Chapter V Chapter V

A Cooperative Society may mobilise funds in the shape of share capital, deposits, debentures, loans and other contributions from its members to such extent and under such conditions as may be permissible under the bye-laws of the Cooperative Society: Provided that at the time of dissolution of a Cooperative Society the amounts due to the members shall be settled only after settlement of due to others.

(1) A Cooperative Society may mobilise debentures, deposits, raise loans and receive grants from external sources to such extent and under such conditions as may be specified in the bye-laws. Deposits and loans raised from external sources, however shall at no time exceed ten times the sum of member funds and organistional reserves less accumulated deficit, if any. (2) A Cooperative Society may accept funds/guarantees from the government or other financing institution for the fulfillment of its objectives on such terms and conditions as are mutually contracted upon and such conditions may include the right of the government or other financier to nominate one expert on the board.

(1) No member in a primary Cooperative Society shall, at anytime, hold more than one-tenth of the paid up equity capital. (2) No Cooperative Society shall accept funds from the Government by way of equity.

(1) In any year, a Cooperative Society shall, out of the surplus arising from transactions with members in that year, make deferred payment to members as patronage rebate, an amount not exceeding twenty-five percent of surplus and make payment of dividend on share capital not exceeding fifteen percent of surplus divided into the members according to their shares. (2) The balance surplus accruing from members and the entire surplus accruing from transactions with others, shall be utilised in the following manner: (a) not less than twenty-five percent shall be transferred to a statutory reserve fund, (b) not less than twenty percent shall be transferred to a reserve for meeting unforeseen losses, (c) where the Cooperative Society is a member of the Cooperative Union, upto three percent may be transferred to a Cooperative Education Fund with the Cooperative Union, (d) bonus shall be paid to employees in accordance with the decision of the general body, (e) not less than five percent may be transferred towards a common good fund whose purpose is approved by the general body, (f) not more than five percent may be paid as contribution for any purpose connected with the development of the Cooperative movement.

(1) Where a Cooperative Society is left with a deficit in any given year, the board shall place before the general body in the first following annual general meeting, a detailed report on the causes of deficit and the manner in which the deficit is proposed to be met. (2) The general body of the Cooperative Society shall decide to have the deficit covered by setting it off against the amounts available in the deficit cover fund, and/or by debiting the deficit to the account of the members in proportion to the services they had availed or were expected to avail of the Cooperative Society during the year.

(1) A Cooperative Society may create statutory and non-statutory reserves and other funds for the promotion of the objects of the Cooperative Society. (2) Reserves and other funds shall be used for the purpose for which they were created when necessary but otherwise may be used in the business of the Cooperative Society.

Such of its funds as are not needed for use by a Cooperative Society may be invested or deposited outside its business (a) in any union/federation of which it is a member, (b) in a local Cooperative bank, (c) in the equities of any other Cooperative Societies, (d) in any of the securities specified in section 20 of the Indian Trust Act, 1882, (e) in the local Postal Savings Bank, (f) in any of the non-speculative manner as provided in the bye-laws.

No Cooperative Society shall make a contribution either in money or in kind, either directly or indirectly to an organisation that has as an object the furtherance of the interests of a political party or of any religious faith. (2) An officer of the Government shall not either during the course of his service with the Government or for a period of three years thereafter, serve in any capacity with any Cooperative Society.

