Section-56 Act to apply to Co-operative Societies subject to modifications

Section-56 Act to apply to Co-operative Societies subject to modifications

The provisions of this Act, as in force for the time being, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to the following modifications, namely,-

(a) throughout this Act, unless the context otherwise requires-

(i) references to a "banking company" or "the company" or "such company" shall be construed as references to a Co-operative Bank,

(ii) reference to "commencement of this Act" shall be construed as reference to commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965);

(b) in section 2, the words and figures "the Companies Act, 1956 (1 of 1956), and" shall be omitted;

(c) in section 5- 273[(1) after clause (cc), the following clauses shall be inserted, namely,-

(cci) "Co-operative Bank" means a State Co-operative Bank, a Central Co-operative Bank and a primary Co-operative Bank;

(ccii) "co-operative credit society" means a co-operative society, the primary object of which is to provide financial accommodation to its members and includes a co-operative land mortgage bank;

(cciii) "Director", in relation to a co-operative society, includes a member of any committee or body for the time being vested with the management of the affairs of that society;

(cciv) "primary agricultural credit society" means a co-operative society-

(1) the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of crops); and

(2) the bye-laws of which do not permit admission of any other co-operative society as a member:

PROVIDED that this sub-clause shall not apply to the admission of a Co-operative Bank as a member by reason of such Co-operative Bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose;

(ccv) "primary Co-operative Bank means a co-operative society, other than a primary agricultural credit society-

(1) the primary object or principal business of which is the transaction of banking business;

(2) the paid-up share capital and reserves of which are less than one lakh of rupees; and

(3) the bye-laws of which do not permit admission of any other co-operative society as a member:

PROVIDED that this sub-clause shall not apply to the admission of a Co-operative Bank as a member by reason of such co-operative Bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose;

(ccvi) "primary credit society" means a co-operative society, other than a primary agricultural credit society-

(1) the primary object or principal business of which is the transaction of banking business;

(2) the paid up share capital and reserves of which are less than one lakh of rupees; and

(3) the bye-laws of which do not permit admission of any other co-operative society as a member:

PROVIDED that this sub-clause clause shall not apply to the admission of a Co-operative Bank as a member by reason of such Co-operative Bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose.

Explanation : If any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final;

(ccvii) "Central Co-operative Bank", "co-operative society", "primary rural credit society" and "State Co-operative Bank" shall have the meanings respectively assigned to them in the National Bank for Agricultural and Rural Development Act, 1981 (61 of 1981)];

(ii) clauses (ff) (h) and (hb) shall be omitted;]

(d) for section 5A, the following section shall be substituted, namely:-

"5A. Act to override bye-laws, etc.-

(1) The provisions of 253[this Act] shall have effect, notwithstanding anything to the contrary contained in the bye-laws of a co-operative society, or in any agreement executed by it, or in any resolution passed by it in general meeting, or by its Board of Directors or other body entrusted with the management of its affairs, whether the same be registered, executed or passed, as the case may be, before or after the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965).

(2) Any provision contained in the bye-laws, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of 274[this Act], become or be void, as the case may be.";

(e) in section 6, in sub-section (1)-

(i) in clause (b), the words "but excluding the business of a Managing Agent or Secretary and Treasurer of a company" shall be omitted;

(ii) in clause (d), after the word "company", the words "co-operative society" shall be inserted;

(iii) in clause (m) after the word "company", the words "or co-operative society" shall be inserted;

253[(f) for section 7, the following section shall be substituted namely :-

7. Use of words "bank" "banker” or "banking"

(1) No co-operative society other than a Co-operative Bank shall use as part of its name or in connection with its business any of the words "bank", "banker", or "banking", and no co-operative society shall carry on the business of banking in India unless it uses as part of its name at least one of such words.

(2) Nothing in this section shall apply to-

(a) a primary credit society, or

(b) a co-operative society formed for the protection of the mutual interest of Co-operative Banks or co-operative land mortgage banks, or

(c) any co-operative society, not being a primary credit society, formed by the employees of-

(i) a banking company or the State Bank of India or a corresponding new bank or a subsidiary bank of such banking company, State Bank of India or a corresponding new bank, or

(ii) a Co-operative Bank or a primary credit society or a co-operative land mortgage bank, in so far as the words "bank", "banker”, or "banking" appear as part of the name of the employer bank, or as the case may be, of the bank, whose subsidiary the employer bank is.]

