Management of Industrial Co-operatives
A Co-operative Society is a body corporate registered under Co-operative Society Act. As a body corporate it has power to hold property, enter into contracts, institute and defend suits and legal proceedings and do all things necessary for the purpose for which it is constituted.
Since the very inception of the Co-operative movement in this Country, as early as 1904, the Registrar has been vested with power of registration of Cooperative Societies under Section-4 of the Orissa Co-operative Societies Act 1962, which lays down that "subject to the provision of this act a Co-operative Society which has its object, the promotion of economic interest of its members in accordance with cooperative principles or a Co-operative society, established with the object of facilitating the co-operation of such a society may be registered under this Act."
No where in the Act. or Rules framed there-under the expression "economic interest and co-operative principles" have been defined. Broadly speaking economic interest implies promoting the material welfare of the members by undertaking economic activities through joint efforts. The methods adopted for promoting the economic interest should not be opposed to public policy or ethical norms.
However, it may be ensured that the promotion of economic interest should be in accordance with the cooperative principles. Societies intended for promoting recreation or entertainment or amusement may not be considered as having promotion or direct economic interest as the main object. Societies for promoting exploitation, gambling, black marketing, smuggling and other anti-social activities as well as those opposed to moral principles or public policy need not be registered under this act.
Under section-7 of the O.C.S. Act., 1962, Registrar has been vested with powers for registration of Co-operative Societies. He registers a Co-operative society if he is satisfied that (a) the application complies with the provision of Act. and Rule. (b) that the objects of the proposed society are in accordance with the section-4 (c) that the aims of the proposed society are not inconsistent with the principles of social justice (d) that the proposed bye-laws are not contrary to the provisions of the Act. and Rules and (e) that the proposed society implies with the requirement of sound business and has reasonable chances of success. Govt. in Co-operation Deptt., Orissa has delegated the powers of Addl. Registrar, Joint Registrar, Deputy Registrar and Assistant Registrar of Co-operative Society to the Director, Handicrafts & Cottage Industries, Orissa, Joint Director, Handicrafts & Cottage Industries, Orissa, District Cottage Industries Officer and Assistant Manager(CI) respectively. An application for the registration of a Co-operative society shall be made to the Registrar in such form as the Registrar Co-operative Societies, Orissa has prescribed along with the five copies of proposed bye laws of the society. In a primary society the number of individuals joining in the application shall not be less than fifty one, out of which the minimum number of individuals shall include three members from scheduled caste including one women, three from scheduled tribe including one women, four from other backward classes including one women and five from other categories of members including two women. In the event of non-availability of the minimum number of individuals from the scheduled castes, scheduled tribes, other backward classes or women so required for the registration, the Registrar may exempt the proposed society from the requirement of such category of individuals.
1) As per Section-72 of the O.C.S. Act. 1962 a Co-operative Society can be put under liquidation on the following considerations :
a) If 3/4th of the members of the society are of the opinion that the society ought to be wound up and apply to the Registrar accordingly.
b) If the total membership of the society falls short of 51 members as required under section-6(2) of O.C.S.Act.1962.
c) If the society has ceased to work and there is no prospect of working as determined by officer competent to pass order for liquidation.
d) If the society has not commenced working within a period of eighteen months from the date of registration.
e) If the Registrar is of opinion that the society ought to be wound up on the basis of enquiry under section-65 or inspection under section-64 or audit under section-62 of the O.C.S. Act, 1962 which reveals that the society is continuing under loss and there is no future hope of revival or there is no future prospect of proper working or no longer services the purpose for which the society was organised or it has lost its utility in the changed circumstances.
f) If the Reserve Bank of India has given its opinion for winding up.
2) Appointment of Liquidator.
a) Where the Registrar has made an order under section-72 for the winding up of a society he may appoint a liquidator for the purpose under section-73 of O.C.S. Act, 1962.
b) Order of liquidation of a society and appointment of liquidator and any change there off be published in the Orissa Gazette and be communicated to the society and to the financing bank, if any, by registered post as provided in Rule-83 of O.C.S. Rule, 1965.