(1) Any person, who needs the services of the Cooperative Society, accept the responsibilities of membership and fulfils such other conditions as may be specified in the bye-laws of the Cooperative Society, may be admitted as a member: Provided that the Cooperative Society is in a position to extend its services to the applicant and that the applicant is not already a member of a Cooperative Society registered under this Act, or the Bihar Cooperative Societies Act, 1935 providing the same or similar services. (2) Membership shall be available without any discrimination on grounds of sex. (3) Admission of members and removal from membership shall be made in accordance with the procedure specified in the bye-laws only by an elected board or by the general body where such an elected board does not exist for the time being. (4) No Cooperative Society shall, without sufficient cause, refuse admission to any person duly qualified for membership under the bye-laws. Where admission is so refused, the decision with the reasons therefor shall be communicated to such applicant within fifteen days of the date of the decision or within thirty days from the date of application for membership. Whichever is earlier: Provided that if no such decision is communicated within thirty days of applying for membership then the person shall be deemed to have been admitted as a member of the Cooperative Society on the thirty-first day. (5) Where a person has been refused membership by the board, an appeal may be lie within thirty days of communication of such decision to the general body against the decision of the board. (6) Any applicant aggrieved by the decision of the general body may file a revision within sixty days of communication of such decision before the Cooperative Tribunal. (7) A person admitted as a member may exercise the rights of membership, including the right to vote, only on fulfilment of such conditions as may be laid down from time to time in the bye-laws: Provided that a person shall have been a member for at least one year before being eligible to exercise the right of vote: Provided further that the above proviso shall not apply to the promoter members in the first year of registration of a Cooperative Society. 5. Amendment in subsection (7) of section 23 shall be substituted by the following: “A person admitted as a member may exercise the rights of membership, including the right to vote only after ensuring minimum attendance, as required in the meetings convened for participation in the management of the society and availing of minimum requisite services of the society as may be prescribed in the bye-laws of the society; Provided that a person shall have been a member for at least one year before being eligible to exercise the right to vote; Provided further that the above provision shall not apply to the promoter members in the first year of registration of a Co-operative Society.” 6. After subsection (7) of section 23 the following sub-sections (8), (9) and (10) shall be inserted, namely: “(8) Every Co-operative Society shall provide access to every member to the books, information and accounts of the Co-operative Society kept in regular transaction of its business with such member. (9) Every member of a Co-operative Society shall have the right to get all information/ documents regarding books, information and accounts of the Co-operative Society kept in regular transaction of its business. The chief executive officer/manager of the Co-operative Society shall ensure access to every member to all required information/documents. (10) The members of any Co-operative Society shall have the right to get education and co- operative related training as per the rules or bye-laws made under any provisions of this Act.”

A Cooperative Society's services shall ordinarily be available only to members unless otherwise provided in the bye-laws.

(1) Subject to the provisions of this Act and the bye-laws the ultimate authority of a Cooperative Society shall vest in its general body. (2) Where a Cooperative Society so desires, its bye-laws may provide for a representative general body drawn from the members to be constituted in such a manner and with such functions as specified in the bye-laws: Provided that the representative general body shall not have the right to amend the bye-laws of the Cooperative Society except those in relation to which the bye-laws have delegated the power of amendment to the representative general body. (3) Subject to the provisions of this Act, and of the bye-laws the following matters shall be dealt with by the general body (a) election of directors of the board, (b) removal of directors of the board and filling up of vacancies, (c) consideration of the annual report presented by the board for being filed with the Registrar, (d) appointment and removal of statutory auditors and internal auditors, (e) consideration of the auditor's report and audited statement of accounts for being filed with the Registrar, (f) consideration of audit/special audit compliance report, (g) report on action taken on inquiry report under section 36, if any, (h) disposal of net surplus, (i) review of operational deficit, if any, (j) approval of the long term perspective plan and the annual operational plan, (k) approval of the annual budget, (l) creation of specific reserves and other funds, (m) review of actual utilisation of reserve and other funds, (n) report on membership of the Cooperative Society in other Cooperative Societies, (o) review of annual report and accounts of any subsidiary organisation, 7. In the said Act section - 25 shall be amended as follows, namely – (a) Sub-section (1) shall be substituted by the following, namely - “(1) Subject to the provisions of this Act and the bye-laws the ultimate authority of a Co- operative Society shall vest in its general body. Board of every Co-operative Society shall convene annual general meeting within six months from the closure of financial year, which shall deal with all or any matter dealt with subsection (3) except those in relation to the election of members and office- bearer of the Board.” (b) Sub section (3)(a) and (b) shall be deleted.

