Co-Operative Law as an Instrument of
Strengthening Co-Operative Identity:
An INDIAN Experience
ICA-AP Co-Operative Research Conference, 16th September,
2014 BALI
BY:
B.D. SHARMA
FORMER DIRECTOR, ICA – AP
&
FORMER CHIEF EXECUTIVE,
NATIONAL CO-OPERATIVE UNION OF INDIA
(NCUI)
Scope of Paper
 Evolution of Co-operative Laws in India.
 Evolution of Co-operative Identity.
 Inclusion of provisions in Co-Operative.
 Steps for Effective Integration of Co-Operative Identity in COOP.
A. Backdrop of Co-operative Law in Pre-Independence Period
 Indian Co-operative movement emerged as solution to problems of
Farmers.
 Deteriorating rural economy prompted emergence of Informal credit
COOPS in Rural and also Urban Areas.
 Recommendation of FREDRIK NICHOLON to create rural credits Co-
operatives based on RAIFFELSEN patterns of rural credit COOPS of
Germany.
Co-operative Credit Societies Act of 1904
 First Co-operative law.
 Applicable in whole of India.
 A central legislation.
 This law creating a simple framework of administration of COOPS .
 Creation of Institution of registrar whose role was to register and motivate
people to COOP.
 Govt. Role very minimal.
 Law recognized “SELF RELIANCE”, SELF-HELP, MUTUALITY,
DEMOCRACY” as COOP Principles.
Co-operative Society acts of 1912
 Scope of law was widened to cover Co-operatives in rural and Urban
areas in the field of credit, marketing, consumers, workers etc.
 Was based on British Industrial Provident Societies Act.
 Co-operative principles of “Self reliance, self-help, mutuality,
democracy” were retained.
 Application of law led to diversification of Co-operative sector.
Co-operations becomes state subject
 Review of progress/growth of coops by MACLAGON Committee (1915) and
recommending a federal structure for COOPS.
 As a result of MONTAGUE-CHELMSFORD recommendation for constitutional
reforms (1919) cooperation became state subject.
 States enact their own laws; Bombay state takes lead followed by Bihar, Orissa,
Tamilnadu etc..
 State coops laws retain provision of coop law of 1912.
 Important provision made in Bombay coop societies act, 1925 defining purpose of
Co-operative, “ to facilitate information working of COOPS for promotion of thrift,
self-help & cooperation”.
 1925 act amended as Maharashtra coop societies act of 1960, “where as with a view
to provide orderly development of coop movement in the state of Maharashtra in
accordance with directive principles of state policy enunciated in the constitution of
India . . . . “
B. Post-Independence period
 Major shift in economic policy
i.
ii.
iii.
Economic planning to establish socialistic pattern of society
Mixed economy
Recognition of cooperative sector as balancing sector

State financial partnership in Co-operative was incorporated in coop
laws (rural credit survey committee).

Increased state control over coops.

Distance between the membership and coops.
ST RAJAH committee of 1956 on COOP law
 Simple coop law.
 Decentralization of powers of registrar.
 Societies to confirm to common economic interest of members, social
justice.
 Amalgamation with the consent of members . . . . .
Impact of state partnerships on coops
 Negative impact on democratic management.
 Dependency of syndrome.
 Quantitative growth of coops.
 Image as Pseudo coops.
 Politicization of coops.
National development council (1958) resolution
 Criticized state parternership in coops.
 Emphasized de-officialisation.
 VL Mehta committee recommended framework for administration and
amendments in coop law.
Vested interests in coops
 Coop growth attracted vested interest in coops to misuse them for their
own benefits (MIRDHA committee, 1965).
 Removal of restrictive provision to curb vested interests (guidelines
issued by Govt. Of India).
 Coop movement called upon govt. to suitably amend coop law to
restore democratic character of coops (1976 coop congress).
Chaudhary Brahm Perkash Committee model coop law
 Implementation of new economic policy (1990).
 Committee recommended features of model coop law
Enunciation of state policy and ICA cooperative principles in the
beginning of the act itself
ii.
Removal of restrictive provisions
iii. No rule making power to Govt.
iv. Greater responsibility to federations
v.
No equity of govt. in coops
vi. Accountability of board and responsibility of members defined
vii. Role of registrar to be reduced
viii. Constitution of coop tribunals
i.
Emergence Parallel coop law
 A.P. mutually aided cooperative societies acts for unaided coops by
govt.
 Non involvement of govt. in such coops at all. Only broad monitoring
required.
Committee on democratization and professionalization of
coops (Ardhanari Swaran Committee)
 Review of various state coop laws are against coop identity.
 Role of registrar need to be positive.
 Federation of coop to play more active role for promoting guiding
coops.
 Professionalization has to be made of coop management.
Globalization and coop law
 Increasing advocacy for amendment of coop law.
 Producer company law for producer companies following coop.
 principles and complete in the market.
 Owned by primary producers.
 Undertake activities relating to primary produce.
 Members equity not trade able in stock exchange.
Multistate coop law of 2002
 Replaces erstwhile multiunit coop act of 1942. based on review by an
expert committee in 1977 – first multistate coop law of 1984 and
presently multi state coop law of 2002.
 This law includes coop identity statements of ICA, 1995 as an annexure
mentioned in first schedule.
National Coop Policy 2002
 Recognizes coop identities and calls for necessary amendments in coop
law accordingly.
 Although coop law has been liberalized through various amendments.
 Legal interpretation of identity is yet to be provided by law or by law of
coops.
 High power committee (ShivaJi Rao Patil Committee) recommended
constitutional amendments to restore coop identity.
 Parliament has passed constitutional amendments bill in 2011 & it has
become law on 08.02.2012.
Evolution of coop Identity
 Stage 1:
Application of Rochdale Principles (till 1936)
Open membership
ii.
Democratic control (one member one vote)
iii. Distribution of surplus in proportion to transactions
iv. Limited interest on capital
v.
Political and religion neutrality
vi. Cash trading
vii. Promotion of education
i.
…..contd.
 Stage 2
ICA commission on coop principles (1966)
i.
ii.
iii.
iv.
v.
vi.
Open and voluntary membership
Democratic governments
Limited return on capital
Education of members and public in coop principles
Surplus belong to member
Cooperation among coops
……contd.
 Stage 3:
ICA cooperative identity
i.
Backdrop – globalization
ii.
a)
b)
c)
Consists of three components:
Coop definition
Coop values
Coop principles
A.
i.
ii.
iii.
iv.
v.
Coop definition: Defines characteristics of coop
Autonomy
Association of persons
Voluntary organization
Common economic, social and cultural needs
Jointly and democratically controlled enterprise
…..contd.
B.
Values
i.
Basic values : Self help, self responsibilities, democracy, equality,
equity, solidarity.
Ethical Values : Honesty, Openness, social responsibility, care for
others.
ii.
C.
Cooperative principles
i.
ii.
iii.
iv.
v.
vi.
vii.
Voluntary & open membership
Democratic member control
Member economic participation
Autonomy & independence
Education, training and information
Cooperation amongst coops
Concern for community
Integration of cooperative identity in working & business of
coops
 Making specific provision in law for enforcement of coop identity
 Levels of integrations
a.
b.
c.
d.
e.
f.
Members level
Board members
Professional managers
Federations
Govt.
HRD institutes