(3) Steps of the liquidator for taking over of charges.
a) On receipt of the liquidation order, the liquidator shall take over charges and shall make an inventory of all the books and registers, properties and assets of the society. The fact of taking over of charges be intimated to the Registrar and the financing bank.
b) Where the out-going office bearers avoid or refuse to hand-over charges of the records or properties of the society the liquidator should give proper notice to them to do so by a particular date and hour. If they still fail to hand over the liquidator has to proceed to secure possession of the records and properties of the society under section 33 of O.C.S. Act, 1962.
c) If any officer or office bearer was in possession of records or properties at the time of issue of liquidation order and yet he fails to deliver possession of these records, or properties after due notice, such person commits an offence under section 115(6) of the O.C.S. Act. In such case the liquidator may lodge a prosecution case in the court of Magistrate 1st Class against such person with prior sanction of the registrar.
d) If after exhausting all the means of securing the records are not available or if it is ascertained that the records have either been damaged or destroyed and no longer exists, the liquidator must take steps to get the records reconstructed, on the basis of available latest audit report, liability statement available in the financing bank or audit office, loan disbursement receipts, transaction lists, demand list and other reference available in banks.
(4) Duties of liquidator.
a) As soon as the liquidator assumes charges of the liquidated society and takes over the records, properties or assets of the society or reconstructs those, he shall open a Savings Bank Deposit account in the concerned Central Co-operative Bank and other banks in his official designation as liquidator of the society. If there are any other accounts those should be closed, transferred and deposited in one account opened newly by the liquidator.
b) The whole of the assets of the society which is put under liquidation shall vest in the liquidator appointed under section 73 from the date on which the order takes effect to - he should be also the custodian of all the records of the liquidated society and look to its proper safety.
c) Soon after taking over charges by the liquidator, the staff on the pay roll of the society shall be deemed to have been discharged from the date of order of liquidation and orders to that effect must also be issued. The liquidator may further if necessary for closing up the proceedings early, engage full time or part time worker by fresh appointment indicating the remuneration to be paid. The expenditures involved towards remuneration to staff would be met out of the funds of the society and the same should not exceed 3% of the amount collected.
d) The liquidator after taking over charges shall prepare an upto date list of
(ii) Post members with dates of their withdrawal who are subject to liability under section 25 of O.C.S. Act, 1962.
(iii) Deceased members with date of their death and names of their legal heirs who represent their estate who are subject to liability under section 25 of O.C.S. Act, 1962.
e) The liquidator on the date of assuming charges shall open a new bound book in which the details of the working are to be noted and the day to day decisions recorded. This book is to be in the nature of a master register to show the details of the actions of the liquidator.
f) The liquidator shall publish a notice inviting claims of the creditors against the society as required under Rule 86 of the O.C.S. Rule, 1965. Such claims should be presented before him by the creditors within one month from the publication of the notice. No claim received after expiry of the period of one month should be entertained. However, the liquidator should take note of all liabilities and claims recorded in the books of accounts of the society and in spite of non-receipt of any claim from any creditor, his claim have to be considered on the basis of written entries in the books of accounts of the society.
g) The paid up share is also the liability of the society but refund of share, shall be taken up as the last item i.e. after meeting all outside claims and liabilities of the society. The liquidator shall draw up a fresh membership and share register in the prescribed form, and to see that the total paid up share capital as per recasted register should agree with the balance sheet.
h) The liquidator is required to draw up a balance sheet as it stands on the date of liquidation of the society as required under Rule 86(3). Such balance sheet should be drawn up basing on the latest audited balance sheet. He should take all possible steps for immediate and upto date audit of the society.