(1) The general body of a Cooperative Society shall constitute a board in accordance with the bye-laws. (2) The size of the board shall be in accordance with the bye-laws. Chief Executive shall be an ex-officio member of the board. (3) In addition to such criteria as may be specified in the bye-laws, a person shall be ineligible for being chosen as a director, if he (a) has at any time lost the right to vote as a member as specified in the bye-laws. (b) loses the right to continue as member as specified in the bye-laws, or (c) incurs any other disqualification specified in the bye-laws. (4) In addition to such criteria as may be specified in the bye-laws, a person shall cease to be a director if he incurs any of the disqualifications specified in sub-section (3), or (a) absents himself from three consecutive board meetings without leave of absence, (b) absents himself from three consecutive general body meeting without leave of absence, or (c) is penalised under this Act. (5) In addition to such criteria as may be specified in the bye-laws, the directors of the board shall incur disqualification for a period of three years for being chosen as directors and shall be ineligible to continue as directors of any Cooperative Society if during their term as directors of a Cooperative Society: (a) they did not conduct elections within the time specified in the bye-laws and before the expiry of their term, (b) they did not conduct annual general body meeting within four months of closure of the Cooperative's accounting year or a requisitioned meeting of the general body, or (c) they did not place the audited accounts for the preceding financial year alongwith the reports of the auditors before the general body at its annual general meeting. (6) In order to be eligible for being chosen as a director of the board of a Cooperative Society which has been in existence for more than two years, a member (a) shall have been a voting member of the Cooperative Society for atleast two years immediately preceding the year of election, (b) shall have attended two general body meetings of the Cooperative Society immediately preceding the elections, and (c) shall not have been a director or an office-bearer of the Cooperative Society for two consecutive terms. (7) Every director and employee of a Cooperative Society while exercising his powers and discharging his duties shall: (a) act honestly and in good faith and in the best interests of the Cooperative Society, and (b) exercise such due care, diligence and skill as a reasonably prudent person would exercise in similar circumstances. (8) A director or employee which is guilty of misappropriation, breach of trust or any other omission or commission resulting in loss to the Cooperative Society, shall be personally liable to make good that loss, without prejudice to such criminal action to which he is liable under the law. 8. In the said Act sub-section 2 of section - 26 shall be amended as follows, namely – “(2) The Board shall consist of maximum twenty one members including office-bearers in accordance with the bye-laws. Chief Executive shall be an ex-officio member of the Board. The Board shall co-opt such persons having experience in the field of banking, management, finance or specialization in any other field relating to the object and the activities under taken by the Co- operative Societies, as members of the board; provided that the number of such co-opted members shall not exceed two and this shall be in addition to the total members of the board; Provided further that such co-opted members shall not have the right to vote in any election of the Co-operative Society in their capacity as such member or to be eligible to be elected as office bearers of the board; Provided further also that the functional directors of a Co-operative Society shall also be the members of the board and such members shall be excluded for the purpose of counting the total number of directors; Provided that at least 50 percent seats of managing board shall be reserved for the women members, out of which two seats shall be reserved for the scheduled castes or Scheduled Tribes women in the board of every Co-operative Society consisting of individuals as members and having members from such class or category of persons. The seats so reserved shall be filled up from amongst the members of scheduled castes or scheduled tribes women members either by election or/ and by co-option.”

(1) The board shall in accordance with the bye-laws, be the authority to (a) admit and terminate membership, (b) elect the Chair-person and other office-bearers, (c) remove from office the chair-person and other office-bearers, (d) appoint and remove the chief executive, (e) fix staff strength, (f) frame policies concerning (i) organisation and provision of services to members, (ii) qualifications, recruitment, service conditions and other matters related to its employees, (iii) mode of custody and investment of funds, (iv) manner of keeping accounts, (v) mobilization, utilisation and investment of various funds, (vi) monitoring and management of information system including statutory returns to be filed, (vii) such other subjects and matters necessary for the effective performance of the Cooperative Society. (g) place the annual report, annual financial statements, annual plan and budget for the approval of the general body, (h) consider audit and compliance reports and place these before the general body, (i) review membership in other Cooperative Societies, (j) undertake such other functions as delegated by the general body. (2) The chair-person shall be elected by the board from among the elected members and shall, in accordance with the bye-laws (a) preside at meetings of the board and the general body meetings, (b) have a second vote in the event of equality of votes on any matter being decided upon by the board except in matter of election, (c) exercise such other powers as delegated by the board specified in the policies framed or resolutions adopted by the board.

