CHAPTER – 2

2.1 History of Co-Operative society

Introduction

The cooperative movement in India owes its origin to agriculture and allied sectors.
Towards the end of the 19th century, the problems of rural indebtedness and the consequent
conditions of farmers created an environment for the chit funds and cooperative societies.

The cooperative movement in India owes its origin to agriculture and allied sectors.
Towards the end of the 19th century, the problems of rural indebtedness and the consequent
conditions of farmers created an environment for the chit funds and cooperative societies.
The farmers generally found the cooperative movement an attractive mechanism for pooling
their meagre resources for solving common problems relating to credit, supplies of inputs and
marketing of agricultural produce. The experience gained in the working of cooperatives led
to the enactment of Cooperative Credit Societies Act, 1904. Subsequently, a more
comprehensive legislation called the Cooperative Societies Act was enacted. This Act, inter
alia, provided for the creation of the post of registrar of cooperative societies and registration
of cooperative societies for various purposes and audit. Under the Montague-Chelmsford
Reforms of 1919, cooperation became a provincial subject and the provinces were authorised
to make their own cooperative laws. Under the Government of India Act, 1935, cooperatives
were treated as a provincial subject. The item "Cooperative Societies" is a State Subject under
entry No.32 of the State List of the Constitution of India.

In order to cover Cooperative Societies with membership from more than one
province, the Government of India enacted the Multi-Unit Cooperative Societies Act, 1942.
This Act was an enabling legislative instrument dealing with incorporation and winding up of
cooperative societies having jurisdiction in more than one province. With the emergence of
national federations of cooperative societies in various functional areas and to obviate the
plethora of different laws governing the same types of societies, a need was felt for a
comprehensive Central legislation to consolidate the laws governing such cooperative
societies. Therefore, the Multi-State Cooperative Societies Act, 1984 was enacted by
Parliament under Entry No. 44 of the Union List of the Constitution of India.
 After India attained Independence in August, 1947, cooperatives assumed a great
significance in poverty removal and faster socio-economic growth. With the advent of the
planning process, cooperatives became an integral part of the Five Year Plans. As a result,
they emerged as a distinct segment in our national economy. In the First Five Year Plan, it
was specifically stated that the success of the Plan would be judged, among other things, by
the extent it was implemented through cooperative organisations.

The All-India Rural Credit Survey Committee Report, 1954 recommended an

integrated approach to cooperative credit and emphasised the need for viable credit
cooperative societies by expanding their area of operation, encouraging rural savings and
diversifying business. The Committee also recommended for Government participation in the
share capital of the cooperatives.

In view of these recommendations, different States drew up various schemes for the
cooperative movement for organising large-size societies and provision of State partnership
and assistance. During 1960s, further efforts were made to consolidate the cooperative
societies by their re-organisation. Consequently, the number of primary agricultural
cooperative credit societies was reduced from around two lakh to 92,000.

PUBLIC SECTOR
 The public sector is the part of the economy concerned with providing various
governmental services. The composition of the public sector varies by country, but in
most countries the public sector includes such services as
the military, police, infrastructure(public roads, bridges, tunnels, water
supply, sewers, electrical grids, telecommunications, etc.), public transit, public
education, along with health care and those working for the government itself, such
as elected officials. The public sector might provide services that a non-payer cannot
be excluded from (such as street lighting), services which benefit all of society rather
than just the individual who uses the service.

 Businesses and organizations that are not part of the public sector are part of
the private sector. The private sector is composed of the business sector, which is
intended to earn a profit for the owners of the enterprise, and the voluntary sector,
which includes charitable organizations.
PRIVATE SECTOR

 The private sector is the part of a country's economic system that is run by individuals
and companies, rather than the government. Most private sector organizations are run
with the intention of making profit.
 The segment of the economy under control of the government is known as the public
sector. Charities and non-profit organizations are sometimes considered to make up a
third segment, known as the volunteer sector. However, such organizations are more
commonly considered part of the private sector.
 The private sector is larger in free enterprise economies, such as the United States, in
which the government imposes relatively few restrictions on businesses. In countries
with more government control, such as China, the public sector makes up the larger
part of the economy.
 In many countries, there is considerable overlap between public and private sector
industries. Examples of enterprises that are often run cooperatively include waste
management, water management, health care and security services.
 An industry or business may start out in one sector and move to the other. The act of
turning a publicly-run enterprise over to private citizens is known as privatization.
The opposite movement, from private to public, is known by various names, including
nationalization or municipalization, depending on the level of government involved.