i) The liquidator basing on the prepared balance sheet and on the basis of available records, should prepare a liability register and asset register wherein he should note all the liabilities and assets of the society in detail allocating separate pages for individual creditors or debtors. Hence forth he is to maintain these two registers regularly as and when payment to parties or recoveries from parties is effected by him.
j) The liquidator should maintain the cash book of the society but he should not keep any cash with him. As and when collections come it should immediately be deposited in the Savings Bank Deposit Account opened by him. The old receipt book which was being utilised by the society prior to liquidation be discontinued. The seals of the society should have the additional words "under liquidation".
k) The liquidator may at any time call meeting of the members or if the creditors or joint meeting of the members and creditors and such meeting shall be called, held and conducted at such time or place and in such manner as the liquidator thinks fit.
l) The liquidator shall submit to the Registrar such reports or returns in such form and in such manner showing the progress of the liquidation of the society as the Registrar may require from time to time.
m) The liquidator may empower any person by General or Special order in writing to make collections and to grant valid receipts on his behalf and such amount shall be paid immediately to the account of the liquidator.
n) The liquidator shall not create any new asset by way of purchase from the funds of the society and such funds should not be utilised otherwise than for meeting the liabilities of the society. In case of necessity the permission of the Registrar be obtained for creating any new asset.
(5) Appeal period.
A period of sixty days time has been allowed for an appeal against the order of winding up as per section 109(k) of the O.C.S.Act, 1962. Therefore the liquidator may restrain himself from taking coercive action and other ten measures within the appeal period.
If the order of winding up of the society is either cancelled by the Registrar under section 72(3) of O.C.S.Act, 1962 or it is set aside, the property effects and actionable claims of society shall revest in the society.
(6) Legal action.
a) The duty of the liquidator is to realise the outstanding loans, advances and other realisable assets and recoverable items shown in the audit reports or account of the society. Normally he should utilise his good offices for collection of the dues by approach and pursuassive methods and in case where it fails he shall without any loss of time, proceed to raealise the amount through proceedings under section 68. Besides, the proceedings under section 68 concerning such society with whatever authority pending as on the said date of commencement shall stand transferred to the liquidator on that date, and the liquidator shall decide the disputes so raised/started or transferred as the case may be in accordance with law. If the defaulter is not a member, then the liquidator shall have to initiate proceedings in the civil court.
b) The liquidator shall immediately after taking over charges of the records, find out if there is any case of mis-management, mis-appropriation, fraudulent, retension, negligence, mis-conduct or the like an account of which there is loss or deficiency and on locating such cases, he shall report the matter with definite charges to the concerned Administrative Authorities to take necessary steps to draw up surcharge proceedings against the concerned management or office bearers etc.
(7) Business and Assets.
a) After liquidation, the business of the society is to be closed. However, in the interest of the society, the liquidator has the power to continue the business basing on its merits.
b) The assets of the society are to be disposed of as imperiously as possible to prevent un-necessary expenditure on storage, maintenance, watch and ward etc. Some assets are also subject to deterioration of damage if they are stored any longer. Secondly, the longer it is kept, the lesser the value it may fetch. Disposal of assets be done in proper forms based on cost price (in case of perishable articles), by auction sales and by sale through negotiation according to the circumstances and instruction of the Registrar.
(8) Repayment Priority.
As and when amounts are received from the debtors and loans or advances are recovered the liquidator shall liquidate the outstanding liabilities of the society in the following orders of priority:
i) All Government loans, dues, advances and deposits and audit fees.
ii) All wages and salary of any employee of the society in respect of service rendered to the society within two months next before the date of the winding up order, provident fund, and gratuity.
iii) Deposit of any kind and other advances.
iv) Dues of the Financing bank
v) Dues of other creditor.
vi) Share money.
(9) Contribution of the members.
Where the assets are insufficient to meet over the outside liabilities, the liquidator shall examine the possibility of assessing the contributions from the members to meet the deficiencies while assessing such contributions the liquidator has to act as per the provision of the bye laws of the society to this effect.