(fi) in section 8, for the proviso, the following proviso shall be substituted, namely,-

"PROVIDED that this section shall not apply-

(a) to any such business as aforesaid which was in the course of being transacted on the commencement of clause (iii) of section 42 of the Banking Laws (Amendment) Act, 1983 (1 of 1984), so, however, that the said business shall be completed before the expiry of one year from such commencement; or

(b) to any business as is specified in pursuance of clause (o) of sub-section (1) of section 6;";

(fii) in section 9, for the second proviso, the following provisos shall be substituted, namely:-

"PROVIDED FURTHER that in the case of a primary credit society which becomes a primary Co-operative Bank after the commencement of clause (iii) of section 42 of the Banking Laws (Amendment) Act, 1983 (1 of 1984), the period of seven years shall commence from the day it so becomes a primary Co-operative Bank:

PROVIDED ALSO that the Reserve Bank may, in any particular case, extend the aforesaid period of seven years by such period as it may consider necessary where it is satisfied that such extension would be in the interests of the depositors of the Co-operative Bank."];

(g)Sections 10, 10A,10B, LOBB, 10C1 and 10D1 shall be omitted;

(h) for section 11, the following section shall be substituted, namely,-

11. Requirement as to minimum paid-up capital and reserves-(1) Notwithstanding any law relating to co-operative societies for the time being in force, no Co-operative Bank shall commence or carry on the business of banking in India unless the aggregate value of its paid-up capital and reserves is not less than one lakh of rupees:

PROVIDED that nothing in this sub-section shall apply to-

(a) any such bank which is carrying on such business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of three years from such commencement; or

(b) to a primary credit society which becomes a primary Co-operative Bank after such commencement, for a period of two years from the date it so becomes a Primary Co-operative Bank or for such further period not exceeding one year as the Reserve Bank, having regard to the interests of the depositors of the Primary Co-operative Bank, may think fit in any particular case to allow. 

(2) For the purposes of this section, "value" means the real or exchangeable value and not the nominal value which may be shown in the books of the Co-operative Bank concerned

(3) If any dispute arises in computing the aggregate value of the paid-up capital and reserves of any such Co-operative Bank, a determination thereof by the Reserve Bank shall be final for the purpose of this section.'

(i) sections 12,12A, 13 and 15 to 17 shall be omitted;

(j) for section 18, the following section shall be substituted, namely,-

"18. Cash reserve-

(1) Every Co-operative Bank, not being a State Co-operative Bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934) (hereinafter referred to as a "Scheduled State Co-operative Bank"), shall maintain in

India by way of such reserve with itself or by way of balance in a current account with the Reserve Bank or the State Co-operative Bank of the State concerned or by way of net balance in current account, or, in the case of a Primary Co-operative Bank, with the Central Co-operative Bank of the district concerned, or in one or more of the aforesaid ways, a sum equivalent to at least three per cent of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight and shall submit to the Reserve Bank before the fifteenth day of every month a return showing the amount so held on alternate Fridays during a month with particulars of its demand and time liabilities in India on such Fridays or if any such Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), at the close of business on the preceding working day.

Explanation : In this section and in section 24-

(a) "liabilities in India" shall not include-

(i) the paid up capital or the reserves or any credit balance in the profit and loss account of the Co-operative Bank;

(ii) any advance taken from a State Government, the Reserve. Bank, the Development Bank, the Exim Bank 276[the Reconstruction Bank], 277[the National Housing Bank], the National Bank 278[the Small Industries Bank] or from the National Co-operative Development Corporation established under section 3 of the National Co-operative Development Corporation Act, 1962 (26 of 1962) by the Co-operative Bank;

(iii) in the case of a State or Central Co-operative Bank, also any deposit of money with it representing the reserve fund or any part thereof maintained with it by any other co-operative society within its area of operation, and in the case of a Central Co-operative Bank, also an advance taken by it from the State Co-operative Bank of the State concerned;