CO-OPERATIVE SOCIETY
A co-operative society is an autonomous association of persons united voluntarily to
meet their common economic, social and cultural needs and aspirations through a jointly-
owned and democratically-controlled enterprise.
The businessman tries to promote his own interest through all possible means
including exploitation of consumers. The co-operative form of organisation is a democratic
set up run by its members for serving the interests of themselves. It is self help through
mutual help. The philosophy behind co-operative movement is “All for each and each for
all”.
2.2 THE CO-OPERATIVE SOCIETY ACT, 1912

Cooperative Societies Act:

Cooperative Societies Act is a Central Act. However, 'Cooperative Societies' is a State

Subject (Entry 32 of List II of Seventh Schedule to Constitution, i.e. State List).

Though the Act is still in force, it has been specifically repealed in almost all the States and
those States have their own Cooperative Societies Act. Thus, practically, the Central Act is
mainly of academic interest.

As per preamble to the Act, the Act is to facilitate formation of cooperative societies for the
promotion of thrift and self-help among agriculturists, artisans and persons of limited means.

The Statement of Objects and reasons states as follows -

(a) Cooperative Society can be established for purpose of credit, production or distribution.
(b) Agricultural credit societies must be with unlimited liability.

(c) Unlimited society is not best form of cooperation for agricultural commodities. However,
the provision is continued as in several provinces (now States) such societies do exist and are
working. It is not intended to give them undue encouragement, but to legalise their
existence.

(d) Unlimited society can distribute profits with permission of State Government.

Registration of Society -

State Government will appoint Registrar of Cooperative Societies. State Government can
appoint persons to assist Registrar and confer on such persons all or any of powers of
Registrar. [section 3]. Function of Registrar starts with registration of a society. He has
powers of general supervision over society. Returns of Society are to be filed with Registrar.
He can order inquiry or inspection against society. He can order dissolution of society.

Societies which may be registered -

A society which has as its object the promotion of economic interests of its members in
accordance with cooperative principles can be registered as a Society. Similarly, a society
established with the object of facilitating operation of such a society can also be registered
under the Act.
The society can be registered with limited or unlimited liability. However, unless State
Government otherwise directs,

(1) Liability of a society of which a member is a registered society shall be limited.

(2) Liability of a society of which object is to creation of funds to be lent to members, and of
which majority of members are agriculturists and of which no member is a registered society
shall be unlimited [section 4]. Thus, a registered society can be member of another society,
but liability of such other society must be limited, unless State Government otherwise directs.

Who can form a society -

A society can be formed with at least 10 members of age above 18 years. If object of society
is creation of funds to be lent to its members, all the members must be residing in same town,
village or group of villages or all members should be of same tribe, class, caste or occupation,
unless Registrar otherwise directs.

The provision of minimum 10 members or residing in same town/village etc. is not applicable
if a registered society is member of another society.

The last word in name of society should be 'Limited'. If the Society is registered with limited
liability. [section 6]. Registrar is empowered to decide whether a person is agriculturist or
non-agriculturist or whether he is resident of same town/village or whether the members
belong to same caste/tribe etc. and his decision will be final. [section 7].

Restrictions on society with limited liability -

If a society has limited liability, any individual member of such society cannot have share
capital more than one-fifth of total capital. An individual member cannot have interest in
shares exceeding Rs 1,000.

This restriction of 20% shares or Rs 1,000 shares value is not applicable to a registered
society which is member of another society. [section 5].

Thus, if a registered society is member of another society, it can hold shares exceeding 20%
or exceeding Rs 1,000 in value.

Amendment of bye-laws -

Any Amendment to bye-laws shall be registered with Registrar. If Registrar is satisfied that
the amendment is not contrary to Act or rules, he will register the amendment. He will issue a
certificate of registration along with copy of amendment certified by him, which is conclusive
evidence that the amendment has been duly registered. [section 11].

Rights and liabilities of members -

If liability of members is not limited by shares, each member shall have one vote irrespective
of amount of his interest in the capital. [section 13(1)].

If liability of members of a registered society is limited by shares, each member will have as
many votes as may be prescribed in bye-laws. [section 13(2)].

If a registered society has invested in shares of other registered society, it can vote by
appointing a proxy. [section 13(3)]. - -

A member of registered society shall not exercise his rights as member, unless he has made
payment to society in respect of membership or has acquired interest in society, as may be
prescribed by rules or bye-laws. [section 12].

Thus, if there is any default in payment to society, the member cannot exercise his rights.

Management of society -

Each society will be managed by Committee. - -

Committee means the governing body of a registered society to whom the management of its
affairs is entrusted. [section 2(b)]. Officer of society includes a Chairman, Secretary,
treasurer, member of Committee or other person empowered under rules or bye-laws to give
directions in regard to business of society. [section 2(e)].

