Wednesday, December 26, 2012

Cooperative Governance


Cooperative Governance
The Constitution 97th Amendment Act 2012, one of the very progressive legislations of the UPA Government aims to correct misgovernance of cooperative societies in the country among other important provisions at a time when speaking of good governance is akin to smelling  jasmine in fish and fowl market. The Act itself specified that the States shall amend their respective cooperative Acts before February 14, 2013, one year from the date of notification of the Act in line with the provisions of this Act. If the States do not amend their Acts as above, the 97th Amendment Act shall govern the State Cooperatives.
Article 19(4) defined Cooperative Society as one that is promoted, managed and controlled by members. This would mean that the control of the Cooperative Societies to whatever extent it rested with the Registrar of the Cooperative Societies shall be unconstitutional. All such provisions in the existing Acts shall be removed from the modified Acts.
 It also specified in section 243ZO that such member to participate in elections should be actively availing the services of the Society and should be attending its meetings with certain regularity. This called for defining the Active Member in the new Act of the States.
This Act under article 243ZK also specified that the States shall also set up a State Election Authority to conduct elections to the Cooperative Societies in the State and these should be conducted once in every five years. If the State Government so chooses, it can entrust the responsibility to the State Election Commission, but with specific mention in the newly amended Cooperative Act. It has also mentioned that such elections should be conducted in a manner that the new Board should assume charge immediately after the first Board concludes its term. There are around six lakh cooperatives in the country with estimated 23million members. It has become a habit with the States conducting such elections irrespective of party in power to go in for enrollment of members just before elections as anybody paying a small share capital of ten rupees can become a member. To prevent such malpractice the Act in section, 243ZO specifies the eligibility of members who can participate in voting.
The Act clearly defines Board as the ‘Board of Directors or the Governing Body of the Society, or whatever name called, to which the direction and control of the management of the affairs of a society is entrusted to.’ There is brazen violation of the Constitution by even the UPA ruled State like Andhra Pradesh. The 97th Constitution Amendment Act 2012 dealing with Cooperative legal reforms and governance statutorily seeks a State Election Authority to conduct elections to cooperatives and the States are to carry out all the amendments required before February 14, 2013. The State that has been postponing elections to cooperatives for the last two years announced them hurriedly to have the last laugh on their subversive methods of winning the elections. The New Act would not allow non-active members to cast their vote. The ruling party is afraid of losing hold on the cooperative societies that hitherto formed the bedrock of State politics. States like Tamil Nadu and Karnataka issued ordinances repeating the Central Act that were returned promptly.
The Board shall have maximum 21 members and provided for reservation of SC/ST and women not exceeding three provided the Society base itself does not have such constituency. General Body has been given supreme authority thus conferring autonomy in the Society. The rights of members have also been defined along with the information the society should provide to the members and the regulator. The Board shall have three independent professional directors but would not have voting rights. These directors should submit to the General Body their statement of assets and liabilities and shall not be defaulters to the society in terms of their obligations.
No Board can be superseded by the Government for more than six months with the exception of cooperative banks where the supersession can be for one year under the direction of the RBI.
Governance of cooperatives through this Act provides for better participation in its management and control and has prospect of superior governance over the existing Companies, where the shareholders of the Company have to understand the company only from their half-yearly and annual reports. Cooperatives as body corporate managed and controlled by members could compete on their own terms effectively with other forms of business organizations.
Edited form appeared in http://www.scribd.com/doc/117937064/Business-Advisor-December-25-2012