Chapter IX THE FEDERAL CO-OPERATIVE

Constitution, functions and management of Federal Co-operative. (1) There shall be a Federal Co-operative in the State. All Co-operatives registered under this Act shall be the members of such Federal Co-operative. (2) After the registration of fifty Co-operatives under this Act, the Registrar shall frame the bye-laws of the proposed Federal Co-operative and take steps to register the Federal Co-operative and its bye-laws: Provided that till the assumption of office by the first Board, the Registrar shall exercise the powers and perform the functions of the Federal Co-operative under this Act. (3) Where the Federal Co-operative is registered under this Act, the Registrar shall issue a certificate of registration signed by him which shall be conclusive evidence that the Federal Co-operative is duly registered as such under this Act. (4) The Federal Co-operative registered under this Act shall be a body corporate having perpetual succession and a common seal with power to hold property, enter into contracts, institute and defend the suits and other legal proceedings and to do all things necessary for the purposes for which it was constituted. (5) The Federal Co-operative shall immediately after its registration adopt its bye-laws framed by the Registrar. Any amendments of the bye-laws shall be in accordance with the procedure specified in section 11 and such amendment of bye-laws shall come into force on the date it is approved by the Registrar. (6) [XXX] (7) The Federal Co-operative shall perform the following functions, namely:- (a) promote and organise Co-operative and for this purpose frame model bye-laws and issue guidelines for framing various policies for Co-operatives in accordance with co-operative principles; (b) provide co-operative training, education and information and propagate co-operative principles; (c) undertake research and evaluation and assist in the preparation of perspective development plans for the member Co-operatives; (d) promote harmonious relations between member Co-operatives; (e) xxx (f) provide management development services to member Co-operatives including participation in board meetings when required; (g) evolve code of conduct for member Co-operatives; (h) evolve viability norms for member Co-operatives; (i) provide legal assistance and advice to member Co-operatives; (j) provide any other services at the behest of member Co-operatives; (k) promote new forms of Co-operative enterprises; (l) constitute and maintain a Co-operative education fund; (m) undertake experimental projects towards the application of Co-operative ideology; (n) liaison on behalf of and amongst Co-operatives; (o) serve as data bank of Co-operatives; (p) represent the interest of member Co-operatives; (q) ensure conduct of audit, elections and general body meetings of its member Co-operatives within the time stipulated; (r) undertake business and services on behalf of the member Co-operatives; (s) convene the special general body meeting where a member Co-operative fails to convene such a meeting under sub section (2) of section 30; (t) [XXX] (u) have the power of inspection of the member Co-operatives: Provided that in the case of a Co-operative Bank, no action under this clause shall be taken unless it has the approval of the Reserve Bank. (v) The Board of directors or employees of any Souharda Cooperatives commits any irregularities or misappropriation or fraudulence reported under sections 33 or 35 or clause (u) of sub-section (7) of section 53, the Souharda Federal shall file a criminal case against the persons involved in the said reports. (w) The Souharda Federal shall issue circulars/directions in respect of working of member Cooperatives under the provisions of this Act and rules made thereunder. (8) The provisions of section 23 relating to general body shall mutatis mutandis apply to the Federal Co-operative. (9) The Board of the member co-operative may nominate elected director by resolution to represent the co-operative in the Federal Co-operative. Such nominated Director shall represent the co-operative in Federal co-operative along with such resolution.

