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Draft amendments don’t align with Co-op Principles on many points: NCUI

NEW DELHI– Reacting to the draft amendments to Multi-State Cooperative Societies  [MSCS] Act 2002, circulated to the national federations in India by the Ministry of Cooperation, several representatives of member institutions of National Cooperative Union of India [NCUI] have commented that some of the provisions of the draft amendments are not in accordance with the democratic and autonomous principles of cooperatives.

The proposed draft amendments are related to elections, governance, recruitment, transparency, and efficiency in multi-state cooperative societies for the benefit of their members keeping cooperative principles in mind.

And according to the Indian Cooperative, NCUI has submitted its comments to the Ministry after organizing a conference in hybrid mode to discuss the provisions of the draft amendments with the stakeholders.

The representatives of member institutions at national and state level came up with their wide-ranging comments on some of the provisions of the draft amendments of the Multi-State Cooperative Societies Act 2002, which they found restrictive and not aligning with cooperative principles.

One provision of the draft amendment has proposed that the shares of the cooperatives shall not be redeemed without prior approval of the government, and the redemption of shares shall be on face value, or book value of shares which is agreed by the authorities. As per cooperative principles, the shares of cooperative societies are issued and redeemed on face value only as the shares of co-ops are neither tradable nor listed on stock exchanges. Refunding of share capital on book value to the govt is not practical to implement as it’s against the principle of equality.

Regarding provision proposed that the bylaws of cooperative societies may include the procedure for deciding the number of employees, their designation and recruitment including that of CEO, provided that the procedure for recruitment will be subject to such rules as prescribed by the Central Government in this respect, if any, the members opined that the as per Article 43 A of the Constitution, the professional management of the cooperatives vests within autonomous and democratic functioning of cooperatives.

So the proposed amendment is not constitutionally appropriate especially for those multi-state cooperative societies where the government does not have majority shareholding.

The change in business environment and opportunities being provided to the cooperatives to contribute to the 5 trillion economy, the cooperatives may be provided a conducive atmosphere to grow without any restrictive provision as conferred to them under the 97th CAA, says a press release issued by the NCUI.

Regarding another provision that no relative or any of the sitting Directors of the multi-state cooperative society shall be recruited as employee including CEO of that society, the members felt that the proposed provision for restriction on employment of relatives of sitting directors of the multi-state cooperative societies is infringement of fundamental rights under the Constitution for any citizen under right to earn livelihood.

Regarding the provision related to Section 123 with the heading ‘Supersession of board of specified multi-state cooperative society, the members objected to the proposed explanation that multi-state cooperative society means any multi-state society where there is government shareholding or loan or financial assistance or any guarantee by the government, so the members felt that the existing explanation may continue as the revised explanation gives far-reaching power to the government which is against the cooperative principles as well as true spirit of 97th Constitutional Amendment Act.

They opined further that the government should play the role of a facilitator not controller, hence, the specified multi-state cooperative society may be those where government shareholding is more than 51% as per the existing provision.

Relating to another provision, the members felt that the proposed provision in the draft amendment for restriction on employment of relatives of sitting directors of multi-state cooperative societies is an infringement of fundamental rights under the constitution to earn livelihood.

Further, regarding another draft bye-laws provision that a member who has been a director of the Board of any multi-state cooperative societies or bank, where such board has been superseded, shall not be eligible to be elected as director of the board of another multi-state cooperative society or cooperative bank for a period of 5 years, the members felt that the proposed clause is arbitrary and against the principles of natural justice which the cooperative principles emphasize.

Regarding another provision related to the draft amendment that the Government of India may establish Cooperative Rehabilitation, Reconstruction and Development Fund for revival of sick multi-state cooperative societies where multi-state cooperative societies which are in profit for three years may credit fund, the members felt that this is additional burden for profit-making MSCS and will hamper requirements of funds for further business development.

Regarding another draft provision related to proposed clause to appoint auditors from the panel of RBI for non-credit MSCS, the members felt this will adversely affect the functioning of such societies as the nature of business conducted by MSCS and MSC banks are entirely different, so the existing provision in the Multi- State Cooperative Societies Act 2002 may be retained.

Regarding proposed clause that Cooperative Education Fund has to be maintained by Central Government and proceeds may be used for cooperative education and training through NCUI or any other agency as decided by the Central Government, the members felt that the management of the fund by government will diminish the importance of NCUI which is an apex body of the cooperative movement with focus on cooperative education and training, so the existing provision of NCUI being given the authority to collect and manage the fund as present in the Multi-State Cooperative Societies Act, must remain unchanged.

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