Registered Society is body corporate -

A registered cooperative society is a body corporate with perpetual succession and common
sea. (just like a company). It can hold property, enter into contracts, institute and defend suit
and other legal proceedings and to do all things necessary for the purposes of its constitution.
[section 18].

Priority claim of society dues from member -

A registered society is entitled to priority to other creditors and enforce outstanding demand
due to society from any member. However, the priority is subject to prior claims of

(a) Government dues in respect of land revenue or

(b) Dues of landlord in respect of rent receivable by the landlord.

The priority of society is in respect of following -

(a) Supply of seed or manure or loan for purchase of seed or manure. The priority is upon the
crops or other agricultural produce upto 18 months from date of supply of seed/manure or
loan.

(b) Supply of cattle or fodder of cattle, agricultural implements or machinery or raw materials
or loan for these. The priority is upon the cattle/fodder/ machinery / raw materials supplied or
any articles manufactured from raw materials supplied or purchased form loan given by
society. [section 19].

Liability of past member -

Liability of past members towards society as on the date he ceased to be member will
continue for two years. [section 23].

Restrictions on loans -

A registered society can give loans only to its members. However, it can give loan to another
registered society with permission of Registrar. [section 29(1)]. A society with unlimited
liability cannot lend money on security of movable property without sanction of registrar.
[section 29(2)]. State Government, by issuing a general or special order, can prohibit or
restrict lending of money on mortgage of immovable property by any registered society or
class of registered society.

Inspection of affairs of society -

Registrar can hold an enquiry or direct some person authorized by him to hold enquiry in
following circumstances -

(a) Of his own motion

(b) Request of Collector

(c) Application by majority of committee members of society or

(d) At least one-third of members of society. [section 35(1)]. All officers and members of
society shall furnish necessary information to registrar or person authorised by him. [section
35(2)].
 Dissolution of society -

Registrar, after inspection or inquiry, or on application received from 75% of members of

society, may cancel the registration of society, if in his opinion, the Society should be
dissolved. Any member can appeal against the order of Registrar within two months to State
Government or other Revenue Authority authorised by State Government. If no appeal is
filed within two months, the order of dissolution shall become effective. If appeal is filed, the
order will become effective only after it is confirmed by appellate authority. [section 39].

MISSION

The main object of the administration is to ensure the economical and social upliftment of the
people at large and to promote the tendency of the saving on co-operative base and to reach
the facility of loans to the various sections of the society with the mean of co-operative
institutions and to ensure to make available the reasonable and just price of the agricultural
produces and facilities of storage to the farmers with the mean of APMC. While, the Money-
lending Act aims to protect the debtors and borrowers from exploitation by the money lenders
and the Flat Act intends to protect the flat owners from being cheated by the builders.
Mission of these Acts is as under for the effective execution

DEVELOPMENT

 Enabling more and more people to avail the benefits of co-operative activities and to become
the members of co-op societies.

 Constitution of co-op societies of various nature.

 Enhancement of substantial contribution of co-operative activities in finance sector.

 Increasement in loans of thrust to agricultural production and extension of facilities to

provide inputs therein.

 Strengthening of the people's co-op Banks by promotions to savings- protection coves to

deposits- application of surplus finance.

 Making the consumer activities operational and significant.

 Development of milk co-operatives activities in undeveloped sectors.

 Making efforts to extend the growth of the residential facilities with the mean of housing
societies.

 Constitution of new co-operative societies in the sectors such as insurance- Medical,

electricity- hospital-information technology bio medical production- academic services etc.

SERVICE

 Extending financial facilities to strengthen and to pacify the co -operative societies.

 Assistance and guidance to the administrative process.

 Research in exploited sector and actions against the exploiters and actions against the
exploiters.

VISION OF THE DEPARTMENT

 Making administration transparent and people oriented with mean of administrative reforms

 Pacification in administration with the mean of Information technology

 Making the services available to the grass-root level

 Modernization in administration and providing satisfactory services

JEWELLARY LOAN

 Jewel Loan (For Loan Value : Till Rs.50,000/-)

 Jewel Loan (For Loan Value : From Rs.50,001/- to Rs.2,00,000/-)

 Jewel Loan (For Loan Value : From Rs.2,00,000/- and Above)

 Salary Loan / Personal Loan

HOUSE LOAN

 House Mortgage Loan

 Housing Loan

 Pensioner Loan

 Petty Traders Loan

COMPANY AT A GLANCE

Name of the society - Z.819 Thirunageswaram Primay Agricultural Co-Operative society Ltd.,

