Introduction of MSCS

With the evolution of the concept of Co-operation in the economic activities in India, the pooling of resources was made by the people of an area, village, town, district and so on. In the formative stage people pooled their resources for credit purposes. Money was lent to the needy members who paid interest together with the amount of the loan in installments. The interest on borrowings being higher than that of the deposits, the surplus income after meeting the expenses of management was distributed among the members of the pool at regular intervals by way of dividends. The surplus many a times was also retained for extending the operations of the pool i.e. creating a Capital Fund.

With the passage of time these pools were named as Co-operative Credit Societies since their only activity was to grant credit, to their members. To legalise the operations of these Societies the Central Government passed the Co-operative Societies Act, 1904. The Registration of all such societies was mandatory under this Act. Thus the functioning of these societies was controlled by the Act, simple reason being to protect the interests of the members of such societies.

In 1909 a conference of the Registrars of Co-operative Societies was called and they examined the adequacy of the Co-operative Societies Act, 1904. The conference drew up the proposals for the amendment of the 1904 Act and after getting the views of the State Governments on these proposals, the Central Government prepared a Bill which was enacted as "Cooperative Societies Act, 1912 (Act 2 of 1912). This Act was made applicable to all types of Co-operative Societies, Rural, Urban, with limited liability or unlimited liability.

The Act of 1912 was enacted with a view to establish a socialist pattern of society in India through the Co-operative Development. Therefore, a cardinal principle, which is being observed in the setting up and development of co-operative societies in Europe, was also followed by the Indian Government. This Cardinal Principle is the grouping of the Co-operative Societies into Unions and their financing to be made by the Central Banks, so that the functioning of the primary societies does not suffer on account of the paucity of funds. In order to give effect to this purpose, section 4 of the Co-operative Societies Act, 1912 provided for the registration of societies to facilitate the operations of Co-operative Credit Societies that care for and serve the economic interests of their members. Thus the District Co-operative Banks and State Co-operative Banks were set up. The State Co-operative Banks are also known as the Apex Co-operative Banks. The District Co-operative Banks are also named as Central Cooperative Banks. With the consequent amendment in the Banking Companies Act, the Reserve Bank of India was also empowered to exercise its control over these Co-operative Banks.

Multi-State Co-operative Societies Act, 1984

In the Co-operative Sector, not only the Co-operative Societies grew up in number but also in their area of operation crossed their geographical limits. A society registered in one state but had its offices and activities of operation in more than one state. This created difficulty in controlling such societies and also resolving conflicts. The reason being that certain States had their own law governing the activities of the societies registered in the area of their jurisdiction. For example, a Co-operative Society registered in Karnataka may also set up its offices in Kerala and Tamilnadu. Now, which State's law will apply to redress the grievances of this society, Kerala or Tamilnadu?

To solve this problem, the need of a Central Law governing the activities of societies having their offices in more than one State was greatly felt. Therefore, "The Multi-Unit Co-operative Societies Act, 1942 (Act 6 of 1942)" was passed. "Armed with an experience of 42 years in the working of Multi-State Co-operative Societies and Multi-Unit Co-operative Societies Act, 1942 the Central Government came out with a comprehensive measure in the from of "Multi-State Co-operative Societies Act, 1984 (Act 54 of 1984), repealing the Act of 1942."

The Multi-State Co-operative Societies Act, 2002

This Act has been introduced to consolidate and amend the law relating to Co-operative Societies, with objects not confined to one State and serving the interests of members in more than one State, to facilitate the voluntary formation and democratic functioning of co-operatives as people's institutions based on self-help and mutual aid and to enable to promote their economic and social betterment and to provide functional autonomy. The Multi-State Co-operative Society Bill was passed by both houses of the Parliament and received the assent of the President on 3rd August, 2002 and it came into force on 19th August, 2002 vide GSR 571(E) dated 16th August, 2002.

The new Act, has made several changes in the law and many new provisions has been introduced like concept of federal co-operative, deeming provisions for registration, the detailed provisions for the procedure of amendment in the bye-laws etc., these provisions are on par with the provisions of the Companies Act, 1956. For example the registration of the society makes the society as a body corporate, requirement relating to publication of name of the society, audit etc.

The Act comprises 126 Sections in all and as per section 126, the rules made under the Act of 1984, continued to apply except which are inconsistent with the Multi-State Co-operative Societies Act, 2002.

The rules were made to regulate the working of Co-operative Credit Societies, Agricultural and Housing Societies, Industrial and Consumer Cooperatives, Co-operative Banks and Societies established with the object of developing educational and cultural aspects of the members of such societies. Such societies must function in accordance with the Co-operative principles as defined in the First Schedule to the Act.

The membership of such societies should be open to every person without any discrimination on the basis of caste, creed, and religion is based on voluntary basis. The functioning of such societies should be on the principle of democracy and each member of such societies should be having equal rights of vote.

The society with a limited liability should have the word 'Ltd.' suffixed with its name, so that the persons dealing with it may know that the liability of the society is limited. After the introduction of this Act, no new Multi-State Co-operative Society with unlimited liability shall be registered under the Act. (Section 16).