(iv) in the case of a Primary Co-operative Bank, also any advance taken by it from the State Co-operative Bank of the State concerned or the Central Co-operative Bank of the district concerned;

(v) in the case of any Co-operative Bank, which has granted an advance against any balance maintained with it, such balance to the extent of the amount outstanding in respect of such advance; and

(vi) in the case of any Co-operative Bank, the amount of any advance or other credit arrangement drawn and availed of against approved securities;

(b) "fortnight" shall mean the period from Saturday to the second following Friday, both days inclusive;

(c) "net balance in current accounts" shall, in relation to a Co-operative Bank, mean the excess, if any, of the aggregate of the credit balances in current account maintained by that Co-operative Bank with the State Bank of India or a subsidiary bank or a corresponding new bank, over the aggregate of the credit-balances in current accounts held by the said banks with such Co-operative Bank;

(d) for the purpose of computation of liabilities, the aggregate of the liabilities of a Co-operative Bank to the State Bank of India, a subsidiary bank, a corresponding new bank, a Regional Rural Bank, a banking company or any other financial institution notified by the Central Government in this behalf shall be reduced by the aggregate of the liabilities of all such banks and institutions to the Co-operative Bank;

(e) any cash with a Co-operative Bank or any balance held by a Co-operative Bank with another bank, shall not, to the extent such cash or such balance represents the balance in, or investment of, Agricultural Credit Stabilization Fund of such Co-operative Bank, be deemed to be cash maintained in India.(2) The Reserve Bank may, for the purposes of this section and section 24, specify from time to time, with reference to any transaction or class of ,transactions, that such transaction or transactions shall be regarded as liability in India of a Co-operative Bank, and, ' if any question arises as to whether any transaction or class of transactions shall be regarded for the purposes of this section and section 24, as liability in India of a Co -operative Bank, the decision of the Reserve Bank thereon shall be final."];

(k) for section 19, the following section shall be substituted, namely,

"19. Restriction on holding shares in other co-operative societies-No Co-operative Bank shall hold shares in any other co-operative society except to such extent and subject to such conditions as the Reserve Bank may specify in that behalf:

PROVIDED that nothing contained in this section shall apply to:-

(i) shares acquired through funds provided by the State Government for that purpose;

(ii) in the case of a Central Co-operative Bank, the holding of shares in the State Co-operative Bank to which it is affiliated;

(iii) in the case of a primary Co-operative Bank, the holding of shares in the Central Co-operative Bank to which it is affiliated or in the State Co-operative Bank of the State in which it is registered:

PROVIDED FURTHER that where any shares are held by a Co-operative Bank in contravention of this section at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), the Co-operative Bank shall without delay report the matter to the Reserve Bank and shall, notwithstanding anything contained in this section, be entitled to hold the shares for such period and on such conditions as the Reserve Bank may specify".;

(1) for section 20 of the principal Act, the following section shall be substituted, namely-

"20. Restrictions on loans and advances-No Co-operative Bank shall-

(a) make any loans or advances on the security of its own shares; or

(b) grant unsecured loans or advances:

(i) to any of its Directors; or

(ii) to firms or private companies in which any of its Directors is interested as Partner or Managing Agent or Guarantor or to individuals in cases where any of its Directors is a guarantor; or

(iii) to any company in which the Chairman of the Board of Directors of the Co-operative Bank (where the appointment of a Chairman is for a fixed term) is interested as its Managing Agent, or where there is no Managing Agent, as its Chairman or Managing Director:

PROVIDED that nothing in clause (b) shall apply to the grant of unsecured loans or advances-

(a) made by a Co-operative Bank-

(i) against bills for supplies or services made or rendered to government or bills of exchange arising out of bona fide commercial or trade transactions, or

(ii) in respect whereof trust-receipts are furnished to the Co-operative Bank;

(b) made by a Primary Co-operative Bank to any of its Directors or to any other person within such limits and on such terms and conditions as may be approved by the Reserve Bank in this behalf.

(2) Every Co-operative Bank shall, before the close of the month succeeding that to which the return relates, submit to the Reserves Bank a return in the prescribed form and manner showing all unsecured loans and advances granted by it to companies in cases [other than those in which the Co-operative Bank is prohibited under sub-section (1) to make unsecured loans and advances] in which any of its Directors is interested as Director or Managing Agent or Guarantor.