10) Temporary advance from Bank/C.C.B.
Where the society has no liquid cash to meet the unavoidable requirements and legal expenses, the liquidator may seek an advance from the financing bank to which the society is affiliated. In case the bank does not agree to give advances, the liquidator shall refer the matter to the Registrar whose decision shall be final as per Rule-84 of O.C.S. Rules, 1965.
11) Final Reports.
a) After the liquidation proceedings of a society have been closed, the liquidator shall submit a final report to the Registrar and on receipt of such report, the Registrar shall terminate the liquidation proceedings of cancelling either the registration or order of the winding up of the society. Such order shall be published in the Orissa Gazettee and shall be communicated to the society or the financing bank.
b) After the final report is submitted, the liquidator shall deposit the records of the society in such place as the registrar may direct and shall make over the surplus assets of the society to the Registrar.
12) Disposal of surplus assets.
The surplus assets of a society made over by the liquidator to the registrar shall not be divided among its members but shall be approved by the Registrar in whole or in part in the following objects.
i) An objects specified in that behalf in the bye-laws of the society.
ii) An object of local public authority.
iii) A charitable purpose as defined in section-2 of the charitable endowments Act 6 of 1890.
iv) Any union of Co-operative society the object of which is the development of the Co-operative movement.
v) Reserve fund of a new society, if and when established with the same object and the same area of operation of the society wound up.
13) Termination of liquidation proceedings.
The liquidator should see that the liquidation proceedings of a society are closed within a period of 3 years from the date of the order of winding up. If due to reasons beyond his control and in spite of his best efforts, it could not be closed within 3 years, he should submit proposals to the Registrar two months prior to the date of termination explaining the steps taken during last 3 years and where he has been struck up and the time he requires to finally close the proceedings. On receipt of the same the Registrar shall consider the report of the liquidator and shall issue extension order which will be published in the Orissa Gazette.
14) Disposal of undercharged liability.
a) If any liability can not be discharged by the liquidator owing to the where abouts of the claimant not been known or for any other cause, the amount covered by such undercharged liability may be deposited in the financing bank and shall be available for meeting the claims of the persons or person concerned within a period of 3 years from the date of deposit.
b) If no claimant comes forward to receive his claim within the said period such claim shall be extinguished and the amount of deposit shall became available to the liquidator for payment to the creditors, if the liquidation proceedings are closed it will be treated as surplus under section-76 of the Act.
Nature & Scope:
Under Section 68 (1) any dispute between parties enumerated under section 68(1)(a) to (d) and touching the constitution, management or the business of a society, other than a dispute regarding disciplinary action taken by a society or its committee against a paid servant of the society, shall be referred to the Registrar, Sub-Section-3 says that no dispute referred to in this section shall be entertained in any civil court and the decision of the Registrar in this respect shall be final. Judicial power for adjudicating disputes, touching the constsitution, management or the business of a society has been vested with the Registrar under the Act. in the interest of speedy justice at normal cost.
Procedure for filing of dispute:
In order to file a dispute, notice must be duly served on the affected party. If inspite of due notice, the party fails to pay or comply, then the dispute can be filed. In case of a society, specific resolution of the managing committee for filing dispute against the concerned party is necessary, Rule-71 & 72 says that a dispute is to be referred to the Registrar in writing containing a statement of the subject matter of the disputes a statement of the claims, copy of the ledger account in case of one suit and every pleading must be verified and signed by the person making the statement. As the O.C.S. Act. did not provide the procedural details regarding the contents of the plaint, the civil procedure code order VII-Rule-1 need be applied which reads as follows:
The plaint shall contain the following particulars.
a) The name of the Court in which the suite is brought.
b) The name, description and place of residence of the plaintiff.
c) The name, description and place of residence of the defendant so far as they can be ascertained.
d) Where the party is a minor or of un-sound mind, a statement to that effect.
e) The facts constituting the cause of action and when it arose.
f) The fact showing that the court has jurisdiction.
g) The relief which the plaintiff claims in money suits, the precise amount claimed.
h) Where the plaintiff has allowed a set off or relinquished a portion of his claim, the amount so allowed or relinquished and
i) A statement of the value of the subject matter of the suit for the purpose of court fees.
