Chapter VI Chapter VI

Properties and Funds of Societies

("State aid to Societies") The Government may, subject to the rules,—

1. (a) give loans or advance moneys to a society ;
2. (b) subscribe to the share capital of a society ;
3. (c) provide moneys to a society-
   • (i) for the purchase of shares of other societies ; or
   • (ii) to enable it to provide moneys to another society to purchase shares in other societies ;
4. (d) guarantee the repayment of principal and payment of interest on debentures issued by a society ;
5. (e) guarantee the repayment of share capital of a society and dividends thereon at such rates as may be specified by the Government ;
6. (f) guarantee the repayment of principal and payment of interest on loans and advance of moneys to a society ;
7. (g) guarantee the repayment of deposits received by a society and payment of interest on such deposits subject to such terms and conditions as may be laid down by the Government ; and
8. (h) give financial aid in any other form including subsidies to any society.

("Funds other than net profits not to be divided among members") No part of the funds other than the net profits of a society shall be paid by way of bonus or dividend or otherwise distributed among its members: Provided that a member may be paid remuneration from the funds on such scale as may be prescribed for any service rendered by him to the society :

Disposal of profits Disposal of profits:— [Rule 36,64,36A,36B]

1. (1) A society shall, subject to such limits as may be prescribed, credit one percent of gross profit or gross income in a year, as the case may be, to the Cooperative Education Fund.
2. (2) A society shall credit an amount not being more than 30 percent of gross profit or 2 percent of working capital, whichever is less, in a year to the administrative and contingent fund towards pay and other allowances of its employees and contingencies in the manner prescribed;
3. (3) A society shall, out of its net profits in any co-operative year,—
   • (a) transfer an amount not being less than twenty-five per cent of the profits as may be prescribed, to the reserve fund : Provided that when the total amount so transferred becomes equal to the amount of paid-up share capital, the amount to be transferred may, with the previous permission of the Registrar, be reduced to a sum not less than ten per cent of such profits;
   • (b) [xxx]
   • (c) credit such portion of the profits, as may be prescribed, to the bad debts reserve ;
   • (d) pay towards dividend to members on their paid-up share capital, an amount not being less than fifteen per cent of the net profit;
   • (e) pay an amount not being less than fifteen per cent of the net profit towards rebate to members on the amount or volume of business done by them with the Society in the manner specified in the bye-laws.
4. (4) The balance of the net profits may be utilised for all or any of the following purposes, namely:— (a&b) [Omitted by the Act No. 21 of 1985]
   • (c) constitution of or contribution to, such special funds as may be specified in the bye-laws ;
   • (d) payment of bonus to employees of the society or remuneration to a member for services rendered by him to the society to the extent and the manner specified in the bye-laws ;
   • (e) donation of moneys, not exceeding ten per cent of the net profits to be utilised within the area of operation of the society for any charitable purpose as defined in Section 2 of the Charitable Endowments Act, 1890:

Investment of funds

Investment of funds:— [Rule 37,38,39]

A Society may by a resolution of majority of committee with due care and diligence, invest or deposit its funds which are not immediately required for the business of the society,-

1. (a) in the Postal Savings Banks ;
2. (b) in any of the securities specified in Section 20 of the Indian Trust Act, 1982 ;
3. (c) in the shares of securities of any other society :
4. (d) with any Nationalised Bank or Scheduled Bank ; or the concerned District Co-operative Central Bank.
5. (e) [xxx] Provided that every primary agricultural credit society and every Co-operative Central Bank shall invest or deposit in each co-operative year towards the bad debts reserve of the said society or bank, a sum equal to one-fourth percentum of the amount granted by it as short term loans or medium term loans to its members during the co-operative year from out of the amounts borrowed by it from other co-operative financial institutions for granting such loans ; so however that no such investment or deposit shall be necessary when the total amount so invested or deposited towards bad debts reserve becomes equal to the total amount of bad debts of the society as estimated by the auditor appointed under Section 50.

Restrictions on borrowings and loans:— [Rule 40,41,41A,41B,41C]

1. (1) A society shall receive deposits and raise loans only to such extent and under such conditions as may be specified in the bye-laws.
2. (2) A society shall not grant a loan to any person other than a member, but it may grant loans to another society with the general or special sanction of the Registrar or to its employees on such terms as may be specified in the bye-laws: Provided that a society may make a loan to a depositor on the security of his deposit.
3. (3) (a)Subject to such directions as the Reserve Bank of India may give to Co-operative Banks in this behalf, primary agricultural credit societies shall, during a co-operative year, disburse to small farmers such proportions, having regard to the class of societies and the strength of membership of small farmers therein, as may be prescribed, out of the total amounts borrowed by them from the co-operative financial institutions, for granting short term loans or medium term loans to their members during that year, so however that the amount of any such loans that may be granted to each of their members, whether or not he is a small fanner, shall not in the aggregate exceed such amount or amounts as the Government may, from time to time, by notification in the Andhra Pradesh Gazette, specify in relation to the various classes of members and having regard to the purposes for which loans are required. Explanation:-For purposes of this sub-section, ‘small farmer’ means a member who holds not more than such extent of land as may be notified by the Government from time to time, and Government may notify different standards for different districts or parts of districts.
   • (b) Every primary agricultural credit society shall, in such areas as may be prescribed disburse the amount granted by it to any of its members towards a short term loan or a medium term loan by way of cheque in favour of the loanee or at the request of the loanee by money order ; and no such cheque shall be endorsed by the loanee in favour of any officer of the society.

Restrictions on other transactions with non-members:—[Rule 48]

1. (1) Save as otherwise provided in Section 47, the transactions of a society, with persons other than members shall be subject to such restrictions, as may be prescribed.
2. (2) Every Primary Weavers’ Co-operative Society shall produce cloth only through the members of the society by supplying raw materials to the members and receiving back cloth or fabric or product and shall not produce or purchase cloth or fabric or product from any source other than the members of the society either for sale on its own account or for sale through Federal Society or others.

Provident Fund Provident Fund:— [Rule 44]

1. (1) A society may, subject to the rules, establish a contributory provident fund for the benefit of its employees to which shall be credited all the contributions made by them and the society in accordance with its bye-laws.
2. (2) The provident fund so established shall not,—
   • (a) be used in the business of the society ;
   • (b) form part of the assets of the society ; or
   • (c) be liable to attachment or be subject to any other process of any Court or other authority.
3. (3) Notwithstanding anything in this section, a provident fund established, by a society to which the Employees Provident Fund Act, 1952, is applicable, shall be governed by that Act.