(1) Subject to the provisions of this Act and the Rules, the Federal cooperative shall function in accordance with its bye-laws which shall as far as possible adhere to the cooperative principles. (2) The bye-laws of the Federal cooperative shall provide for the following matters namely:- (i) the name, address and area of operation of the Federal Cooperative; (ii) the objectives and functions of the Federal co-operative; (iii) the admission and termination of membership; (iv) the rights, duties and liabilities of membership including those of the nominal members; (v) recruitment of staff and their conditions of service; (vi) the functions and duties of the chief executive; (vii) the procedure for the conduct of board meetings and the quorum; (viii) constitution of the board and the powers, functions and duties of the board and the office bearers; (ix) the rights of the directors including the right to vote and the right to contest in the elections; (x) the qualifications and disqualifications for being elected or continued as a member of the board; (xi) the powers and functions of the general body; (xii) the procedure and conduct of general meetings and the frequency and the quorum required; (xiii) the consequences of the default of any member in payment of any dues to the Federal cooperative; (xiv) the scope and terms for mobilisation of funds; (xv) the procedure for collection of the members‟ subscription and the quantum; (xvi) purposes for which the funds may be applied; (xvii) the constitution of various funds and their purposes; (xviii) the appointment of the auditor and his powers and functions; (xix) the powers, function and duties of the President or Chairperson; (xx) the travelling allowance, daily allowance, sitting fee and other allowances of the directors and the office bearers; (xxi) the procedure for the implementation and formulation of the programmes of cooperative education and training; (xxii) constitution of sub committees, their duties and functions; (xxiii) procedure for amendment for bye-laws; (xxiv) the term of office of the board and the office bearers; (xxv) any other matter which is required to be or may be provided in the

Disqualification of Directors. If federal Co-operative fails to function in accordance with Act, Rules the Registrar may disqualify the persons who are responsible for the failure, after due inquiry and giving reasonable opportunity. Provided, if vacuum situation is created in section 38A shall apply mutatis-mutandis.

(1) The board shall be responsible for the direction and control of the management of the affairs of the federal cooperative; (2) The strength of the board of the Federal cooperative shall not exceed twenty one excluding the Chief executive; Provided that the federal cooperative shall co-opt persons having experience in the field of banking management, finance or specialization in any other field relating to the objects and activities undertaken by the Federal cooperative, as members of its board and such co-opted members shall not have the right to vote in any election of the Federal cooperative in their capacity as such members or to be eligible to be elected as office bearers of the board. Provided further that the number of such co-opted members shall not exceed two in addition to twenty-one directors specified above. Provided also further that the functional directors not exceeding three of the Federal cooperative shall be also be the members of the board and such members shall be excluded for the purpose of counting the total number of directors specified above. (2-A) The provisions of section 24 related to the Maximum number of board members and reservation of seats in the Board shall mutatis-mutandis apply to the Federal Co-operative. (3) The term of the Board of the Federal Co-operative shall be five years from the date of election. (4) The Chief Executive shall be the ex-officio director of the Board and shall not have right to vote in the election of office bearers.

(1) A person shall be disqualified for being elected or continued as director of the Federal Co-operative, if such person,- (i) has at any time lost the right to vote as a member or to continue as such; or (ii) has not been a voting member of the Federal Co-operative for a period of atleast two years, immediately preceeding the year of election; or (iii) incurs any other disqualification specified in the bye-laws of the Federal Co-operative; or (iv) absents himself from three consecutive board meetings or general meetings without leave of absence; or (v) is convicted for an offence involving moral turpitude under any law for the time being in force or for an offence committed under this Act. (2) In addition to such disqualification as may be specified in the bye-laws, the directors of the Federal cooperative shall incur disqualification for being elected or continued as directors of the Federal cooperative or any other cooperative if, during their term of office, they have – (a) not provided necessary assistance to the cooperative election authority for conducting elections to the board before the term of expiry of the outgoing board; (b) not conducted the annual general meeting within the twenty fifth day of September every year or have not conducted the special general meeting within the specified time from the date of requisition; (c) failed to present the audit report along with audited financial statements of the preceding year in the annual general meeting; (d) failed to submit returns to the Registrar as per section 64A within six months from the date of close of the cooperative year; (e) committed grave financial irregularities or fraud which have been detected. (f) If he/she fails to submit every financial year the declaration of assets and liabilities of his/her and his/her family. Explanation:- For the purpose of this clause “family” means “Director and his/her Spouse, Unmarried Daughter and Undivided Son. (3) If any question arises as to whether a member of the board was or has become subject to any of the disqualification mentioned in this section, the Registrar shall either suo motu or on a report made to him shall decide the question after giving the person concerned a reasonable opportunity of being heard. (4) The provisions shall mutatis-mutandis apply to the Federal cooperative if its directors incur any of the disqualifications mentioned in clauses (a), (b), (c), (d) and (e) of sub-section (2).

