Chapter VI PROPERTIES AND FUNDS OF CO-OPERATIVE SOCIETIES

No part of the funds of a co-operative society shall be divided by way of bonus or dividend or otherwise among its members : Provided that payment may be made to a member for the work done by him as secretary or as clerk on such scale as may be prescribed by the bye-laws : Provided further that after at least one-fourth of the net profits in any year have been carried to a reserve fund, payments from the remainder of such profits and from any profits of past years available for distribution may be made – (a) as a bonus to a member for any specific service rendered by him to the co-operative society including work done as secretary or as clerk ; and (b) among the members to such extent and under such conditions as may be prescribed or as may be specified in the bye-laws : Provided also that no dividend shall be paid on the paid-up share capital of members at a rate exceeding twelve percent per annum. (1) Besides the manner provided in section 41, a co-operative society may invest or deposit its funds or a portion thereof: (a) in any bonds, certificates or loans issued by the Government; (b) in debentures floated by a co-operative society; and (c) with the previous sanction of the Registrar in the purchase of lease of land or building or in the acquisition, construction or in renewal of any building that may be necessary to conduct its business. (2) The amount of the funds invested under clause (c) of the sub-rule (1) shall be recouped in such terms as may be determined in each case by the Registrar. (3) The provisions of clause (c) of sub rule (1) shall not apply: (a) to immovable property purchased (i) by a co-operative society at a sale held in execution of a decree obtained by it or the recovery of any sum due to it; or (ii) by a financing bank at sale held in execution of a decree obtained by a co-operative society financed by it for the recovery of any sum due to such society or at sale brought about by the liquidator of such co-operative society ; or (b) to the purchase or lease for lands or purchase, construction or renewal of buildings by a co-operative society whose object according to its bye-laws includes such purchase, lease, construction or renewal.

Any co-operative society may, with the sanction of the Registrar, after one-fourth of the net profits in any year has been carried to a reserve fund, contribute an amount not exceeding five percent of the remaining net profits to any purpose connected with the development of co-operative movement or charitable purpose as defined in section 20 of the Charitable Endowments Act, 1890. (6 of 1890). (1) All loans including interest thereon and recovery charges in respect thereof which are found irrecoverable and are certified as bad debts by the auditor under section 48, shall first be written off against the bad debts fund if any and the balance, if any, may be written off against the reserve fund and the share capital of the co-operative society. (2) All other dues and accumulated losses or any other loss sustained by the co-operative society which cannot be recovered and has been certified as irrecoverable by the auditor may be written off against the reserve fund and the share capital of the co-operative society Provided that- (1) No bad debts or losses shall be written off without the sanction of the general body; (2) before any such bad debts or losses is so written off, the co-operative society, if it is affiliated to Central or Apex bank shall first obtain approval of that bank in writing and also the approval of the Registrar. If the co-operative society is affiliated but not indebted to the central or apex bank and in all other cases it shall obtain the approval of the Registrar in writing. If the co-operative society is an apex bank, approval of the Registrar shall first be obtained: Provided that in case of co-operative societies classified as ‘A’ or ‘B’ at the time of last audit, no such permission need be taken, if the bad debts are to be written off against the bad debt fund especially created for the purpose. Provided further, that the Registrar may, while giving his approval, impose such conditions as to the recoupment of the bad debt fund and restoration of part or whole of the amount written off against the reserve fund, out of future profits as he deem fit. (1) All loans including interest thereon and recovery charges in respect thereof which are found irrecoverable and are certified as bad debts by the auditor under section 48, shall first be written off against the bad debts fund if any and the balance, if any, may be written off against the reserve fund and the share capital of the co-operative society. (2) All other dues and accumulated losses or any other loss sustained by the co-operative society which cannot be recovered and has been certified as irrecoverable by the auditor may be written off against the reserve fund and the share capital of the co-operative society Provided that- (1) No bad debts or losses shall be written off without the sanction of the general body; (2) before any such bad debts or losses is so written off, the co-operative society, if it is affiliated to Central or Apex bank shall first obtain approval of that bank in writing and also the approval of the Registrar. If the co-operative society is affiliated but not indebted to the central or apex bank and in all other cases it shall obtain the approval of the Registrar in writing. If the co-operative society is an apex bank, approval of the Registrar shall first be obtained: Provided that in case of co-operative societies classified as ‘A’ or ‘B’ at the time of last audit, no such permission need be taken, if the bad debts are to be written off against the bad debt fund especially created for the purpose. Provided further, that the Registrar may, while giving his approval, impose such conditions as to the recoupment of the bad debt fund and restoration of part or whole of the amount written off against the reserve fund, out of future profits as he deem fit.

A co-operative society shall out of its net profits in any year credit such portion of the profits not exceeding five per cent, as may be prescribed to the Co-operative Education Fund constituted under the rules. The bye-laws of a co-operative society shall lay down limit beyond which a co-operative society may not advance loans to individual members without the Registrar’s prior consent.

(1) A co-operative society may invest or deposit its funds - (a) in the post office savings bank; or (b) in any of the securities specified in section 20 of the Indian Trusts Act, 1882 (2 of 1882); or (c) in the shares or securities of any other co-operative society; or (d) in any banking company as defined in section 5 of the Banking Regulation Act, 1949 (10 of 1949), approved in this behalf by the Registrar; or (e) in any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970); or (f) in any State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955) or in any subsidiary banks as defined in section 2 of the State Bank of India (Subsidiary Banks) Act 1959 (38 of 1959). (2) Every investment or deposit made by a co-operative society of its funds before the commencement of this Regulation which would have been valid if this Regulation had been in force at the time or times such investment or deposit was made, shall be deemed to have been made under this Regulation. The Registrar may from time to time, issue such directives as her considers necessary for regulating the extent of security which a co-operative society or class of co-operative societies may demand in respect of loans advanced by it.

(1) A co-operative society shall not make a loan to any person other than a member: Provided that with the general or special sanction of the Registrar, a co-operative society may make loans to another co-operative society. (2) Notwithstanding anything contained in sub-section (1), a co-operative society may make a loan to a depositor on the security of his deposit. No Co-operative society shall grant loans or make advances against the security of its own shares.

(1) A co-operative society shall receive deposits and loans only to such extent and under such conditions as may be prescribed or as may be specified in the bye-laws. (1) A declaration under clause (i) or (ii) of section 32 shall be made in the Form given in Appendix ‘G’. (2) A register of such declaration to be kept by the co-operative society shall be in the Form given in Appendix ‘H’.

Save as otherwise provided in sections 45 and 46, every transaction of a co-operative society with any person, other than a member, shall be subject to such prohibitions and restrictions, if any, as may be prescribed. (1) Subject to provisions of sub-rule (2), a co-operative society shall not receive deposits and loans whether from members or non members which exceed the limit fixed from time to time in a general meeting, subject to the Registrar, who may, at any time reduce it. (2) A Co-operative society which accepts deposits and loans from members only and has no liability to any persons other than the members, may receive such deposits and loans in excess of the limits referred to in sub-rule (1), if the exceed amount is deposited in a co-operative bank to which it is affiliated or is invested in Government securities in section 20 of the Indian Trust Act 1882; Provided that the amount so deposited or invested or any part thereof is not withdrawn or otherwise utilized except for the payment of the deposit accepted in excess of the aforesaid limit;