Co-Operative Societies: Constitutionalisation & Constitutional Provisions

Introduction

Cooperative societies are voluntary associations formed by individuals to address common economic, social, and cultural needs and aspirations. They aim to promote the economic and social well-being of their members by fostering democratic decision-making, equitable distribution of benefits, and sustainable development. Cooperative societies play a crucial role in empowering communities, enhancing livelihoods, and fostering inclusive growth. 

Constitutionalisation of co-operative societies

97th CAA of 2011: Accorded Constitutional Status and gave protection to co-operative societies, and made three changes in the Constitution:

• The right to form co-operative societies is a fundamental right (Article 19).
• Added new DPSP on promotion of cooperative societies (Article 43B).
• Added new Part IX-B in the Constitution: “The Cooperative Societies” (Articles 243ZH to 243ZT).
• Subject/List: Seventh Schedule,  State list (Entry 32)

Constitutional Provisions of co-operative societies

• Incorporation of Co-operative Societies: State legislature: may make provisions for the incorporation, regulation, winding-up of co-operative societies (Article 243ZI).
  • Number and Term of Members of Board and its Office Bearers: (Article 243 ZJ)
    • Directors: Such number of directors may be provided by the state legislature but not more than 21.
    • Term of office: 5 years from the date of election and election of a board shall be conducted before the expiry of the term of the current board (Article 243 ZK) by such body, as may be provided by the state legislature.
    • The superintendence, direction and control of the preparation of electoral rolls and the conduct of elections to a co-operative society shall vest in such a body, as may be provided by the state legislature.
• Reservation of Seats: The state legislature shall provide reservation of 1 seat (SC/ST) + 2 seats (women) on the board of every co-operative society having members from such a category of persons.
• Co-opted Members: The state legislature shall make provisions for co-option of persons having experience in banking, management, finance etc. to the board whose numbers shall not exceed two (in addition to twenty-one directors) without any right to vote.
• Supersession and Suspension of Board and Interim Management (Article 243 ZL)
  • No board shall be superseded or kept under suspension for a period exceeding six months. (In the case of cooperative banks, other than multi-state cooperative banks, this period cannot exceed one year).
  • However, the board of any such co-operative society shall not be superseded or kept under suspension where there is no Government shareholding or loan or financial assistance or any guarantee by the Government.
• Audit of Accounts of Co-operative Societies (Article 243 ZM)
  • Maintenance and Auditing of Cooperative Societies: State legislature may make provisions for the maintenance and auditing of accounts of the co-operative societies (within six months of the close of the financial year) at least once in each financial year.
  • Appointment of Auditors: Every co-operative society shall be audited by an auditor or auditing firm, appointed by the general body of the co-operative society. However, such an auditor or auditing firm shall be appointed from a panel approved by the State Government or a body authorized by the State Government on this behalf.
  • Audit Report: the accounts of an apex co-operative society shall be laid before the state legislature.
• Offences and Penalties: The state legislature may make provisions for the offences relating to the co-operative societies and penalties for such offences.
• Filing of Returns: Every co-operative society shall file returns, within six months of the close of every financial year, to the authority designated by the State Government.
• Mandatory Annual General Body Meeting: The state legislature may provide that the annual general body meeting of every co-operative society shall be convened within a period of six months of the close of the financial year.
• Application to Multi-state Co-operative Societies:
  • The provisions of this part shall apply to the multi-state co-operative societies subject to the modification that any reference to the State Legislature”, State Act” or State Government” shall be construed as a reference to Parliament“, Central Act” or “Central Government”, respectively.
• Application to Union Territories:
  • The provisions of this part shall apply to the UTs. The President may direct that the provisions of this part shall not apply to any Union territory or part thereof as he may specify in a notification (Article 243 ZS).

Conclusion

By granting constitutional status to cooperative societies and recognizing their pivotal role in socio-economic development, the amendment aims to empower these entities and enhance their autonomy. 

The amendment facilitates greater participation of members in the democratic functioning of cooperatives and promotes transparency and accountability in their operations.