The Board of the Federal Co-operative shall be the authority to exercise all the powers and perform all the functions conferred on the Federal Co-operative under this Act, rules and the bye-laws, and shall have powers,- (a) to inform the Cooperative Election Authority to conduct election to the office of the President or Chairperson, Vice-President or Vice-Chairperson and other office bearers; (b) to remove from office the President or Chairperson, or Vice- President or Vice Chairperson and other office bearers; (c) to appoint and remove the Chief Executive; (d) to fix staff strength; (e) to frame policies concerning the organisation and services to the member Co-operatives; (f) to frame regulations regarding,- (i) custody and investment of funds; (ii) maintenance of accounts; (iii) mobilisation, utilisation and investment of various funds; (iv) monitoring and management of information system including statutory returns to be filed; and (v) such other subjects and matters necessary for the effective performance of the Federal Co-operative; (g) to place the annual report, annual financial statements, and annual plan and budget for the approval of the general body; (g-1) to consider the inquiry report, if any, take action for rectification of the irregularities pointed out, if any, in the inquiry, cause compliance report and place the report before the general body; (g-2) to prepare the annual financial statements, schedules, and other statements and produce the same to the auditor along with the concerned books of accounts, records and other documents within the thirty days from the date of close of the cooperative year; (g-3) to provide necessary information and assistance to the Cooperative Election Authority for conducting election before the expiry of the term of the office of the board; (g-4) to file returns and information to the Registrar as per section 64A within the thirtieth day of September every year; (h) to consider audit and compliance report and place the reports before the general body; and (i) to undertake such other functions as may be delegated by the general body.

Powers and functions of President or Chairperson, Vice-President or Vice-Chairperson and other office bearers. (1) There shall be a President or Chairperson, Vice-President or Vice-Chairperson of the Federal Co-operative elected from amongst the elected members of the Board. (2) The President or Chairperson shall preside over the meetings of the Board and general body of the Federal Co-operative. In the absence of the President or Chairperson, the Vice-President or Vice-Chairperson shall preside over the meetings of the board and general body of the Federal Co-operative. The President or Chairperson shall have only a casting vote in the event of equality of votes on any matter being decided upon by the board except election to the office bearers. The President or Chairperson shall exercise such powers as may be delegated by the board and specified in the policies framed or resolutions adopted by the board. (3) The term of office of the President or Chairperson, Vice President or Vice Chair person and any other office bearer to be elected as per the bye-laws shall be five years from the date of election and their term shall be co-terminus with the term of the board. Explanation.- If the election to the office of President or Chairperson, Vice-President or Vice-Chairperson is held in the middle of the term, the remaining part of the term shall deemed to be a full term.

The provisions of the section 38 shall mutatis-mutandis apply to the supersession or suspension of the board of the Federal cooperative. The Registrar shall be competent to take action against the federal cooperative.

(1) The Cooperative Election Authority shall be responsible for conducting elections to the board of the Federal cooperative. (2) The election to the board shall be conducted immediately before the expiry of the term of the outgoing board so as to ensure that the newly elected members of the board assume office immediately on the expiry of the term of office of the outgoing board. (3) The newly elected directors of the board shall assume office immediately on the expiry of the term of the outgoing board. (4) The provisions of section 26A shall mutatis-mutandis apply in relation to the cooperative election authority. (5) The Chief Executive shall, within fifteen days from the date of constitution or deemed constitution of the Board after a general election and immediately before the expiry of the term of office of the President or Chairperson, Vice-President or Vice-Chairperson, convene a meeting in the prescribed manner of all the members of the committee for the purpose of electing President or Chairperson, Vice-President or Vice-chairperson and such others as are required to be elected under the bye-laws of the federal co-operative. One of the members who is not a candidate for the election of President or Chairperson, Vice-president or Vice-Chairperson, shall be chosen to preside over such meeting: Provided that, the Members of the first Board elected in the first general meeting held after the registration of a co-operative shall elect the President or Chairperson, Vice-President or Vice-Chairperson and others in such manner as may be prescribed. (6) The Chief Executive shall, as and when there is a casual vacancy in the office of the President or Chairperson, Vice-President or Vice-Chairperson or others, convene a meeting of the members of the Board for the purpose of filling up the casual vacancy and the provisions of sub-section (5) shall mutatis mutandis apply. (7) The Chief Executive shall within three days from the date of the meeting, forward to the Registrar and Co-operative Election Authority a copy of the notice convening the meeting and also a copy of the proceedings of the meeting. (8) If the Chief Executive fails to convene the meeting in accordance with sub-sections (5) and (6), the Co-operative Election Authority or any officer authorized by it to do so, shall convene a meeting for the purposes specified in the said sub-sections.