Full address of the society – Z.819 Thirunageswaram Primay Agricultural Co-Operative Society

Regd.No.&Date – Z.819&Date: 20.09.1967

Name of the administrative circle – Deputy Registrar of Co-op,Society, Kumbakonam

Name of financing bank & branch – Kumbakonam District Central Co-op, Bank, Kumbakonam Branch

Name of the central Bank – Kumbakonam District Central Co.op, Bank

Name of the block – Thiruvidaimaruthur Block

Area of operation – Thirunageswaram, Sannapuram, Aathamangalam, Thepperumalanallur

Date of functioning – 22.09.1967

Commericial Bank/Regional rural banks functioning under the area of operation of the society – Nil

Year and period of audit – 2015-2016 (Period 01.04.2015 to 31.03.2016)

Chronological number of audit – 49th Year

Name & Address of the Secretary/chief executive and period of working – N.Venkatesan, SEcretary

2.3 WORK PLACE ENVIRONMENT

Many definitions exist as to what qualifies as a workers' cooperative. CICOPA, the

International Organisation of Industrial, Artisanal and Service Producers’ Cooperatives, gives
an 8-page definition in their World Declaration on Workers' Cooperatives, which was
approved by the International Co-operative Alliance General Assembly in September 2005.
Below is the section on the basic characteristics of workers' cooperatives:

1. They have the objective of creating and maintaining sustainable jobs and generating
wealth, to improve the quality of life of the worker-members, dignify human work,
allow workers’ democratic self-management and promote community and local
development.
 2. The free and voluntary membership of their members, in order to contribute with their
personal work and economic resources, is conditioned by the existence of
workplaces.
3. As a general rule, work shall be carried out by the members. This implies that the
majority of the workers in a given worker cooperative enterprise are members and
vice versa.
4. The worker-members’ relation with their cooperative shall be considered as different
from that of conventional wage-based labour and to that of autonomous individual
work.
5. Their internal regulation is formally defined by regimes that are democratically
agreed upon and accepted by the worker-members.
6. They shall be autonomous and independent, before the State and third parties, in their
labour relations and management, and in the usage and management of the means of
production.[2]
Workers' cooperatives also follow the Rochdale Principles and values, which are a set of core
principles for the operation of cooperatives. They were first set out by the Rochdale Society
of Equitable Pioneers in Rochdale, England, in 1844 and have formed the basis for the
principles on which co-operatives around the world operate to this day.

Even though there is no universally accepted definition of a workers' cooperative, they can be
considered to be businesses that make a product, or offer a service, to sell for profit where the
workers are members or worker-owners. Worker-owners work in the business, govern it and
manage it. Unlike with conventional firms, ownership and decision-making power of a
worker cooperative should be vested solely with the worker-owners and ultimate authority
rests with the worker-owners as a whole. Worker-owners control the resources of the
cooperative and the work process, such as wages or hours of work.[3]

As mentioned above, the majority—if not all—of the workers in a given worker cooperative
enterprise are worker-owners, although some casual or wage workers may be employed with
whom profits and decision making are not necessarily shared equally. Workers also often
undergo a trial or screening period (such as three or six months) before being allowed to have
full voting rights.[3]

Participation is based on one vote per worker-owner, regardless of the number of shares or
equity owned by each worker-owner. Voting rights are not tied to investment or patronage in
the workers' co-operative, and only worker-owners can vote on decisions that affect them. In
practice, worker co-operatives have to accommodate a range of interests to survive and have
experimented with different voice and voting arrangements to accommodate the interests of
trade unions,[7] local authorities,[8] those who have invested proportionately more labour, or
through attempts to mix individual and collective forms of worker ownership and control.[9]

As noted by theorists and practitioners alike, the importance of capital should be subordinated
to labour in workers' cooperatives. Indeed, Adams et al. see workers' cooperatives as "labor-
ist" rather than "capital-ist":

"Labor is the hiring factor, therefore the voting and property rights are assigned to the people
who do the work and not to capital, even though the worker-members supply capital through
membership fees and retained earnings...Any profit or loss after normal operating expenses is
assigned to members on the basis of their labor contribution."[3]

Nevertheless, recent developments in the co-operative movement have started to shift

thinking more clearly towards multi-stakeholder perspectives. This has resulted in repeated
attempts to develop model rules that differentiate control rights from investment and profit-
sharing rights.[10] Workers' co-operatives have often been seen as an alternative or "third
way" to the domination of labour by either capital or the state (see below for a comparison).
Co-operatives traditionally combine social benefit interests with capitalistic property-right
interests. Co-operatives achieve a mix of social and capital purposes by democratically
governing distribution questions by and between equal controlling members. Democratic
oversight of decisions to equitably distribute assets and other benefits means capital
ownership is arranged in a way for social benefit inside the organization. External societal
benefit is also encouraged by incorporating the operating-principle of cooperation between
co-operatives.

