Sahakar Bharati’s President Satish Marathe is a troubled man today. It is his govt and yet he is finding everything going wrong. First, it was RBI’s advocacy of converting co-ops into private bodies and now this proposed clause of permitting Multi State Co-Operatives to convert themselves into limited Company in the bill to amend MSCS Act, 2002.
Marathe has finally decided to take up the issue with the Union Agriculture Minister Radha Mohan Singh. He wrote a letter explaining the perils of allowing this clause in the proposed amendment. It contains the seed to destruct cooperative sector full and final, he felt.
As it makes interesting reading we are producing below the entire text of Marathe letter for readers’ benefit.
“We understand that the bill to amend the Multi State Cooperative Societies Act, 2002 has been finalized and has been sent for vetting to the Law Ministry pending Cabinet approval, before being introduced in the Lok Sabha.
We are worried that an enabling provision in the Amendment Bill to convert a Multi-State Cooperative Society into any other form of entity, including a limited Company is fraught with risks and is likely to be used by various authorities and vested interest to pressurise the managements of Cooperatives to convert themselves into limited Companies.
Our worry stems from the fact that this proposal hits at the very roots of Co- Operatives and the principles and values that Co Operatives stand for.
It was all along expected by all Co-Operators that RBI would initiate a process for enactment of an empowering legislation which would be in the best interests of both the Urban Co-Operative Banks and the Regulator viz. RBI.
Instead of the above, unfortunately, the Reserve Bank of India is contemplating to forcefully convert a category of large Urban Co-Operative Banks into limited Companies.
RBI Committee, appointed under the Chairmanship of Shri R Gandhi, Dy Governor is expected to make such recommendation in the very near future. If implemented, it will have a far reaching and a disastrous effect on the Co-Operative movement.
We have in our country Co Operative Societies that have been in existence for several decades and a few of them are even more than hundred years old. Many of these Co Operatives have grown in size and are doing well.
The surplus generated by a Co-Operative is indivisible and is the property of the Co-Operative. After payment of nominal dividend to the shareholders, the surplus is ploughed back in the working of the Co Operative. Thus, the surplus i.e retained profit is handed over from one generation of shareholders to the next generation of shareholders, year after year. Hence,it is universally called ‘intergenerational surplus’ that belongs to all the shareholders at large.
In contrast, shareholder of a limited Company gets maximum dividend and its shares also get appreciated on the basis of the profits and performance of a Company.
By permitting conversion of healthy and strong Co-Operatives into limited Companies, we are in fact allowing the present generation of members to encash the goodwill and surplus created over the years – surplus which really does not belong to them and have to be passed on to the next generation.
We fear that once the shares of converted Co-Operatives get listed, the same would be easily cornered by vested interests with deep pockets. This would make redundant the very purpose and the ethos behind the formation of the Co Operative. It would also result in the small shareholder being denied any say in running of the converted Co-Operative.
Further, Co-Operative is a State subject and we are of the considered view that the States will NOT enact such an amendment which enables a Co-Operative to get converted into a limited Company.
Sahakar Bharati is committed to protect and uphold Co-Operative principles and values to promote growth of the Co-Operative movement in every possible way.
The amendment, though an enabling one, is likely to be abused by authorities and vested interests and hence Sahakar Bharati appeals to you on behalf of the entire Co-Operative Sector to drop this clause of permitting Multi State Co-Operatives to convert themselves into limited Company.
