Chapter VII PROPERTIES AND FUNDS OF CO-OPERATIVE SOCIETIES

(1) A registered 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 the securities of any other registered society; or (d) with any bank or person carrying on the business of banking approved for this purpose by the Registrar; or (e) in any other mode permitted by the rules. (2) Any investment or deposit made before the commencement of this Act which would have been valid if this Act had been in force is hereby ratified and confirmed.

A co-operative society shall, out of its net profits in any year, credit such portion of the profits not exceeding 5 per cent, as may be prescribed, to the co-operative education fund constituted under the rules.

No part of the funds, other than the dividend, equalisation or bonus equalisation funds as may be prescribed or 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 on such scale as may be laid down by the bye-laws, for any services rendered by him to the society.

(1) A society earning profit shall calculate the net profits by deducting from the gross profits for the year, all interest accrued and accruing in accounts which are overdue, establishment charges, interest payable on loans and deposits, audit fee, working expenses including repairs, rent, taxes and depreciation, and after providing for or writing of bad debts and losses not adjusted against any fund created out of profits. A society may, however, add to the net profits for the year, interest accrued in the preceding years, but actually recovered during the year. The net profits thus arrived at, together with the amount of profits brought forward from the previous year, shall be available for appropriation. (2) A society may appropriate its net profits to the reserve or any other fund, to payment of dividends to members on their shares, to the contribution to the educational fund of the society which may be notified in this behalf by the Registrar, to the payment of bonus on the basis of support received from members and persons who are not members to its business, to payment of honoraria, provident fund to its employees, and towards any other purpose which may be specified in the rules or bye-laws: Provided that, no part of the profits shall be appropriated except with the approval of the society in its annual general meeting and in conformity with the Act, rules and bye-laws.

(1) Every society shall maintain a reserve fund in respect of the profits, if any, derived from its transactions. (2) Of the net profits of a society in each year there shall be carried to the reserve fund not less than twenty-five per centum or such higher proportion as may be prescribed for such society or class of societies. (3) Save to the extent, and in such manner, as may be prescribed, no part of its reserve fund shall be used in the business of a society. (4) Subject to the rules, any portion of the reserve fund not used in the business of a society shall be invested or deposited,- (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), other than those specified in clause (e) of that section; or (c) in any other bank approved by the Registrar.

(1) No society shall make loan to any person other than a member, or on the security of its own shares, or on security of any person who is not a member: Provided that, with the special sanction of the Registrar, a society may make loans to another society. (2) Notwithstanding anything contained in the foregoing sub-section, a society may make a loan to a depositor on the security of the deposit. (3) If, in the opinion of the State Government, it is necessary in the interest of the society or societies concerned to do so, the State Government may, by general or special order, prohibit, restrict, or regulate the lending of money by any society or class of societies on the security of any property: Provided that the Registrar may, for ensuring safety of the funds of the society or societies concerned for proper utilisation of such funds in furtherance of their objects and for keeping them within the loan making limits laid down in the rules and bye-laws, in consultation with the financing bank, by general or special order, regulate further the extent, conditions and manner of making loans by any society or class of societies to its members or other societies.

A co-operative society shall receive deposits from its members and loans only to such extent and under such conditions as may be prescribed or as may be specified in the bye-laws.

Save as is provided in sections 58 and 59, the transactions of a society with person other than a member shall be subject to such prohibitions and restrictions, if any, as may be prescribed.