Rule-75 provides for payment of arbitration fees which need be deposited in the treasury and treasury challan attached to the plaint.
Rule 74(1) says that a dispute relating to the election of a member or office bearer of a society shall be referred within two months from the date on which the election, with reference to which the dispute arose, was held Sub-section-2 says, a dispute relating to the expulsion of a member shall be referred within two months from the date on which the expulsion was made.
The Election dispute is to be filed in the Co-operative Tribunal.
Section 69(1) of the O.C.S. Act says that when the dispute relates to any Act. or omission on the part of either party to the dispute the period of limitation shall be 4 years from the date of detection of such act or omission with reference to which the dispute arose took place.
According to sub-section-2 when the dispute relates to any sum including interest their on if any due to the society by a member, it may be referred within the same period (4 years) after the death or cessation of membership. The date of reporting during inspection, inquiry, audit or winding up will be computed for limitation of 4 years.
Procedure for admission and hearing:
Rejection of plaint: In the absence of specific provision in the O.C.S. Act. 1962, rejection of plaint order VII, Rule 11 to 93 of the civil procedure code need be applied.
Under the Rule 11 the plaint can be rejected where it does not disclose a cause of action, where the plaintiff does not comply the direction of the court within the time fixed by the court regarding payment of court fees and where the suit appears from the statement in the plaint to be barred by any law.
Under Rule-12, where a plaint is rejected the judge shall record an order to that effect with the reason for such order. Rule-13 lays down that rejection of plaint on any of the grounds mentioned above shall not preclude the plaintiff from presenting a fresh plaint in respect of the same cause of action.
According to section 70(1) of the O.C.S. Act the Registrar on receipt of a reference of a dispute under section 68(1) hear it himself of (a) transfer it for disposal to any person who has been invested by the Govt. with power on that behalf (b) refer it for disposal to an arbitrator appointed by the Registrar. Sub-sesction-2 empowers the Registrar to withdraw any reference from the Arbitrator and decide himself or transfer the case to another arbitrator. Sub-section-3 says that the Registrar or any person to whom a dispute is referred for decision may pending the decision, make such interlocutory orders as he may deem, necessary in the interest of justice.
Service of Summon:
Under Rule 77 of the O.C.S. Rule 1965 the Registrar of Co-operative society or the person or the Arbitrator shall fix the date, hour and place of hearing of the dispute and issue and cause summon to be served in the manner laid down under Rule 150 of O.C.S. Rule 1965 to the parties concerned. As per Rule 150 the summon can be served in any of the following
a) by giving or tendering a copy of it to such person or
b) if such person is not found, by giving or tendering it to some adult member of his family
c) if address is known by sending it to him by registered post
d) if none of the means aforesaid are available by fixing it in some conspicuous part of his last known place of abode, or business.
O.C.S. Rule 73 provides that the defendant may at or before the first hearing or within such time as the Registrar or Arbitrator may permit file a written statement of his defence.
Registrar's power to include parties while hearing:
Rule-77 (2) provides, that where a dispute has been referred in the name of a wrong person or where all the defendants have not been included, the Registrar or the Arbitrator may, at any stage of hearing is satisfied that the mistake was bonafied, order any other person to be substituted or added as a plaintiff or a defendant upon such terms as he thinks fit.
Appearance of parties and consequences of non appearance: Rule 79:
1) Where neither party appears, the case shall be dismissed.