In short, workers' co-operatives are organised to serve the needs of worker-owners by

generating benefits (which may or may not be profits) for the worker owners rather than
external investors. This worker-driven orientation makes them fundamentally different from
other corporations. Additional cooperative structural characteristics and guiding principles
further distinguish them from other business models. For example, worker-owners may not
believe that profit maximisation is the best, or only, goal for their co-operative or they may
follow the Rochdale Principles. As another example, worker cooperatives’ flattened
management structure and more egalitarian ideology often give workers more options and
greater freedom in resolving work-place problems.[11]

Profits (or losses) earned by the worker's cooperative are shared by worker owners. Salaries
generally have a low ratio difference which ideally should be "guided by principles of
proportionality, external solidarity and internal solidarity"[3] (such as a two to one ratio
between lowest and highest earner), and often are equal for all workers. Salaries can be
calculated according to skill, seniority or time worked and can be raised or lowered in good
times or bad to ensure job security.

Internal structure[edit]
Worker cooperatives have a wide variety of internal structures. Worker control can be
exercised directly or indirectly by worker-owners. If exercised indirectly, members of
representative decision-making bodies (e.g. a Board of Directors) must be elected by the
worker-owners (who in turn hire the management) and be subject to removal by the worker-
owners. This is a hierarchical structure similar to that of a conventional business, with a
board of directors and various grades of manager, with the difference being that the board of
directors is elected.

If exercised directly, all members meet regularly to make—and vote on—decisions on how
the co-operative is run. Direct workers' cooperatives sometimes use consensus decision-
making to make decisions.[12] Direct worker control ensures a formally flat management
structure instead of a hierarchical one. This structure is influenced by activist collectives and
civic organizations, with all members allowed and expected to play a managerial role. Such
structures may be associated with political aims such as anarchism,libertarian
socialism and participatory economics.[13][14]

Some workers' cooperatives also practice job rotation or balanced job complexes to overcome
inequalities of power as well as to give workers a wider range of experiences and exposure to
the different jobs in a work place so that they are better able to make decisions about the
whole workplace. The Mondragon Bookstore & Coffeehouse is a good example of a
workplace that does this.

Worker Collectives[edit]
The term 'worker collective' is sometimes used to describe worker cooperatives which are
also collectives: that is, managed without hierarchies such as permanent manager roles.[15]
2.4 SAFETY ANALYSIS

Safety and security are two important aspects in the analysis of cyber-physical
systems (CPSs). In this short paper, we apply a new safety and security analysis method to
intelligent and cooperative vehicles, in order to examine attack possibilities and failure
scenarios. The method is based on the FMEA technique for safety analysis, with extensions
to cover information security. We examine the feasibility and efficiency of the method, and
determine the next steps for developing the combined analysis method.

2.5 EMPLOYEE DETAILS

A worker cooperative is a cooperative that is owned and self-managed by its

workers. This control may be exercised in a number of ways. A cooperative enterprise may
mean a firm where every worker-owner participates in decision-making in a democratic
fashion, or it may refer to one in which management is elected by every worker-owner, and it
can refer to a situation in which managers are considered, and treated as, workers of the firm.
In traditional forms of worker cooperative, all shares are held by the workforce with no
outside or consumer owners, and each member has one voting share. In practice, control by
worker-owners may be exercised through individual, collective, or majority ownership by the
workforce; or the retention of individual, collective, or majority voting rights (exercised on a
one-member one-vote basis).[1] A worker cooperative, therefore, has the characteristic that
each of its workers own one share, and the all shares are owned by the workers.[2] The
International organisation representing worker cooperatives is CICOPA.

2.6 TYPES OF SCHEME AREA PROFILE

The present day cooperative credit sector is the result of the revolution against
mercantile economy. This gained the social and economic objectives which were formulated
into cooperation by veterans namely Robert Owen of Britain and Charles Fourier of France.
The cooperative movement saw the light of the day in 1844 after the formation of the
Rockdale Society in England. Later, it gave inspiration1 to the cooperative movement on the
principle of ‘all for one and one for all.’ The origin and development of cooperative
movement is discussed in this chapter to understand the mechanism of cooperative banks
with reference to the aspect of financial management.