History of Cooperative Legislation in India
Rochadale Society of Equitable Pioneers, which was world’s first successful cooperative society in 1844,
was registered under the Friendly Societies Act as there was no separate Law under which Co-operative
societies could be registered. It was only in 1852 a separate law was enacted in Britain for co-operatives
in the form of Industrial and Provident Societies Act. Need was felt for a separate Law for Co-operatives
as the Companies Law does not facilitated the working of co-operative Societies because this Law is
basically framed for facilitating capital creation and profit maximization. Co-operatives, on the other
hand, are member centered organizations and aim at maximizing services to members. Co-operatives
are generally organizations of the poorer and deprived ones hence, the Law has to be simple and easily
understandable.
The first Law enacted on the subject in the India was the Co-operative Credit Societies Act (CCSA) of
1904. The salient features of CCSA 1904 are as under
(1) At least 10 persons living in the same village or town or belonging to the same class or caste could
start a society for encouraging thrift and self-help among members.
(2) The main function of the societies was to raise funds and give loans to members.
(3) Each province was to appoint a Registrar of Co-op Societies to guide and control the societies. (4) In view of concessions given to societies and in order to create confidence among the public, the
accounts of each society were to be audited by the Registrar or his staff.
(5) Societies having four-fifth of the members as agriculturists were classified as rural societies, and
society with four-fifth non-agriculturist members were urban societies. Rural societies had unlimited
liability whereas the urban societies could have limited or unlimited liability. In rural societies, no
dividends were allowed. All profits were credited to the Reserve Fund. In urban societies, one-fourth of
the profits were credited to the Reserve Fund and out of the rest, dividend could be given.
(6) Societies were exempt from Stamp Fees, Registration Fee and Income-tax.
(7) Its objective is the economic interests of its members.
The CCSA 1904 suffered from some inherent limitations. It did not provided for organization of noncredit
societies nor did it provided for the establishment of secondary/federal societies. Limitations of
CCSA 1904 were removed by the enactment of Co-op Societies Act of 1912. The salient features of the
1912 Act are summarized below:
(1) The 1912 Act provided for the organization of all types of co-ops and not just credit societies.
(2) Instead of classification of societies as rural and urban, the 1912 Act classifies societies based on the
nature of liability of their members. However, agricultural credit societies continued to be of unlimited
liability.
(3) Distribution of profits was made easier. Profits could now be divided even in rural societies after
keeping one-fourth as reserve fund.
(4) The Act also provide for organization of secondary/federal societies.
With the Constitutional Reforms of 1919, Co-operation became a Provincial Subject. Every
Province started enacting its own Co-operative Law, suitable for growth and special needs of the cooperative
movement in that Province. The Bombay Province was the first to enact its own Co-operative
Law in 1925, followed by Madras in 1932, Bihar in 1935, Orissa and Bengal in 1940 etc. Even though the
provincial laws continue to have the essential features of 1912 Act, many improvements were however
made to the 1912 Act by these laws and some of the improvements made are listed below.
(1) The scope of movement has been widened by omitting from preamble the words “persons of limited
means” found in the Act II of 1912.
(2) Procedure regarding arbitration found place in the Act itself, instead of being left to the rules as in
the old Act and provision had also been made for conditional attachment of property.
Provision had been made for amalgamation and division of societies and for change of liability.
(4) Provision had been made for winding up of a society before it could be cancelled. Large powers had
been given to liquidator to wind up the affairs of the societies expeditiously under the guidance of the
Registrar.
(5) The principle of ‘one member one vote’ found place in the Act.
(6) In some Acts, the Government or the Registrar had been given the powers to supersede the
committee of societies which may be found to be mismanaging the affairs.
(7) The Registrar had also been given powers to impose surcharge against persons found responsible for
losses, misappropriation, breach of trust, etc.
(8) The limit of individual shareholding in the capital of a society was increased to enable them to
undertake larger economic activities.
(9) Provision was also made for the provincial Government to extend financial assistance to co-op
societies.
With Independence and the reorganization of States on linguistic lines in 1956, almost every
State in the country is having its own separate Co-operative Law, as co-operation is included in the State
List (entry 32) under the Indian Constitution (Seventh Schedule). On acceptance of the concept of State
Partnership in Co-operatives as recommended by the All India Rural Credit Survey Committee (1954) by
Government of India, a committee was constituted under the Chairmanship of Shri. S.T.Raja in 1957 to
draft a model co-operative societies bill, providing for enabling provisions to give effect to this concept.
The Model Bill 1957 drafted in a simple and lucid form, has honestly tried and succeeded in retaining the
essential characters of a co-operative organization like democratic control, voluntary membership,
limited interest on capital etc. while providing for state partnership in co-operatives. State Laws on the
subject are essentially structured on this Model Bill with necessary additions/modifications to suit the
special conditions and requirements of individual States.
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