2) Where the defendant appears but the plaintiff fails, the case shall be dismissed unless the defendant admits the claim or part there of in which case a decree can be passed on such admission.
3) Where a case is dismissed for non appearance of the plaintiff he may apply to set aside the dismissal on showing sufficient cause for his non-appearance.
4) Where the plaintiff appears but the defendant does not appear in spite of due summon, the hearing may proceed exparte.
5) When a cause adjourned for hearing exparty, the defendant at or before such hearing, appears and assign good cause for his previous non appearance, he may upon such terms as to cost or otherwise be heard on the day fixed.
6) The defendant may apply to set aside the exparte order, giving sufficient reasons.
Award or decision Rule -78:
The Registrar or Arbitrator deciding the dispute shall record a brief memorandum of the evidence of the parties and witnesses and upon the evidence so recorded and after consideration of any documentary evidence produced by theparties a decision or award shall be given in accordance with justice, equity and good conscience. The decision or award shall contain the number of the reference, the name and description of the parties and particulars of the dispute, relief granted the amount decreed, the future interest allowed, if any, and the cost awarded if any and shall be signed and pronounced in presence of parties or communicated by certificate of posting.
If, in the course of any audit, enquiry, inspection or the winding up of a society, it is found that any person, who is or was entrusted with the organisation or management of such society or who is or has at any time been an officer, office bearer or employee of the society has made any payment contrary to this act, rules or the bye-laws, or has caused any deficiency in the assets of the society by breach of trust, wilful negligence, or otherwise or has misappropriated or fraudulently or unauthorisedly retained any money or other property belonging to the society, the Auditor General or a person authorised by him by an order is wanting in that behalf, on his own motion, or on the application of a liquidator, the committee or any creditor, after giving the person concerned a reasonable opportunity of being heard may make an order in the manner prescribed, requiring him to repay or restore the money or property or any past dues thereof with interest at such rates or to pay such contribution, costs or compensation as he may consider just and equitable, and all such orders shall effect without prejudice to any other action that may be lawfully taken against him. Provided that no proceedings under this section shall be initiated after the expiry of a period of 4 years from the date of any act or omission as aforesaid is first effected during audit inspection, enquiry on the winding up of a society as the case may be.
Procedure of surcharge
1. Where a surcharge proceeding is initiated under section 67 of the Act, the Auditor General or the person authorised by him shall issue a notice to the person concerned furnishing him with particulars of payments made contrary to Act, rules and bye-laws or the deficiency caused in the assets of the society or breach of trust, wilful negligence or otherwise, or the sum or property belonging to the society misappropriated, fraudulently or unauthorisedly retained by him and the extent of his liability involved therein and calling upon him to put a statement in his defence within 15 days of issue of the notice.
2. Notice under sub-rule (1) shall be accompanied by copy of the relevant portions of the audit report, or enquiry report or liquidator's report as the case may be.
3. The person concerned shall furnish along with his statement a list of documents and witness which he would like to produce.
4. The Auditor General or the person authorised by him may allow the person concerned to look into the relevant records of the society if required for furnishing an explanation.
5. The Auditor General or the person authorised by him shall receive and record such evidence as may be necessary and relevant.
6. The Auditor General or the person authorised by him may there upon record a decision.
7. The Auditor General or the person authorised by him also provide in his decision, for the payment of cost of the proceedings under this rule or any part of such costs as he may think just.
8. The Auditor General or the person authorised by him shall furnish a copy of the decision under sub-rule (6) of the party concerned within 7 days from the date of decision.
Delegation of Co-operative Powers
For smooth and effective management of Cooperative Societies under the administrative control of Handicrafts & Cottage Industries Directorate, the Govt. in Co-operation Department have delegated the powers of Registrar to the following officers vide Order No.19920/Co-op. dt.20.9 .99, No.20127 dt.23.9.99, No.7973 dt.8.5.01 and No.8179 dt. 10.5.01 of Co-operation Department, Orissa.