Filling up of casual vacancies. The board may fill up a casual vacancy on the board by virtue of death, resignation, disqualification or any other reason by nomination out of the same class of members in respect of which the casual vacancy has arisen, if there is a quorum.

(1) The number of board meetings and general meetings shall be specified in the bye-laws of the Federal Co-operative: Provided that the board shall conduct not less than six board meetings and one general meeting in a cooperative year; Provided further that the annual general meeting shall be held within twenty fifth day of September of every year. (2) The board of the Federal cooperative may convene special general meeting at any time as per its needs, but shall convene a special general meeting within thirty days of receipt of a requisition to this effect from not less than one tenth of members of the Federal Co-operative or as provided in the bye-laws and any such requisition shall contain the reasons for conducting such meeting. (3) In the event of failure by the Federal Co-operative to call such meeting, the Registrar shall convene such general meeting within sixty days of receipt of such a request made to him by not less than one tenth of the members of the Federal Co-operative. (3A) The quorum for a general meeting shall be as specified in the bye-laws, but shall not be less than ten percent of the members or one thousand whichever is less, those members eligible to vote at the meeting. If there is no quorum at the time of transaction of any business in any general meeting, such business shall not be transacted. (3B) The quorum for a meeting of the board shall be as specified in the bye-laws but shall not be less than the number next to fifty per cent of the strength of the board. If there is no quorum at the time of transacting any business in any meeting of the board, such business shall not be transacted. (4) The Chief Executive of the Federal Co-operative shall record in the minute’s book minutes of all proceedings of every general meeting and of every meeting of the board of the Federal Co-operative. (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) The Board of Federal Co-operative shall determine the cadre strength of the establishment and scales of pay of its employees: Provided that the Federal Co-operative may borrow the services of the employees of other Co-operatives, Co-operative societies, State or Central Government or their Organisations, Public Sector Undertakings and such other professional experts on such terms and conditions as may be approved by the general body: Provided further that the first Chief Executive shall be appointed by the Registrar. (2) The Chief Executive shall perform functions in accordance with the bye-laws and shall,- (a) have general superintendence and control over the day to day affairs of the Federal Co-operative. (b) be the person to sue and be sued on behalf of the Co-operative; (c) have powers on behalf of the Federal Co-operative to endorse, sign, negotiate cheques and other negotiable instruments and operate the bank accounts of the Federal Co-operative; (d) be responsible for appointment of employees and to ensure discipline, performance and welfare; (e) be the person to enter into agreements or contracts on behalf of the Federal Co-operative; (f) arrange to maintain proper records and accounts of the Federal Co-operative; (g) present the draft annual report and financial statements for the approval of the board within the time stipulated in the bye-laws; (h) convene the board meetings and general body meetings in consultation with the President or Chairperson, in accordance with the bye-laws and record the proceedings thereof; (i) assist the board in the formation of policies and plans; (j) be responsible to the board; (k) furnish to the board information necessary for monitoring the performance of the Federal Co-operative; (l) furnish the financial statements, schedules and other statements with the approval of the board and the related books of accounts, records and other documents necessary for the annual audit of accounts of the Federal cooperative to the auditor within the thirty days from the close of the cooperative year; (l-1) place before the board the action to be taken for rectification of defects pointed in the audit report, obtain approval of the board and take action accordingly. (l-2) place before the board the action to be taken for rectification of defects pointed in the inquiry report, if any, obtain approval of the board and take action accordingly. (l-3) render necessary information and assistance to the cooperative election authority for conduct of elections before the term of expiry of the board. (l-4) furnish to the Registrar within the thirtieth day of September every year, the returns and information to be submitted as per section 64A to the Registrar. (l-5) may conduct Suo motu Inquiry or cause an Inquiry to be conducted expeditiously into any specific matter touching the constitution, management, working or financial condition of a member cooperative. (m) perform any other function authorised by a resolution of the board and general body.