The term of office of the director of the board, or where the bye-laws provide for retirement of directors by rotation, the term of office of the individual director, shall be for such period as specified in the bye-laws but shall not exceed three years from the date of assumptions of office: Provided that the term of office can be terminated by the general body at its meeting by a majority of members with right of vote: Provided further that the first board shall not exceed twelve months from the date of registration of the Cooperative Society. 9. In the said Act section - 28 shall be amended as follows, namely – The term of office of elected members of the board and its office bearers shall be five years from the date of election and the term of office bearers shall be co-terminus with the term of the board; Provided that the board may fill a casual vacancy on the board by nomination out of the same class of members in respect of which the casual vacancy has arisen, if the term of the board is less than half of its original term. Provided further that the term of the first board shall not exceed twelve months from the date of registration of the Co-operative Society.”

(1) The conduct of elections to the board of a Cooperative Society shall be the responsibility of the incumbent board. (2) Elections shall be conducted in the manner specified in the bye-laws before the term of office of the outgoing directors comes to an end. (3) The election of the directors shall take place at the general body meeting. (4) The directors shall hold office for the period specified in the bye-laws and for which they were elected and the newly elected directors shall assume office on completion of the period of the outgoing directors or the cessation of the period as the case may be. (5) The directors shall if the bye-laws so permit, be eligible for re-election: Provided that he had not been a director or an office-bearer of the Cooperative Society for two consecutive terms. (6) Where the number of nominees exceeds the numbers of directors to be elected, the election of directors shall be by secret ballot. (7) Where a board does not take necessary steps to conduct elections before the expiry of the terms of the directors, or where there are no directors remaining on the board, a minimum of five percent of total members of the Cooperative Society may jointly convene a general meeting of the members, for appointing an ad-hoc board for the specific purpose of conducting elections. (8) The term of ad-hoc board so appointed shall not exceed three months. (9) If an ad-hoc board is not constituted in accordance with sub-section (7), it shall be the duty of the federation to inform the Registrar. (10) The Registrar on the report of the Federation under sub-section (9) may suo moto convene a general meeting for appointing another ad-hoc board for the specified purpose of conducting elections. (11) The term of the ad-hoc board appointed under sub-section (10) shall not exceed one month and this ad-hoc board shall cease to function as soon as a regular board is elected in accordance with the bye-laws. (12) The cost of conducting elections shall be borne by the Cooperative Society. (13) Where there is vacancy on the board and where there is not a quorum of directors due to such vacancy the remaining directors shall call a general meeting for the purpose of electing members to fill any vacancies for the remaining period, if the remaining period is over six months. 10. In the said Act sub-section (1), (2) & (3) of section - 29 shall be amended as follows, namely – “(1) The conduct of elections to the board of a Co-operative Society shall be the responsibility of the incumbent board. “(2) The election shall be conducted before the expiry of term of the outgoing director in the manner specified in the bye-laws and the provisions made there under and as per the provisions of the Jharkhand Self-Supporting Co-operative Societies Act, 1996 and rules made there under.” Subsection (3) shall be deleted.

(1) The bye-laws of a Cooperative Society shall specify the frequency of and manner in which board meetings and general body meetings shall be hold, so however the board shall meet at least once in every three months and the general body shall meet atleast once a year. (2) The board shall also convene a general meeting within thirty days of receipt of a requisition of convening a meeting signed by atleast one-tenth of members of the Cooperative Society and any such requisition shall contain the proposed agenda and the reasons why the meeting is felt necessary. (3) Where the board fails to convene the annual or requisitioned general meeting within due time, it shall be competent for the Registrar to convene the requisitioned or annual general meeting as the case may be. (4) Every Cooperative Society shall record in the minute's book minutes of all proceedings of every general meeting and of every meeting of its board of directors. (5) Such minutes shall be communicated to all persons invited for the meeting within thirty days of the conclusion of the meeting. (6) The minutes so recorded shall be signed by the person who chaired the said meeting.

(1) All staff of the Cooperative Society shall be the employees of the Cooperative Society and shall be fully accountable to the Cooperative Society and be appointed, removed and function in accordance with such service conditions as may be framed by the board. Provided that a Cooperative Society may take personnel on deputation from other agencies on such terms as are mutually agreed upon.