What is Cooperative Society?

By : Neha Dhyani

Updated : May 12, 2022, 8:57

The Constitution (97th Amendment) Act, 2011 added a new Part IXB right after Part IXA (Municipals) regarding the cooperatives working in India. In Article 19(1)(c) under Part III of the Constitution, the word cooperatives were added after unions and associations.

This enables all the citizens to incorporate different types of Cooperative Societies by giving them the status of a fundamental right of citizens. A new Article 43B regarding the promotion of Cooperative Societies was added to the Directive Principles of State Policy (Part IV).

Cooperative Society - SC Ruling

The Supreme Court struck down certain provisions of the 97th Amendment Act, 2011, in July 2021.

It gave a major push for federalism as the amendment shrank the exclusive authority of States over their different types of Cooperative Societies.

Genesis of the Cooperative Movement in India

The Cooperative Movement in India was born out of the suffering and uncertainty that prevailed in the last quarter of the 19th century.

The village industries were given a death blow by the Industrial Revolution, which also drove people to agriculture, the only avenue of employment and livelihood. The consequent fragmentation and sub-division of holdings had made agriculture an uneconomic proposition.

Other factors such as the uncertainty of rainfall, consequently lesser crop production, and rigidity of land revenue collection compelled the farmers to approach the money-lenders.

The money lenders advanced money by purchasing the crop at a very low price or charging very high-interest rates. These factors stressed the need to provide cheap credit through an alternative agency.

Incorporation of Cooperative Societies

The state legislature may prescribe provisions for the incorporation, regulation, and winding up of Types of Cooperative Societies based on the principles of voluntary formation, member economic participation, democratic member control, and autonomous functioning.

Advantages of Cooperative Societies

  • The products sold in different types of Cooperative Societies are cheaper than in the market.
  • Members of the Cooperative Society can get quick loans.
  • There exists no black marketing.

Disadvantages of Cooperative Society

  • It suffers from management inefficiency.
  • Since it is an association of members of low-income groups, the scope of raising capital is limited.

Cooperative Society - Number of Directors

The board shall consist of some directors as may be prescribed by the state legislature. A maximum number of directors of a Cooperative Society shall not exceed 21. The tenure of such directors shall be for five years.

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Election of Cooperative Societies

The election of a board of Cooperative Society shall be conducted before the expiry of the term of the existing board.

The directions, superintendence, and control of the preparation of electoral rolls and the conduct of elections to a Cooperative Society shall vest in such body as may be prescribed by the state legislature.

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Cooperative Society - Audit and Accounts

The state legislature may prescribe provisions for maintaining accounts by the types of Cooperative Society and audit such accounts at least once in each financial year.

The audit report of the accounts of an apex-Cooperative Society shall be placed before the state legislature.

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FAQ on Cooperative Society

Q1. What is a Cooperative Society as per the Constitution of India?

Ans. Cooperative Societies as a subject matter belong wholly and exclusively to the State legislatures to legislate upon. In contrast, multi-state Cooperative Societies, i.e., Cooperative Societies having objects not confined to one State alone, are exclusively within the knowledge of Parliament.

Q2. What is the reference for the Cooperative Society in the constitution of India?

Ans. Part IX B of the constitution. The amendment introduced Part IX B of the Constitution, stating the powers of the state legislature and the Centre to regulate the incorporation, governing and elections of these Cooperative Societies.

Q3. Is Cooperative Society a constitutional body?

Ans. No, a Cooperative Society is not a constitutional body but instead a voluntary association of individuals having common needs who join hands to accomplish common economic interests.

Q4. Is Cooperative Society private or government?

Ans. Now, Cooperative Societies have become a part of Article 19 of the Constitution of India, making them one of the fundamental rights of a citizen and have been given the status of local self-government in Part IX of the Constitution.

Q5. Does a Cooperative Society come under RTI?

Ans. RTI Act does not apply to Housing / Commercial Cooperative Societies.