(1) The Federal Co-operative shall constitute a fund called “Federal Co-operative Fund”. (2) The Federal Co-operative Fund shall consist of,- (i) interest free initial loan of a sum of Rs. 10 Lakhs made by the Government which is repayable within a period of ten years by the Federal Co-operative to Government; and (ii) contributions made by each member Co-operative every cooperative year at such rates specified in the bye-laws of the Federal Co-operative. (3) The Federal Co-operative shall also maintain a Co-operative Education Fund. (4) If any member Co-operative fails to make the contribution towards the Federal Co-operative Fund without prejudice to any action to which such member Co-operatives is liable under section 68, such Co-operative shall not have a right to vote and contest for any office in the general body meeting of the Federal

The Federal Co-operative shall maintain the following records and books of accounts, namely:- (a) the minutes book; (b) registration certificate and a copy of the registered bye-laws and of the amendments registered from time to time; (c) bye-laws of the Federal Co-operative and of each of its member Co-operatives with upto date amendments; (d) accounts of all sums of money received and expended by the Federal Co-operative and the respective purposes; (e) accounts of all purchases and sales of goods by the Federal Co-operative; (f) accounts of the assets and liabilities of the member Co-operatives and the Federal Co-operative; (g) a register showing total membership and the memberwise use of various services; (h) a list of members with voting rights for the current year updated within thirty days of closure of the cooperative year; (i) up-to-date copies of the Board resolutions; and (j) annual report and audit report.

Furnishing information to the members. The Federal cooperative shall provide access to every member to peruse the books, information and accounts kept in regular transaction of its business with such member and to obtain the related information and accounts.

The Federal cooperative shall, within a period of six months, from the close of the cooperative year, file the following returns and information to the Registrar; namely,– (a) annual report of the activities of the preceding year and the programme for the ensuing year; (b) audited financial statements; (c) plan for disposal of surplus or savings as approved by the general body; (d) list of amendments made to the bye-laws, if any; (e) declaration regarding the date of conducting the general body meeting and elections, if any; (f) list of directors and their term; (g) any other information required by Registrar under the provisions of this Act.

(1) On an application of a creditor to whom the Federal Co-operative is indebted or of not less than one third of the members of the Board of the Federal Co-operative or of not less than one-tenth of the total members of the member Co-operatives, the Registrar shall conduct an inquiry forthwith into any matter raised in such an application relating to the constitution, management, working and financial conditions of the Federal Co-operative. The cost of inquiry shall be met by the creditor or by the Federal Co-operative or by the member Co-operatives, as the case may be. (2) The Registrar shall issue, in writing, a notice of not less than fifteen days to the Federal Co-operative regarding the date on which he proposes to commence the inquiry: Provided that for reasons to be recorded in writing he may issue a shorter notice. (3) The inquiry shall be completed as far as may be within a period of six months from the date of order of the inquiry. However, such period may be extended by six months under extraordinary circumstances. (4) The Registrar shall, within a period of one month from the date of conclusion of the inquiry, send a copy of the inquiry report to the Federal Co-operative and to the applicant. (5) For the purpose of inquiry under this Act, the Registrar,- (a) may require in writing the President or Chairperson, Vice-President or Vice-Chairperson, or any Director, office bearer or officer or any other authority concerned to produce such receipts, vouchers, statements, returns, correspondences, notice or any other documents as he may consider necessary for the purpose of inquiry; (b) shall, at all times, have free access to the books, accounts, documents, securities, cash and other properties belonging to or in the custody of the Federal Co-operative and may summon any person in possession or responsible for the custody of any other properties to produce the same at any public office or at the head quarters of the Federal Co-operative or any branch thereof; (c) may summon any person who, he has reason to believe has knowledge of any of the affairs of the Federal Co-operative, to appear before him at public office or at the headquarters of the Federal Co-operative or any branch thereof and may examine such person on oath.

Where the inquiry report reveals mismanagement on the part of any or all of the office bearers or directors or officers and employees of the Federal Co-operative, the Registrar may without prejudice to any civil or criminal proceedings to which they may be liable, direct the board to convene a general meeting within such reasonable time as he may specify, to discuss the findings of the inquiry report and for initiating necessary action against the concerned.