(3) If, on examination of any return submitted under sub-section (2), it appears to the Reserve Bank that any loans or advances referred to in that sub-section are being granted to the detriment of the interests of the depositors of the Co-operative Bank, the Reserve Bank may, by order in writing, prohibit the Co-operative Bank from granting any such further loans or advances or impose such restrictions on the grant thereof as it thinks fit, and may by like order direct the Co-operative Bank to secure repayment of such loans or advances within such time as may be specified in the order."];

(m) in section 20A, in sub-section (1).-

(i) the words and figures "Notwithstanding anything to the contrary contained in section 293 of the Companies Act, 1956 (1 of 1956)" shall be omitted;

(ii) in clause (a), for the words "any of its Directors" the words" any of its past or present directors" shall be substituted.]

(n) in section 21, in sub-section (2), in clause (c) and (d), for the words "any one company, firm, association of persons or individual", the words "any one party" shall be substituted;

(o) in section 22:-

(i) for sub-sections (1) and (2), the following sub-sections shall be substituted, namely,-

"(1) Save as hereinafter provided, no co-operative society shall carry on banking business in India unless:-

(a) it is a primary credit society, or

(b) it is a Co-operative Bank and holds a license issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fit to impose:

PROVIDED that nothing in this sub-section shall apply to a co-operative society, not being a primary credit society or a Co-operative Bank carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of one year from such commencement.

(2) Every co-operative society carrying on business as Co-operative Bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), shall before the expiry of three months from such commencement, every Co-operative Bank which comes into existence as a result of the division of any other co-operative society carrying on business as a Co-operative Bank, or the amalgamation of two or more co-operative societies carrying on banking business shall, before the expiry of three months from its so coming into existence, every primary credit society which becomes a Primary Co-operative Bank after such commencement shall before the expiry of three months from the date on which it so becomes a Primary Co-operative Bank and every co-operative society other than a primary credit society shall before commencing banking business in India, apply in writing to the Reserve Bank for a license under this section:

PROVIDED that nothing in clause (b) of sub-section (1) shall be deemed to prohibit,-

(i) a co-operative society carrying on business as a Co-operative Bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965); or

(ii) a Co-operative Bank which has come into existence as a result of the division of any other co-operative societies carrying on business as a Co-operative Bank, or the amalgamation of two or more co-operative societies carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), or at any time thereafter; or

(iii) a primary credit society which becomes a Primary Co-operative Bank after such commencement, from carrying on banking business until it is granted a license in pursuance of this section or is, by a notice in writing notified by the Reserve Bank that the license cannot be granted to it.]  

253[(ii) sub-section (3A) shall be omitted;  

(iii) in sub-section (4),in clause (iii), the words, brackets, figures and letters "and sub- section (3A)" shall be omitted;]

(p) 273[in section 23-

(i) for sub-section (1), the following sub-section shall be substituted, namely-

"(1) Without obtaining the prior permission of the Reserve Bank, no Co-operative Bank shall open a new place of business or change otherwise than within the same city, town or village, the location of an existing place of business:

PROVIDED that nothing in this sub-section shall apply to-

(a) the opening for a period not exceeding one month of a temporary place of business within a city, town or village or the environs thereof within which the Co-operative Bank already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a mela or any other like occasion;

(b) the 280[opening or changing the location of branches] by a Central Co-operative Bank within the area of its operation.";

253[(ii) after sub-section (4), the following sub-section shall be inserted, namely,-

"(4A) Any Co-operative Bank other than a Primary Co-operative Bank requiring the permission of the Reserve Bank under this section shall forward its application to the Reserve Bank though the National Bank which shall give its comments on the merits of the application and send it to the Reserve Bank:

PROVIDED that the Co-operative Bank shall also send an advance copy of the application directly to the Reserve Bank."];

275[(q) in section 24:-

(i) in sub-section (1), the words "After the expiry of two years from the commencement of this Act", shall be omitted;

(ii) for sub-sections (2) and (2A), the following sub-section shall be substituted, namely: -

"(2) In computing the amount for the purposes of sub-section (1),-