Key provisions of the Part IX-B

Definitions of Co-operatives (Article 243 ZH)

• • Co-operative Society: Refers to any society registered or presumed to be registered under the current cooperative society law in any State.
  • Multi-State Co-operative Society: Denotes a group with objectives spanning multiple States, registered or presumed to be registered under the governing law.
  • State-level Co-operative Society: Encompasses a cooperative society whose operational jurisdiction covers the entire State, as determined by the State legislature.

Incorporation of Cooperative Societies (Article 243 ZI)

• • State legislatures may enact laws governing the formation, regulation, and dissolution of cooperative societies, adhering to principles like voluntary formation, democratic control, member participation, and autonomous functioning.

Number and Term of Board Members and Office Bearers (Article 243 ZJ)

• • Determination of Board Size: The board’s size is determined by the State legislature, with a maximum limit of twenty-one directors.
  • Reservation for Underrepresented Groups: Mandatory reservation of one seat for Scheduled Castes or Scheduled Tribes and two seats for women in cooperative societies with members from these categories.
  • Term of Office for Board Members: Elected board members and office bearers serve a five-year term from the date of their election.
  • Co-option of Experts: The State legislature can co-opt individuals with expertise in banking, management, finance, or related fields as board members, limited to two (in addition to the maximum of twenty-one directors). 
  • These co-opted members cannot vote or hold office.
  • Inclusion of Functional Directors: Functional directors are considered part of the board but are not counted within the total limit of twenty-one directors.

Election of Board Members (Article 243 ZK)

• • Board elections are to be held before the current board’s term expires, ensuring seamless transition.
  • The responsibility for preparing electoral rolls and conducting elections in a cooperative society lies with a body designated by the State legislature.

Supersession and Suspension of Board and Interim Management (Article 243 ZL)

• • Conditions for Supersession or Suspension: Boards may be superseded or suspended for up to six months under certain conditions, including persistent defaults, negligence, acts against the cooperative society’s interests, constitutional issues, or election-related failures.
  • Exemption from Supersession: Cooperative societies without government shareholding, loans, financial assistance, or guarantees are exempt from supersession.
  • Arrangements for Elections Post-Supersession: In the event of board supersession, an administrator must arrange elections within six months and transfer management to the elected board.
  • Special Provisions for Banking Cooperative Societies: If a cooperative society is carrying out the business of banking, then the provisions of the Banking Regulation Act, 1949 shall also apply where the Board can be superseded and suspended for up to one year.

Audit of Accounts of Cooperative Societies (Article 243 ZM)

• • Maintenance of Accounts: State legislatures can stipulate the maintenance of accounts by cooperative societies, requiring annual audits.
  • Qualifications of Auditors: Auditors and auditing firms must meet minimum qualifications and experience criteria, approved by the State Government or its authorised body.
  • Timeline for Audits: Cooperative societies must undergo audits within six months of the financial year’s end.
  • Presentation of Audit Reports: Audit reports for apex cooperative societies must be presented to the State legislature.

Convening of General Body Meetings (Article 243 ZN)

• • The State legislature can mandate annual general body meetings within six months of the financial year’s close.

Promoting transparency in Working (Article ZO)

• • Members must have access to the cooperative society’s books, information, and accounts, and provisions can be made to ensure their participation in management. Cooperative education and training can also be promoted.

Returns (Article 243 ZP)

• • Cooperative societies must submit annual returns to the designated authority within six months of the financial year’s end. 
  • These returns should cover various aspects, including an annual report, audited accounts, surplus disposal plans, by-law amendments, and details on general body meetings and elections.

Offences and Penalties (Article 243 ZQ)

• • State legislatures can establish offences and penalties related to cooperative societies, covering aspects such as false reporting, disobedience of orders, non-payment by employers, failure to hand over documents, and corrupt practices during a board or office bearer elections.

Application to Multi-State Cooperative Societies (Article 243 ZR)

• • The provisions in this part apply to multi-State cooperative societies, with modifications that replace references to “State Legislature,” “State Act,” and “State Government” with “Parliament,” “Central Act,” and “Central Government,” respectively.

Application to Union Territories (Article 243 ZS)

• • This part’s provisions are applicable to Union territories, but the President can exclude any Union territory or part thereof via notification.

Continuance of Existing Laws (Article 243 ZT)

• • Any existing State laws related to cooperative societies, inconsistent with the provisions of this part, remain in force until amended, repealed, or for a maximum of one year from the commencement of the Constitution (Ninety-seventh Amendment) Act, 2011.

However, a board shall not be superseded or kept under suspension if there is no Government shareholding, loan, financial assistance, or guarantee by the Government. If a board is superseded, the appointed administrator shall manage the co-operative society’s affairs and arrange for elections within six months and transfer management back to the elected board.