6 months. The grounds include :
  ≫ Persistent default / negligence of duties / committing acts against the cooperative or its members / elections not in accordance with the provisions of State Act.
  ≫ Supersession or suspension not possible for Co-ops with Govt shareholdings, loan, financial assistance, guarantee.
• Audit of Accounts : State Leg may make provisions for maintenance of accounts & audit of the same every year. Also lay down qualifications for auditors. A panel of auditors or auditing firms shall be selected by Govt, from which one will be appointed by General body of Co-op.
  ≫ Accounts of Co-ops will be audited within 6 months of close of financial year. Audit report of an apex cooperative society will be laid before Legislature.
  ≫ May also provide for convening of Gen Body within same period.
• Application of the Part lX-B :
  ≫ shall apply to multi-state Co-ops, where provisions regarding the Co-ops will be made by Centre.
  ≫ Shall also apply to UTs but Prez may exclude a part of the UT from the application of this Part lX-B.

Constitution 97th Amendment Act and Part IXB
The Constitution (Ninety Seventh Amendment) Act 2011 relating to the co-operatives is aimed to encourage economic activities of cooperatives which in turn help progress of rural India. It is expected to not only ensure autonomous and democratic functioning of cooperatives, but also the accountability of the management to the members and other stakeholders. As per the amendment the changes done to constitution are:-

• In Part III of the constitution, after words "or unions" the words "Cooperative Societies" was added.
• In Part IV a new Article 43B was inserted, which says: The state shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of the co-operative societies".
• After Part IXA of the constitution, a Part IXB was inserted to accommodate state vs centre roles.

Salient features Part IXB

• It makes Right to form cooperatives is a fundamental right.
• Reservation of one seat for SC/ST and two seats for women on the board of every co-operative society.
• Cooperatives could set up agency which would oversee election.
• Uniformity in the tenure of Cooperative Board of Directors.
• Provisions for incorporation, regulation and winding up of co-operative societies based on the principles of democratic process and specifying the maximum number of directors as twenty-one.
• Providing for a fixed term of five years from the date of election in respect of the elected members of the board and its office bearers;
• Providing for a maximum time limit of six months during which a board of directors of co-operative society could be kept under suspension;
• Providing for independent professional audit;
• Providing for right of information to the members of the co-operative societies;
• Empowering the State Governments to obtain periodic reports of activities and accounts of co-operative societies; which have individuals as members from such categories;
• Providing for offences relating to co-operative societies and penalties in respect of such offences.

Implications

• The amendment of the Constitution to make it obligatory for the states to ensure autonomy of cooperatives makes it binding for the state governments to facilitate voluntary formation, independent decision-making and democratic control and functioning of the cooperatives.
• It also ensures holding regular elections under the supervision of autonomous authorities, five-year term for functionaries and independent audit. Significantly, it also mandates that in case the board is dissolved, the new one is constituted within six months. Such a constitutional provision was urgently required as the woes of the cooperative sector are far too many, long-lasting and deep-rooted to be addressed under the present lax legal framework
• However, it fails to establish what constitutional amendments can’t do in reviving institutions and may be victim of rival political institutions at the state level as happened in case of 73rd amendments. It is feared that state-level politicians will do to this amendment on cooperatives what they did to the one on panchayats. Barring exceptions in a few sectors and states, the cooperative sector, particularly cooperative credit societies numbering over 120 million, has for a long time been in a shambles with all kinds of vested interests using them as personal fiefdoms and ladders to political power and means of personal aggrandisement.